In re Swan, 06-50708-ASW.

• Citation: 368 B.R. 12
• Decision Date: 18 April 2007
• Docket Number: No. 06-50708-ASW.,06-50708-ASW.
• Parties: In re Cathie M. SWAN, Debtor.
• Court: United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Northern District of California

368 B.R. 12

In re Cathie M. SWAN, Debtor.

No. 06-50708-ASW.

United States Bankruptcy Court, N.D. California.

April 18, 2007.

Richard T. Hilovsky, Law Offices of Richard T. Hilovsky, San Jose, CA, for Debtor.

Eva Alexandra Delateur, Office of the Chapter 13 Trustee, San Jose, CA, for Trustee.

MEMORANDUM DECISION ON CREDITOR'S AMENDED OBJECTION TO CONFIRMATION

ARTHUR S. WEISSBRODT, Bankruptcy Judge.

Before the Court is the amended objection of American Express Centurion Bank ("Creditor") to confirmation of the amended chapter 13 plan of Cathie M. Swan ("Debtor"). Creditor's objection is based on the assertion that (1) Debtor has not pledged all of her projected disposable income in support of the amended plan; (2) that Debtor (A) improperly claimed a transportation ownership expense based on the IRS Local Standard Transportation Expense Standards on Form B22C for a vehicle she owns free and clear of any liens and (B) improperly claimed a housing expense based on the IRS Local Standards for a one member household in Santa Clara County, California, although such expense exceeds Debtor's actual housing expense; and (3) that the phrase "applicable commitment period" referenced in 11 U.S.C. § 1325(b)(4)¹ requires the amended plan to have a term of sixty months.

The Chapter 13 Trustee in this case is Devin Derham-Burk ("Trustee"). Richard T. Hilovsky, Esq. of the Law Offices of Richard T. Hilovsky, represents Debtor. John M. O'Donnell, Esq. of the Law Offices of John M. O'Donnell, represents Creditor.

This Memorandum Decision constitutes the Court's findings of fact and conclusions of law, pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.

I. FACTS

The facts of this case are undisputed.

Debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code on May 1, 2006. Concurrently with the filing of the petition, Debtor submitted a proposed chapter 13 plan, Statement of Financial Affairs, and Form B22C "Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income" ("Form B22C"). On June 1, .2006, Creditor filed an "Objection to Confirmation of Debtor's Plan". Debtor filed an amended plan on July 10, 2006 ("Plan"), and Creditor filed an amended objection on August 24, 2006 ("Objection"). The Trustee filed a Brief in Support of Confirmation of Debtor's Proposed Plan on December 15, 2006.

Debtor lives in San Jose, California. Debtor's Schedule J shows a monthly rental expense of $800. On Schedule B, Debtor lists a single automobile: a 1988 Ford Tempo with 120,000 miles. Debtor owns the Ford Tempo free and clear of any liens.

On Schedule I, Debtor lists gross monthly wages of $4,462 and net monthly income (after deductions for taxes,`insurance, and union fees) of $2,958. Debtor's total monthly expenses on Schedule J are $2,433, leaving monthly net income, according to the schedules, of $525.

On Form B22C, Debtor checked the box at the top of the first page indicating that "Disposable income is determined under § 1325(b)(3)", and the "applicable commitment period is 5 years." Debtor's current monthly income from Form B22C, line 11, is $4,965.04. Annualizing her current monthly income from Form B22C totals $59,580.48, which exceeds California's median family income of $43,107 for a family with one earner. Accordingly, Debtor is an above-median debtor and must complete the expense portion of Form B22C to determine the amount of disposable income that must be paid into her plan pursuant to 11 U.S.C. § 1325(b)(3).

On Line 25B of Form B22C, Debtor deducted $1,644 for housing using the IRS Local Standard for a one-member household in Santa Clara County, California. In addition, on Line 28 of Form B22C, Debtor deducted $471 for the Local Standard amount allowed for vehicle ownership expense. Debtor's total expenses allowed under the IRS Standards at line 38 of Form B22C are $4,905.54. As a result, Debtor's monthly disposable income according to Form B22C is $59.50.²

The Plan proposes payments of $525 per month for 36 months, resulting in total Plan receipts of $18,900.00. The proposed dividend to Debtor's unsecured non-priority creditors is approximately 17%.

