In re Hay
| Citation | 413 B.R. 198 |
| Decision Date | 13 November 2008 |
| Docket Number | No. 1:08-bk-00474MDF.,1:08-bk-00474MDF. |
| Parties | In re Howard Albert HAY, Jr. and Christy Elizabeth Hay, Debtors. Charles J. Dehart, Standing Chapter 13 Trustee, Plaintiff v. Howard Albert Hay, Jr. and Christy Elizabeth Hay, Defendants. |
| Court | United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Middle District of Pennsylvania |
Dorothy L. Mott, Marc Allan Crum, Law Office of Dorothy L. Mott, Harrisburg, PA, for Debtor.
The Standing Chapter 13 Trustee ("Trustee") has objected to the chapter 13 plan proposed by Howard and Christy Hay ("Debtors"), alleging that Debtors have failed to commit all of their future disposable income to the plan. The Trustee asserts that Debtors should not be permitted to deduct as expenses monthly mortgage payments and payments for one of their vehicles because, under the terms of their plan, they intend to surrender the collateral for these loans. For the reasons set forth below, the Trustee's objection to the plan will be overruled and Debtors' plan will be confirmed.1
On February 16, 2008, Debtors filed a joint petition under chapter 13 of the Bankruptcy Code. Debtors' report on Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income ("Form 22C") that their current monthly income ("CMI") is $6,793.67. They also report that their household income is above the median for a family of four residing in Pennsylvania. On Form 22C Debtors state that after their deductions are subtracted they have negative disposable income of $873.37. Among their deductions are a monthly mortgage payment of $2,449.00 payable to Everhome Mortgage, a property tax claim of $72.06 per month and a monthly payment to Hampden Township of $15.05, all of which are expenses related to Debtors' residence at 5038 Erbs Bridge Road, Mechanicsburg, Pennsylvania. Debtors' plan provides for the surrender of their interest in the Erbs Bridge Road property, which they vacated in November 2006. Debtors also include on Form 22C a transportation ownership expense deduction of $42.82 per month for payments to PSECU for a loan secured by a 2002 Toyota Tacoma that Debtors also are surrendering. Debtors propose to commit $350.00 per month to their plan, but no payments will be made to Everhome Mortgage or to PSECU either through or outside the plan.
Before the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 37 ("BAPCPA"), a chapter 13 debtor was required to commit all "projected disposable income" to payments under the plan for at least three years. 11 U.S.C. § 1325(b)(2004). Disposable income was calculated by deducting from a debtor's actual income expenses "reasonably necessary" for the maintenance and support of the debtor and his dependents. 11 U.S.C. § 1325(b)(2) (2004). The income and expenses reported on schedule I (a debtor's actual income when the petition was filed) and schedule J (a debtor's actual expenses when the petition was filed) provided the starting point for calculating disposable income. See In re Turner, 384 B.R. 537, 539 (Bankr.S.D.Ind.2008); 6 Keith M. Lunden, Chapter 13 Bankruptcy § 466.1 (3d ed. 2000 & Supp.2007-1).
Under the pre-BAPCPA Code, if a trustee objected to a chapter 13 plan, confirmation could not occur unless "as of the effective date of the plan" all claims were paid in full or the debtor committed all disposable income to the plan for three years. 11 U.S.C. § 1325(b)(1)(2004). BAPCPA amended § 1325(b)(1) by requiring that if claims are not paid in full, a debtor must commit all projected disposable income to the plan during the applicable commitment period (either three or five years) to pay unsecured creditors. (emphasis added) Section 1325(b)(2), which also was amended, now defines the term "disposable income" as "current monthly income received by the debtor ... less amounts reasonably necessary to be expended for the maintenance and support of the debtor...." 11 U.S.C. § 1325(b)(2)(A)(i). For a debtor with income above the median, like Debtors, expenses that are "reasonably necessary to be expended" are determined by reference to § 707(b)(2).
