In re Barnes, Case Number 14–11079
Decision Date | 17 March 2015 |
Docket Number | Case Number 14–11079 |
Citation | 528 B.R. 501 |
Parties | In re: Mark C. Barnes, Debtor |
Court | U.S. Bankruptcy Court — Southern District of Georgia |
Zane P. Leiden, Leiden & Leiden, Augusta, GA, for Debtor.
Before the Court is an Objection to Confirmation filed by the Chapter 13 Trustee (“Trustee”) arguing that the chapter 13 plan submitted by Mark C. Barnes (“Debtor”) does not satisfy 11 U.S.C. § 1325(b)(1) because it fails to propose to pay interest on Debtor's allowed general unsecured claims and Debtor is not committing all of his disposable income into the plan. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L) and the Court has jurisdiction under 28 U.S.C. § 1334. For the following reasons, the Trustee's objection to confirmation is sustained.
Debtor filed his chapter 13 bankruptcy petition on June 18, 2014. Debtor's chapter 13 plan proposes to pay $1,125.00 for 60 months and “a 100% dividend or a pro-rata share of $7,500.00, whichever is greater.” Dckt. No. 4. According to Debtor's means test calculation, Debtor is an above median debtor with the applicable commitment period of 5 years and a monthly disposable income of $930.77. Dckt. No. 2. However, according to Debtor's schedule J, his current monthly net income is $2,102.87, well above his proposed monthly plan payment. Dckt. No. 1. Schedule I also includes a pro rated tax refund in the amount of $935.33 per month.
This matter involves two issues. The first issue is whether Debtor is proposing to contribute all of his projected disposable income into the plan. The second issue is whether Debtor must pay interest to his unsecured creditors when his plan proposes to pay a 100% dividend to his unsecured creditors over five years, but he fails to contribute all of his projected disposable income into the plan.
Section 1325(b)(1) provides:
11 U.S.C. § 1325(b)(1). The section is in the disjunctive requiring a debtor to comply with either § 1325(b)(1)(A) or § 1325(b)(1)(B) to overcome an objection by the Trustee or an unsecured creditor. Hamilton v. Lanning, 560 U.S. 505, 508–09, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010) ()(emphasis added); In re Sampson–Pack, 2014 WL 1320371, at *2 (Bankr.D. Md. March 31, 2014) (same); In re Bailey, 2013 WL 6145819, at *1 (Bankr.E.D.Ky. Nov. 21, 2013) (same) (quoting In re Jones, 374 B.R. 469, 469 (Bankr.D.N.H.2007) ); In re Winn, 469 B.R. 628, 630 (Bankr.W.D.N.C.2012) ().
The Trustee contends Debtor's plan does not satisfy 11 U.S.C. § 1325(b)(1)(A) because the language “as of the effective date of the plan-the value of the property to be distributed” requires a present value determination which requires Debtor to pay interest on allowed unsecured claims. See In re Hight–Goodspeed, 486 B.R. 462, 464 (Bankr.N.D.Ind.2012). The Trustee also argues Debtor's plan fails to satisfy subsection (B) because the Debtor is not proposing to pay all of his projected disposable income into his plan for the applicable commitment period.1
Conversely, Debtor contends he has satisfied both prongs of § 1325(b)(1). First, he claims he has satisfied § 1325(b)(1)(B) because his projected tax refund should not be included in the Trustee's calculation of his projected disposable income. With the tax refund properly excluded, Debtor argues he is devoting all of his disposable income to the plan and therefore his proposal satisfies § 1325(b)(1)(B). Second, Debtor argues § 1325 (b)(1)(A) does not require him to pay interest therefore his plan is confirmable under § 1325(b)(1)(A).
11 U.S.C. § 1325 (b)(1)(B).
The Bankruptcy Code defines the term “disposable income” to mean:
11 U.S.C. § 1325(b)(2). Current monthly income:
11 U.S.C. § 101(10A) (emphasis added). The Bankruptcy Code expressly excludes specific items from the definition of current monthly income, and tax refunds are not among the excluded items. In addition, tax refunds are a product of a debtor's wages and are generally property of the bankruptcy estate included in a debtor's projected disposable income. See In re Cook, 2013 WL 5574978 (Bankr.N.D.Ala. Oct. 10, 2013) ( ); In re Murchek, 479 B.R. 521 (Bankr.N.D.Iowa 2012) ( ); In re Myles, 2006 WL 6591834 (Bankr.N.D.Ga. March 9, 2006) (same); In re Abner, 234 B.R. 825 (Bankr.M.D.Ala.1999) (same).
This refund money would unquestionably be included in Debtor's projected disposable income if Debtor did not voluntarily elect to overwithhold. See generally, In re Hale, 2007 WL 2990760, at *2 (Bankr.N.D.Ohio Oct. 10, 2007) (); In re Rhein, 73 B.R. 285, 288 (Bankr.E.D.Mich.1987) ( ); see also In re Lawson, 361 B.R. 215, 223, n. 24 (Bankr.D.Utah 2007) (). Given the nature of Debtor's tax refund, I find the refund is included within Debtor's projected disposable income and therefore Debtor's plan fails to satisfy § 1325(b)(1)(B). See Hamilton v. Lannin g , 560 U.S. at 524, 130 S.Ct. 2464 ().
11 U.S.C. § 1325 (b)(1)(A).
Next, Debtor argues § 1325(b)(1)(A) does not require interest to be paid in 100% dividend cases where debtors propose to devote less than all of their projected disposable income into the plan. By paying less than all of his projected disposable income into the plan each month, Debtor proposes to extend the length of his chapter 13 plan to the fullest term allowed by the Bankruptcy Code, 5 years.
There is a split of authority among bankruptcy courts and treatises as to whether interest is required in these circumstances. Compare In re Hight–Goodspeed, 486 B.R. at 465 ( ); In re McKenzie, 516 B.R. 661 (Bankr.M.D.Ga.2014) (interest required); In re Sampson–Pack, 2014 WL 1320371, at *3–4 (Bankr.D.Md. March 31, 2014) (interest required); In re Rhein, 73 B.R. 285, 287 (Bankr.E.D.Mich.1987) (interest required); 7 Norton Bankr.L. & Prac. § 151:19 (3d ed.2015) (interest required); Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy, § 168.1, at ¶ 6, (4th ed.), Sec. Rev. June 7, 2004, www.Ch13online.com (interest required); with In re Richall, 470 B.R. 245, 249 (Bankr.D.N.H.2012) ( ); In re Stewart–Harrel, 443 B.R. 219, 222–24 (Bankr.N.D.Ga.2011) ( ); In re Ross, 375 B.R. 437, 444 (Bankr.N.D.Ill.2007) (same); In re Eaton , 130 B.R. 74, 77–78 (Bankr.S.D.Iowa 1991) (same); 8 Alan N. Resnick and Henry J. Sommer Collier on Bankruptcy, ¶ (13...
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