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FILED

AUG 23 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1441-KuFD

)

DESIREE H. DRURY, ) Bk. No. 2:15-bk-17125

)

Debtor. )

______________________________)

)

DESIREE H. DRURY, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

UNITED STATES TRUSTEE, )

)

Appellee. )

______________________________)

Argued and Submitted on July 28, 2016

at Pasadena, California

Filed – August 23, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Thomas B. Donovan, Bankruptcy Judge, Presiding

 

Appearances: Stephen R. Wade argued for appellant Desiree H.

Drury; John Postulka argued for appellee United

States Trustee.

 

Before: KURTZ, FARIS and DUNN, Bankruptcy Judges.

*This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8024-1.
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INTRODUCTION

When a debtor does not own an automobile but makes monthly

lease or loan payments as a prerequisite to his or her continued

possession and use of a vehicle, may the debtor claim an expense

allowance under the means test for car “ownership” expenses? We

answer this question in the affirmative. Even though the debtor

Desiree H. Drury is not the owner of the automobile, is not the

borrower under the automobile loan and is not legally obligated

to repay that loan, it is undisputed that Drury will lose

possession of the automobile unless she continues to make

payments to the lender. This undisputed fact establishes for

means test purposes that the relevant IRS local transportation

expense standard of $517 for car ownership expenses is

“applicable” to Drury and thus she is entitled to claim this

amount for purposes of determining whether her chapter 71 case

filing was presumptively abusive under § 707(b)(2).

The bankruptcy court incorrectly disallowed Drury’s car

ownership expense claim. As a result, it incorrectly determined

that Drury’s chapter 7 case should be dismissed as presumptively

abusive under § 707(b)(1) and (2).

Additionally, the bankruptcy court rendered insufficient

findings to support its determinations that the chapter 7

petition was filed in bad faith under § 707(b)(3)(A) and that the

chapter 7 case was abusive under the totality of the debtor’s

1Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all "Rule" references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037.

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financial circumstances pursuant to § 707(b)(3)(B). Accordingly,

the bankruptcy court’s dismissal order is VACATED and this matter

is REMANDED for further proceedings. 

FACTS

In May 2015, Drury commenced her bankruptcy case by filing a

voluntary chapter 7 petition. This was not Drury’s first

bankruptcy case. In fact, she had filed six prior bankruptcy

cases in the past five years, all of which were dismissed for

failure to comply with various Bankruptcy Code provisions and

Rules. In addition, she also had filed a chapter 7 case in 2001,

in which she obtained a discharge order.

The U.S. Trustee filed his motion to dismiss her most recent

case in October 2015. The U.S. Trustee asserted that Drury had

over $800 in monthly disposable income that she could use to

repay her creditors and that, based on this amount, granting

Drury relief under chapter 7 would be an abuse of the Bankruptcy

Code.

According to the U.S. Trustee, the information provided on

Drury’s Official Form 22A reflected that Drury had over $100,000

in annual income and current monthly income (as defined in

§ 101(10A)) of $8,580 per month. However, Drury’s initial

Form 22A omitted some of her income. She only later disclosed

that, in addition to her annual salary, she also received child

support in the amount of $175 per month.

This is only one of several errors and omissions in the

financial information Drury provided in her bankruptcy schedules

and in her other bankruptcy filings. She also claimed in her

initial Form 22A that she paid $60 per month for telephone

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services and $40 per month in charitable contributions. Both of

these claimed expenses turned out to be inaccurate. Similarly,

Drury claimed $550 per month, in aggregate, for child care

expenses and minor-child education expenses, but the only

evidence she ever offered for these claimed expenses was a letter

from a family friend stating that Drury paid her $75 per week for

picking up two of Drury’s children from school and for helping

them with their homework. 

In addition, in her Schedule B, Drury claimed to own a 2008

Toyota Camry worth $3,000. She also represented in her statement

of intention regarding secured debts that the Toyota was property

of her bankruptcy estate. She later admitted that she does not

own the car and that she never has owned it. Instead, she

informed the U.S. Trustee that her sister bought the car on

credit on Drury’s behalf because Drury did not have the credit to

obtain an automobile loan in her own name. Nonetheless, Drury

maintained that she drives the car and pays $540 every month to

cover the loan payment for the vehicle.

