In re Vaughn

• Decision Date: 08 June 2007
• Docket Number: No. 1-06-bk-00788MDF.,1-06-bk-00788MDF.
• Citation: 411 B.R. 199
• Parties: In re Michael Bradley VAUGHN and Carol Elizabeth Vaughn, Debtors eCAST Settlement Corp., Objectant v. Michael Bradley Vaughn and Carol Elizabeth Vaughn, Respondents.
• Court: U.S. Bankruptcy Court — Middle District of Pennsylvania

411 B.R. 199

In re Michael Bradley VAUGHN and Carol Elizabeth Vaughn, Debtors eCAST Settlement Corp., Objectant v. Michael Bradley Vaughn and Carol Elizabeth Vaughn, Respondents.

No. 1-06-bk-00788MDF.

United States Bankruptcy Court, M.D. Pennsylvania.

June 8, 2007.

COPYRIGHT MATERIAL OMITTED

Donald M. Hahn, Stover McGlaughlin Gerace et al, Bellefonte, PA, Tonia M. Torquato, Stover McGlaughlin Gerace et al, State College, PA, for Debtors.

OPINION

MARY D. FRANCE, Bankruptcy Judge.

How is a debtor's "projected disposable income" calculated for chapter 13 plan confirmation purposes? This determination is significant because the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 23 (2005) ("BAPCPA"), provides that if a party in interest objects to a debtor's proposed plan, it may not be confirmed unless the debtor either pays 100% of the allowed unsecured claims or devotes all of his "projected disposable income" for the applicable commitment period to pay unsecured creditors. 11 U.S.C. § 1325(b)(1). Some bankruptcy courts have held that "projected disposable income" is derived from the calculation of "disposable income" through the preparation of Form B22C ("Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income Calculation")¹ multiplied by the number of months in the applicable commitment period. A majority of courts have rejected this formulaic approach and have adopted a totality of the circumstances analysis using the information included in the schedules of income and expenses (Schedules "I" and "J," respectively), as well as other factors. Still others have found that monthly disposable income, calculated using Form B22C, presumptively is a debtor's "projected disposable income," but that this amount may be adjusted by examining other factors, including the information on Schedules "I" and "J." For the reasons set forth below, I conclude that, except in rare circumstances, "projected disposable income" is "disposable income" as calculated on Form B22C multiplied by the number of months in the applicable commitment period.

Factual and Procedural History

Michael and Elizabeth Vaughn ("Debtors") filed a chapter 7 bankruptcy petition on April 26, 2006. They converted their case to chapter 13 a few months later and filed amended Schedules "I" and "J." Schedule "I" reported joint income of $4,994.27 per month, and Schedule "J" reported monthly expenses of $4,633.23. When the expenses on Schedule "J" are deducted from gross income on Schedule "I," Debtors have monthly net income of $361.04. Debtors also filed an amended Form B22C after they converted to chapter 13 that reported annualized current monthly income of $71,492.40, which is above the Pennsylvania median income of $68,836.00. After deducting their expenses, Debtors reported monthly disposable income on Form B22C, Line 58 of $196.91. The income reported on Form B22C, unlike the income reported on Schedule "I," is based on "current monthly income," which is defined as the average monthly income received during the six calendar months prior to the filing of the bankruptcy petition. 11 U.S.C. § 101(10A). Debtors' income as reported on Form B22C was higher than the income reported on Schedule "I," but the total deductions of $5,760.79 on Form B22C, Line 51 were significantly higher than the Schedule "J" expenses of $4,633.23. Therefore, the monthly disposable income reported on Form B22C was less than the difference between monthly income and expenses as reported on Schedules "I" and "J." Debtors' chapter 13 plan proposes to pay $264.00 per month from future income for a period of sixty months.

