Conrad v. Dehart (In re Conrad), Case No. 1:16-bk-03844-HWV
| Decision Date | 13 August 2019 |
| Docket Number | Case No. 1:16-bk-03844-HWV |
| Citation | 604 B.R. 163 |
| Parties | IN RE: Robert P. CONRAD, Jr., and Lisa Lanocha Conrad, Debtor Robert P. Conrad, Jr., and Lisa Lanocha Conrad, Movant v. Charles J. Dehart, III Standing Chapter 13 Trustee, Respondent/Objector |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
Michael R. Caum, Shrewsbury, PA, for Debtor.
Motion to Modify Plan 11 U.S.C. § 1329
In this case the court considers the Motion of Robert P. Conrad, Jr. and Lisa Lanocha Conrad (the "Debtors") Seeking Leave to Modify their Confirmed Chapter 13 Plan (the "Motion to Modify") pursuant to § 1329(a)(1) of Title 11, U.S.C.1 The Chapter 13 Trustee, Charles J. DeHart, III, Esquire (the "Trustee"), has objected to the Motion on multiple grounds, including a failure on the part of the Debtors to establish a "change in circumstances" from the time they filed their voluntary chapter 13 bankruptcy petition in this case.
This court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1334(a). This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1), 157(b)(2)(A) and (b)(2)(L).
On September 17, 2016, the Debtors filed their chapter 13 petition. Their schedules listed assets including a house, three vehicles, one utility trailer, a 17-foot boat, various firearms, clothing and costume jewelry, funds in several bank accounts, personal and household furnishings and an interest in a pension, all of which were exempted. Debtors' Schedule E listed $48,142.98 in priority unsecured debt and Schedule F listed $29,516.00 in nonpriority unsecured debt.
Schedule I showed that Mr. Conrad was employed as an Emergency Vehicle Driver for the Baltimore City Fire Department earning an average of $5,866.08 per month and that Mrs. Conrad received $3,593.66 per month from a pension or other retirement income. Schedule I also listed other monthly income in the amount of $100.00 per month in the form of a monthly contribution from a step-daughter. The Debtors' combined average monthly income therefore totaled $7,781.87 per month. The Debtors' Schedule J reflected expenses of $7,011.12 per month, leaving a monthly net income of $770.75 per month.
The Debtors' Forms 122C-1 and 122C-2 (collectively, the "Means Test") indicated they were above-median debtors and reflected a projected disposable income of $2,000.04 per month. The Debtors subsequently filed several plans, each of which were objected to by the Trustee because they did not submit all the Debtors' projected disposable income as calculated by the Means Test. Unable to overcome the Trustee's objections, the Debtors eventually filed a Third Amended Chapter 13 plan which proposed a tiered payment schedule ranging from $1,415.00 to $2,460.00 per month over 48 months totaling $94,480.00. Accounting for payments made by the Debtors under their prior plans, the total base amount of the Third Amended Plan was $105,990.00. Aside from small payments to secured creditors, the bulk of distributions under the Third Amended Plan were to be paid to the Debtors' attorney and unsecured creditors, who were expected to receive 100% on their claims. The Debtors proposed to pay the secured creditors on their home directly. The Trustee did not object to confirmation of the Debtors' Third Amended Plan and it was confirmed by order entered on January 31, 2018.
Just over seven months later, on August 3, 2018, the Debtors filed their Motion to Modify. In their Motion to Modify, the Debtors stated that modification was necessary because the "Debtor has suffered a reduction in income and an increase in expenses." Motion to Modify 4a, ECF No. 76. Under the Motion to Modify, the Debtors' confirmed plan would be modified to provide for reduced payments of $25.00 per month for the months of July 2018 through September 2018 and a plan payment of $914.00 per month beginning in October 2018 and continuing through November 2021. Payments under the plan as modified totaled $34,807.00. Base funding of the plan was therefore reduced from $105,990.00 under the confirmed plan to $49,147.00 under the plan as modified. The proposed term of the plan was not altered. However, the Debtors' plan as modified did propose to reduce distributions to unsecured nonpriority creditors from 100% to approximately 21%. The Trustee objected to the Motion to Modify on August 23, 2018 asserting that it did not submit all the Debtors' projected disposable income as calculated by the Means Test.
