In re Alexander
| Decision Date | 30 June 2006 |
| Docket Number | No. 06-00147-8-JRL.,No. 06-00324-8-JRL.,No. 06-00177-8-JRL.,No. 05-10598-8-JRL.,No. 0600074-8-JRL.,No. 06-00811-8-JRL.,No. 06-00299-8-JRL.,No. 05-10612-8-JRL.,No. 05-10699-8-JRL.,No. 05-10652-8-JRL.,No. 06-00128-8-JRL.,No. 06-00098-8-JRL.,No. 05-10619-8-JRL.,No. 05-10625-8-JRL.,No. 05-10617-8-JRL.,No. 06-00318-8-JRL.,No. 06-00149-8-JRL.,No. 06-00300-8-JRL.,No. 06-00027-8-JRL.,No. 06-00064-8-JRL.,No. 06-00049-8-JRL.,No. 0510679-8-JRL.,No. 05-10597-8-JRL.,No. 0510689-8-JRL.,No. 06-00089-8-JRL.,06-00324-8-JRL.,06-00147-8-JRL.,06-00318-8-JRL.,06-00149-8-JRL.,06-00089-8-JRL.,06-00811-8-JRL.,0510689-8-JRL.,06-00300-8-JRL.,05-10652-8-JRL.,05-10625-8-JRL.,05-10597-8-JRL.,05-10617-8-JRL.,06-00128-8-JRL.,05-10699-8-JRL.,06-00027-8-JRL.,06-00049-8-JRL.,06-00064-8-JRL.,05-10598-8-JRL.,0600074-8-JRL.,05-10612-8-JRL.,06-00098-8-JRL.,06-00299-8-JRL.,05-10619-8-JRL.,06-00177-8-JRL.,0510679-8-JRL. |
| Citation | 344 B.R. 742 |
| Parties | In re Frances Cleo ALEXANDER, Ruth Anistead Bowens, Barbara Ann Braswell, Gladys Parker Bulluck, Louise Vaughan Cherry, Brian Elliot, Natalie Elliot, John Robert Ezell, Marilyn Labiano Ezell, Cleveland Rudolph Foster, Jr., Brenda Bell Foster, Gertrude Price Johnson, Marvin Nathaniel Johnston, Hildagarde Harrison Johnston, David Anthony Jones, Lorie Wilson Jones, John Michael Jordan, Tammie Patterson Jordan, James Knight, Jr., Carolyn Jean Knight, Robin Wayne Nordan, Darlicia Catrina Pope, Geraldine Richardson, Jesse James Rudd, Robert Martin Stokely, Cynthia Murdoch Stokely, Ronald Lawrence Thomas, Trudi Samantha Thomas, Tina Louise Watson, Richard Dean Webb, Crystal Dawn Webb, Agnes Denton Whitley, Adrian Gerand Williams, Evelyn Davis Williams, Nadine Eatmon Wilson, Vera Burton Woodard, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of North Carolina |
John T. Orcutt, Offices of John T. Orcutt, P.C., Raleigh, NC, for Debtors.
Joseph E. Bledsoe, Fayetteville, NC.
These cases are before the court on the debtors' objections to the trustee's motions for confirmation. On April 27, 2006, the court conducted a hearing on these matters in Wilson, North Carolina. Because resolution of the issues before the court will directly impact the functioning of Chapter 13, the court opened the hearing to all interested Chapter 13 debtors, trustees, and creditors in the district and authorized the filing of briefs before and after the hearing1
In this district, after reviewing a debtor's petition, schedules, statements, proposed plan, and information provided at the § 341 meeting, the trustee will move for confirmation of a plan that he asserts is consistent with the requirements of Chapter 13. The motion may or may not incorporate all of the provisions from the debtor's proposed plan. The debtor is free to object to the trustee's motion as is any other party in interest.
