IN RE EISENHAUER

PETER McNIFF, Bankruptcy Judge

June 20, 2006 the court heard the United States Trustee's Motion to Dismiss Case Under 11 U.S.C. § 707(b). The U.S. Trustee appeared through his counsel, Michele R. Hankins, and the Debtors appeared with counsel, Stephen R. Winship. The court has considered the testimony and other evidence and the applicable law and concludes this case should be dismissed.

Jurisdiction

This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(O). The court has jurisdiction over this matter under 28 U.S.C. §§ 157(a) and 1334(a).

Findings

The facts are basically undisputed. The Debtors, Daniel Eisenhauer and Dona Eisenhauer (Debtors), began having serious financial problems in 2001. At that time, Mrs. Eisenhauer was laid off from her job at Enron. She decided to start a weight-loss business and to that end, the Debtors borrowed funds from Mr. Eisenhauer's 401k plan. The business did not materialize, but the plan withdrawal resulted in an income tax debt of $8,700.

Also around that time, Mr. Eisenhauer was transferred by his employer, Anadarko, to Garden City, Kansas. These disruptions resulted in unexpected expenses. The Debtors also incurred unexpected vehicle repair expenses.

Mrs. Eisenhauer returned to work, but in 2004, she took unpaid leave for surgery. Also that year, Mr. Eisenhauer was transferred from Kansas to Wyoming, and Mrs. Eisenhauer was again temporarily unemployed.

The Debtors have three children, an 18-year old daughter, Jenna, who is attending college; an emancipated son, Justin; and an emancipated, married daughter, Jessica. All three of these children were involved in vehicle accidents during the last few years, for which the Debtors assisted them financially.

These unanticipated expenses caused the Debtors to increase their credit card use, culminating in the filing of the voluntary chapter 7 petition on August 29, 2005. In the Schedules, the Debtors list $40,000 in medical and consumer credit card debt and $50,000 in student loan debt cosigned for their children. The student loans are in forebearance, but will require $283 per month payments in the near future. The Debtors' schedules list virtually no unencumbered or non-exempt property.

Schedule I shows combined monthly income of $9,951. The Debtors' employment is stable, and they have deductions on Schedule I of $826 per month to repay the 401k loan and $916 per month combined contributions to retirement plans.

Schedule J lists monthly expenses of $6,824. The expenses are reasonable for a family of three, except for the $950 scheduled to support Justin. There may be comparable expenses for Jenna while she is in college, as she is presently a dependent of the Debtors.

On Schedule J, the Debtors list vehicle payments of $791 per month, including a car payment for a 2001 Dodge Strata owned by Jessica. Since the filing of this chapter 7 case, the Debtors borrowed $8,000 from Mrs. Eisenhauer's father and redeemed the Dodge Strata and a 1999 Chevy Tahoe. They are paying the new vehicle debt at the sum of $520 per month. The Debtors also pay $268 per month for Jenna's 2001 Jetta. The payment of a loan for the benefit of a married daughter is not proper while the Debtors are unable to pay their creditors.

Discussion

The U.S. Trustee's Motion is brought under 11 U.S.C. § 707(b)(1) of the Bankruptcy Code in effect prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). At the time this case was filed, that section stated:

After notice and a hearing, the court, on . . . a motion by the United States trustee . . . may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor.

In the Tenth Circuit, the bankruptcy courts apply the totality of the circumstances test. Stewart v. U.S. Trustee (In re Stewart), 175 F.3d 796, 809 (10th Cir. 1999). A substantial abuse analysis must be made on a case-by-case basis, with the ability to repay the debts the primary factor. Other factors to be considered include the debtor's eligibility for chapter 13, the reasonableness of the debtor's expenses, the accuracy of a debtor's schedules, any evident bad faith, and the existence of a calamity or other extenuating circumstances. Id.

The debts in this case are primarily consumer debts, the Debtors' income is stable, they anticipate no substantial change to their income or their expenses, and the Debtors are eligible for chapter 13 relief. The Debtors testified that they previously tried credit counseling to no avail. The Debtors have had a number of unfortunate and unexpected pre-petition events that negatively impacted their financial circumstances, including three employment transfers, changes in Mrs. Eisenhauer's employment, the failed attempt to establish a business, three vehicle accidents involving their children, Mrs. Eisenhauer's hospitalization, and the standard snowball affect of unpaid credit card bills. The court concludes the Debtors did not file their chapter 7 petition in bad faith.

This case turns solely on the Debtors' ability to repay their debts under a chapter 13 plan. The case is unique because it was filed prior to the enactment of BAPCPA, but the hearing was held after BAPCPA became effective. The parties sought several continuances before the hearing was eventually held, and that self-imposed delay has contributed further to changes in circumstances.

The Debtors contend their financial picture on the date of filing controls. The U.S. Trustee, citing the case of Cortez v. U.S. Trustee (In re Cortez), ___ F.3d ___, 2006 WL 2023117 (5th Cir. 2006), argues the financial circumstances existing at the time of the hearing should be considered.

Two scenarios under these facts are obvious. If this pre-BAPCPA case were dismissed and the Debtors sought to refile, they would be subject to the presumption of abuse under § 707(b)(2) of BAPCPA. The U.S. Trustee's analysis shows that the Debtors would be required to file a chapter 13 case and propose a plan with a 60-month term and $475 per month payments. The Debtors' payment is fixed by Form B22C, and they could not continue to support an emancipated child. The Debtors could continue to contribute to their retirement plans and to repay the 401k loan. The return to the unsecured creditors is estimated by the U.S. Trustee at 30%.

Had this case been heard before the effective date of BAPCPA, or if the Debtors were to convert this case to one under chapter 13, the Debtors could propose a 36-month plan. However, the court will apply its pre-BAPCPA analysis and require the Debtors to cease all retirement plan contributions and loan repayments. By disallowing expenses for retirement and expenses for the support of the two emancipated children, the Debtors could pay at least $72,000 into a three-year chapter 13 plan. As far as the court can estimate, the return to creditors would be similar to that of a new BAPCPA chapter 13 case.

In other words, whether analyzed under pre-BAPCPA law or current law, the Debtors have the ability to fund a chapter 13 plan that returns approximately 30% to the unsecured creditors, including the student loan obligations. Although the ability to repay the creditors in a chapter 13 case is only one of several factors, in this case the return is significant. Therefore, the court concludes that whether the case is based on an analysis close to the time of filing, or one brought as the circumstances now exist, the case should be dismissed under § 707(b)(1).

IT IS ORDERED that the U.S. Trustee's Motion to Dismiss is granted.