The most hotly-disputed issue between the parties concerned

the automobile expenses Drury claimed in her form 22A.

Notwithstanding her admission that she did not own the 2008

Toyota Camry, Drury continued to contend that she was entitled to

deduct from her income a vehicle “ownership” expense of $517 and

a vehicle operating expense of $400. The U.S. Trustee contested

these expense claims. According to the U.S. Trustee, Drury only

was entitled to claim a $295 vehicle operating expense, and no

vehicle ownership expense, because she did not own the Toyota.

As the U.S. Trustee put it, the allowed $295 vehicle

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operating expense was a standard deduction permitted for debtors

operating vehicles in the Los Angeles metropolitan area, and no

vehicle expenses above that amount – ownership or operating

expenses – could be claimed in the absence of ownership.2

The U.S. Trustee assailed Drury for her inflated and

inaccurate expense claims and for her inaccurate and incomplete

information regarding her income. He also challenged Drury’s

claim that she was entitled to deduct tax-related expenses of

roughly $2,000. The U.S. Trustee instead insisted that she was

entitled to deduct from her income, at most, roughly $1,500 for

tax expenses.3

Based on these contentions, the U.S. Trustee asserted that

Drury’s bankruptcy case should be dismissed as a presumptively

abusive bankruptcy filing under § 707(b)(2) and, alternately,

2The U.S. Trustee posited, without citing any authority,

that the age of the Toyota would have entitled Drury to a $200

older vehicle operating expense if Drury had actually owned the

vehicle. We disagree. In Drummond v. Luedtke (In re Luedtke),

508 B.R. 408, 411 (9th Cir. BAP 2014), we held that this older

vehicle operating expense is not part of the Internal Revenue

Service's National Standards or its Local Standards, which

generally control which expenses above-median-income debtors may

claim for purposes of calculating their disposable income under

11 U.S.C. § 1325(b)(2). Given our decision in In re Luedtke,

there is no legal or logical reason why a chapter 7 debtor should

be able to claim an older vehicle operating expense for chapter 7

means test purposes. See In re Willingham, 520 B.R. 818, 823

(Bankr. E.D. Cal. 2014).

3The U.S. Trustee stated in his responsive appeal brief that

the bankruptcy court did not render any findings regarding

Drury’s tax-related expense claim and did not rely on the taxrelated expense issue to support its ruling. In light of our

analysis and resolution of this appeal, there is no need for us

to consider further Drury’s tax-related expenses.

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that her case should be dismissed as abusive under the totality

of Drury’s financial circumstances pursuant to § 707(b)(3)(B). 

Oddly, the U.S. Trustee’s dismissal motion contained no argument

under § 707(b)(3)(A) specifically asserting that Drury filed her

bankruptcy in bad faith, even though the U.S. Trustee’s moving

papers asked for relief under both § 707(b)(3)(A) and (B), as

well as under § 707(b)(2).

The bankruptcy court held a hearing on the U.S. Trustee’s

motion to dismiss. At the hearing, Drury admitted that she is

not legally obligated to make the car loan payment every month. 

She nonetheless insisted that her continued possession and use of

the Toyota depends upon her continued monthly payments on the

automobile loan. According to Drury, if she stopped making the

monthly loan payments, the lender would repossess the vehicle. 

The U.S. Trustee never challenged Drury’s factual assertion

regarding the consequences of her not making the loan payments. 

Instead, the U.S. Trustee argued that, as a matter of law, 

debtors cannot claim a loan or lease payment as a car ownership

expense under the IRS’s local transportation expense standard

unless they are legally obligated to make that payment. The

U.S. Trustee contended that, without such a legal obligation, the

debtor can stop making the car payments at any time, and thus

counting the payment for means test purposes would not accurately

reflect what Drury can afford to pay her creditors. 

At the conclusion of the hearing, the bankruptcy court

determined that the U.S. Trustee’s position on the vehicle

ownership expense was correct. The court also found that “[t]he

Debtor clearly has violated her duty of truthful disclosure

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notwithstanding her lengthy experiences with the bankruptcy

system and in spite of her right to amend her Schedules.” 

Findings of Fact and Conclusions of Law (Dec. 14, 2015) at p. 2.