In the subject cases, the debtors propose plans with fixed durations subject to early termination. The early termination would take effect once the allowed secured claims, priority claims, and administrative claims required to be paid inside the plan are paid in full plus payment of any required dividend to non-priority, unsecured creditors. The proposed plans include the following language:
This Chapter 13 plan will be deemed complete and shall terminate and a discharge shall be entered, at the earlier of, the expiration of said duration [the estimated proposed duration of the plan] or the payment in full of: (1) The following claims, proposed to be paid "inside" the plan, to the extent "allowed": (1) Arrearage claims on secured debts, (ii) Secured claims (not including those to be paid "outside" the plan), (iii) Unsecured priority claims, (iv) Cosign protect claims (only where the Debtor proposes such treatment), plus (2) The required divided to unsecured, non-priority creditors, if any is required by 11 U.S.C. 1325(b). (For purposes of 11 U.S.C. 1325(b)(1)(B), "unsecured creditors" shall be deemed to mean all unsecured creditors, including both priority and non-priority unsecured creditors.)
In the motions for confirmation filed by the Chapter 13 trustee in these cases, the above language is not incorporated. The debtors, therefore, object to the trustee's motions for confirmation in these cases. The debtors assert that, in formulating a plan, they must estimate how much will be due and allowed on secured, priority, and administrative claims. The debtors, however, contend that claims are often filed and allowed in amounts less than estimated. The debtors argue that, by failing to include the possibility of early termination in the motions for confirmation, the trustee is requiring a fixed duration based upon a "pot plan" formula approach, disregarding the possibility that some claims might be allowed for less than anticipated.
The trustee asserts that, by including the early termination provisions in their proposed plans, the debtors are attempting to end the plans sooner than the applicable commitment period without full payment to unsecured creditors. The trustee contends that the applicable commitment period functions as a temporal period of either 3 or 5 years depending upon a debtor's current monthly income. 11 U.S.C. § 1325(b)(4). "Applicable commitment period" and "current monthly income" are new terms under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). The trustee argues that, based upon the plain language of 11 U.S.C. § 1325(b)(4)(B), the only way a plan can be shorter than the applicable commitment period is if all allowed unsecured claims are paid in full over a shorter period of time. The debtors disagree with the trustee's interpretation of "applicable commitment period" and assert that the term functions as a multiplier rather than as a period of time.
While the trustee made no specific objection to the debtors' calculations of disposable income under BAPCPA, he frowns upon the outcome resulting from those calculations, disagrees with the debtors' interpretation of "projected disposable income," and asserts that the debtors are violating the good faith requirement under § 1325(a)(3) by not proposing plans that make substantial contributions to unsecured creditors for the applicable commitment period.
Calculation of "Disposable Income"
Disposable income is now defined as "current monthly income ... other than child support payments, foster care payments, or disability payments for a dependent child ... less amounts reasonably necessary to be expended...." 11 U.S.C. § 1325(b)(1)(2). Current monthly income is a new term under BAPCPA defined as "the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive)" during the 6-month period preceding the commencement of the case or a date upon which the current income is determined by the court. 11 U.S.C. § 101(10A)(A). CMI excludes "benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism ... or domestic terrorism ..." 11 U.S.C. § 101(10A)(B).
Prior to the passage of BAPCPA, in order to arrive at a disposable income figure for any Chapter 13 debtor, one would subtract monthly expenses reported on Schedule J from monthly income reported on Schedule I. The court had discretion regarding whether the listed expenses were reasonably necessary for the support of the debtor and any dependents. Now, there is a bifurcated process that hinges upon whether a debtor's current monthly income is above or below the median family income for a similarly-sized household. In addition to Schedule I and J, Interim Rule 1007(b)(6) of the Federal Rules of Bankruptcy Procedure requires a debtor to file a statement of current monthly income `prepared on the official form, known as "Form B22C, Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income." The debtor reports her current monthly income in Part I of Form B22C and determines whether her currently monthly income is above or below the median family income in Part II of Form B22C. If a debtor's currently monthly income, multiplied by 12, is greater than the median family income of similarly-sized households, then "amounts reasonably necessary to be expended" are determined in accordance with § 707(b)(2)(A) and (B). 11 U.S.C. § 1325(b)(3). Thus, an abovemedian income debtor calculates her disposable income figure using the remainder of Form B22C taking allowed deductions under § 707(b)(2). To arrive at a disposable income figure for a below-median income debtor, one takes the debtor's currently monthly income from Part I of Form B22C and subtracts the total monthly expenses from Schedule J. While there is rigidity in arriving at the disposable income figure for the above-median debtor, the court has more flexibility in determining whether the expenses of the belowmedian income debtor are reasonably necessary.2
At the hearing, three of the four Chapter 13 trustees in this district reported their frustrations with this new calculation method, noting that the old I and J comparison revealed a more accurate depiction of disposable income than the calculation method employed under the new law. A debtor who may have had disposable income under the old law may now have little or no disposable income using the new calculation method. The bulk of the cases before the court involve below-median income debtors, and the results seem to differ based upon individualized circumstances regarding whether a below-median income debtor has more disposable income under the old or new law.3 However, for the seven cases of above-median income debtors, the debtors uniformly have less disposable income using the new calculation method.4 The trustees reported that this is the typical result for above-median income debtors under the new law. Perhaps Congress, in an effort to make higher income debtors pay more to their unsecured creditors, unwittingly reached the opposite result.
