In re Turner

Decision Date27 March 2008
Docket NumberNo. 07-06592-JCK-13.,07-06592-JCK-13.
PartiesIn re Joel Anthony TUNRER, Debtor.
CourtUnited States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Southern District of Indiana

Matthew D. Boruta, Indianapolis, IN, for Debtor.

John Morgan Hauber, Robert A. Brothers, Ch 13 Trustee, Indianapolis, IN, for Trustee.

ORDER OVERRULING TRUSTEE'S OBJECTION TO CONFIRMATION

JAMES K. COACHYS, Bankruptcy Judge.

This matter came before the Court on the Chapter 13 Trustee's (the "Trustee") Objection to Confirmation (the "Objection"), wherein the Trustee argues that the Debtor's Chapter 13 plan should not be confirmed because it does not meet the "disposable income" or "good faith" tests of 11 U.S.C. § 1325.1 For the reasons stated below, the Court overrules the Objection.2

A. Facts

Debtor sought Chapter 13 bankruptcy protection on July 17, 2007. Along with his petition, Debtor submitted Official Form B22C, Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income ("Form B22C") and a proposed plan (the "Plan"). Per Form B22C, Debtor has "current monthly income" of $5,453.00. His annual income of $65,436.00 is well above the average median income for a household of one in Indiana. Factoring in his expenses, Form B22C indicates that he has a deficit of $94.60 in monthly "disposable income." Debtor's calculation includes a monthly mortgage payment, listed on Subpart C of B22C, of $1,521.00 for his residence. According to his Plan, however, Debtor intends to surrender his residence. Thus, neither the Plan nor Schedule J includes payments for any mortgage, mortgage arrearage or property taxes. Instead, Schedule J lists $950.00 in estimated monthly rent and net income of $250.00 per month, which is also the amount that Debtor proposes to devote to the Plan for a period of 60 months.

B. Discussion and Decision
1. Disposable Income

Prior to the amendments made to the Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), § 1325(b)(1) provided:

If the trustee or the holder of an allowed unsecured claimobjects 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 or such claim; or

(B) the plan provides that all of debtor's projected disposable income to be received in the three year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.

11 U.S.C. § 1325(b)(1) (2004). Section 1325(b)(2), in turn, defined disposable income as "income received by the debtor and which [was] not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor...." Pursuant to that definition, both the income and expense components of disposable income were determined primarily by reference to the amounts listed by the debtor on Schedules I and J. 11 U.S.C. § 1325(b)(2) (2004).

BAPCPA amended § 1325(b)(1)(B) to prohibit the court from approving a proposed Chapter 13 plan over the objection of the trustee or an unsecured creditor unless the proposed plan commits all of a debtor's "projected disposable income to be received in the applicable commitment period" to the payment of unsecured creditors. 11 U.S.C. § 1325(b)(1)(B). BAPPA also amended the definition of "projected disposable income." Section 1325(b)(2) now provides that for purposes of subsection (b), disposable income "means current monthly income received by the debtor less amounts reasonably necessary to be expended...." 11 U.S.C. § 1325(b)(2). "Current monthly income," in turn, is defined as the debtor's average monthly income received during the six calendar months prior to filing. 11 U.S.C. § 101(10A) (italics added).

Significant to the case at hand, BAPCPA further amended § 1325(b) by adding a provision stating that the "amounts reasonably necessary to be expended" for above median income debtors is to be calculated in accordance with subparagraphs (A) and (B) of § 707(b)(2). 11 U.S.C. § 1325(b)(3). In contrast, the expense component for below median income debtors is determined — as it was prior to BAPCPA — by reference to the figures provided by Schedules I and J. See In re Miller, 361 B.R. 224, 228 n. 7 (Bankr N.D.Ala.2007) (citing In re Dew, 344 B.R. 655 (Bankr.N.D.Ala.2006) and In re Alexander, 344, B.R. 742 (Bankr.E.D.N.C. 2006)). Pursuant to Section 707(b), which is commonly referred to as the "means test," a debtor is permitted to deduct certain standardized and actual expenses to calculate "disposable income." 11 U.S.C. § 707(b)(2)(A)(ii)(I).

