DEBTORS DENIED CHAPTER 7 BANKRUPTCY DUE TO OVERSTATED BUDGET ITEMS

June 24, 2004

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In a bankruptcy case from the Northern District of Texas, the Debtors wanted to maintain large house and car payments, 401(k) contributions and loan payments, overstated utility budgets, excess food expenditures, excessive “medical” expenses, which are, in reality, activity fees for their daughter’s activities, and expensive private school tuition.

The Bankruptcy Court ruled that these things, in and of themselves, are not bad, but, in the aggregate, demonstrate substantial abuse of the Chapter 7 process.

Accordingly, the case will be dismissed unless the Debtors file a motion to convert their case to Chapter 13 within ten days of entry of this order.

Debtors have an annual combined income of approximately $150,000. Their unsecured debts, totaling approximately $80,000, are primarily consumer debts, consisting mostly of credit cards and a deficiency obligation on a boat.The debtors’ budget included $410/month for repayment of pension plan loan; $1,200/month food budget for family of three; $320/month for home maintenance, much of it spent on the swimming pool; $900/month for daughter’s parochial school. The daughter’s tennis lessons and participation at a local country club and for diving lessons were lumped into “medical expenses” to the tune of $750/month.

Noting that there is a split in authority as to whether payment of tuition for a child’s private schooling is reasonably necessary, the court reserved ruling on that item pending conversion to chapter 13.

IN RE: RATHBUN (N.D. Texas 2004)