In re Austin, 07-10031.

• Decision Date: 07 August 2007
• Docket Number: No. 07-10031.,07-10031.
• Citation: 372 B.R. 668
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re Cory S. AUSTIN and Lucinda Hill Austin, Debtors.

Page 668

372 B.R. 668

In re Cory S. AUSTIN and Lucinda Hill Austin, Debtors.

No. 07-10031.

United States Bankruptcy Court, D. Vermont.

August 7, 2007.

Michelle Kainen, Esq., White River Junction, VT, for the Debtors.

Jan Sensenich, Esq., White River Junction, VT, for the trustee-movant.

MEMORANDUM OF DECISION

OVERRULING THE TRUSTEE'S OBJECTION TO THE DEBTORS' CHAPTER 13 PLAN AND GRANTING CONFIRMATION OF THE PLAN

COLLEEN A. BROWN, Bankruptcy Judge.

This case presents questions of first impression in this District concerning Chapter 13 plan confirmation requirements for above-median debtors under section 1325(b), as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). The Trustee in this case has objected to confirmation of the Debtors' plan, asserting that: (1) the Debtors are not devoting all of their projected disposable income to the plan; (2) the Debtors' payments on a backhoe lease — a payment in excess of their proposed plan payment — constitutes an unreasonable and unnecessary expense; and (3) the Debtors' plan is not proposed in good faith. To adjudicate the objection raised, the Court must decide if amended § 1325(b) requires courts to use the figures from the means test, or Schedules I and J, when determining the projected disposable income an above-median debtor must devote to a Chapter 13 plan.

For the reasons set forth below, the Court overrules the Trustee's objection. The Court holds that the plain language of § 1325(b), as amended by BAPCPA, requires courts to rely exclusively on the means test when computing the minimum Chapter 13 plan payment for above-median debtors and, according to the means test, the Debtors are devoting all of their disposable income to the Plan. As to the second ground for the objection, the Court holds that it does not have the discretion to determine the reasonableness of payments that these above-median Debtors propose to make on the backhoe, since that debt was current on the bankruptcy filing date. Third, the Court holds that the amount of tie Debtors' plan payment does not determine whether the Plan was proposed in good faith and there is no other allegation before the Court to warrant a determination that the Debtors' Plan was not filed in good faith. Accordingly, the Court confirms the Debtors' Plan.

JURISDICTION

The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. § 157(b)(2)(A) & (L).

THE FACTS

Cory S. Austin and Lucinda Hill Austin ("the Debtors") commenced this case by filing a petition and schedules under Chapter 13 on January 24, 2007 (doc. # 1). The Debtors scheduled $55,025 in secured debt plus $175,410 in unsecured business and personal debt. On their Schedule G, Executory Contracts and Unexpired Leases, they included a "48-month lease on backhoe. Payment shared with Debtor's father." Schedule I of their petition listed the Debtors' combined average monthly income, as of the filing date, at $4,814. Schedule J indicated that the Debtors' monthly expenses were $4,534, leaving a monthly net income of $280. In the "Installment payments" section of Schedule J, the Debtors allocated $325 per month for "1/2 Backhoe Payment."

The Debtors filed an Official Form B22C, the "Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income," known as the "means test," with their petition. The means test form, promulgated by the Judicial Conference, tracks the text of the amended § 1325(b).¹ By itemizing their income and allowable deductions according to the directions on the form, debtors determine if they are above- or below-median, what their applicable commitment period is and, if abovemedian, what their monthly disposable income is for purposes of § 1325(b)(2). Part I of the means test form requires debtors to calculate their income in a way that "must reflect average monthly income received from all sources, derived during the six calendar months prior to filing the bankruptcy case" (means test, line 1). The Debtors calculated their monthly income to be $5,974 (means test, line 11). Their annualized income (multiplying the monthly figure by 12) came to $71,688 (means test, line 21), which put them above the $63,753 median family income for a three-member household in Vermont. As "above-median debtors," the means test requires the Debtors to determine their disposable income as specified in § 1325(b)(3) (see Part III of the means test form). Also, as above-median debtors, the Debtors' applicable commitment period is five years (means test, line 17).

