In re Powers
| Decision Date | 28 March 2014 |
| Docket Number | 11–72448.,Nos. 10–71700,s. 10–71700 |
| Citation | 507 B.R. 262 |
| Parties | In re Myrick James POWERS and Elvie Owens–Powers, Debtors. In re David W. Powell, Debtor. |
| Court | U.S. Bankruptcy Court — Central District of Illinois |
OPINION TEXT STARTS HERE
Jeffrey Abbott, Robert P. Follmer, Larry Spears, Jason D. VanHemert, Ostling & Associates, LTD, Bloomington, IL, for Debtors in No. 10–71700.
Jay Barr, Decatur, IL, for Debtor in No. 11–72448.
Kenneth Takis Siomos, Petersburg, IL, for Trustee.
The Chapter 13 Trustee has filed motions to modify the confirmed plans in each of these cases. The Trustee claims that the debtors in each case have had increases in their incomes since their plans were confirmed and, accordingly, their plans should be modified to provide increased payments to unsecured creditors. Because the Trustee has failed to meet his burden of proof and failed to establish that he is entitled to the relief requested, both motions will be denied.
Because the same legal issues were raised in each of these cases, they have been consolidated for the purposes of this Opinion. The factual basis for the Trustee's motion in each case is different, however, and the facts of each case must be set forth separately.
Myrick and Elvie Powers filed their voluntary petition under Chapter 13 on May 24, 2010. At the same time, they filed their Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income (“B22C”). The calculations on their B22C resulted in the Powers being identified as over-the-median-income debtors with a five-year applicable commitment period for their Chapter 13 plan. The Powers' income was disclosed on their B22C and their Schedule I as consisting of about $5800 gross per month from Mrs. Powers' employment, $1479 per month in Mr. Powers' Social Security benefits, and $1129 per month in Mr. Powers' VA benefits.
On March 1, 2011, the Powers' First Amended Chapter 13 Plan (“Plan”) was confirmed. The Plan proposed that the Powers would pay $660 to the Trustee for seven months and then $758 per month for fifty-three months. From the amounts paid in, the Trustee was directed to pay the claims of several secured creditors and distribute “approximately $22,665” to unsecured creditors. The Powers' B22C calculation had resulted in available monthly disposable income of only $18.43. The significant payment to unsecured creditors was required because the Powers owned a non-exempt unencumbered parcel of real estate valued at $29,900.
In February 2012, the Powers moved to sell their residential real estate for an amount less than what was owed against it. They expected to complete the sale with financial assistance from Mrs. Powers' employer. After the sale was approved and closed, the Powers moved to modify the terms of their Plan to remove the payments on their mortgage arrearage debt which had been fully satisfied through the sale. They also requested that their monthly payments to the Trustee be reduced to the amount necessary to fund the Plan with the mortgage arrears deleted. The Powers' motion to modify was granted and their plan payments were reduced to $670 per month beginning in May 2012.
On June 17, 2013, the Trustee filed the motion to modify which is at issue here. The Trustee claims that the Powers' 2012 income tax return disclosed a $50,000 increase in income over the amounts shown on their 2011 return. After providing an involved tax calculation, the Trustee suggests that the Powers now have a net increase in income of $2984.92 per month. He suggests that for the twenty-three months which remained at the time the motion was filed, the Powers should raise their payments by $746 per month resulting in a total increase in Plan payments of $17,158. He suggests that after his commission, this increase would result in a net additional dividend to unsecured creditors of $15,442.
The Powers filed an objection to the motion to modify. They claimed that some of the increased income came from moving and relocation benefits received from Mrs. Powers' employer. Mrs. Powers was transferred by her employer to Florida. The Powers also claimed that they were divorcing and their expenses were changing and increasing due to the establishment of separate households.
The Trustee undertook discovery on the Powers' financial situation. Subsequently, the parties filed a stipulation on the submission of agreed documents. The documents include amended Schedules I and J prepared by Mrs. Powers and alternate amended Schedules I and J prepared by the Trustee for Mrs. Powers. On her own amended Schedule I, Mrs. Powers says that she is divorced and that her fifteen-year-old daughter resides with her. She discloses net monthly income of $5108.64 which includes $766 of Social Security benefits for her daughter but also includes the deduction of an auto loan payment. The Trustee's amended Schedule I for Mrs. Powers shows net income of $6509.76 per month. On her own amended Schedule J, Mrs. Powers claims $4546 in expenses. On the amended Schedule J prepared by the Trustee, expenses are listed as $4496 and the Trustee notes that he used “Means Test” figures for St. John County, Florida, for some of the figures. The parties' stipulation says that the Trustee's amended Schedule I accurately reflects Mrs. Powers' income for the “six month period for which pay advices were provided.” Further, the parties agreed that the Trustee's amended Schedule J accurately reflects Mrs. Powers' expenses “with the exception of motor vehicle payments.”
