In re Walker, 383 B.R. 830,  2008 WL 696659 (Bankr. N.D. Ga. March 5, 2008)(Drake).   The primary issue was whether Chapter 7 debtors were permitted to support their adult children in college when those funds would have been available to their creditors in a Chapter 13 plan.

As of the time of the hearing, the Debtors’ monthly post-petition debt service included a $157 per month payment to Circuit City for a big-screen television and other electronics and computer equipment; a $139 per month payment on a debt reaffirmed with the Bank of Coweta, a monthly student loan payment of $150 for Timothy and a monthly student loan payment of $69 for Matthew; a payment of $197 per month on the 2001 Dodge Ram; a payment of $309 per month for a 2005 Ford F-150; and a payment of $430 per month for the reaffirmed debt that is secured by the 2001 Ford F-150. The Debtors also testified that they give approximately $500 per month to Timothy and Matthew for spending money and $300 per month to Matthew to assist with his rent. Accordingly, the Debtors’ combined monthly expenses and debt payments total $5796.

Many of these installment payments and household expenses were incurred for and are made for the benefit of the Debtors’ two adult sons. These expenses include the payment of $309 per month for Timothy’s vehicle (the 2005 Ford F-150), $66 per month for car insurance on Timothy’s vehicle, $500 to $1,000 per semester for Timothy’s books, $120 per month for cellular phones for Timothy and Matthew, the payment of $430 per month for Matthew’s vehicle (the 2001 Ford F-150), $144 per month for car insurance, $300 to $400 per semester for Matthew’s books, $500 per month for spending money for both sons, and $300 per month for Matthew’s apartment rent. As noted above, the Debtors also make a payment of $69 per month on a student loan incurred to permit Matthew to attend college and are repaying a student loan incurred for Timothy’s tuition with payments of between $150 and $200 per month. The Debtors also pay for the *835 annual registration and taxes associated with both vehicles.

Having considered the testimony of the Debtors and the evidence before the Court, the Court finds that the totality of the Debtors’ financial circumstances indicates that granting relief under Chapter 7 would be an abuse. The Debtors have the income to pay a meaningful dividend to unsecured creditors. The impetus for the filing of their petition was not illness, calamity, or job loss. Instead, it appears to the Court that the Debtors simply reordered their priorities once their two oldest children reached college age. The Debtors have re-directed their income to enable them to provide Timothy and Matthew with cell phones, spending money, book money, rent assistance, vehicles, and car insurance. The Court is not implying that supporting college-age children is not admirable when parents have the means to do so. However, the Court agrees with its learned colleagues that supporting adult children at the expense of unsecured creditors is not permissible. See In re Hess, 2007 WL 3028422 (Bankr.N.D.Ohio Oct. 15, 2007) (debtor’s contribution of $300 per month to support her 24-year old son while attending optometry school was not proper deduction from income); In re Pfahler, 2007 WL 2156401 (Bankr.N.D.Ohio 2007) (finding abuse where debtor had stable employment and income and was spending $350 per month for the support of his college-age son) (citing U.S. Trustee v. Harrelson, 323 B.R. 176, 179 (W.D.Va.2005), In re Staub, 256 B.R. 567, 571 (Bankr.M.D.Pa.2000), and In re Studdard, 159 B.R. 852, 856 (Bankr.E.D.Ark.1993)); In re Hicks, 370 B.R. 919, 923 n. 7 (Bankr.E.D.Mo.2007) (holding that the debtor was not entitled to deduct under section 707(b)(2) expenses of college-age son because “[f]or an adult to be able to attend college as a full-time student is a luxury, not a necessity, and the costs associated with such attendance do not constitute expenses incurred for the provision of a person’s necessary care and support”); In re Haar, 373 B.R. 493 (Bankr.N.D.Ohio 2007) (expenses for maintenance of two cars and cell phones for debtors’ adult daughters were not appropriate allocation of debtor’s financial resources). 