In addition, the court further found that Drury had a

“substantial ability” to repay her debts, especially in light of

the substantial amount of her income, “though her financial

habits have been to some extent careless.” Id.

While the bankruptcy court specified that the U.S. Trustee

had established grounds for dismissal under § 707(b)(1), (b)(2),

(b)(3)(A) and (b)(3)(B), the bankruptcy court made no explicit

findings regarding Drury’s bad faith. Nor did the bankruptcy

court comment on Drury’s bad faith at the dismissal motion

hearing.

On December 14, 2015, the bankruptcy court entered its order

dismissing Drury’s bankruptcy case, and Drury timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction pursuant to 28 U.S.C.

§§ 1334 and 157(b)(2)(A) and (O). We have jurisdiction under

28 U.S.C. § 158.

ISSUE

Did the bankruptcy court abuse its discretion when it

dismissed Drury’s bankruptcy case under § 707(b)(1), (b)(2),

(b)(3)(A) and (b)(3)(B)?

STANDARDS OF REVIEW

We review dismissals under § 707(b) for an abuse of

discretion. Ng v. Farmer (In re Ng), 477 B.R. 118, 125 (9th Cir.

BAP 2012); Ceniceros v. Yaqub (In re Ceniceros), 2012 WL 2017969,

at *5 (Mem. Dec.) (9th Cir. BAP June 5, 2012).

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The bankruptcy court abuses its discretion if it applies an

incorrect legal rule or its factual findings are illogical,

implausible or without support in the record. See United States

v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

DISCUSSION

1. The Means Test and Its Expense Allowance Standards – Generally

As amended in 2005, the Bankruptcy Code authorizes 

bankruptcy courts to dismiss as abusive certain chapter 7 cases

and presumes that abuse is present when the debtor fails what

commonly is known as the “means test.” See § 707(b)(1) &

(b)(2)(A); see also Egebjerg v. Anderson (In re Egebjerg),

574 F.3d 1045, 1048 (9th Cir. 2009). The means test measures the

debtor’s “current monthly income”4 and determines whether that

income (less certain allowed expenses and then multiplied by 60)

exceeds threshold amounts designated in the statute.

§ 707(b)(2)(A). At the time of Drury’s bankruptcy filing, the

relevant designated statutory threshold amount was $12,475. Id.

There is no genuine dispute regarding the amount of Drury’s

current monthly income. Instead, this appeal hinges on the

transportation expense amounts Drury attempted to deduct from her

current monthly income and whether the bankruptcy court correctly

disallowed most of Drury’s claimed transportation expenses. But

before we look at any of the transportation expense claims, a bit

of background on the means test and its expense standards will

4Generally speaking, the term “current monthly income” means

the debtor’s average monthly income, regardless of source, and 

includes amounts paid by others on a regular basis for the

debtor’s household expenses. For the full definition of “current

monthly income” please see § 101(10A).

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provide some helpful context.

Before the passage of the Bankruptcy Abuse Prevention and

Consumer protection Act of 2005, Pub. L. 109–8, 119 Stat. 23

(2005) (“BAPCPA”), the Bankruptcy Code instructed the bankruptcy

courts to employ a presumption that chapter 7 debtors were

entitled to chapter 7 relief. In re Egebjerg, 574 F.3d at 1048. 

But the 2005 BAPCPA amendments replaced this presumption with an

emphasis on maximizing the recovery for the debtor’s creditors. 

Id. As In re Egebjerg explained, BAPCPA accomplished this sea

change in chapter 7 practice by introducing the means test to

determine if the debtor could repay at least some amount to his

or her creditors. Id.

The expense side of the means test equation,

§ 707(b)(2)(A)(ii)(I), was novel. Prior to BAPCPA, there was no

need for chapter 7 debtors to prove routinely that they had no

ability to repay their creditors over time, so there was no

routine need to measure the debtor’s allowable expenses for

purposes of calculating the debtor’s disposable income (if any). 

See In re Egebjerg, 574 F.3d at 1048. For purposes of

determining the debtor’s allowable expenses, the means test

provides in part:

The debtor's monthly expenses shall be the debtor's

applicable monthly expense amounts specified under the

National Standards and Local Standards, and the

debtor's actual monthly expenses for the categories

specified as Other Necessary Expenses issued by the

Internal Revenue Service for the area in which the

debtor resides, as in effect on the date of the order

for relief . . . .