With respect to Mr. Powers, an amended Schedule I was filed which the parties stipulated correctly discloses his current income. Mr. Powers now receives $1559 per month in Social Security benefits and $3088 per month in VA benefits for total monthly income of $4647. Mr. Powers prepared an amended Schedule J which claims $4712.56 in expenses. Another amended Schedule J was prepared by the Trustee showing $2856 in monthly expenses for Mr. Powers and noting that the Trustee used “Means Test” figures from St. John County, Florida, for “reasonably necessary” expenses. The parties agreed that Mr. Powers' own amended Schedule J accurately reflects his current expenses.
The stipulation also includes some pay advices, the Powers' 2012 tax return, and Mrs. Powers' 401k loan statement. Both parties rely on the stipulation for their factual presentation and waived the opportunity for an evidentiary hearing. Both the Trustee and the Powers' attorney have briefed the issues.
David Powell filed his voluntary petition under Chapter 13 on September 20, 2011. His subsequently-filed B22C showed that he was an under-the-median-income debtor with an applicable commitment period of three years. Although both Mr. Powell's B22C and Schedule I disclosed gross income in excess of $7000 per month, he supports a spouse, a stepson, a daughter, and a grandson. His net income was shown as about $5200 per month and on his Schedule J, he claimed expenses of almost $5000 per month. The Trustee initially objected to the B22C, claiming that Mr. Powell had incorrectly completed the form and that if the form were corrected, Mr. Powell would have a five-year applicable commitment period. Mr. Powell filed an amended B22C which showed he was an over-the-median-income debtor but the Trustee subsequently conceded that Mr. Powell was, in fact, an under-the-median-income debtor.
After several failed attempts at plan confirmation, Mr. Powell's Second Amended Chapter 13 Plan (“Amended Plan”) was finally confirmed on July 26, 2012. The Amended Plan proposed payments over a thirty-six-month term totaling $15,096. Of that amount, $10,507 was projected to be paid to unsecured creditors.
On June 17, 2013, the Trustee filed his motion to modify claiming that Mr. Powell's income had increased by a little over $32,000 from 2011 to 2012. The Trustee requested that Mr. Powell increase his monthly plan payment by $436.75 for the last fifteen months of his plan term and, thereby, increase the dividend to unsecured creditors by almost $6000. Mr. Powell objected claiming that he was not legally obligated to modify his the Amended Plan as requested.
The Trustee undertook significant discovery on Mr. Powell's financial condition. In lieu of an evidentiary hearing, however, the parties simply stipulated that “if there is legal authority” for the proposed increase, Mr. Powell does have significantly increased income and could make increased payments. Both parties also briefed the legal issues.
This Court has jurisdiction over the issues before it pursuant to 28 U.S.C. § 1334. Core proceedings include decisions about the confirmation of Chapter 13 plans and other proceedings affecting the adjustment of the debtor-creditor relationship. See28 U.S.C. § 157(b)(2)(A), (L), (O).
The Trustee alleges in each case that the debtors have more income now than they had at the time of plan confirmation and, accordingly, their plans should be modified to provide increased dividends to their unsecured creditors. Although the Trustee concedes that the disposable income provisions of § 1325(b) do not apply to motions to modify and denies that he is seeking to recalculate their disposable income, his motions to modify do, in fact, request a resetting of disposable income. Regardless of how the Trustee characterizes his motions, his evidentiary stipulations and his arguments claim that disposable income can and should be recalculated in both cases. Neither the Bankruptcy Code nor the case law interpreting the relevant Code provisions supports his position.
Debtors are only required to commit all of their projected disposable income to plan payments for distribution to unsecured creditors if the trustee or an unsecured creditor has objected to confirmation of the...
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Germeraad v. Powers
...bankruptcy court decided the trustee's motion to modify based on the parties' briefs and their stipulation of facts. See In re Powers , 507 B.R. 262 (Bankr.C.D.Ill.2014). The court denied the motion for two independent reasons. First, the court held that, as a matter of law, the Bankruptcy ......
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...Chapter 13 plans may be modified.... But modifications are allowed only for the purposes set forth in the statute." In re Powers , 507 B.R. 262, 268 (Bankr. Ill. 2014) (reversed on other grounds); See , In re Miller , 2002 Bankr. LEXIS 2137, *7 (Bankr. M.D.N.C. April 19, 2002) (" Section 13......
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...a recent decision, this Court discussed the statutory framework for properly prosecuting a motion to modify. See In re Powers, 507 B.R. 262, 274 (Bankr. C.D. Ill. Mar. 28, 2014). First, modification of a confirmed plan may only be sought for one of the limited purposes enumerated in §1329(a......
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