In re Kibbe

• Decision Date: 20 February 2007
• Docket Number: Bankruptcy No. 06-10012-MWV.,BAP No. 06-019.
• Citation: 361 B.R. 302
• Parties: Karen KIBBE, Debtor. Karen Kibbe, Appellant, v. Lawrence P. Sumski, Chapter 13 Trustee, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, First Circuit

Page 302

361 B.R. 302

Karen KIBBE, Debtor.

Karen Kibbe, Appellant, v. Lawrence P. Sumski, Chapter 13 Trustee, Appellee.

BAP No. 06-019.

Bankruptcy No. 06-10012-MWV.

United States Bankruptcy Appellate Panel of the First Circuit.

February 20, 2007.

COPYRIGHT MATERIAL OMITTED

Michael Kainen, Esq., on brief for Appellant.

Lawrence P. Sumski, Chapter 13 Trustee, on brief for Appellee.

Before FEENEY, BOROFF & SOMMA, United States Bankruptcy Appellate Panel Judges.

PER CURIAM.

The debtor, Karen Kibbe (the "Debtor"), appeals from the bankruptcy court's order denying confirmation of her Chapter 13 plan. The issue on appeal is whether the bankruptcy court properly determined how to calculate a below-median income debtor's "projected disposable income," as that term is employed in 1325(b)(1)(B) of the Bankruptcy Code.¹ The resolution of this question turns on whether (and/or how) the term "projected disposable income" differs from the unmodified term "disposable income," as defined in 1325(b)(2). Reconciliation of these terms is of particular import where, as here, a debtor's income has changed such that the debtor's "current monthly income," as defined by 101(10A) and incorporated into the term "disposable income," differs significantly from the debtor's actual monthly income during the Chapter 13 plan commitment period.

By its order, the bankruptcy court below concluded that "projected disposable income" should be determined according to the income and expenses represented on Schedules I and J, rather than by the outcome of Official Form B22C which is used to calculate "current monthly income." Our view differs slightly, but under the circumstances of this case perhaps not materially, from the view expressed by the court below. In any event, we agree with the bankruptcy court that Congress intended the term "projected disposable income" for below-median income debtors to be forward-looking and reality-based and not grounded in blind adherence to any artificial formulation. Accordingly, the order denying confirmation of the Debtor's Chapter 13 plan is hereby AFFIRMED.

JURISDICTION

A bankruptcy appellate panel is duty-bound to determine its jurisdiction before proceeding to the, merits, even if the issue of jurisdiction is not raised by the litigants. See In re George. E. Bumpus, Jr. Constr. Co., 226 B.R. 724 (1st Cir. BAP 1998). A panel may hear appeals from "`final judgments, orders and decrees,' or `with leave of the court, from interlocutory orders and decrees.'" Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (1st Cir. BAP 1998) (quoting 28 U.S.C. 158(a)(1) and (3)) (internal citations omitted). An order is final if it "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment," whereas an interlocutory order "`only decides some intervening matter pertaining to the cause, and requires further steps to be taken in order to enable the court to adjudicate the cause on the merits.'" Id. (quoting In re American Colonial Broad. Corp., 758 F.2d 794, 801 (1st Cir.1985)).

Generally, an order denying confirmation of a proposed Chapter 13 plan is not a final order because, typically, the debtor will be free to propose an alternate plan. See Watson v. Boyajian, 309 B.R. 652, 659 (1st Cir. BAP 2004), aff'd, 403 F.3d 1 (1st Cir.2005); Bentley v. Boyajian, 266 B.R. 229, 233-34 (1st Cir. BAP 2001). However, this Panel, exercising its discretionary authority under 28 U.S.C. § 158(a)(3), granted the Debtor leave to appeal the denial of her proposed Chapter 13 plan.

STANDARD OF REVIEW

Reviewing courts generally apply the clearly erroneous standard to findings of fact and De novo review to conclusions of law. See T.I. Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir.1995); Western Auto Supply Co. v. Savage Arms. Inc., 43 F.3d 714, 719-20 n. 8 (1st Cir. 1994). Accordingly, where the issue on appeal is essentially one of statutory interpretation, it will be subject to De novo review. See Vicenty v. San Miguel Sandoval, 327 B.R. 493, 506 (1st Cir. BAP 2005) (citing Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir.1995)). Here, the bankruptcy court's denial of confirmation of the Debtor's Chapter 13 plan was premised upon its interpretation of § 1325(b). That interpretation of the Bankruptcy Code is a conclusion of law subject to de novo review.

