Opinion ID: 760468
Heading Depth: 2
Heading Rank: 2

Heading: The Merits of the Dismissal

Text: 21 The debtors contend that the bankruptcy court improperly analyzed their financial situation in dismissing their petition for substantial abuse. We disagree. As noted, the bankruptcy court rejected the per se test sought by the U.S. Trustee and applied a totality of circumstances test that was well within the mainstream of analysis used by other circuits. We agree with that analysis. The U.S. Trustee's per se test would not survive the first case of a frugal family with income over the designated level but with unusually large medical expenses necessary to a child's life. 22 We review the bankruptcy court's factual findings for clear error, and, even after treating the facts recited in the Statement in Opposition as true, we find none. Whether these findings constitute substantial abuse is a matter of law and is reviewed de novo. See, e.g., Fonder v. United States, 974 F.2d 996, 999 (8th Cir.1992); Green, 934 F.2d at 570. We find that the debtors committed such abuse. 23 In the instant case, the bankruptcy court found that the debtors had incurred substantial debts largely because of an extravagant lifestyle that they declined to alter in the face of lowered income. It also found that Dr. Kornfield had an established medical practice that would yield substantial, even if diminished, future income. Noting the lack of mitigating factors and the availability of other forms of relief, it concluded that the petition constituted substantial abuse no matter what legal standard the Court utilizes. Carlton, 211 B.R. at 483. 24 We do not agree that, in so concluding, the bankruptcy court improperly considered exempt assets. Even though the debtors' pension plan may be exempt from creditors, the court was within its discretion in noting its existence in evaluating the totality of their circumstances. Cf. Koch, 109 F.3d at 1289 (holding that exempt income should be treated as disposable income under Chapter 13). A totality of circumstances inquiry is equitable in nature and the existence of an asset, even if exempt from creditors, is relevant to a debtor's ability to pay his or her debts. For example, a pension plan with substantial assets is at least relevant to a debtor's need to put aside portions of future income to provide for old age. 25 Nor did the court err in concluding that the $53,640 annual educational expense for the debtors' four children was excessive and possibly even extravagant. Carlton, 211 B.R. at 481; cf. In re Gyurci, 95 B.R. 639, 643 (Bankr.D.Minn.1989) (stating that debtor should find another way to fund child's college costs other than at expense of creditors). This conclusion was accompanied by specific findings as to the quality of public educational services in the debtors' school district that are not clearly erroneous. 26 We also agree with the bankruptcy court that the debtors' petition cannot satisfy a totality of circumstances test no matter which variation of such a test is applied. We need not, therefore, spell out in greater detail the precise content of the proper totality of circumstances test in this circuit. The record depicts debtors with substantial present and future income who have declined to adopt a lifestyle consistent with that income. Most of the present debt could have been avoided, and all of it can be repaid over time. Adequate educational services, including services tailored to special needs of some of the children, are available in the debtors' particular community. This is a paradigm of the case that Section 707(b) was designed for: debtors enjoying a substantial income but seeking to transfer the cost of an unnecessarily extravagant lifestyle to creditors.