In re Kolb

• Decision Date: 30 March 2007
• Docket Number: No. 06-32036.,06-32036.
• Citation: 366 B.R. 802
• Parties: In re Denise M. KOLB, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of Ohio

366 B.R. 802

In re Denise M. KOLB, Debtor.

No. 06-32036.

United States Bankruptcy Court, S.D. Ohio, Western Division, at Dayton.

March 30, 2007.

COPYRIGHT MATERIAL OMITTED

Jeffrey P. Albert, Dayton, OH, for Debtor.

DECISION SUSTAINING CHAPTER 13 TRUSTEE'S OBJECTION TO CONFIRMATION AND DENYING CONFIRMATION OF DEBTOR'S PROPOSED PLAN

LAWRENCE S. WALTER, United States Bankruptcy Judge.

I. Background

On July 28, 2006, the Debtor, Denise M. Kolb, filed her chapter 13 petition (Doc. 1) and proposed chapter 13 plan (Doc. 2). According to her plan, she would contribute $1,660.00 per month, for approximately 36 months, and her unsecured creditors would receive a 10% dividend (Doc. 2). The proposed plan was consistent with the Debtor's schedules I and J, which showed monthly net income of $1,660.00. Monthly net income (See Doc. 1 — Schedule J) represents, at the time of filing, the Debtor's representation, under oath, of her actual income after subtracting her actual expenses.¹ Under prior law, to ascertain that a debtor was devoting all of her disposable income to the plan, the court's inquiry would be whether a debtor was contributing all her actual income and whether her expenses were reasonably necessary for her and her dependents' support.

However, this case is governed by the Bankruptcy Code as amended by applicable provisions of Pub.L. No. 109-8, 119 Stat. 23, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). BAPCPA modified the means by which disposable income is calculated. 11 U.S.C. § 1325(b)(2). With certain exceptions for charitable contributions, child support, disability and foster care payments, a debtor must now exclusively determine her income by employing a new BAPCPA term, "current monthly income" ("CMI"). 11 U.S.C. § 101(10A). As will be detailed, CMI is based on a debtor's average prepetition income for the six months prior to filing, includes certain household contributions to income, and contains limited statutory exclusions. The initial point is only that, regardless of any details in the formula of CMI, it does not reflect a debtor's present income.

Under BAPCPA, once CMI is calculated for an above median family income debtor,² such as this Debtor, a debtor's expenses are determined by 11 U.S.C. § 707(b)(2)(A). See 11 U.S.C. § 1325(b)(3). Just as CMI does not represent a debtor's actual income, the expenses enumerated in § 707(b)(2)(A) are not derived from a debtor's actual expenses. Instead, the expenses are based, in large part, on predetermined standards, particularly standards "issued by the Internal Revenue Service." 11 U.S.C. § 707(b)(2)(A)(ii)(I). Although the list of available expenses is both detailed and lengthy, the calculation of disposable income for an above median family incomedebtor is theoretically simple: CMI minus the allowed expenses of § 707(b)(2)(A) equals disposable income. Finally, after those calculations are completed, the court may consider "special circumstances" under the court's limited discretion to adjust either CMI or expenses. 11 U.S.C. § 707(b)(2)(B)"

A debtor is required to make the appropriate calculation of her CMI, allowed expenses, and disposable income on Form B22C, a form that must be completed and filed under the new law.³ In this case, the Debtor's Amended Form B22C (Doc. 16) indicated that the Debtor's CMI is $7,953.00. On an annualized basis, the Debtor's income is above the median family income in the state of Ohio for her household size⁴ After subtracting expenses, the parties agree that the Debtor's disposable income [§ 1325(b)(2) ] is $2,283.76 per month.⁵ Thus, although the Debtor's actual monthly net income on her schedules is $1,660.00, her disposable income as derived from the § 1325(b)(2) formula is $2,283.76 per month.

Because the Debtor proposes only to pay her actual monthly net income into her plan rather than pay her unsecured creditors the higher disposable income figure, the Chapter 13 Trustee, Jeffrey M. Kellner (the "Trustee"), filed an objection to confirmation of the proposed plan (Doc. 18). Initially, the Trustee argued that the plan was not filed in good faith pursuant to 11 U.S.C. § 1325(a)(3). However, the parties later stipulated that good faith was no longer at issue (Doc. 30). The Trustee instead argues that as an above median family income debtor, the Debtor's disposable income warrants a plan that pays a 100% dividend to unsecured creditors.