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§ 707(b)(2)(A)(ii)(I).5

While there is no pre-BAPCPA history of routinely measuring

chapter 7 debtors’ allowable expenses, the measuring of

chapter 13 debtors’ expenses, for the purpose of determining

whether they were paying all of their disposable income to their

creditors during the term of their chapter 13 plan, predates

BAPCPA. See Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 65 &

78 (2011); In re Luedtke, 508 B.R. at 413. Before BAPCPA,

bankruptcy courts had broad discretion to determine which

expenses were reasonable and necessary for individual chapter 13

debtors to claim on a case-by-case basis. Ransom, 562 U.S. at

65. 

Apparently unhappy with the “varying and often inconsistent

determinations” that resulted from the pre-BACPA case-by-case

approach, id. at 65, Congress specified in its BAPCPA amendments 

that the means test’s standardized and mathematical approach for

determining allowable expenses would be utilized to calculate the

disposable income of both chapter 7 debtors and chapter 13

debtors whose income exceeded certain benchmarks. Id. at 65, 78;

see also In re Luedtke, 508 B.R. at 413 (“BAPCPA replaced [the

bankruptcy courts’] discretion with the ‘means test’ — a

formulaic and mechanical method of assessing debtors’ ability to

pay.”). 

Indeed, Congress referred to its adoption of its means test

5In addition to the amounts provided for in the National

Standards, the Local Standards and in the Other Necessary

Expenses categories issued by the Internal Revenue Service,

debtors can claim payments on account of secured and priority

debt to the extent permitted by § 707(b)(2)(A)(iii) and (iv).

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as “[t]he heart of [BAPCPA's] consumer bankruptcy reforms,”

because it would “help ensure that debtors who can pay creditors

do pay them” and thereby would help prevent those abuses of the

bankruptcy system that BAPCPA was intended to prevent. Ransom,

562 U.S. at 64 (emphasis in original) (citing H.R. Rep.

No. 109–31, pt. 1, p. 2 (2005)).

2. Proper Application of the Means Test Expense Allowance 

Standards to Transportation Expenses

Having considered the background behind the means test and

its expense allowance standards, we next consider the correct

application of those standards to transportation expenses. The

National Standards and Local Standards referenced in

§ 707(b)(2)(A)(ii)(I) (quoted above) are “tables that the IRS

prepares listing standardized expense amounts” that are used to

determine a taxpayer’s ability to pay past-due tax liability. 

Ransom, 562 U.S. at 61. But the National Standards and Local

Standards are not self-explanatory. Bankruptcy courts sometimes

must consult the IRS’s Financial Analysis Handbook (IRM 5.15.1)

in order to correctly interpret and apply the National Standards

and Local Standards. In re Luedtke, 508 B.R. at 411, 415; see

also Ransom, 562 U.S. at 72-73 & n.7 (stating that the IRS's

Financial Analysis Handbook is persuasive – but not controlling –

authority for determining how bankruptcy courts should apply the

IRS’s National Standards and Local Standards). So long as the

relevant portion of Financial Analysis Handbook is not

inconsistent with the Bankruptcy Code, bankruptcy courts may

refer to the Handbook as an aid in applying the National

Standards and Local Standards. Id. at 72.

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The relevant version of the Local Standards tables for

transportation expenses merely state that a taxpayer may claim an

expense of $517 in vehicle ownership costs and an expense of $295

in vehicle operating costs. See IRS Local Transportation Expense

Standards - West Census Region – for Cases Filed Between April 1,

2015 and May 14, 2015, Inclusive, as reported in, U.S. Trustee’s

website, https://www.justice.gov/ust/means-testing/means-testingcases-filed-between-april-1-2015-and-may-14-2015-inclusive (last

visited Aug. 16, 2016). The commentary accompanying these tables

states in part as follows: 

b. Transportation Expense Standards for taxpayers with

a vehicle consist of two parts: nationwide figures for

monthly loan or lease payments referred to as ownership

costs, and additional amounts for monthly operating

costs broken down by Census Region and Metropolitan

Statistical Area (MSA). A conversion chart has been

provided with the standards that lists the states that

comprise each Census Region, as well as the counties

and cities included in each MSA. The ownership cost

portion of the transportation standard, although it

applies nationwide, is still considered part of the

Local Standards. The ownership costs provide maximum

allowances for the lease or purchase of up to two

automobiles if allowed as a necessary expense. A

single taxpayer is normally allowed one automobile.