The Debtors have no legal obligation to support Timothy and Matthew, who are now able-bodied adults. The Debtors propose to shift the use of their income from paying their own obligations to enable their adult children to attend college full time without the burden of working to support themselves. This results in the devotion of at least $1860 per month to support Timothy and Matthew.FN10 Without these expenses, the Debtors’ monthly expenses and payments for debt service would total $3,788.16.FN11 Even with the Debtors’ lower projected monthly net income of $5,000, the Debtors would be left with approximately $1200 per month with which to pay a substantial portion of their unsecured debt. Permitting a discharge in this case would be an abuse, as the Debtors are not needy. While it would take time and sacrifice to do so, the Debtors can repay a portion of their debt. Contribution of this $1200 per month would amount to $72,000 over the life of a 60-month chapter 13 plan. Even assuming that the $83,448 in scheduled unsecured debt is increased substantially by the filing of deficiency claims by the mortgage and car creditors, contribution of these funds to a chapter 13 plan would still result in a worthwhile dividend to unsecured creditors.

 Notably, the Court listed several legal issues that have not been settled (after the jump):

The Court has not yet considered many of the legal issues that will be relevant to this determination, such as: 1) whether, in a chapter 13 case, an above-median income debtor is entitled to deduct secured debt payments for collateral that has been surrendered for purposes of determining projected disposable income, compare In re Oliver, 2006 WL 2086691 (Bankr.D.Or.2006) (deduction permitted), with In re Spurgeon, 378 B.R. 197 (Bankr.E.D.Tenn.2007) (deduction not allowed) and In re Crittendon, 2006 WL 2547102 (Bankr.M.D.N.C. Sept. 1, 2006) (same); 2) whether the requirement that a plan be filed in good faith requires a chapter 13 debtor to propose a dividend when projected disposable income is a negative number or zero, but the debtor has significant actual disposable income available for payment to unsecured creditors, compare In re Barr, 341 B.R. 181 (Bankr.M.D.N.C.2006) (not appropriate to consider whether debtor is contributing all actual disposable income to plan payment as part of good faith analysis) and In re Winokur, 364 B.R. 204 (Bankr.E.D.Va.2007) (if the debtor has proposed a plan payment that complies with the mathematical requirements of  section 1325(b), the debtor has “done everything Congress asked him to do” and such a plan is proposed in good faith), with In re Edmunds, 350 B.R. 636 (Bankr.D.S.C.2006) (because debtor’s actual income and expenses showed that they had the ability to pay a greater amount to unsecured creditors than plan proposed, debtors’ plan was not proposed in good faith), and In re McGillis, 370 B.R. 720 (Bankr.W.D.Mich.2007) (if debtor’s plan payment complies with the requirements of section 1325(b), court may still deny confirmation on the basis that debtor’s failure to make an honest effort to repay creditors is a lack of good faith); and 3) whether the debtor’s actual expenses may be deducted in lieu of the 707(b)(2) means test expense deductions, compare In re Hughey, 380 B.R. 102 (Bankr.S.D.Fla.2007) (holding that a debtor’s actual income can be considered for purposes of determining projected disposable income, but the debtor’s actual expenses may not be considered), with In re Ries, 377 B.R. 777 (Bankr.D.N.H.2007) (for purposes of projected disposable income, above-median income chapter 13 debtor’s expenses are calculated in accordance with section 707(b)(2), but debtor or party opposing confirmation can rebut the amount of those expenses with evidence of actual expenses), and In re Edmunds, 350 B.R. 636 (Bankr.D.S.C.2006) (when determining “projected disposable income,” court can consider the debtor’s actual income and actual expenses). It is not appropriate to resolve these issues in a case in which no chapter 13 case is pending and may never be pending, as the Debtors may determine that a non-bankruptcy resolution is preferable to conversion. In re Carney, 2007 WL 4287855 (Bankr.N.D.Ohio Dec. 5, 2007) (“Contrary to the implication of Debtors’ argument, the court does not believe that it is necessary, or even possible, in this case to decide the legal and factual issues that might arise should they elect to convert to Chapter 13 in order to analyze whether it would be an abuse for them to obtain a Chapter 7 discharge.”).