In re Murphy, Bankruptcy No. 398-07699.

• Decision Date: 29 October 1998
• Docket Number: Bankruptcy No. 398-07699.
• Parties: In re Brenda Jean MURPHY, Debtor.
• Court: U.S. Bankruptcy Court — Middle District of Tennessee

226 B.R. 601 (1998)

In re Brenda Jean MURPHY, Debtor.

Bankruptcy No. 398-07699.

United States Bankruptcy Court, M.D. Tennessee.

October 29, 1998.

Edgar Rothschild, III, Maria Salas, Nashville, TN, for Debtor.

Rollie L. Woodall, Nashville, TN, for Ms. Constance Morris.

MEMORANDUM

KEITH M. LUNDIN, Bankruptcy Judge.

A judgment lien creditor objects to this Chapter 13 Debtor's motions to partially avoid the judicial lien and for turnover of a car on the ground that the Debtor is not eligible for Chapter 13. The issue is whether an unconditional written commitment to make plan payments by the financially able person with whom this unmarried Debtor shares a home constitutes "regular income" for eligibility purposes. This Debtor has regular income and is eligible for Chapter 13. The following are findings of fact and conclusions of law. FED.R.BANKR.P. 7052.

I.

For 11 years, the Debtor has shared a household with Sam Hambrick. The home is owned by Mr. Hambrick and his elderly mother.

Mr. Hambrick's twin daughters (now 16 years old) live with the Debtor and Mr. Hambrick and have been raised by the Debtor. One of the twins has asthma and needs special medical attention. The Debtor also takes care of Mr. Hambrick's and her own elderly parents.

Mr. Hambrick is a self-employed businessman. He nets $3,800 per month from his businesses. At times during the past 11 years, the Debtor worked at a market owned by Mr. Hambrick. The market closed two or three years ago and the Debtor has not worked outside the home since then.

Throughout their relationship, Mr. Hambrick has deposited money into the Debtor's bank account each month from which the Debtor pays her separate bills. Mr. Hambrick pays all of the utilities and other household expenses for "their family" and typically deposits $800 a month into the Debtor's account.

The Debtor owns a 1994 Cadillac. The monthly installment note on this car was paid before bankruptcy from the bank account funded by Mr. Hambrick. At the petition, the holder of this note, First Indiana National Bank, was owed $5,700. The car was scheduled by the Debtor with a value of $14,750.

In July of 1998, Constance Morris took a default judgment against the Debtor in the General Sessions Court for Davidson County, Tennessee for $15,000.¹ Ms. Morris executed on this judgment during the first week of August 1998 and the sheriff seized the Debtor's 1994 Cadillac. This Chapter 13 case was filed on August 12, 1998, after seizure but before sale of the car to satisfy the judgment.²

The statements and schedules show current income and expenses of the Debtor's household with Mr. Hambrick. Attached to the schedules is an "affidavit of Samuel Hambrick" which recites "I hereby agree to make Brenda Jean Murphy's Chapter 13 plan payment on her behalf, in a timely manner, and in the court order amounts, until completion of the plan."

Under the proposed plan, the Chapter 13 trustee will receive $600 per month for three years. The first lien holder on the car will be paid in full with interest. Constance Morris is treated as a partially secured creditor and the plan provides that the Debtor will avoid the judicial lien "to extent of $4,000 exemption." The portion of Ms. Morris's lien that remains after lien avoidance will be paid in full with interest. Unsecured creditors will receive at least 20% on allowed claims.

The Debtor filed a motion to partially avoid the Morris lien and a motion for turnover of the 1994 Cadillac. Ms. Morris objected arguing that the Debtor is not eligible for Chapter 13 because the Debtor does not have "regular income" as required by 11 U.S.C. §§ 109(e) and 101(30). In the alternative, Ms. Morris argues that her judicial lien is not adequately protected.

II.

Bankruptcy Code § 109(e) provides, "only an individual with regular income . . . may be a debtor under Chapter 13 of this title." 11 U.S.C. § 109(e) (emphasis added). Section 101(30) of the Code further defines "individual with regular income" to mean "individual whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 of this title." 11 U.S.C. § 101(30). The Bankruptcy Code does not define the word "income" within § 101(30).

That § 101(30) defines individual with regular income by reference to stability and regularity suggests that the existence of regular income is predominantly a fact question answered by examining the flow of money available to the debtor. Put another way, the Bankruptcy Code does not specifically exclude any source of funding from the regular income calculus; the Code does require that whatever source of income is claimed by a debtor, it must be regular and stable enough to fund a plan. The stable and regular focus of § 101(30) has led several courts to state that "the test for `regular income' is not the type or source of income, but rather its regularity and stability." In re Fischel, 103 B.R. 44, 48 (Bankr.N.D.N.Y.1989); In re Antoine, 208 B.R. 17, 20 (Bankr.E.D.N.Y. 1997); In re Varian, 91 B.R. 653, 653 (Bankr. D.Conn.1988) (citing In re Campbell, 38 B.R. 193, 195 (Bankr.E.D.N.Y.1984) (quoting In re Cole, 3 B.R. 346, 349 (Bankr.S.D.W.Va. 1980))).