The operating costs include maintenance, repairs,

insurance, fuel, registrations, licenses, inspections,

parking and tolls.

If a taxpayer has a car payment, the allowable

ownership cost added to the allowable operating cost

equals the allowable transportation expense. If a

taxpayer has a car, but no car payment, only the

operating costs portion of the transportation standard

is used to figure the allowable transportation expense.

In both of these cases, the taxpayer is allowed the

amount actually spent, or the standard, whichever is

less.

Census Bureau, IRS Data and Administrative Expenses Multipliers

for Cases Filed Between April 1, 2015 and May 14, 2015, Inclusive

as reported in, U.S. Trustee’s website, https://www.justice.gov/

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ust/means-testing/means-testing-cases-filed-between-april-1-2015-

and-may-14-2015-inclusive (last visited Aug. 16, 2016) (emphasis

added).

After reviewing substantially similar IRS materials, Ransom

held: (1) that the IRS’s vehicle ownership expenses provided for

in its Local Standards only consist of lease payments or loan

payments; and (2) that a debtor who does not make payment on a

car lease or a car loan cannot claim vehicle ownership expenses. 

Ransom, 562 U.S. at 71-72. In so holding, Ransom explained that

vehicle ownership expense amounts are not “applicable” within the

meaning of § 707(b)(2)(A)(ii)(I) (and hence not allowable as

claimed) unless the debtor incurred some vehicle ownership

expenses of the type enumerated in the IRS’s Local Standards for

transportation expenses. Id. at 69-72. 

3. Proper Treatment of Drury’s Claimed Transportation Expenses

Here, Drury conceded that she does not own the Toyota she

originally listed on her Schedule B and that she is not indebted

under any car lease or car loan. According to the U.S. Trustee,

Drury cannot claim the loan payments she makes because she is not

legally obligated to make those payments. Without any legal

obligation, the U.S. Trustee reasons, Drury could stop making the

car payments at any time she wants, so the amount of her car

payments could be made available to pay back her creditors. 

We disagree. Nothing in the Bankruptcy Code or in the IRS

Collection Financial Standards suggests that debtors only may

claim as local transportation expenses car loan or lease payments

they make for which they are personally liable. In fact, the

language of the statute points in the opposite direction:

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"Notwithstanding any other provision of this clause, the monthly

expenses of the debtor shall not include any payments for debts."

Although the meaning of the "notwithstanding" provision is murky,

it cuts against the argument that a car "ownership" expense only

counts if the debtor is legally obligated to pay it, because in

that case the debtor's car payments are "payments for debt[]."

Further, when one considers the means test as a whole and its

underlying purpose – to assure that debtors pay what they can to

their creditors – it makes no sense to focus on the absence or

presence of a legally enforceable debt. Most necessities of life

– including most of those accounted for in the IRS Collection

Financial Standards – are not debts.6 And yet it still is

essential for debtors to pay these amounts in order to maintain a

certain minimal standard of living – as the IRS Collection

Financial Standards explicitly recognize. See Wedoff, supra at

253 & n.57; see also Ransom, 562 U.S. at 70 (“Congress intended

the means test to approximate the debtor’s reasonable

expenditures on essential items.”).

Even without a legally binding obligation to make the

payments for the car loan in her sister’s name, if Drury is going

to continue to use the car, she needs to continue to make the

payments. Otherwise, the lender will repossess the vehicle, and

Drury will be forced to get around Los Angeles without an

automobile – an automobile that the IRS’s Collection Financial

6For a complete description of the types of expenses the

IRS Collection Financial Standards cover, please see Eugene R.

Wedoff, Means Testing in the New § 707(b), 79 Am. Bankr. L.J.

231, 253–65 (2005).

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Standards (and the means test) permit her to use (and pay for)

even if this means that she will have less funds to pay her

creditors.

