Mattson v. Howe (In re Mattson), BAP No. WW–11–1478–JuHKi.

• Decision Date: 05 April 2012
• Docket Number: BAP No. WW–11–1478–JuHKi.,Bankruptcy No. 10–50455.
• Citation: 468 B.R. 361,12 Cal. Daily Op. Serv. 4738
• Parties: In re Robbyn Dale MATTSON and Renee Diane Mattson, Debtors.Robbyn Dale Mattson; Renee Diane Mattson, Appellants, v. David M. Howe, Chapter 13 Trustee, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

12 Cal. Daily Op. Serv. 4738

468 B.R. 361

In re Robbyn Dale MATTSON and Renee Diane Mattson, Debtors.Robbyn Dale Mattson; Renee Diane Mattson, Appellants,

v.David M. Howe, Chapter 13 Trustee, Appellee.

BAP No. WW–11–1478–JuHKi.

Bankruptcy No. 10–50455.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted March 23, 2012.Decided April 5, 2012.

Matthew J.P. Johnson, Esq. argued for appellants Robbyn Dale Mattson and Renee Diane Mattson; Michael G. Malaier, Esq. argued for appellee, David M. Howe, Chapter 13 Trustee.Before: JURY, HOLLOWELL, and KIRSCHER, Bankruptcy Judges.

OPINION

JURY, Bankruptcy Judge.

Chapter 13 ¹ above-median debtors, Robbyn Dale Mattson and Renee Diane Mattson (“Debtors”), moved to modify their confirmed plan under § 1329 due to their post-confirmation increase in income. Debtors proposed to increase plan payments and shorten the term of their plan from five years to three years. The chapter 13 trustee and appellee, David M. Howe, objected to the shortened term, contending that Debtors were above-median and required to contribute their increased income to a five year plan.

The bankruptcy court granted Debtors' motion to increase their payments under the plan, but denied their request to shorten the term. The court held that in addition to satisfying the good faith requirement under § 1325(a)(3), which applies to modified plans by reference in § 1329(b)(1), Debtors also had to show a substantial, unanticipated change in their circumstances since the time of confirmation and that their proposed modification correlated to their change in circumstances. The bankruptcy court found that Debtors' proposed reduction in the term of their plan did not correlate with their change in circumstances (i.e., the increase in their income), nor did they offer any justification for reducing the length of their plan payments. This appeal followed.

Although the reasoning of the bankruptcy court for denying the shortened term deviates from our precedent, for the reasons stated below we nevertheless AFFIRM.

I. FACTS

The facts in this appeal are not in dispute and are adequately summarized in the bankruptcy court's published decision, In re Mattson, 456 B.R. 75 (Bankr.W.D.Wash.2011). We incorporate the relevant facts below and supplement them when needed.

On December 21, 2010, Debtors filed their chapter 13 petition. Their schedules listed assets including a house, four vehicles, various funds in bank accounts, personal and household furnishings and over $83,000 in a retirement account, most of which were exempted. Debtors' Schedule F listed $163,367 in unsecured debt.

Schedule I showed that Debtors were employed by the Camas School District. Ms. Mattson was a teacher, earning an average of $3,067 per month; Mr. Mattson was listed as a “substitute janitor” from which he had no earnings yet per month and also showed an average $1,200 per month from operation of a business. Debtors' combined average monthly income totaled $4,267 per month. Debtors' Schedule J reflected expenses of $4,117 per month, leaving a monthly net income of $150 per month.

Schedule I stated that Mr. Mattson had just been hired as a substitute janitor within a week before the bankruptcy filing, and while he had not commenced work yet, he anticipated getting $16.50 per hour for what work he would be given. That was expected to reduce his other income from “operation of a business.” Mr. Mattson's businesses were not identified in the schedules, but the bankruptcy court noted that the case was filed as “f/d/b/a Robbyn D. Mattson Insurance” and “d/b/a East County Battery Doctors.” Debtors' Statement of Financial Affairs Number 18 identified prior businesses as “insurance sales” and “reconditioning/sales of automotive batteries.” Schedule I further noted that Mr. Mattson also earned approximately $2,760 a year coaching sports but this income was excluded from Schedule I as it was only for two months of the year and would not be available during an average month.

Debtors' Form B22C indicated they were above-median debtors and reflected a projected disposable income of $253 per month, although the Form B22C also noted that it didn't accurately reflect Debtors' projected income because it reflected the income from Mr. Mattson's previous job and his seasonal income. Looking to the prior six-month period, Debtors argued, showed a substantially higher amount than their average income would be going forward, given Mr. Mattson's lower income from the new job and the unavailability of the seasonal income.

