In re Ponce

• Decision Date: 22 June 2009
• Docket Number: No. 1-08-bk-04048 RNO.,1-08-bk-04048 RNO.
• Citation: 406 B.R. 490
• Parties: In re Rolando PONCE and Myrna Garcia, Debtors. Charles J. Dehart, III, Standing Chapter 13 Trustee Movant v. Rolando Ponce and Myrna Garcia, Respondents.
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

Page 490

406 B.R. 490

In re Rolando PONCE and Myrna Garcia, Debtors Charles J. Dehart, III, Standing Chapter 13 Trustee Movant v. Rolando Ponce and Myrna Garcia, Respondents.

No. 1-08-bk-04048 RNO.

United States Bankruptcy Court, M.D. Pennsylvania.

June 22, 2009.

Tracy Lynn Updike, Cunningham and Chernicoff, PC, Harrisburg, PA, for Debtors.

OPINION¹

ROBERT N. OPEL II, Bankruptcy Judge.

This contested matter was commenced by an objection to confirmation filed by the Chapter 13 Trustee ("the Trustee"). This Opinion addresses the Trustee's objection concerning projected disposable income. Presently before this Court is the question of whether, in a Chapter 13 case, projected disposable income is limited to the calculations on Form B22C, which is based upon the means test. First, I will compare and contrast "projected disposable income" and "disposable income." Second, based on the determinations set forth below, an evidentiary hearing will be set to establish a record on whether the Debtors have committed their projected disposable income to their Chapter 13 plan.

I. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and § 157(b)(1) & (2)(A)(B). This is a core proceeding under 28 U.S.C. § 157(L).

II. History and Facts

Rolando Ponce and Myrna Gracia (hereinafter "the Debtors") filed a Chapter 13 voluntary petition on October 30, 2008. A Chapter 13 plan was filed on December 10, 2008. The plan proposes payments of $274.06 per month for sixty months. The Trustee filed an objection to the plan's confirmation on February 9, 2009. At the March 12, 2009, confirmation hearing, the dispute was narrowed to an issue of whether the Debtors' plan provided for the Debtors' projected disposable income received in the applicable commitment period. Also, at that hearing, the parties stipulated that the monthly disposable income as calculated pursuant to Form B22C is $501.36.

III. Discussion

A. The Trustee's Objection

The Trustee maintains that the requirements of 11 U.S.C. § 1325(b)(1)(B)² have not been satisfied. Specifically, the Debtors and the Trustee disagree as to the definition of "projected disposable income" as mentioned in § 1325(b)(1)(B). The Trustee maintains that the definition is restricted to the disposable income determined by Form B22C. However, the Debtors argue that projected disposable income should take into account the decrease in income caused by the loss of a part time job previously held by one of the Debtors. The Debtors also argue that I should look past the disposable income determination of Form B22C and consider the information contained within Schedules I and J. Previously, I wrote on the term "applicable commitment period" and whether § 1325(b)(1)(B) created a specific plan duration requirement. See In re Lopatka, 400 B.R. 433 (Bankr.M.D.Pa.2009). In that opinion, I observed that:

Some courts have held that a projected disposable income is a forward looking concept, so that disposable income per the means test creates only a rebuttable presumption as to "projected disposable income" for purposes of overruling an objection under § 1325(b)(1)(B). In re Lanning, 545 F.3d 1269, 1282 (10th Cir.2008); In re Jass, 340 B.R. 411, 416 (Bankr.D.Utah 2006). These courts hold that it is sometimes appropriate to make adjustments from the means test's formulaic results to account for circumstances like a post-petition job loss or promotion. Other courts have found the means test's results to be the sole determining factor in calculating a debtor's projected disposable income. In re Kolb, 366 B.R. 802, 818 (Bankr. S.D.Ohio 2007); In re Alexander, 344 B.R. 742, 749 (Bankr.E.D.N.C.2006) ("The court finds that, in order to arrive at `projected disposable income,' one simply takes the calculation mandated by § 1325(b)(2) and does the math.").

