In re Demonica

• Decision Date: 31 July 2006
• Docket Number: No. 06-00094.,06-00094.
• Citation: 345 B.R. 895
• Parties: In re Richard C. DEMONICA, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

345 B.R. 895

In re Richard C. DEMONICA, Debtor.

No. 06-00094.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

July 31, 2006.

COPYRIGHT MATERIAL OMITTED

Kerrie S. Neal, Zalutsky and Pinski, Ltd., Chicago, IL, for Debtor.

MEMORANDUM OPINION SUSTAINING THE CHAPTER 13 TRUSTEE'S OBJECTION TO CONFIRMATION

MANUEL BARBOSA, Bankruptcy Judge.

This matter is before the Court on the objection to confirmation brought by Glenn Stearns, the standing chapter 13 trustee (the "Trustee"). The Trustee is represented by Attorney Carolyn A. Suzzi. Richard C. Demonica, the debtor (the "Debtor"), is represented by Attorney Kerrie Neal of Zalutsky & Pinsky. For the reasons set forth below, the Trustee's objection to confirmation is sustained.

JURISDICTION

This Court has jurisdiction to decide this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L).

INTRODUCTION

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") became effective on October 17, 2005. One of the most significant modifications is new § 707(b), commonly referred to as the "means test." The means test is akin to a formula that incorporates figures used by the IRS. In order to implement the use,f the means test, BAPCPA requires the debtor to file a statement of current monthly income. Fed. R. Bankr.P. 1007(b)(1). The Interim Rules and Official Forms Implementing the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005¹ contain three forms to comply with the reporting and calculation of current monthly income. Form B22 has three versions, A, B and C, for use in Chapters 7, 11 and 13, respectively. "The forms contain a series of line entries, divided into columns providing for separate entries by the debtor and the debtor's spouse." (Form B22 committee note para. B.) "The forms provide entry lines for each of the specified expense deductions under the IRS standards, and instruction on the entry lines identify the web pages where the relevant IRS allowances can be found." Id.

In the context of a Chapter 7 petition, the means test is used to determine whether the filing creates a presumption of abuse. Form B22 is used in every Chapter 13 case to determine whether a debtor earns below or above median family income. Median family income is defined as the median family income both calculated and reported by the Bureau of the Census. 11 U.S.C. § 101(39A).² When a debtor's income is below the median family income, the applicable commitment period for confirmation of the plan pursuant to § 1325(b)(4) is three years.³ In addition, "disposable income" is defined as "current monthly income" less "amounts reasonably necessary to be expended ..." in accordance with § 1325(b)(2)(A) and (B). However, if the debtor's income is above the median family income, the applicable commitment period for the plan is "not less than five years" pursuant to § 1325(b)(4). Further, reasonably necessary expenses are determined in accordance with § 707(b)(2)(A) and (B).

This matter involves the application of Form B22C in the context of confirmation of a Chapter 13 plan proposed by a debtor who earns above the median family income.

FACTS

On January 5, 2006, the Debtor filed a Chapter 13 petition. The Debtor is married, but his wife is not a debtor in this case. Schedule A lists a time share but no real estate. Schedule B does not list any vehicles. Schedule F lists unsecured debt totaling $116,450.14. The Debtor's Amended Schedule I indicates that the Debtor has three dependents, two minor children and his 74 year-old mother. It also indicates his gross monthly income totals $6,250.00 plus commissions of $4,385.00 and that his spouse is unemployed. Schedule I lists a rent or home mortgage expense of $1,652.00, real estate taxes of $560.00 and automobile installment payments of $487.00 and $352.81.

The Debtor filed an Amended Plan (the "Plan") and Amended Statement of Current Monthly Income ("CMI") on March 6, 2006. The CMI is calculated on Form B22C. Part I of Form B22C indicates that the Debtor's income totals $17,336.17 per month. That number multiplied by 12 (pursuant to § 1325(b)(3)) is otherwise known as the annualized income and totals $208,034.04. This amount exceeds the applicable median family income for a family of five in the State of Illinois.⁴ Therefore, the amounts reasonably necessary to be expended under § 1325(b)(2) must be determined pursuant to § 707(b)(2)(A) and (B). 11 U.S.C. § 1325(b)(3).

