In re Kapua
| Decision Date | 14 December 2020 |
| Docket Number | Case No.: 20-10538-JCO |
| Parties | In re: ISAAC KULU KAPUA, Debtor. |
| Court | U.S. Bankruptcy Court — Southern District of Alabama |
This matter came before the Court on the Chapter 13 Trustee's Objection to Confirmation (the "Trustee's Objection")(Doc.29) and the Debtor's Response thereto (Doc. 30). Appearances were noted by Attorney Stephen Klimjack for the Debtor, Isaac Kapua ("Kapua"), Attorney Christopher Conte as counsel for the Trustee and Daniel B. O'Brien, the Chapter 13 Trustee. Having considered the record, pleadings, briefs and arguments of counsel, the Court finds that the Trustee's Objection is due to be and is hereby OVERRULED for the reasons set forth below.
The Chapter 13 Trustee objected to confirmation of the Debtor's plan proposing to retain a 2019 Toyota Camry (the "Camry") with payments exceeding the applicable IRS Standard (the "IRS Standard"). Specifically, the Debtor's plan carves out payments to the lienholder of $760.00 per month (the "Specified Payment") while the IRS Standard only allows $508.00 per month for vehicle ownership expense. (Doc. 1 at 14). Kapua is an above median income Debtor and his amended plan (the "Plan")(Doc. 24) surrenders a 2013 Volvo 560 and a 2015 Buick Regal and seeks to keep the Camry as his sole automobile. The Debtor's contractual obligation to the lienholder requires monthly payments of $617.77 (the "Contractual Payment").(ECF Claim 3-1). Since the Plan contemplates no distribution to unsecured creditors, the Trustee submits that surrendering the Camry and finding more affordable transportation would yield increased disposable income and thereby be in the best interest of the Debtor, Estate and all creditors. Debtor's counsel concedes to reducing the Specified Payment initially proposed in the Plan to the Contractual Payment but maintains that the Debtor should be allowed to deduct the Contractual Payments for sixty months from disposable income even though such amount exceeds the IRS Standard.
The court may not approve a debtor's chapter 13 plan over the Trustee's objection, unless it provides for all the debtor's projected disposable income to be applied toward payment to unsecured creditors. 11 U.S.C. §1325 (b)(1)(B). Disposable income is defined as current monthly income received by the debtor less amounts reasonably necessary to be expended for the maintenance or support of the debtor. 11 U.S.C. § 1325(b)(2). In cases involving above median income debtors, subparagraph (A) of Section 707(b)(2) delineates expenses which may be categorized as "reasonably necessary to be expended" and thereby deducted from disposable income. See 11 U.S.C §1325(b)(3). The statutory language provides in pertinent part:
11 U.S.C.§707 (b)(2)(A)(iii).
Upon navigating the provisions of Section 707, many courts have arrived at a finding that Section 707(b)(2)(A)(i)-(iii)(1) allows debtors to deduct amounts contractually due to secured creditors to maintain possession of a primary residence, motor vehicle or other property necessary for the support of the debtor and the debtor's dependents regardless of whether the payment exceeds the IRS Standard. In re Arndt, 2017 WL 5164141 (Bankr. N.D. Ohio Nov. 6, 2017)(indicating this is the majority approach and citing a litany of cases in support thereof). Further, courts adopting this approach have noted the plain language of the statute, " . . . literally requires that all payments due to secured creditors during the relevant period be deducted." In re Plichta, 589 B.R. 794 (Bankr. N.D. Ill. 2018)(citing Collier On Bankruptcy, ¶707.04[3][c][ii] at 707-39 (Richard Levin & Henry J. Sommer eds. 16th ed.).
Such interpretation is consistent with Judge Callaway's In re Green decision in this district. No. 17-1993-HAC (Bankr. S.D. Ala. December 28, 2017). In Green, Judge Callaway held that the debtor could deduct his combined mortgage debt payments although they exceeded the IRS standard amount. The opinion explained that because secured debts are addressed in Section 707(b)(2)(A)(iii), the IRS Standards are not applicable to those payments and serve as neither a minimum nor a cap on the deduction the debtor may take for secured debt payments. Id. at 2. (citing, In re Fields, 534 B.R. 126 (Bankr. E.D. N.C. 2015); In re Witcher, 702 F. 3d 619 (11th Cir. 2012); In re Johnson, 346 B.R. 256 (S.D. Ga. 2006)).
The Trustee offered the United States Supreme Court's opinion of Ransom v. FIA Card Services, N.A., 562 U.S. 61 (2011) and the local decision of In re Kidd, No. 17-747-HAC, Doc. 37(Bankr. S.D. Ala. July 7, 2017), in support of his position; however, this Court does not find either decision dispositive of the issue in this case. The Trustee seemingly relies on a snippet oftext from Ransom stating " . . . if the debtor's actual expenses exceed the amounts listed in the tables, for example, the debtor may claim an allowance only for the specified sum, rather than the real expenditure." Ransom at 75. While at first glance, such language might seem to support the Trustee's position, upon analysis of the Ransom Opinion in its entirety, it is noteworthy that the Debtor sought to claim a deduction of the IRS standard vehicle expense even though he owned his vehicle free and clear. The Supreme Court held that a debtor who does not make loan or lease payments may not take the car-ownership deduction in calculating his disposable income. Ransom at 80. The fact scenario in Ransom is distinguishable from the case before this Court because Kapua does make loan payments, as he owes a substantial debt on his automobile. Additionally, the issue presented is materially different because in Ransom the debtor sought to deduct an expense he did not have, while in this case Kapua seeks to pay his contractual obligation.
Moreover, the excerpt cited by the Trustee was not necessary to the issues presented or the decision reached in Ransom. Extraneous commentary by a court is merely dicta with no precedential authority. Vines v. United States, 28 F.3d 1123, 1128 n.8 (11th Cir.1994)(citing New Port Largo, Inc. v. Monroe County, 985 F.2d 1488, 1500 (11th Cir. 1993) (Edmondson, J., specially concurring) ( , cert. denied, 510 U.S. 964, 114 S. Ct. 439, 126 L.Ed.2d 373 (1993). Accordingly, this Court does not deem it appropriate to enlarge the Ransom ruling or construe dicta therein as binding authority on an issue that was not ruled upon.
Likewise, In re Kidd cited by the Trustee in support of his...
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