Nor does Drury’s lack of title to the automobile persuade us

otherwise. We do not read the Local Standards’ reference to car

“ownership” expenses as making ownership of the automobile

essential to claiming this transportation expense. In order to

claim this transportation expense, the key determinant is whether

the debtor makes a car lease payment or a car loan payment. 

Ownership of the car is no more essential to the necessity of

this expense than a legally enforceable debt. Automobile lessees

do not "own" the cars they drive. The Local Standards’ reference

to car “ownership” expenses can and should be considered a

misnomer. Indeed, the Executive Office for U.S. Trustees has

made this exact point in a published law journal article. See 

Mark A. Redmiles, The Supreme Court Interprets the Means Test,

Am. Bankr. Inst. J., April 2011, at 18, 93 n.21.

Moreover, nothing in Ransom requires a different result. 

Ransom answered a different question: whether a debtor who does

not make any car lease or car loan payments can claim under the

means test a car ownership expense. Ransom in essence held that

car ownership was not sufficient to entitle a debtor to claim

this expense. Ransom did not address whether car ownership was

necessary to entitle a debtor to claim this expense. For the

reasons set forth above, we hold that debtors who make monthly

car loan payments or car lease payments as a prerequisite to

their continued use of the vehicle may claim this expense under

the means test even if they do not own the vehicle.

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4. Correct Calculation of Drury’s Disposable Income

Aside from Drury’s disallowed vehicle ownership expense of

$517, Drury continues to claim an inflated $400 for vehicle

operating expenses, which should not have exceeded $295 under the

relevant version of the IRS’s Local Standards for transportation

expenses. Likewise, Drury continues to claim an inflated $550,

in aggregate, for childcare and minor-child education expenses. 

Drury only substantiated $300 per month for child-related

expenses, which she pays to a family friend for picking up two of

her kids from school and helping them with homework. When the

excess amounts from these expense categories is summed together

($105 + $250), the total reflects that Drury continues to

overstate her allowable monthly expenses by $355 and thereby

continues to understate her monthly disposable income by that

same amount.

Drury has calculated her monthly disposable income as a

negative amount – a negative $364.79. When the above-referenced

$355 is added back into her understated monthly disposable income

figure, the correct amount of Drury’s monthly disposable income

is roughly a negative $15. Because this amount, when multiplied

by 60, does not exceed § 707(b)(2)(A)(i)(II)’s threshold amount

of $12,475, the presumption of abuse under § 707(b)(2)(A)(i) is

not triggered. Therefore, the bankruptcy court abused its

discretion when it dismissed Drury’s bankruptcy case as

presumptively abusive.

5. Dismissal of Drury’s Bankruptcy Case under § 707(b)(3)(A) and

(B)

Because we have concluded that the bankruptcy court’s

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dismissal of the bankruptcy case under § 707(b)(1) and (b)(2) was

an abuse of the bankruptcy court’s discretion, we also need to

address the bankruptcy court’s alternate grounds for dismissal

under § 707(b)(3)(A) and (B). See In re Egebjerg, 574 F.3d at

1048 (“the statute is framed to consider the presumptive abuse

question first, and resorts to the totality of circumstances

analysis [and the bad faith analysis] only if the debtor survives

the means test.”). 

Under § 707(b)(3)(A), a chapter 7 case may be dismissed as

abusive if the debtor filed his or her chapter 7 petition in bad

faith. The Bankruptcy Code does not define bad faith. In the

chapter 13 context, the Ninth Circuit has held that bankruptcy

courts in determining bad faith should consider all relevant

factors and, to aid bankruptcy courts in the bad faith

assessment, set forth the following non-exhaustive list of

factors to consider: (1) whether the debtor has stated inaccurate

facts in his or her bankruptcy filings, attempted to improperly

manipulate the Bankruptcy Code, or otherwise pursued bankruptcy

relief in an inequitable manner; (2) the debtor's prior

bankruptcy case filings and dismissals; (3) the motivation for

the debtor’s bankruptcy case filing, including any intent to

impede state court litigation; and (4) any egregious conduct. 

Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1224 (9th Cir.

1999).