Creditor holds two unsecured non-priority claims for unpaid credit card debt totaling $29,468.85.³ These claims represent approximately 34% of the total claims against Debtor.⁴

Creditor's Objection contends that: (A) Debtor is not allowed to take the standard IRS expense deduction (IRS Local Standard for housing) when her actual rent is less than the standard; and (B) Debtor is not allowed to take an ownership deduction specified in the IRS Local Transportation Expense standards because she owns a car free and clear of liens. If Creditor is correct, and Debtor's claimed expense deductions are disallowed, then Debtor's monthly disposable income according to Form B22C would rise by $1,315.⁵ In that case, Debtor's Amended Plan could not be confirmed because Debtor would not be paying all of her "projected disposable income" to unsecured creditors, and thus the Plan would violate § 1325(b)(1)(B). Debtor counters that the expense deductions are proper, and therefore the Plan satisfies the requirement that all projected disposable income be pledged to pay unsecured creditors. Finally, Creditor contends that because Debtor is an above-median debtor her "applicable commitment period" under § 1325(b)(1)(B) is sixty months, and this requires Debtor to commit to a five-year plan. Debtor responds by arguing that Creditor misunderstands the BAPCPA requirements and that her Plan satisfies the statute because she is paying significantly more than the full amount she would be required to pay over a five-year plan during the three-year term of her proposed Plan. In fact, Debtor is proposing to pay five times more under the proposed threeyear Plan than she would be required to pay over five years.

II. ANALYSIS

The petition was filed on May, 1, 2006, and thus all statutory amendments contained in the BAPCPA apply in this case.

1. Whether calculation of Debtor's projected' disposable income under § 1325(b)(1) requires the Court to look beyond Form B22C.

Pursuant to § 1325(b)(1)(B), the Plan must provide "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)(B). Section 1325(b)(2) defines "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 or a dependent of the debtor ..." 11 U.S.C. § 1325(b)(2).

Creditor's argument in this regard is not. clear. Creditor states that Debtor's Plan should not be confirmed because the debtor is not paying all of her "projected disposable income" under 11 U.S.C. § 1325(b)(1)(B). Creditor cites cases supporting the proposition that "projected disposable income" may be different than "disposable income." In re Harclacre, 338 B.R. 718, 723 (Bankr.N.D.Tex.2006); In re Kibbe, 342 B.R. 411, 414-15 (Bankr.D.N.H. 2006); In re Dew, 344 B.R. 655, 660 (Bankr.N.D.Ala.2006). Creditor fails, however, to provide this Court with any alternative basis for calculating Debtor's projected disposable income. Creditor has not alleged any facts indicating that Debtor has the ability to pay more, or is likely to receive a substantial increase in income hi the near future. Rather, in this case, Debtor's gross monthly income stated on Schedule I ($4,642) is less than on her statement of CMI (84,965.04). Accordingly, Creditor's only allegations regarding Debtor's alleged failure to pledge all of her projected disposable, income to payment of unsecured creditors relate to the housing and vehicle ownership expense deductions. Creditor makes no other argument that the statement of net income on Form B22C does not accurately reflect the income to be received by Debtor in the future. Therefore, the cases cited by Creditor are inapposite. The only specific objections by Creditor involve the expense deductions, which the Court, for the reasons stated infra, overrules in this Memorandum Decision.⁶

2. Whether the expense deductions claimed by Debtor on Form B22C are proper.

Where the holder of an allowed unsecured claim objects to confirmation, a plan must pledge all projected disposable income during the "applicable commitment period." 11 U.S.C. § 1325(b)(1)(B). Disposable income is defined as current monthly income less "amounts reasonably necessary to be expended." In re Crews, 2007 WL 626041, *3 (Bankr.N.D.Ohio Feb.23, 2007). Debtor is an above-median income debtor, and therefore, according to § 1325(b)(3), the amounts reasonably necessary to be expended in calculating Debtor's disposable income under 1325(b)(2) "shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2)." In re Naslund, 359 B.R. 781, 787 (Bankr.D.Mont.2006). Section 707(b)(2)(A)(ii)(I) states, in pertinent part:

The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the. National Standards and. Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area, in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent.

Creditor's Objection regarding Debtor's alleged failure to pledge all projected disposable income to repayment of unsecured creditors is based on two separate arguments. The first is Creditor's contention that Debtor is not entitled to take the IRS standard vehicle ownership deduction because Debtor owns her vehicle free and clear of liens. Creditor's second argument is...