The Debtors filed an amended Schedule J on August 24, 2018 demonstrating an increase of $340.81 in monthly expenses from the commencement of this case through the filing of the Motion to Modify. See Schedule J, ECF No. 25; see also Amendment to Schedule J, ECF No. 79. The Debtors next filed an Amended Schedule I on September 11, 2018 demonstrating that Mr. Conrad's monthly gross income had increased from $5,866.08 to $6,308.75, a difference of $442.67. The Amended Schedule I also demonstrated that Mr. Conrad's monthly net income had increased from $4,088.21 to $4,525.35, a difference of $437.14. Mrs. Conrad's income from her pension remained the same, but the contribution from the step-daughter did not appear on the Amended Schedule I. In total, the amended Schedule I and Schedule J showed an overall decrease in monthly disposable income from $770.75 to $767.08, a difference of $3.67 per month.
Initial argument was heard on November 8, 2018, after which the parties filed briefs. A final hearing on the Motion to Modify was held on January 9, 2019 where additional arguments were heard. The matter is now ripe for a decision.
The Trustee argues that this court should not allow the Debtors to modify their confirmed chapter 13 plan without a showing of a substantial and unanticipated post-confirmation change in their financial circumstances. This change, according to the Trustee, must be established by comparing the Debtors' current financial condition to their financial condition as represented by their Means Test at the time of filing. The Debtors do not dispute that a substantial and unanticipated change in their financial circumstances must be shown to support the Motion to Modify, but they argue that any such change must be established by comparing their current financial condition to their financial condition as it existed at the time of the confirmation hearing, rather than as represented by the Means Test at the time of filing.
The parties, however, have not referenced any language in § 1329(a) to support their shared position that a substantial and unanticipated change in financial circumstances is required to pursue modification of a confirmed plan. Nor is the court aware of any such language. The question thus presented is whether a party seeking post-confirmation modification of a plan pursuant to § 1329 must first demonstrate that the debtors have experienced a substantial and unanticipated change in their financial circumstances and, if so, how that change is determined.
The United States Court of Appeals for the Third Circuit has not commented on § 1329 modifications, though four other circuits and two additional Bankruptcy Appellate Panels ("BAPs") have analyzed this issue. See In re Murphy , 474 F.3d 143, 151 (4th Cir. 2007) ; In re Meza , 467 F.3d 874 (5th Cir. 2006) ; In re Barbosa , 235 F.3d 31, 41 (1st Cir. 2000) ; In re Witkowski , 16 F.3d 739 (7th Cir. 1994) ; In re Brown , 219 B.R. 191, 195 (6th Cir. BAP 1998) ; In re Powers , 202 B.R. 618, 622 (9th Cir. BAP 1996). These cases are instructive. The parties here have not relied upon any of these circuit or BAP decisions, however, except to the extent that they are cited in In re Eckert , 485 B.R. 77 (Bankr. M.D. Pa. 2013) and In re Mellors , 372 B.R. 763 (Bankr. W.D. Pa. 2007), both of which the parties rely upon to support their position. Eckert and Mellors also cite numerous bankruptcy court decisions that support the proposition that a modification under § 1329 is appropriate only upon a demonstration of a "change in circumstances." In relying upon these authorities, the parties present two issues. The first is whether the plain language of § 1329(a) requires a threshold change in circumstance before a motion to modify can be brought under that section. The second is whether the common law doctrine of res judicata applies to the provisions of a confirmed plan, thus imposing a change in circumstance requirement before a motion to modify can be brought under § 1329(a).
It is well settled that the first canon of statutory interpretation is that a court must begin, and where appropriate end, with the statutory language. In re Philadelphia Newspapers, LLC , 599 F.3d 298, 304 (3d Cir. 2010) (citing Conn. Nat'l Bank v. Germain , 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391, (1992) (internal citations and quotations omitted). To determine whether language is unambiguous, courts should "read the statute in its ordinary and natural sense." Id. (citing Harvard Secured Creditors Liquidation Trust v. I.R.S. , 568 F.3d 444, 451 (3d Cir. 2009). A statutory provision is ambiguous only where the disputed language is "reasonably susceptible of different interpretations." Id. (citing Dobrek v. Phelan , 419 F.3d 259, 264 (3d Cir. 2005) (quoting Nat'l R.R. Passenger Corp. v. Atchinson Topeka & Santa Fe Ry. Co. , 470 U.S. 451, 473 n. 27, 105 S.Ct. 1441, 84 L.Ed.2d 432, (1985) )). Where a "statute's language is plain, the sole function of the courts—at least where the disposition required by the text is not absurd—is to enforce it according to its terms." Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A. , ...
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