THE STATUTORY PREDICATE (AND PREDICAMENT)

Section 1325(b)(1) requires that a debtor commit all of his or her "projected disposable income" to payments to unsecured creditors through a Chapter 13 plan.

If the trustee or 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 —

. . .

(B) 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 to unsecured creditors under the plan.

11 U.S.C. § 1325(b)(1)(B) (emphasis supplied).

The Code goes on to define "disposable income," in relevant part, as follows:

For purposes of this subsection, the term "disposable income" means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependant child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended —

(A)(i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and

(ii) for charitable contributions ... in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made

. . .

11 U.S.C. § 1325(b)(2).

Finally, the term "current monthly income" is defined, in relevant part as follows:

(A) ... the average monthly income from all sources that the debtor receives ... without regard to whether such income is taxable income, derived during the 6-month period ending on —

(I) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii) ... and

(B) includes any amount paid by any entity other than the debtor ... on a regular basis for the household expenses of the debtor or the debtor's dependants ... but excludes benefits received under the Social Security Act ...

11 U.S.C. § 101(10A) (2005).

Form B22C, which debtors must file pursuant to Interim Federal Rule of Bankruptcy Procedure 1007(b)(6),² serves, in part, to calculate a debtor's "current monthly income".

THE BACKGROUND AND TRAVEL OF THE CASE

The Debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code on January 5, 2006. At that time, the Debtor filed her bankruptcy Schedules, including Schedule I ("Current Income of Individual Debtor(s)"), Schedule J ("Current Expenditures of Individual Debtor(s)") and Official Form B22C ("Statement of Current Monthly Income").

During the six-month period prior to her filing, the Debtor had been employed, but had procured a higher paying job' just prior to the date the bankruptcy petition was filed. Consequently, by averaging her income during those six prepetition months, the Debtor's Form B22C showed "current monthly income" of $1,068.50. Because her "current monthly income," when multiplied by twelve, was less than the applicable monthly median family income earned in the State of New Hampshire, the Debtor was classified as a "below-median income" debtor.

In preparing her Chapter 13 plan, the Debtor based her "projected disposable income" on the "current monthly income" set forth in her Form B22C. Because $1,068.50 was less thin her "reasonably necessary" monthly expenses of $2,645, derived from her Schedule J,³ the Debtor concluded that she had no "disposable income" as defined by § 1325(b)(2), and therefore no "projected disposable income" to commit to unsecured creditors. This conclusion is reflected in the proposed plan, which provides for no payment to the Debtor's unsecured creditors.

The Chapter 13 Trustee (the "Trustee") filed a motion to dismiss the Debtor's case based on his disagreement with the Debtor's calculation of her "projected disposable income." The Trustee argued that "projected disposable income" should be determined by reference to the Debtor's actual monthly income and expenses as identified in both Schedules I and J, and that the income side of the equation should not be irrevocably rooted in the calculation of "current monthly income" set forth in Form B22C. Indeed, the Debtor's Schedules I and J, respectively, reflect actual monthly income of $5,027 and expenses of $2,645. The Trustee contended that the difference between the two ($2,382) was the Debtor's actual "projected disposable income," the amount that should be dedicated to payment for unsecured obligations through the Chapter 13 plan. Accordingly, the Trustee maintained that the Debtor's plan could not be confirmed because it failed to commit all of her projected disposable income to her unsecured creditors, in violation of § 1325(b)(1).

The bankruptcy court held a hearing on the Trustee's motion to dismiss and, finding the Trustee's arguments more persuasive, subsequently issued its Order and Memorandum Opinion denying confirmation of the plan.⁴ The court held that "projected disposable income" should be determined in accordance with Schedules I and J, and not by adherence to the calculation of "current monthly income" set forth in Form B22C. The Debtor timely appealed.

DISCUSSION

The term "projected disposable income" is not new and has never, even in prior versions of the Bankruptcy Code, been defined. Prior to the 2005 BAPCPA amendments, ...