Part IV of the means test form is entitled "Calculation of Deductions Allowed under § 707(b)(2)." In this part of the form, above-median debtors calculate their expenses as deductions from income. The deductions on the form are divided into four Subparts: Subpart A contains deductions under national Internal Revenue Service ("IRS") standards for items such as food, clothing, household supplies, and personal care; deductions under local IRS standards for housing and utilities, and transportation²; and "Other Necessary Expenses" such as taxes, life insurance, and child care (means test, lines 24-38). Subpart B, "Additional Expense Deductions under § 707(b)," contains deductions for items such as health insurance, home energy costs, and charitable contributions (means test, lines 39-46). Subpart C, "Deductions for Debt Payment," contains deductions for secured claims, priority claims, and Chapter 13 administrative expenses (means test, lines 47-51). The Debtors listed the backhoe lease in Subpart C as a $195 monthly payment³ which represented, in compliance with the instructions on the form, the balance due amortized over sixty months (means test, line 47). The Debtors' calculated their "Total Deductions Allowed under § 707(b)(2)" in Subpart D as $6,084.15 (means test, line 52). Subtracting their total deductions from their total current monthly income, their bottom-line "Monthly Disposable Income Under § 1325(b)(2)" amounted to negative $110.15 (means test form, line 58).

The Debtors' Chapter 13 Plan (doc. # 2) proposes a payment of $280 per month for 60 months and specifies that this amount will be distributed as follows: (1) payment in full of Debtors' counsel fees; (2) a 10% commission to the Chapter 13 Trustee; (3) payment in full of past-due town property taxes; (4) payment of the arrears on the first mortgage against their residence; and (5) a dividend of 4% to the creditors holding allowed unsecured claims. The plan payment corresponds to the difference between income and expenses on Schedules I and J, rather than to the disposable income on the means test (effectively, zero).

THE PARTIES' ARGUMENTS

The Trustee argues that since the Debtors propose to retain their backhoe and to pay $325 per month on the lease for that equipment, the Court must deny confirmation of the Plan. Specifically, he asserts that this expense permits the Debtors to commit less than all of their "projected disposable income" to the Plan and to pay ongoing expenses that are not reasonable and necessary. As a result, he contends that the Plan was not proposed in good faith (doc. # 22). The Trustee acknowledges the post-BAPCPA split of authority on the issue of what test should be applied to determine the amount an above-median debtor must commit to his or her plan. He zealously endorses the holdings of those courts that have relied upon debtors' actual income and expenses on Schedules I and J — rather than the means test — to determine the sufficiency of a proposed plan payment, and that have required the monthly expenses paid during the term of the Plan to be reasonable as a condition of confirmation. He insists that unless the Debtors redirect the monies they propose to pay for the backhoe to their plan payment, the Plan fails to meet the confirmation requirements.

The Debtors respond that: (1) they have properly calculated their "projected disposable income" by projecting the "disposable income" figure derived from their means test, zero, forward through the sixty months of the Plan and have proposed a plan payment that is in excess of this amount; (2) the reasonableness of their ongoing backhoe payment has no place in the computation of their disposable income or whether the Plan is eligible for confirmation; and (3) it is improper to rely on the amount of their plan payment in assessing whether their Plan was proposed in good faith (doc. # 23). The Debtors, too, acknowledge the split of authority concerning the proper method for calculating "projected disposable income" for abovemedian debtors. However, they argue that axioms of statutory construction require the Court to overrule the Trustee's objection, based upon the plain language of 1325(b), and the fact that they do not use the backhoe for any business or income-generating purpose is irrelevant. At oral argument, the Debtors asserted that their voluntary reduction in spending on other allowed expenses, and their voluntary increase in the plan payment above the amount required by the means test, justify their retention of the backhoe during the term of the Chapter 13 plan and further support confirmation of their Plan.

THE PERTINENT STATUTES

BAPCPA significantly amended the section of the Bankruptcy Code which sets forth the requirements for confirmation of a Chapter 13 plan. See § 1325. In particular, BAPCPA revolutionized the procedure by which debtors determine the required plan payment. The crux of the issue presented is ` a dispute over how to interpret the text of the amended statute. The statutory interpretation issue focuses on the meaning of "projected disposable income" in § 1325(b)(1)(B). That statute provides:

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan —

(A) the value of the property to be...