I have commented on this blog about the Baer chapter 7 bankruptcy filing, the heir of the Brandeis fortune.
Now a creditor, the Nebraska Economic Development Corporation (NEDC), has objected to the bankruptcy as being abusive citing the outrageous monthly expenses listed by the Baers.
Generally, the U.S. Trustee, the government agency that examines abuse under the bankruptcy code, will object and file a motion to dismiss chapter 7 cases where expenses are excessive and where the debtor has disposable monthly income to pay to creditors.
In this case, the NEDC has cited as excessive, the Baer’s monthly food budget of $2,000.00, home maintenance expenses of $1,500.00, recreation expenses of $850.00 a month, and clothing budget of $800.00 a month. Additionally, the Baers spend $300.00 a month on laundry and dry cleaning.
The U.S. Trustee recognizes an IRS standard living expense for a determination of whether a filing is abusive.
Clearly, the expenses listed by the Baers is nowhere close to the IRS standards:
The NEDC also contends that the Baers have budgeted $4,500.00 a month in estate and retirement planning and that this amount should be paid to creditors. The NEDC states that the disposable monthly income the Baers have, after reducing the listed expenses to allowable standards, should be paid to creditors in a chapter 13 Plan.
The Baer’s attorney makes two arguments: 1) The Baers have too much debt to qualify for chapter 13; and 2) The disposable income would be insignificant in relation to the millions in debt the Baers hold.
The attorney is correct on the first argument. The Baers debt is over the limits set under the bankruptcy code for chapter 13, but the Baers would be able to convert the case to chapter 11 and pay a portion of the disposable income to creditors under a reorganization plan.
The attorney’s second argument is a poor attempt to shuffle the overwhelming abuse and bad faith apparent from the outrageous expenses. The Baers list monthly income of $20,000.00. If we were to agree that allowable monthly expenses are $8,000.00 a month (which would be $4,000.00 above the normal monthly expenses I see on a daily basis as an Omaha Bankruptcy Attorney) there would be $12,000.00 a month in disposable monthly income. Over the life of a 60 month plan, $720,000.00 would be paid to creditors, an amount of approximately 5% of creditor claims. Additionally, as reported on this blog, the Baers retirement may be considered excessive, not exempt under Nebraska law, and may be paid out to creditors. Also, the Baers may be entitled to an inheritance which would be paid to creditors as well. Even as little as 5% repaid to creditors cannot be claimed to be insignificant. If that were the case, then I would have quite a few of my chapter 13 filings that pay less than 5% to creditors, end up being chapter 7 cases.
The Baers have until August 30, 2010 to file a resistance to the Motion to Dismiss filed by NEDC. At the time of this publishing on August 28, 2010, the Baers have yet to file a resistance.