Despite criticisms that the old law was better, in discerning congressional intent, the starting point is the "existing statutory text" and "not the predecessor statutes." Lamie v. U.S. Trustee, 540 U.S. 526, 533, 124...
To continue reading
Request your trial
-
In re Phillips
...using Form 22C Form to determine `projected disposable income.'" Id. at 442 (citing Nance, 371 B.R. at 364 and In re Alexander, 344 B.R. 742 (Bankr. E.D.N.C.2006). See In re Berger, 376 B.R. 42 (Bankr.M.D.Ga.2007); In re Kolb, 366 B.R. 802 (Bankr.S.D.Ohio 2007); In re Tranmer, 355 B.R. 234 ......
-
In re Rush
...re Edmunds, 350 B.R. 636 (Bankr.D.S.C. 2006); In re Hardacre, 338 B.R. 718 (Bankr. N.D.Tex.2006) (same). 3. See, e.g., In re Alexander, 344 B.R. 742 (Bankr.E.D.N.C.2006) (determination made on basis of B22, not Schedules I and J); In re Guzman, 345 B.R. 640 (Bankr.E.D.Wis.2006) (same); In r......
-
In re Brady
...disposable income when a debtor's income is above the median"); In re Guzman, 345 B.R. 640, 642 (Bankr. E.D.Wis.2006); In re Alexander, 344 B.R. 742 (Bankr.E.D.N.C.2006); In re Barr, 341 B.R. 181 (Bankr.M.D.N.C.2006). Other courts have concluded that Form B22C merely provides the starting p......
-
In re Briscoe
...merely an average of her pre[-]petition income.").9 A smaller number of courts agree with Judge Leonard's conclusion in In re Alexander, 344 B.R. 742 (Bankr.E.D.N.C.2006), that "to arrive at `projected disposable income,' one simply takes the calculation mandated by § 1325(b)(2) and does th......
-
Thomas J. Izzo, Projecting the Past: How the Bankruptcy Abuse Prevention and Consumer Protection Act Has Befuddled Sec. 1325(b) and "projected Disposable Income"
...1325(b)(3), prepared as prescribed by the appropriate Official Form. FED. R. BANKR. P. [INTERIM] 1007(b)(6); see also In re Alexander, 344 B.R. 742, 746 (Bankr. E.D.N.C. 2006); In re Kibbe, 361 B.R. at 306 n.2. 59 CMI and "income as reported on Schedule I 'differ because Form B22C requires ......
-
U.S. Bankruptcy Court Judge Utschig: Current monthly income must be based on actual income.
...(Bankr.E.D.Wis. 2006); In re Hanks, 362 B.R. 494 (Bankr.D.Utah 2007); In re Barr, 341 B.R. 181 (Bankr.M.D.N.C. 2006); and In re Alexander, 344 B.R. 742 (Bankr.E.D.N.C. 2006). Judge Utschig joined those courts to have held that the B22C is not conclusive of projected income, reasoning, "Blin......
-
The Honorable Neil P. Olack, Consumer Bankruptcy Panel: Selected Hot Bapcpa Topics
...W.D. Mo. 2006). 7 348 B.R. 795 (Bankr. D. Or. 2006). 8 347 B.R. 94 (Bankr. D. Utah 2006). 9 343 B.R. 747 (Bankr. N.D. Ga. 2006). 10 344 B.R. 742 (Bankr. E.D.N.C. 2006). 11 348 F.3d 1289 (11th Cir. 2003). 12 No. 06-10492-JDW, 2006 WL 3734391 (Bankr. M.D. Ga. Dec. 19, 2006). 13 336 B.R. 678 (......