Under the means test, debtors may subtract "the total of all amounts scheduled as contractually due to secured creditors each month of the 60 months following the date of the petition." 11 U.S.C. § 707(b)(2)(A)(iii)(I). Because Debtor intends to surrender his residence, however, the question before the Court is whether he properly included his mortgage payment in calculating his disposable income or whether he should be compelled to exclude such payment, thereby increasing the amount of disposable income he must commit to pay unsecured creditors under the Plan.

To answer that question, the Court must construe and apply the Code provisions outlined above. 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." Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) (internal quotation marks omitted) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917))). A court may look beyond the plain meaning of a statute when the "result it apparently decrees is difficult to fathom or where it seems inconsistent with Congress' intention." Public Citizen v. U.S. Dep't of Justice, 491 U.S. 440, 454-55, 109 S.Ct. 2558, 2567, 105 L.Ed.2d 377 (1989); see also United States v. Ritsema, 31 F.3d 559, 566-67 (7th Cir.1994). However, a court's "task is to give effect to the will of Congress, and where its will has been expressed in reasonably plain terms, `that language must ordinarily be regarded as conclusive.'" Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 570, 102 S.Ct. 3245, 3250, 73 L.E.2d 973 (1982) (quoting Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980)).

Bankruptcy courts have reached conflicting conclusions as to the "plain meaning" of § 707(b)(2)(A)(iii). Compare In re Skaggs, 349 B.R. 594 (Bankr.E.D.Mo.2006) with In re Nockerts, 357 B.R. 497 (Bankr. E.D.Wis.2006). In Skaggs, the court did not use the common dictionary definition of "scheduled as" but instead construed the phrase to mean those debts listed on the debtor's bankruptcy schedules and statement of intent. Skaggs, 349 B.R. at 599. The court explained:

Congress used the phrase "scheduled as" several times in the Bankruptcy Code to refer not to the common dictionary definition meaning for the word schedule (i.e., "to plan for a certain date"), but to whether a debt is identified on a debtor's bankruptcy schedules. See 11 U.S.C. § 1111(a) wherein a claim or interest is not deemed filed if it is scheduled as disputed, contingent, or unliquidated. When Congress amends a law, as it did with BAPCPA, the prior statute's "... longstanding meaning forms the background against which Congress legislates ... The courts presume that Congress will use clear language if it intends to alter an established understanding about what a law means; if Congress fails to do so, courts presume that the new statute has the same effect as the other version." Nothing in 11 U.S.C. § 707(b)(2)(A )(iii) indicates an intent to assign a different meaning to the phrase "scheduled as" in this provision and to do so would run contrary to the statute.

Accordingly, the Debtors' schedules and statements form the basis from which the Court should determine whether a debt is "scheduled as contractually due." 11 U.S.C. § 521, in conjunction with Federal Rule of Bankruptcy Procedure 1007(b), requires debtors to file, inter alia, schedules and a statement of intent as prescribed on the appropriate official forms. Further, debtors have a duty to amend their schedules and statements "to keep the information in them current."

Id. at 599 (citations omitted).

The court in Nockerts disagreed with the above reasoning. Engaging in its own examination of the Code's use of "scheduled" and "scheduled as," the court noted that "[w]hen describing the bankruptcy schedules, Congress included in the statute a reference to the schedules, either directly by name or indirectly by reference to § 521, the provision that requires the debtor to file bankruptcy schedules." Nockerts, 357 B.R. at 503. Emphasizing that Section 707(b)(2)(A)(iii) does not refer to § 521, the' court concluded that the phrase "scheduled as" was intended to have its common, dictionary definition. Id. As such, to be included in the disposable income calculation, a secured payment must merely be due under the contract, i.e., a promissory note, on a specific date for each of the sixty months following the filing of the petition.

The Court finds Nockerts to be more persuasive than Skaggs. As expressed in In re Mundy, 363 B.R. 407, 412-413 (Bankr.M.D.Pa.2007), "[t]o interpret the common verb `scheduled' as a reference to the proper noun `Schedule' as used in the Bankruptcy Code is a grammatical exercise too complex and strenuous to be considered `plain.'" Unlike Chapter 7 debtors, Chapter 13 debtors are not required to file a statement of intention. See 11 U.S.C. § 521(a)(2)(A). Unless Congress intended ...

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