If the monthly contribution of money committed by Mr. Hambrick to the Debtor is income, the facts overwhelmingly support the finding that this Debtor's income is sufficiently regular and stable to fund a Chapter 13 plan. For 11 years Mr. Hambrick has maintained unbroken financial support to the Debtor. The Debtor has raised Mr. Hambrick's twin daughters and taken care of Mr. Hambrick's elderly parent while maintaining a home for herself, Mr. Hambrick, and Mr. Hambrick's children. Mr. Hambrick's income is substantial and regular and for many years has produced at least the amount he has committed to funding this plan. The expenses in the budget for the Debtor and Mr. Hambrick are comprehensive, modest and appropriate. Mr. Hambrick has signed an unconditional written commitment to provide the Debtor with money sufficient to fund the proposed Chapter 13 plan. Mr. Hambrick was forthright and honest in his testimony. Both Mr. Hambrick and the Debtor presented undisputed and convincing evidence of their commitment to each other and to their collective family and of their intent and ability to fund a Chapter 13 plan.

If Congress intended the word "income" in § 101(30) to excluded the money Mr. Hambrick will pay to the Debtor, that less inclusive definition is not apparent in the Bankruptcy Code or its legislative history. The Code easily could but does not restrict the notion of income to wages, salary, return on investment or any of the other restrictions suggested in reported cases. See, e.g., In re Hanlin, 211 B.R. 147, 149 (Bankr.W.D.N.Y. 1997) (citing dictionary definitions of income). The legislative history of what is now 11 U.S.C. § 101(30) is unusually clear that Congress intended to expand and broadly define "individual with regular income" to include funding from diverse and nontraditional sources. As explained in the Senate Report:

Paragraph (30) defines "individual with regular income." The effect of this definition, and of its use in section 109(e), is to expand substantially the kinds of individuals that are eligible for relief under chapter 13, Adjustment of Debts of an Individual with Regular Income. Chapter XIII is now available only for wage earners. The definition encompasses all individuals with incomes that are sufficiently stable and regular to enable them to make payments under a chapter 13 plan. Thus, individuals on welfare, social security, fixed pension incomes, or who live on investment incomes, will be able to work out repayment plans with their creditors rather than being forced into straight bankruptcy. Also, self-employed individuals will be eligible to use chapter 13 if they have regular incomes.

S.REP. No. 95-989, at 24 (1978). See also H.REP. No. 95-595, at 311-12 (1977).

The examples in the legislative reports demonstrate congressional intent that regular income need not have as its source employment or the provision by the debtor of services or property to another. Income includes entitlements and benefits that can be freely given and freely taken away by governments. The legislative history of § 101(30) supports the view that the touch-stone for an individual with regular income is not the source of the income, but its regularity and stability.

Many reported decisions recognize that nontraditional sources of money can generate income for § 101(30) purposes. Social security benefits can be regular income. In re Murray, 199 B.R. 165 (Bankr. M.D.Tenn.1996); In re Cornelius, 195 B.R. 831 (Bankr.N.D.N.Y.1995); In re Crowder, 179 B.R. 571 (Bankr.E.D.Ark.1995). Disability benefits can be regular income. In re Tucker, 34 B.R. 257 (Bankr.W.D.Okla.1983); In re Dawson, 13 B.R. 107 (Bankr.M.D.Ala. 1981); In re Howell, 4 B.R. 102 (Bankr. M.D.Tenn.1980). Unemployment compensation can be regular income. In re McMonagle, 30 B.R. 899 (Bankr.D.S.D.1983); In re Overstreet, 23 B.R. 712 (Bankr.W.D.La.1982). Aid to Families with Dependent Children can be regular income. Bibb County Dep't of Family & Children's Servs. v. Hope (In re Hammonds), 729 F.2d 1391 (11th Cir.1984); In re Iacovoni, 2 B.R. 256 (Bankr.D.Utah 1980). A debtor who was employed, but then became unemployed may have regular income. McMonagle, 30 B.R. at 902-03. A self-employed debtor who essentially determines his or her own income can have regular income. See In re Monaco, 36 B.R. 882 (Bankr.M.D.Fla.1983); Margraf v. Oliver (In re Oliver), 28 B.R. 420 (Bankr.S.D.Ohio 1983); In re Wilhelm, 6 B.R. 905 (Bankr. E.D.N.Y.1980); In re Ballard, 4 B.R. 271 (Bankr.E.D.Va.1980). Odd jobs can produce regular income. In re Cole, 3 B.R. 346 (Bankr.S.D.W.Va.1980). Several courts have held that a nonfiling spouse's income can be regular income for § 101(30) purpose. See In re Sigfrid, 161 B.R. 220 (Bankr.D.Minn. 1993); ...