In Re Gaboury, the Chapter 13 debtors had two adult children who lived with them. Their son was 27 years old. He was “employed sporadically.” Aside from providing a roof over his head, the debtors provided little additional financial support for him. He also provided little financial support to the family. Their daughter was 23 years old. She was a full-time student. Debtors calculated the ‘means test’ based on a four-person household. The trustee objected to confirmation on the basis that the debtors’ household should exclude the adult children. In other words, the trustee argued that their household size should only be two, not four. The trustee asserted that the proper test for determining the size of a debtor’s household for the purposes of completing the ‘means test’ should be based upon the totality of the debtors’ circumstances, which is known as the ‘Economic Unit’ approach. The debtors, on the other hand, relied on either the Bureau of Census definition of “household,” which is the “heads on beds” approach, or the Internal Revenue Service practice of counting the number of dependents according to certain Internal Revenue Code regulations.

The court adopted the “Economic Unit” test, noting that, “the objective of the Means Test are completely unrelated to the functions of either the Census Bureau or the IRS” and that, “neither the Census Bureau nor the IRS deal with projected disposable income, and unlike the Court, neither is charged with adjudicating the interests of bankruptcy debtors and creditors.” In contrast, the ‘Economic Unit’ approach strives to determine, case by case, which people living in the same household constitutes an economic entity. The court concluded that the debtors’ household included their daughter, but not their son.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.