In re Pautin
| Decision Date | 25 November 2014 |
| Docket Number | No. 12–53298–CAG.,12–53298–CAG. |
| Parties | In re Rodelyn PAUTIN, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Texas |
Heidi McLeod, San Antonio, TX, for Rodelyn Pautin.
Mary K. Viegelahn, San Antonio, TX, pro se.
Came on to be considered the above-numbered bankruptcy case, and, in particular, the Chapter 13 Trustee's Motion to Modify Confirmed Plan Pursuant to 11 U.S.C. § 1329(a)(1) (“Trustee's Motion to Modify”) (ECF No. 37), and Debtors' Response thereto (ECF No. 38). The Court has jurisdiction over this matter under 28 U.S.C. §§ 157 and 1334. Venue is proper under 28 U.S.C. § 1408(1). This matter is referred to this Court under the District's Standing Order of Reference. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) () in which the Court may enter a final order. The Court notes that the Supreme Court's decision in Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), does not suggest or hold that this Court lacks authority to hear and enter final orders regarding a motion to modify a Chapter 13 plan. The Court finds that this is a contested matter as defined under Federal Rule of Bankruptcy Procedure 9014. As such, the Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052. The Court took this matter under advisement and finds that the Chapter 13 Trustee's (the “Trustee”) Motion to Modify should be DENIED, in part and GRANTED, in part.
Debtor Rodelyn Pautin filed Chapter 13 bankruptcy on October 26, 2012 (ECF No. 1). On March 12, 2013, the Court signed an Order Confirming the Debtors' Chapter 13 Plan (ECF No. 22). At the time that Debtor's Chapter 13 Plan was confirmed, Debtor indicated income from three sources on her Amended Schedule “I” (ECF No. 12): (1) gross wages of $5,943.00/month working as a Registered Nurse (“RN”) for Health South; (2) rental income of $900.00/month; and (3) Debtor's share of her ex-spouse's retirement income of $339.00/month. According to her Amended Schedule “I”, Debtor's monthly net income was $775.00/month.
Thereafter, on May 7, 2014, the Chapter 13 Trustee filed her Motion to Dismiss Chapter 13 Case for Failure to Turnover Tax Return and/or Refund with Notice and Opportunity to Object (ECF No. 30). The Trustee sought dismissal of Debtor's case for her failure to provide a copy of her 2013 individual income tax return (Form 1040) to the Trustee as required by 11 U.S.C. § 521(f)(1)1 and the Court's Amended Standing Order Relating to Chapter 13 Practices in the San Antonio Division (the “Standing Order”). Debtor filed a Response (ECF No. 32) arguing that the Code and Standing Order do not provide a penalty, such as dismissal of the case, for failure to provide a tax return. The Trustee then filed a Notice of Withdrawal of her Motion to Dismiss presumably on the basis that Debtor did provide her 2012 and 2013 income tax returns to the Trustee.
The Trustee then filed another Motion to Dismiss and Notice of Hearing on July 11, 2014, stating that Debtor was in plan arrears in the total amount of $1,740.52 (ECF No. 35). Per the Court's Standing Order for Chapter 13 cases, Debtor filed her Motion to Modify in Response to Trustee's Motion to Dismiss and First Request for Additional Compensation (ECF No. 41). Debtor states that the grounds for her proposed modification of the plan are:
Ms. Pautin failed to inform her attorney that she had pawned numerous items of jewelry prepetition. The payments on these items were not factored into her budget. As a result she was working overtime and additional jobs to make the interest payments on these loans. When the additional work was not available she continued to make payments to the pawn shops and fell behind on her plan payments. She has now reduced the debt to the pawn shops and believes she will be able to make the plan payments in the future.
Debtor proposed to increase the plan payment to $810.00/month to cure her plan arrears over the remaining term of the plan. The Debtor also amended her Schedules “I” and “J” in connection with her Motion to Modify Plan (ECF No. 42). This second Amended Schedule “I” indicates the same rental income of $900.00/month but deletes the retirement income previously received from Debtor's ex-spouse. Also, Debtor lists the same employer, Health South, but with an increased monthly income of $6,360.00. Debtor also lists an amortized tax refund for 2013 individual income taxes in the amount of $435.00/month. The amended Schedule “J” indicates a slight reduction of net income to $771.00/month.