In re Lopatka, 400 B.R. at 435.

The starting point for analysis of statutory construction is the "existing statutory text." Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 1030, 157 L.Ed.2d 1024 (2004). I, therefore, now turn to the analysis of § 1325(b).

B. 11 U.S.C. § 1325(b)

Section 1325(b) sets forth certain requirements for overruling a trustee's objection to confirmation of a chapter 13 plan. Specifically:

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then 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 on account of such claim 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. (Emphasis added).

The term "disposable income" is further defined in § 1325(b)(2) as:

(2) For purposes of this subsection, the term "disposable income" means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended—

(A)(i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and

(ii) for charitable contributions that meet the definition of "charitable contribution" under section 548(d)(3) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and

(B) if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.

As made clear by § 1325(b)(3), the "amounts reasonably necessary to be expended" for the purposes of § 1325(b)(2) are statutorily defined by the provisions of § 707(b)(2) (hereinafter "Means Test") if a debtor's "current monthly income" exceeds certain thresholds. Current monthly income is defined by § 101(10A) as:

(10A) The term "current monthly income"—

(A) means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on—

(i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii); or

(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by section 521(a)(1)(B)(ii); and (B) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor's spouse), on a regular basis for household expenses of the debtor or the debtor's dependents (and in a joint case the debtor's spouse if not otherwise a dependent), but excludes ...

For the purposes of § 1325(b)(3), current monthly income is multiplied by twelve and then compared with the median family income based on the household size for the applicable state. See § 1325(b)(3). In the present case, it was stipulated at the confirmation hearing that the Debtors' current monthly income multiplied by twelve is above the median family income. Therefore, the statutory framework of the Means Test applies to the determination of disposable income. I will next consider what relevance the Debtors' disposable income has in defining projected disposable income.

C. The Approaches to Defining Projected Disposable Income

While the definition of disposable income is statutorily clear, the significance of the phrase "projected disposable income" is that of much dispute. See, e.g., In re Lanning, 545 F.3d 1269, 1275-1278 (10th Cir.2008) (comparing and contrasting the mechanical versus the forward looking approaches to determining projected disposable income). However, the "... mere existence of multiple constructions alone [does] not make [a] statute ambiguous." Rather, "`[t]he 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.'" In re Lopatka, 400 B.R. at 437-438 (citing In re Price, 370 F.3d 362, 368-369 (3d Cir.2004)).

Bankruptcy and appellate courts have reached divergent conclusions in interpreting this section of the Bankruptcy Code. On one side are the courts that determine projected disposable income by looking forward and treating Form B22C's disposable income as a presumption that can be rebutted. See, e.g., In re Lanning, 545 F.3d at 1282; In re Jass, 340 B.R. 411, 416 (Bankr.D.Utah 2006); In re Frederickson, 545 F.3d 652, 659 (8th Cir.2008), cert. denied ___ U.S. ___, 129 S.Ct. 1630, 173 L.Ed.2d 997 (2009); In re Hardacre, 338 B.R. 718, 722 (Bankr.N.D.Tex.2006); In re Petro, 395 B.R. 369, 377 (6th Cir. BAP2008); In re Kibbe, 361 B.R. 302, 314 (1st Cir.BAP2007). On the other side are the courts that determine projected disposable income by multiplying the applicable commitment period by the monthly disposable income determined on Form B22C. See, e.g., In re Kagenveama, 541 F.3d 868, 875 (9th Cir.2008); In re Austin, 372 B.R. 668, 679 (Bankr.D.Vt.2007); In re Tranmer, 355 B.R. 234, 242 (Bankr. D.Mont.2006); In re Kolb, 366 B.R. 802, 817-18 (Bankr.S.D.Ohio 2007); In re Hanks, 362 B.R. 494, 498 (Bankr.D.Utah 2007). Within this District, my colleague, Judge Thomas, has chosen the latter approach. In re Bardo, 379 B.R. 524, 528 (Bankr.M.D.Pa.2007). In this ...