Part IV of Form B22C itemizes the deductions. The Debtor lists deductions totaling $14,818.81. The total expenses deducted from the total income, as calculated on the Debtor's CMI, results in $2,517.36 of disposable income. However, Part VI contains additional expense claims. The Debtor lists an additional $1,317.81 of monthly expenses. Thus, the Plan provides for plan payments of $1,202.00⁵ for 60 months. The Plan also indicates under the Special Terms provision that the time share payments will be made outside the Plan by his spouse and her grandmother.

The CMI lists the deductions allowed under § 707(b)(2) using the following amounts:

                line 25A: non-mortgage expense                      $ 496.00
                Line 25B: mortgage rent expense                     $1373.00
                line 26: housing adjustment
                "To pay mortgage and T & I on residence but
                title to property in grandmother's name"            $ 937.00
                line 27: operation of 2 vehicles                    $ 422.00
                line 59: Other Expenses
                a. "Addtnl travel and car repair for job"           $ 478.00
                B. "Car payments in W's name"                       $ 839.81
                

After deducting all expenses claimed by the Debtor, the monthly income totals $1,199.55. However, the amount listed on line 58 titled: Monthly Disposable Income Under § 1325(b)(2) is $2,517.36. Based upon the CMI, the Trustee objects to confirmation on the basis that the Debtor is not using all of his disposable income to fund the Plan.

The Trustee objects to expenses claimed for housing and transportation that exceed the amounts specified in the Local Standards. The Trustee asserts that the amount listed on line 58 equals a debtor's "projected disposable income." The Debtor asserts that the Other Expense amounts for transportation should be included in the calculation of "projected disposable income." In addition, the Debtor claims that additional housing expenses should be allowed in addition to the Local Standard amount.

DISCUSSION

Numerous issues have arisen since BAPCPA became effective. This Court must determine how to calculate projected disposable income pursuant to § 1325(b)(1)(B) when a debtor earns more than the median family income. Two components must be determined to calculate "projected disposable income" pursuant to § 1325: disposable income and "amounts reasonably necessary to be expended."

In order to construe what Congress has enacted, "we begin, as always, with the language of the statute." Duncan v. Walker, 533 U.S. 167, 172, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001). "It is our duty to give effect, if possible, to every clause and word of a statute." Id. at 174, 121 S.Ct. 2120 (quoting United States v. Menasche, 348 U.S. 528, 538-39, 75 S.Ct. 513, 99 L.Ed. 615 (1955)) (internal quotations omitted). Moreover, "where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acted intentionally and purposely in the disparate inclusion or exclusion." Id. at 173, 121 S.Ct. 2120 (quoting Bates v. United States, 522 U.S. 23, 29-30, 118 S.Ct. 285, 139 L.Ed.2d 215 (1997) (internal quotations omitted)); see also Gildon v. Bowen, 384 F.3d 883, 886 (7th Cir.2004).

I. Disposable Income

A plan cannot be confirmed when the trustee objects unless the plan provides that all of the debtor's "projected disposable income" to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan. 11 U.S.C. § 1325(b)(1)(A) and (B). For purposes of § 1325(b), the term "disposable income" means current monthly income received by the debtor less amounts reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and for charitable contributions. 11 U.S.C. § 1325(b)(2)(A)(i) and (ii). Subparagraph (3) provides: "Amounts reasonably necessary to be expended under paragraph (2) shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income" greater than the median income. 11 U.S.C. § 1325(b)(3).

In re Hardacre, 338 B.R. 718 (Bankr. N.D.Tex.2006), is one of the first opinions that addressed this issue. The court held that "projected disposable income" "must be based upon the debtor's anticipated income during the term of the plan, not merely an average of [the debtor's] prepetition income." Id. at 722. This Court concurs with the reasoning set forth in support of such an interpretation. Id. at 722-23; see also In re Kibbe, 342 B.R. 411, 414-15 (Bankr.D.N.H.2006). Specifically, § 1325(b)(1)(B) refers to "projected disposable income" while subsection (b)(2) defines "disposable income." To equate the terms would be to render the term "projected" superfluous. Even the Supreme Court is "reluctant to treat statutory terms as surplusage in any setting." Duncan v. Walker, 533 U.S. at 174, 121 S.Ct. 2120 (quoting Babbitt v. Sweet Home Chapter, Cmtys. for Great Ore., 515 U.S. 687, 698, 115 S.Ct. 2407, 132 L.Ed.2d 597 (1995))(internal quotation omitted). Therefore, the term "projected" cannot be disregarded.

Further, as the Hardacre court discussed, § 1325(b)(1) also supports such an interpretation. 338 B.R. at 723. A chapter 13 plan must provide for payment of all of the debtor's projected...