In re Martin
| Decision Date | 27 November 2013 |
| Docket Number | CASE NO. 10-64790 |
| Parties | IN RE: JOE MARTIN AND BETTY JO MARTIN, Debtors. |
| Court | United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio |
The court incorporates by reference in this paragraph and adopts as the findings and orders of this court the document set forth below. This document was signed electronically at the time and date indicated, which may be materially different from its entry on the record.
______________________
Russ Kendig
MEMORANDUM OF OPINION (NOT
Toby L. Rosen, the chapter 13 trustee ("Trustee"), filed a modification to increase Joe Martin and Betty Jo Martin's (collectively, "Debtors") monthly chapter 13 plan payments from $250.00 to $1,512.00, based on Trustee's calculation of Debtors' increase in monthly income and reductions in Debtors' allegedly excessive monthly expenses. Debtors oppose Trustee's modification and submit their own modification, which would increase Debtors' monthly plan payments to $336.04. The court held hearings on the modifications on July 10, 2013 and September 25, 2013. During the September hearing, the court ordered Trustee and Debtors to submit briefs in support of their positions. Both parties have submitted the required documents, and the modification of Debtors' chapter 13 plan is now before the court. Therefore, the issue is whether Debtors' monthly chapter 13 plan payments should be modified under 11 U.S.C. § 1329, and if so, what Debtors' new monthly plan payments should be.
The court has jurisdiction over this case pursuant to 28 U.S.C. § 1334 and the general order of reference entered in this district on April 4, 2012. Venue in this district and division is proper pursuant to 28 U.S.C. § 1409. This modification is a core proceeding under 28 U.S.C.§ 157(b)(2)(L),1 which relates to the "confirmations of plans," especially because "[m]odification of a plan is essentially a new confirmation." Ledford v. Brown (In re Brown), 219 B.R. 191, 195 (B.A.P. 6th Cir. 2012).
This opinion is not intended for publication or citation. The availability of this opinion, in electronic or printed form, is not the result of a direct submission by the court.
Debtors commenced a joint chapter 13 bankruptcy case on November 12, 2010. At the time of the petition, Debtors were a married couple with a seventeen year-old daughter. According to Debtors' original bankruptcy schedules ("Original Schedules"), Mr. Martin was a heavy machinery operator at Oxford Resources GP, LLC with gross earnings of approximately $47,190.00 per year. After subtracting taxes and other payroll deductions, Mr. Martin's take-home pay was $3,216.93 per month. Also according to the Original Schedules, Mrs. Martin worked in human resources at Imco Recycling of Ohio, Inc. earning approximately $34,040.00 annually. After removing taxes and other payroll deductions, Mrs. Martin's take home pay was $2,241.44 per month. Based on the above, when Debtors filed their bankruptcy petition, their annual gross income was approximately $81,230.00, resulting in $5,458.37 in monthly take home pay. Debtors' schedule J in their Original Schedules lists total monthly expenses of $5,032.37, leaving a monthly surplus of $426.00.
The court confirmed Debtors' chapter 13 plan on September 8, 2011, which stated that Debtors will make monthly plan payments of $426.00 for sixty months, resulting in unsecured creditors receiving 20% on their claims. On the same day, Debtors and Trustee entered into an agreed order increasing Debtors' monthly plan payments to $535.00.
Sometime before November of 2012, Debtors were involved in an automobile accident which destroyed one of their vehicles. In order to obtain a new vehicle, Debtors submitted a motion to obtain new debt, which the court approved on November 14, 2012. On December 11, 2012, in order for Debtors to make their new car payments and maintain their standard of living, Debtors' monthly plan payments were reduced from $535.00 to $250.00. Immediately before the drafting of the current opinion, Debtors' monthly plan payments remained at $250.00.
The next year, on July 9, 2013, Debtors' amended schedules I and J ("July Schedules"), showing an increase in monthly net income by approximately $370.00, up to $5,830.07, and a corresponding increase in monthly expenses by approximately $200.00, up to $5,230.07. The main changes in expenses were monthly reductions in: (1) cellular telephone by $52.00; (2) cable television and internet by $50.00; and (3) home maintenance by $50.00, but the reductions were offset by monthly increases of $396.00 for payments on the new vehicle and $100 for medical and dental expenses. Trustee's arguments in favor of modification are based on the July Schedules.