These same factors are equally pertinent to the bad faith

inquiry in the chapter 7 context. In re Mitchell, 357 B.R. 142,

154 (Bankr. C.D. Cal. 2006); see also Franco v. United States

Trustee (In re Franco), 2016 WL 3227154, at *5 (Mem. Dec.) (9th

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Cir. BAP June 2, 2016) (“Although Leavitt involved a chapter 13

case, we see no reason why the standards for a finding of bad

faith in a chapter 7 case should be any different.”).

Here, the only findings of the bankruptcy court arguably

applicable to its bad faith determination were as follows:

The Debtor clearly has violated her duty of truthful

disclosure notwithstanding her lengthy experiences with

the bankruptcy system and in spite of her right to

amend her Schedules.

Debtor nevertheless has a substantial ability to pay

her creditors, especially as her income is substantial,

though her financial habits have been to some extent

careless.

Findings of Fact and Conclusions of Law (Dec. 14, 2015) at

2:25-28. The bankruptcy court did not specifically find that

Drury acted in bad faith, nor is there any indication that the

bankruptcy court considered all of the Leavitt factors or all

relevant factors. While there are other facts in the record that

might support a finding of bad faith, we cannot say on this

record, and in light of the limited findings the bankruptcy court

made, that we have a clear and complete understanding of the

basis for the bankruptcy court’s bad faith ruling. 

In re Leavitt, 171 F.3d at 1223. More importantly, on this

record, we cannot ascertain whether the bankruptcy court applied

the correct legal standard. Consequently, vacating the

bankruptcy court’s bad faith determination and remanding for

further findings is necessary.

 Under § 707(b)(3)(B), a chapter 7 case may be dismissed as

abusive under the totality of the debtor’s financial

circumstances. In assessing the totality of the debtor’s

financial circumstances, we consider the same non-exhaustive list

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of factors used by the Ninth Circuit for the determination of

substantial abuse under pre-BAPCPA law. In re Ng, 477 B.R. at

126 (citing Price v. United States Trustee (In re Price),

353 F.3d 1135, 1139–40 (9th Cir. 2004)). These factors include:

(1) Whether the debtor has a likelihood of sufficient

future income to fund a Chapter 11, 12, or 13 plan

which would pay a substantial portion of the unsecured

claims; [2] Whether the debtor's petition was filed as

a consequence of illness, disability, unemployment, or

some other calamity; (3) Whether the schedules suggest

the debtor obtained cash advancements and consumer

goods on credit exceeding his or her ability to repay

them; (4) Whether the debtor's proposed family budget

is excessive or extravagant; (5) Whether the debtor's

statement of income and expenses is misrepresentative

of the debtor's financial condition; and (6) Whether

the debtor has engaged in eve-of-bankruptcy purchases.

Id. “[A] ‘debtor’s ability to pay his debts will, standing

alone, justify a section 707(b) dismissal.’” Id. (quoting

In re Price, 353 F.3d at 1140).

Here, the bankruptcy court found that Drury had “a

substantial ability to pay her creditors.” But the bankruptcy

court did not explain how it reached this conclusion for purposes

of § 707(b)(3)(B). It very well might have been based on the

bankruptcy court’s erroneous disallowance of Drury’s car loan

payments as an actual and necessary transportation expense. For

the same reasons we rejected this disallowance in the context of

determining whether there was presumption of abuse under

§ 707(b)(2), we also reject this disallowance for § 707(b)(3)(B)

purposes.7 Because the bankruptcy court’s findings were

7To be clear, the legal standards governing expense

allowance under the means test (§ 707(b)(2)) and under the

totality of the debtor’s financial circumstances (§ 707(b)(3)(B))

are different. Compare Ransom, 562 U.S. at 65-66, with In re Ng,

(continued...)

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insufficient on the record presented to afford us with a clear

and complete understanding of the basis for the bankruptcy

court’s totality of the circumstances ruling, we must vacate the

bankruptcy court’s § 707(b)(3)(B) determination and remand for

further findings regarding the totality of the debtor’s financial

circumstances.

CONCLUSION

For the reasons set forth above, we VACATE the bankruptcy

court’s dismissal order, and we REMAND this matter for further

proceedings consistent with this decision.

7(...continued)

477 B.R. at 126. Nonetheless, the bankruptcy court here did not

sufficiently justify the disallowance of Drury’s car ownership

expense under either standard.

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