The Trustee filed the instant Trustee's Motion to Modify seeking to increase the plan payment to $l,691.00/month, which would result in a 100% distribution to all creditors (ECF No. 37). The Court held a hearing on the Trustee's Motion to Modify and Debtor's Response (ECF Nos. 37 and 38) on September 25, 2014, and took the matter under advisement. The Court reset the hearing on the Trustee's Motion to Dismiss and the Debtor's Motion to Modify in Response (ECF Nos. 35 and 41) pending consideration of this matter.
The Trustee raises the following arguments in her Motion to Modify:
(1) The confirmed plan provides a 13% dividend to unsecured claims.
(2) Pursuant to the 2012 Tax Return, Debtor's gross wages in 2012 were $97,497.00. The Trustee calculates that this is an increase of $26,181.00 per year. Per the 2012 Tax Return, Debtor received a profit in rental income of $1,716.00. Debtor also received a 2012 Tax Refund of $3,143.00. Debtor's net income for 2012 was $84,096.00, which amounts to additional net income of $12,876.00 per year or $1,073.00 per month.
(3) Pursuant to the 2013 Tax Return, Debtor's gross wages in 2013 were $107,112.00. The Trustee calculates that this is an increase of $35,796.00 per year. Per the 2013 Tax Return, Debtor shows a loss in rental income of $794.00. Debtor also received a 2013 Tax Refund of $5,213.00. Debtor's net income for 2013 was $88,228.93, which amounts to additional net income of $17,008.93 per year or $1,417.41 per month.
(4) Based on the additional disposable income for 2013, Debtor's monthly Plan payment should increase to $1,691.00, and the dividend to the allowed general unsecured claims should increase to 100%. The Trustee asks that Debtor file amended Schedules “I” and “J” and be compelled to turnover future tax returns and refunds to the Trustee.
In response, Debtor argues that:
(1) She is a contract nurse and earned the additional income in 2012 and 2013 by working extra shifts at two jobs. Debtor states that she is no longer receiving additional shift work. Consequently, Debtor's net income approximates what she was earning at the time of confirmation of her plan.
(2) The Trustee incorrectly calculated her additional income by failing to deduct social security taxes from her calculations.
(3) Upon confirmation, the disposable income test of 11 U.S.C. § 1325(b)2 does not apply to modifications of the plan under § 1329 because § 1329(b) does not make § 1325(b) specifically applicable to plan modifications. Further, under Hamilton v. Lanning, 560 U.S. 505, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010), only income that is known or virtually certain to be known at time of confirmation may be included in determining disposable income. Because Debtor did not know at the time of plan confirmation that she would have the opportunity to work extra shifts, the additional income cannot be used in determining disposable income.
(4) Section 521(f)(4)(B) does allow a party in interest to ask for copies of a debtor's tax returns. Debtor maintains that, prior to the Trustee's recent request in her case, she was not required to provide any additional income information. Moreover, even if Debtor had provided the requested information, she was not required to turn over the additional earnings or tax returns because of the limitations indicated in § 1329(b).
At the hearing on the Trustee's Motion to Modify, the Trustee attached, as Exhibit “C” to the Motion, her calculations of what Debtor's disposable income would have been if the extra shift work and tax refunds had been turned over to the Trustee in a timely fashion. The Trustee's calculations are based solely on the information that Debtor reflected in her bankruptcy filings and the information contained in Debtor's 2012 and 2013 individual income (Form 1040) tax returns. The Trustee concluded that Debtor would not have been required to turn over all her additional disposable income to the Trustee to achieve a 100% distribution to unsecured claimants. The Trustee believes that, if Debtor's plan payments were increased to $1,691.00 per month for the remaining term of the plan, all creditors would be paid in full.
The Court questioned Debtor about her income. Debtor acknowledged that she had earned additional income due to extra shift work at her Health South job and that, through her employment at Health South, she was able to find additional RN shifts at hospitals on a temporary basis. Debtor stated that she was no longer receiving the additional shift work nor does she anticipate additional shift work in the foreseeable future. Debtor acknowledged that she was receiving rental income of $900.00 per month, but stated that such income was offset by the mortgage payment on the rental property of $740.00/month plus homeowner's insurance. Debtor also stated that her ex-husband is no longer providing her with any share of his monthly military retirement income—a change which is reflected in Debtor's most recent Schedule “I”.
In addition to the arguments cited in the Parties' Contentions, there were some additional arguments raised at the hearing that this Court will address as an initial matter. First, Debtor's counsel argued at the hearing that, given the res judicata...
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