PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JOHN G. CALHOUN; GLENDA R.
CALHOUN,
Plaintiffs-Appellants,
v. No. 09-1646
UNITED STATES TRUSTEE,
Trustee-Appellee.
Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Cameron McGowan Currie, District Judge.
(3:09-cv-00822-CMC)
Argued: January 25, 2011
Decided: May 3, 2011
Before MOTZ and WYNN, Circuit Judges,
and Irene C. BERGER, United States District Judge
for the Southern District of West Virginia,
sitting by designation.
Affirmed by published opinion. Judge Berger wrote the opin-
ion, in which Judge Motz and Judge Wynn joined.
2 CALHOUN v. UNITED STATES TRUSTEE
COUNSEL
ARGUED: Joseph Edward Mitchell, III, JOSEPH E.
MITCHELL, III, PC, Augusta, Georgia, for Appellants. Cath-
erine Bentley Sevcenko, UNITED STATES DEPARTMENT
OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF:
Ramona D. Elliott, General Counsel, P. Matthew Sutko,
Associate General Counsel, UNITED STATES DEPART-
MENT OF JUSTICE, Washington, D.C., for Appellee.
OPINION
BERGER, District Judge:
John and Glenda Calhoun appeal the judgment of the dis-
trict court, which affirmed the bankruptcy court’s decision to
dismiss their petition for Chapter 7 bankruptcy on grounds of
abuse. We affirm.
I.
When reviewing a decision by a district court in its capacity
as a bankruptcy appellate court, "our review of [its] decision
is plenary." Bowers v. Atlanta Motor Speedway, Inc. (In re Se.
Hotel Props. Ltd.), 99 F.3d 151, 154 (4th Cir. 1996). Accord-
ingly, here, we assess the factual findings of the bankruptcy
court for clear error and review its legal conclusions de novo.
See Educ. Credit Mgt. Corp. (In re Kirkland), 600 F.3d 310,
314 (4th Cir. 2010).
II.
John and Glenda Calhoun filed a voluntary Chapter 7 bank-
ruptcy petition on February 27, 2008, seeking to discharge
$106,707 in unsecured debt. Mr. Calhoun retired from his job
as the Chief Financial Officer of a hospital in 1997, and
CALHOUN v. UNITED STATES TRUSTEE 3
receives $7,313 monthly from two retirement plans, in addi-
tion to $1,459 in Social Security benefits, for a total of $8,772
in monthly income. Mrs. Calhoun does not receive any inde-
pendent income. The Calhouns live on a 3.5 acre property on
Tennis Ranch Road in Jackson, South Carolina, with no
dependents. In 2000, they attempted to sell their home but
were unsuccessful after two years and decided to spend over
$130,000 renovating the home with the intention of staying.
Mr. Calhoun had a separate retirement account in connec-
tion with his employment that he converted to an IRA. The
Calhouns planned to use those investments, which Mr. Cal-
houn was managing, to supplement Mr. Calhoun’s income,
but those funds were significantly and unexpectedly reduced
during the economic downturn. After accumulating debt on a
second mortgage and five credit cards, the Calhouns entered
into a payment plan with a credit management company
whereby they reduced their monthly expenses and paid their
creditors a total of $2,638 per month. They continued this
payment plan for twenty-two (22) months, but became dis-
couraged due to the fact that the payment plan did not leave
any money left over in their budget for emergencies. Mr. Cal-
houn began exploring options for bankruptcy.
III.
Congress enacted the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 ("BAPCPA") and amended
Section 707(b) of the Bankruptcy Code with the intent of
relaxing the standard for dismissing a petition brought under
Chapter 7 and characterized as abusive. H.R. Rep. No. 109-
31(I), at 7-8 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 98-
99. Specifically, the standard for dismissal under section
707(b) was changed from "substantial abuse" to simply
"abuse." 11 U.S.C. § 707(b)(1). The amendment also elimi-
nated a presumption in favor of granting a debtor’s discharge.
As amended by the BAPCPA, § 707(b) permits the court’s
dismissal of "a case filed by an individual debtor under this
4 CALHOUN v. UNITED STATES TRUSTEE
chapter whose debts are primarily consumer debts . . . if it
finds that the granting of relief would be an abuse of the pro-
visions of this chapter." 11 U.S.C. § 707(b)(1).
An essential element to the BAPCPA is the "means test,"
a formula that screens a debtor’s income and expenses to
determine whether the debtor is able to repay his debt. 11
U.S.C. § 707(b)(1), (2); see also Morse v. Rudler (In re
Rudler), 576 F.3d 37, 40 (1st Cir. 2009); Ross-Tousey v.
Neary (In re Ross-Tousey), 549 F.3d 1148, 1151 (7th Cir.
2008) ("The purpose of the means test is to distinguish
between debtors who can repay a portion of their debts and
debtors who cannot."). When the debtor’s income exceeds the
"highest median family income of the applicable State for a
family of the same number or fewer individuals," the means
test is applied to create a rebuttable presumption of abuse. 11
U.S.C. § 707(b)(2), (6), (7).
The means test takes into account the debtor’s monthly
income and certain deductible expenses such as the cost of
housing, utilities, taxes, health insurance and an allowance for
food and clothing. 11 U.S.C. § 707(b)(2)(A). Some of these
expenses may be calculated by using national or local stan-
dards. 11 U.S.C. § 707(b)(2)(A). The debtor’s monthly dis-
posable income is determined by subtracting these allowable
expenses from his monthly income, and if that number is
greater than a statutory benchmark then the presumption of
abuse arises.1
In cases where the presumption does not arise or is rebut-
ted, the court still must determine whether granting a debtor
1
The debtor may rebut this presumption of abuse due to an excess of
expenses "by demonstrating special circumstances, such as a serious medi-
cal condition or a call or order to active duty in the Armed Forces, to the
extent such special circumstances that justify additional expenses or
adjustments of current monthly income for which there is no reasonable
alternative." 11 U.S.C. § 707(b)(2)(B)(i).