In preparing Trustee's current modification proposal, she investigated Debtors' current financial circumstances and discovered evidence illustrating that Debtors' income from employment has increased substantially. Trustee bases her finding on Debtors' year-to-date income amounts from Debtors' June pay stubs. Trustee also believes Debtors' prior year tax refund of $1,811.00 should be factored into Debtors' future monthly plan payments. Trustee similarly evaluated each of Debtors' expenses, finding that the expenses in the following categories are excessive and should be reduced: (1) cable internet and television; (2) cellular and home telephone; (3) transportation; and (4) charitable contributions. After combining all of Trustee's proposed modifications, she seeks an increase in Debtors' monthly plan payments from $250.00 to $1,512.00. Trustee filed a brief in support of her position on October, 21 2013.
In support of their proposed plan modification, Debtors filed their own brief, also on October 21, 2013. Debtors' brief included new schedules I and J ("October Schedules"), which made significant changes to Debtors' July Schedules. The October Schedules decreased Debtors' monthly take-home pay $22.88, from $5,830.07 to $5,807.19, while also increasing Debtor's monthly expenses $241.08, from $5,230.07 to $5,471.15. The October Schedule J makes a number of significant changes, but none larger than a $500.00 monthly increase in medical expenses.
This court notes that Debtors' modification is based on the October Schedules, while Trustee's modification is based on the July Schedules. However, the court's scheduling order filed on October 2, 2013 states that if either party desires to submit a reply to their opponent's legal brief, that reply will only be permitted with leave of the court. Trustee has not asked for leave to respond to Debtors' October Schedules. Based on Trustee's decision not to respond, the court moves forward with this opinion. A comparison showing the changes in monthly expenses between the July Schedule J and the October Schedule J is set out below.
October Schedule J
Change
Electricity and Heating Fuel
390.00
310.00
(80.00)
Water and Sewer
125.00
50.00
(75.00)
Home Telephone2
85.37
35.00
(50.37)
Cellular Telephone
133.00
215.00
82.00
Cable Television and Internet
110.00
123.79
13.79
Trash
45.00
20.00
(25.00)
Medical and Dental
600.00
1,100.00
500.00
Transportation
520.00
645.00
125.00
Charitable Contributions
400.00
150.00
(250.00)
Total
240.423
Once a chapter 13 plan has been confirmed, modifications of that plan must occur under 11 U.S.C. § 1329. In re Hill, 386 B.R. 670, 673 (Bankr. S.D. Ohio 2008). The parts of § 1329 relevant to the current dispute state that:
Based on the sections incorporated by reference in § 1329(b)(1), a modification must be proposed in good faith and be feasible, as well as a number of other requirements (such as the "best interest of creditors test"). 11 U.S.C. § 1325(a)(3), (4), (6).
The first additional requirement made applicable by § 1329(b)(1) that is relevant to this case is that all chapter 13 modifications must be proposed in good faith. 11 § U.S.C. §§ 1329(b)(1), 1325(a)(3); In re Walpole, 2010 WL 2696847, at *1-2 (Bankr. N.D. Ohio 2010). Within the Sixth Circuit, good faith under § 1325(a)(3) does not focus on one item, but instead "requires consideration of the totality of the circumstances." Soc'y Nat'l Bank v. Barrett (In re Barrett), 964 F.2d 588, 591 (6th Cir. 1992). Some of the factors a court should evaluate when making a good faith determination are the debtor's income, the debtor's living expenses, special circumstances (such as unusually high medical expenses), the amount of plan payment as indicative of the debtor's sincerity, and "the statutorily-mandated policy that bankruptcy provisions be construed liberally in favor of the debtor." In re Brinkley, 2013 WL 5935157, at *6 (Bankr. E.D. Mich. 2013) ().
Another § 1329(b)(1) requirement is that a chapter 13 plan modification must be feasible. 11 U.S.C. § 1325(a)(6). This requires that a debtor "be able to make all payments under the plan and to comply with the plan." Id. If, after evaluating the debtor's plan, the court determines that a debtor has a "clear inability" to make the required plan payments, then the court must deny modification. 8 Collier on Bankruptcy, ¶ 1325.07[1] (Alan N. Resnick & Henry J. Sommers eds., 16th ed. 2013). "While...
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