Debtors filed a chapter 13 plan which proposed a $150 per month payment for 60 months, for total payments of $9,000. Those payments went to Debtors' attorney and unsecured creditors, who were expected to receive 2% on their claims. Debtors proposed to pay directly the secured creditors on their home and one vehicle. The bankruptcy court confirmed Debtors' plan by order entered on March 2, 2011.

Just over two and a half months later, on May 24, 2011, Debtors filed amended Schedules I and J. On amended Schedule I, Mr. Mattson was now listed as a “janitor” (rather than substitute) and the average monthly income for both Debtors had increased to a total of $5,936 per month. Ms. Mattson's income had increased slightly more than $400 a month, and Mr. Mattson's income had doubled, to over $2450 per month. The amended Schedule J listed higher expenses totaling $4,906 per month, nearly $800 per month higher than the original schedule. While the amended Schedule J no longer reflected business operation expenses of $288 per month, indicating Debtors' apparent abandonment of Mr. Mattson's previous business, expenses in nearly every other category increased. Some of the increases reflected potentially expected changes due to Mr. Mattson's increase to full time employment as a janitor (increases in transportation and clothing, for example). However, the amended Schedule J also included increased expenses in other areas (for example, electricity and heating fuel for Debtors' home, home maintenance, food, medical and dental expenses, vehicle maintenance and licensing, and recreation and entertainment). In total, though, the amended Schedule I and Schedule J showed an overall increase in monthly excess income to $1,030 per month.

Approximately three weeks after the amended schedules were filed, or just over three months after the plan had been confirmed, Debtors filed their amended plan and a motion for modification on June 15, 2011. In their motion to modify, Debtors stated that modification was necessary because their income had increased. Under the amended plan and motion, Debtors' plan would be modified to provide for increased payments of $900 per month in June 2011 and then $1,000 per month beginning with the July 2011 payment and the term of the plan would be reduced from 60 to 36 months. Debtors' amended plan proposed to pay their attorney and unsecured creditors, who would receive a payout increasing from $4,000 to $30,000.

The chapter 13 trustee objected to Debtors' motion, arguing that Debtors should be required to pay the increased $1,000 monthly payment for the confirmed commitment period of 60 months. Under the originally filed means test, from which Debtors had increased their income, Debtors had a positive monthly disposable income of $253 per month. Given the positive disposable income figure, the trustee argued, Debtors were not permitted under the Ninth Circuit's decision in Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir.2008), to seek a deviation from the 60 month commitment period and Debtors cited no authority in their motion which would allow them to do so. The trustee maintained that because Debtors' income had increased there was no reason why Debtors could not make payments for 60 months. Lastly, the trustee argued that Congress clearly intended that above-median debtors propose and complete a 60 month plan.

Debtors replied that they were not bound to any predetermined commitment period because income based calculations under § 1325(b) were not applicable to modifications under § 1329 under our holding in Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (9th Cir. BAP 2005). Debtors argued that as long as their proposed amended plan was filed in good faith and met the other requirements of chapter 13 incorporated into § 1329, they could reduce the duration of the plan, without consideration of the applicable commitment period in the confirmed plan. Debtors also cited other bankruptcy court decisions in the Ninth Circuit which they contended authorized the debtor to amend his or her plan to less than 60 months. In re Hall, 442 B.R. 754, 760–61 (Bankr.D.Idaho 2010); In re Ewers, 366 B.R. 139, 143 (Bankr.D.Nev.2007).

After a hearing on July 5, 2011, the matter was submitted and the bankruptcy court issued its published opinion. In it, the court decided that a predictable test for crafting and reviewing plan modifications was preferable to the good faith analysis espoused in In re Sunahara. Accordingly, the court held that, in addition to the Sunahara good faith analysis, plan modification under § 1329 also requires the moving party to show that there has been a substantial change in the debtor's circumstances after confirmation “which was unanticipated or otherwise could not be taken into account at the time of the confirmation hearing, and that the change in the plan correlate[s] to the change in circumstances.” In re Mattson, 456 B.R. at 82 (emphasis in original). In light of this standard, the bankruptcy court found that Debtors' proposed modification to shorten the term of their plan did not correlate with the change in circumstances—their increased income. Id.

The bankruptcy court also addressed the relevance of the applicable commitment period to plan modifications. The court found that § 1329(c), which states that a plan “modified under this section may not provide for...