CALHOUN v. UNITED STATES TRUSTEE 5
relief would be an abuse of the provisions of Chapter 7 by
considering "whether the debtor filed his petition in bad faith"
and/or by considering "the totality of the circumstances . . .
of the debtor’s financial situation." 11 U.S.C. § 707(b)(3).2
IV.
The Calhouns’ fixed income, excluding Mr. Calhoun’s
Social Security benefits, is $7,313 per month or $87,756 per
year—well above the $46,521 median income for a household
of two in South Carolina. Including the Social Security bene-
fits, their average monthly income is $8,772. The means test
splits the Calhouns’ monthly expenses into three categories:
(A) expenses allowed under IRS standards, (B) additional
expense deductions under § 707(b), and (C) deductions for
debt payment.
The Calhouns list $3,917.83 in monthly expenses allowed
under IRS standards, including $925 for food, clothing,
household supplies, personal care, and miscellaneous; $426
for housing and utilities, non-mortgage expenses; $1,318 for
transportation and expenses for their two vehicles; $556.83
2
In Green v. Staples (In re Green), 934 F.2d 568 (4th Cir. 1991), this
Court adopted a "totality of the circumstances" approach to identifying
"substantial abuse" in Chapter 7 cases, utilizing the following five factors:
(1) Whether the bankruptcy petition was filed because of sudden
illness, calamity, disability, or unemployment;
(2) Whether the debtor incurred cash advances and made con-
sumer purchases far in excess of his ability to repay;
(3) Whether the debtor’s proposed family budget is excessive or
unreasonable;
(4) Whether the debtor’s schedules and statement of current
income and expenses reasonably and accurately reflect the true
financial condition; and
(5) Whether the petition was filed in good faith.
Green, 934 F.2d at 572.
6 CALHOUN v. UNITED STATES TRUSTEE
for taxes; $439 for two life insurance policies; $76 for health
care and $69 for telecommunication services. In additional
expense deductions under § 707(b), they claim $286 for
health insurance and $884 for charitable contributions. Their
total deductions for debt payment include a $2,151 mortgage
payment and $91.36 for payments on priority claims. The
total of all of the Calhouns’ monthly deductions allowed
under the means test is $7,330.19. The Calhouns’ expenses,
when subtracted from their income, left a monthly net income
that was insufficient to trigger a presumption of abuse under
§ 707(b)(2).
However, the bankruptcy court proceeded under
§ 707(b)(3) and concluded that the totality of the Calhouns’
financial situation evidenced an abuse of Chapter 7. In so con-
cluding, the court found the factors set forth in Green to be
instructive, while recognizing that "the underpinnings of
Green have been removed" with the amendment of § 707(b).
The court concluded that there was no illness, calamity, dis-
ability or unemployment that precipitated the Calhouns’ filing
for bankruptcy, and that they had the ability to repay their
debt.
The Calhouns object to the court’s dismissal based on their
ability to pay, and assert that Green prohibits a dismissal on
that ground alone. They further assert that Mr. Calhoun’s
Social Security benefits should be excluded from the analysis
of their ability to pay. Finally, the Calhouns posit that the
means test is conclusive of eligibility for Chapter 7 relief.
We can readily dispense with the last argument. The means
test provides a formula by which a court can presume abuse
on the part of above-income debtors and dismiss their case on
that basis. The means test is not conclusive, the presumption
is rebuttable, and a court may still find abuse even if there is
no presumption. See In re Crink, 402 B.R. 159, 168 (Bkrtcy.
M.D.N.C. 2009). Indeed, §707(b)(3) describes precisely that
CALHOUN v. UNITED STATES TRUSTEE 7
situation and provides considerations for determining abuse
when the presumption does not arise or is rebutted.
With respect to the Calhouns’ other objections, we need not
make a determination as to the enduring applicability of the
holding in Green or the inclusion of Social Security benefits
in an analysis of the totality of financial circumstances. The
bankruptcy court found a multitude of factors weighing in
favor of abuse, and we discern no error in those findings.
The bankruptcy court ultimately found that the Calhouns
were able to pay their creditors based on the totality of the cir-
cumstances of their financial situation, including the follow-
ing evidence:
—- The Calhouns made payments in the amount of
$2,638 a month to their unsecured creditors for
twenty-two (22) months before filing for Chap-
ter 7 relief;
—- Testimony demonstrated that the Calhouns did
not file for bankruptcy as a result of sudden ill-
ness, calamity, disability, or unemployment;
—- The Calhouns’ monthly expenses "border on
the extravagant" and their budget leaves
"ample room for reduction";
—- The Calhouns paid $439 per month on two life
insurance policies, including one that would
provide for Mrs. Calhoun after Mr. Calhoun’s
death, even though Mrs. Calhoun will receive
75% of Mr. Calhoun’s monthly income from
his retirement account;
—- The Calhouns claim to spend $930 per month
on food and have expenses for cable and inter-
net, laundry and dry cleaning; and
8 CALHOUN v. UNITED STATES TRUSTEE
—- The Calhouns did not justify their excessive
transportation expenses.
This evidence amply supports the bankruptcy court’s find-
ing that granting the Calhouns’ Chapter 7 relief would be an
abuse of the provisions of that chapter. This conclusion holds
firm even without considering Mr. Calhoun’s Social Security
benefits. A finding of abuse based on the above-stated evi-
dence of the Calhouns’ excessive budget and unjustifiable
expenses does not depend on the additional $1,459 in Social
Security benefits they receive each month.
AFFIRMED