This argument is not based on good faith, but, as will be discussed, on a legal interpretation of § 1325(b) and its requirement that, upon an objection to confirmation, a Debtor must submit all of her projected disposable income to the plan. 11 U.S.C. § 1325(b)(1)(B). Although this Bankruptcy Code requirement existed prior to BAPCPA, the new act modifies its meaning with its changes to the calculation of disposable income in § 1325(b)(2). The parties dispute how the modified definition and calculation of "disposable income" affect "projected disposable income" and determination of the amount of each monthly plan payment under § 1325(b)(1)(B).

Additionally, the proposed plan had a term of approximately three years (Doc. 2). The Trustee argues that, under changes enacted in BAPCPA, a five year "applicable commitment period," as defined in § 1325(b)(4), is required. The parties dispute the meaning of "applicable commitment period" and how that term impacts this chapter 13 case.

The parties agreed that the issues in this case could be resolved as a matter of law. See Order — Doc. 32. They filed a Joint Stipulation of Facts (Doc. 30), and, pursuant to the court's order, they briefed the applicable legal issues (Does. 31 and 34).

II. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Standing Order of Reference entered in this District. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L) which concerns plan confirmations.

III. Issues and Summary Conclusions

1) Does the phrase "projected disposable income" in 11 U.S.C. § 1325(b)(1)(B) require a debtor to contribute to her unsecured creditors a different amount than her "disposable income" as calculated in 11 U.S.C. § 1325(b)(2)?

Conclusion: While acknowledging divergent judicial views on this issue, the court determines that "projected disposable income" is simply monthly "disposable income" (based on prepetition "current monthly income") applied to each future month of a chapter 13 plan.

1) How does the term "applicable commitment period," as defined in 11 U.S.C. § 1325(b)(4) and included in 11 U.S.C. § 1325(b)(1)(B), impact the amount that an above median income debtor must pay to unsecured creditors?

Conclusion: For above median income debtors, the "applicable commitment period" is a five-year obligation to pay the debtor's defined disposable income into a chapter 13 plan for the benefit of unsecured creditors unless unsecured creditors would be paid in full in a lesser period of time.

IV. Statutory Interpretation Principles

Because this analysis requires the court to engage in statutory interpretation of BAPCPA's modifications, modifications that have already been the subject of divergent judicial interpretations, the court begins with a description of the relevant statutory interpretation principles or "tools" it utilizes for that purpose. BAPCPA, by enacting substantial changes, additions and deletions throughout the Bankruptcy Code, has raised challenging issues of statutory interpretation. Early reported decisions suggest that the language used throughout BAPCPA has exacerbated these challenges. See, e.g., In re Trejos, 352 B.R. 249, 253-54 (Bankr.D.Nev. 2006) (reviewing various negative comments about the drafting of BAPCPA). Nevertheless, the court's first obligation when interpreting a statute is to apply its plain meaning. As the United States Supreme Court has instructed with regard to the bankruptcy statutes: "We have stated time and time again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there." Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992) (citation omitted). In determining congressional intent, the starting point is always the statutory text. Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438, 119 S.Ct. 755, 760, 142 L.Ed.2d 881 (1999). It is settled that "when the statute's language is plain, the sole function of the courts-at least where the disposition required by the text is not absurd — is to enforce it according to its terms." Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S.Ct. 1942, 1947, 147 L.Ed.2d 1 (2000) (citations and internal quotes omitted). The Supreme Court has also reminded the bankruptcy courts that it is significant to recognize that "while pre-Code practice `informs our understanding of the language of the Code,' it cannot overcome that language. It is a tool of construction, not an extratextual supplement." Id. at 10, 120 S.Ct. at 1949.

As cited in Hartford, absurdity represents an exception to the doctrine of plain meaning. This doctrine is not an exact tool, but instead a guide to statutory interpretation. See generally Karen Cordry, One Man's Absurdity ..., 12 Norton Bankr.L. Advisor 1 (Dec.2006); Cf. In re TCR of Denver, LLC, 338 B.R. 494 (Bankr. D.Colo.2006) (use of "and" in § 1112(b) is absurd because it would require every factor to exist in order to have cause to dismiss a chapter 11 case); In re McNabb, 326 B.R. 785 (Bankr.D.Ariz.2005) (the conclusion that § 522(p), which restricts the homestead exemption, does not apply to opt-out states cannot be considered absurd because it is consistent with prior bankruptcy law). However, absurdity cannot mean that BAPCPA was awkwardly written,⁶ does not reach some of the understood goals of BAPCPA,⁷ and/or creates unintended consequences,⁸ or fails to embrace the same principles as the...