The primary function of § 707(b) is to provide a precise methodology for determining whether the filing of a chapter 7 case is an abuse of the Bankruptcy Code. 11 U.S.C. § 1325(b)(3).3 As applied in both chapter 7 and chapter 13 cases, § 707(b)(2)(A)(iii) enables a debtor to deduct payments to secured creditors before disposable income is determined. This provision states that "[t]he debtor's average monthly payments on account of secured debts shall be calculated as the sum of — (1) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition . . . divided by 60." 11 U.S.C. § 707(b)(2)(A)(iii)(I) (emphasis added). As the Trustee acknowledges, I previously have construed this section and, in particular, the phrase "scheduled as contractually due." In In re Mundy, 363 B.R. 407 (Bankr.M.D.Pa.2007), I found that payments that are "scheduled as contractually due" are payments that a debtor is required to make on certain future dates under the terms of the contract in existence on the petition date. Accordingly, I held that a chapter 7 debtor is permitted to deduct amounts owed to a secured creditor on the petition date even if the debtor intends to surrender the collateral because whether the payments are paid or not, they are "scheduled as contractually due."
The Trustee concedes the holding in Mundy, but asserts that § 707(b)(2)(A)(iii) is applied with different results in a chapter 13 case because of the language which surrounds the provision when it is incorporated into § 1325(b)(1).4 The Trustee advances two arguments in support of this proposition. First, because projected disposable income as described in § 1325(b)(1)(B) is determined "as of the effective date of the plan," as provided in § 1325(b)(1), a debtors' expenses must be determined as of this date. The Trustee also argues that the language "scheduled as contractually due" in § 707(b)(2)(A)(iii)(I) should be understood differently in a chapter 13 case. According to the Trustee, the plan itself is a new contract, which is formed between a debtor and his creditors when it is confirmed. Therefore, once Debtors' plan is confirmed in the within case, the payments to Everhome and PSECU no longer will be "contractually due."
Debtors respond that the phrase "as of the effective date of the plan" in § 1325(b)(1), which precedes the reference to projected disposable income in subparagraph (B) of the same paragraph, refers to when the plan must provide for payments and not how disposable income is calculated. Debtors further argue that even if the effective date of the plan determines how disposable income is calculated, the result is the same because the plan does not supplant the existing contracts between Debtors and the two affected creditors.
To resolve this matter I first must examine the language of the statute. Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 1030, 157 L.Ed.2d 1024 (2004). "It is well established 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." Id. (citations and internal quotations omitted). "[A]s long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute." In re American Steel Product, Inc., 197 F.3d 1354, 1356 (11th Cir.1999) quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). "The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982).
Section 1325(b)(1) provides that when a trustee objects to the confirmation of a plan
the court may not approve the plan unless, as of the effective date of the plan — (A) the value of the property to be distributed under the plan . . . is not less than the amount of such claim; or (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)(emphasis added). Although projected disposable income is not defined, paragraph (b)(2) specifies that "`disposable income' means current monthly income received by the debtor . . . less amounts reasonably necessary to be expended — (A)(i) for the maintenance or support of the debtor or a dependent of the debtor. . . ." 11 U.S.C. § 1325(b)(2)(A)(i). The "amounts reasonably necessary to be expended" referred to in paragraph (b)(2) are determined by reference to subparagraphs (A) and (B) of § 707(b)(2). 11 U.S.C. § 1325(b)(3).
In In re Vaughn, 411 B.R. 199 (Bankr.M.D.Pa.2007)5, I determined that "projected disposable income" was simply monthly "disposable income" projected out over the applicable commitment period. Accord In re Bardo, 379 B.R. 524 (Bankr. M.D.Pa.2007). The Trustee does not dispute this definition of projected disposable income directly. He does assert, however, that because subparagraph (A) is prefaced by the phrase "as of the effective date of the plan," projected disposable income should be based upon information available on...
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...Cir. 1993)). 101. Doc. 101, Ex 5. 102. See, e.g., Doc. 98, 17. 103. K.S.A. § 60-511(1). 104. K.S.A. § 60-520(a). 105. In re Hay, 413 B.R. 198, 203-04 (Bankr. M.D. Pa. 2008); see also In re Klaas, 858 F.3d 820, 830 n.8 (3rd Cir. 2017) ("[W]e have never held that a Chapter 13 plan creates a c......