Debtors listed three vehicles on their schedule of personal property—a 1989 Chevrolet Cavalier valued at $300.00, a 1998 Chevrolet Tracker valued at $890.00, and a 2002 Chevrolet Impala valued at $7,300.00. The balance owed on the Impala as of the date of the petition was listed as $5,957.60, with monthly payments under the contract of $270.80. At $270.80 per month, the Impala will be paid off in less than two years. Debtors hold title to both the Cavalier and the Tracker free and clear of any liens. On Form B22C, Debtors reported a deduction of $200.20 for their Impala (their "first vehicle"). This deduction was calculated by subtracting the monthly loan payment of $270.80 from the IRS Local Transportation Expense Standard, Northeast Census Region, Ownership Costs for a "first car" in the amount of $471.00.² Debtors also claimed a deduction of $332.00 for a second vehicle, even though they have no debt payments due on either the Cavalier or the Tracker.

On November 8, 2006, eCAST, which holds an undisputed, liquidated unsecured claim, filed an objection to the plan. A hearing was held on January 26, 2007, and this matter was taken under advisement. Briefs have been filed, and the matter is ready for decision.³

Discussion

Seeking to "cover all the bases," eCAST argues that whether Form B22C or Schedules "I" and "J" are used to calculate projected disposable income, Debtors have failed to meet the requirements of 11 U.S.C. § 1325(b)(2). According to eCAST, if Form B22C is used to compute projected disposable income, Debtors have made three errors in their calculations on the form. First, Debtors are not entitled to claim the transportation ownership deduction if their actual ownership expense is less than the maximum deduction permitted under Internal Revenue Code guidelines. Second, Debtors have incorrectly calculated the deduction for debt payment on their Chevrolet Impala by claiming the monthly contract amount rather than the "Average Monthly Payment" as defined in Form B22C. Finally, e-CAST asserts that Debtors are not entitled to a second ownership deduction for a vehicle that is not subject to a lien. Alternatively, eCAST states that if "projected disposable income" is calculated using Schedules "I" and "J," the plan fails to devote all of Debtors' "projected disposable income" as required by § 1325(b)(1).

Debtors respond that they are committing more than 100% of their disposable income to the plan. Specifically citing 11 U.S.C. § 1325(b)(2), Debtors state that the amount of their "proposed disposable income" is not the difference between Schedules "I" and "J," but rather is determined by reference to Form B22C. Further, they argue that they are entitled to claim the ownership deduction for two vehicles even if the payments are less than the allowable deduction or the vehicle is not subject to a lien.

I. Projected disposable income under BAPCPA

a. Statutory provisions at issue

The issues in this case arise from the BAPCPA amendments to 11 U.S.C. § 1325(b). If the trustee or an unsecured creditor objects to the confirmation of a plan, a court may not approved the plan unless the claim is paid in full 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.

11 U.S.C. § 1325(b)(1)(B). The subsection further provides that:

(2) For purposes of this subsection, the term "disposable income" means current monthly income received by the debtor ... less amounts reasonably necessary to be expended—

(A)(i) for the maintenance or support of the debtor or a dependent of the debtor....

11 U.S.C. § 1325(b)(1)(B) (italics added). Section 1325(b)(3) further provides that "[a]mounts reasonably necessary to be expended" that may be deducted from "disposable income" are to be determined under § 707(b)(2)(A) and (B).

In the instant case, Debtors are above median income debtors,⁴ and they have calculated their "projected disposable income" using Form B22C. The Court must determine whether the undefined term "projected disposable income" is a simple mathematical calculation determined by multiplying the defined term "disposable income" by the number of months in the applicable commitment period or is a discreet term that accommodates additional considerations.

The "starting point" when construing the words of a statute is "the existing statutory text." Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 1030, 157 L.Ed.2d 1024 (2004). "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." Id. (citations and internal quotations omitted). "[A]s long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute." In re American Steel Product, Inc., 197 F.3d 1354, 1356 (11th Cir.1999) quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). The plain meaning of a statute is controlling unless "the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters." Ron Pair Enterprises, 489 U.S. at 242, 109 S.Ct. 1026. "The 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." Robinson v. Shell Oil Co., 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982).

It is undisputed that BAPCPA was enacted to address perceived abuses of the bankruptcy laws. "Among the abuses identified by Congress was the easy access to chapter 7 liquidation proceedings by consumer debtors who, if required to file under chapter 13, could afford to pay some dividend to their unsecured creditors." In re Hardacre, 338 B.R. 718, 720 (Bankr. N.D.Tex.2006). In its effort to thwart abuse, Congress not only...