In re Wilson

• Citation: 397 B.R. 299
• Decision Date: 03 March 2008
• Docket Number: No. 07-50382.,07-50382.
• Court: United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Middle District of North Carolina
• Parties: In re Pecolia Griffin WILSON, Debtor.

397 B.R. 299

In re Pecolia Griffin WILSON, Debtor.

No. 07-50382.

United States Bankruptcy Court, M.D. North Carolina, Winston-Salem Division.

March 3, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John A. Meadows, Winston-Salem, NC, Debtor.

MEMORANDUM OPINION CONFIRMING CHAPTER 13 PLAN

THOMAS W. WALDREP, JR., Bankruptcy Judge.

This matter came before the Court on August 15, 2007, for confirmation of the Chapter 13 plan of reorganization (the "Plan") of the above-referenced debtor (the "Debtor") as described in the Notice and Proposed Order of Confirmation filed by the Chapter 13 Trustee (the "Trustee") on April 19, 2007. John A. Meadows appeared on behalf of the Debtor, and Vernon J. Cahoon appeared on behalf of the Trustee. The Trustee objects to confirmation on the basis that the Plan violates Section 1325(b)(1)(B) of the Bankruptcy Code, which requires the Plan to provide that all of the Debtor's projected disposable income during the applicable commitment period (five years in this case) be applied to pay claims of unsecured creditors. The Trustee argues that the projected disposable income of an above median income debtor is not determined exclusively by the calculation rendered by Form B22C and that, based on Schedules I and J, the Debtor is not proposing to commit all of her projected disposable income to the Plan for the benefit of her unsecured creditors. The Trustee also argues that the Social Security income of the Debtor's non-filing husband should be included in the calculation of projected disposable income pursuant to Section 1325(b)(1)(B) as determined by Schedule I. The Debtor argues that the projected disposable income of an above median income debtor is determined solely by the calculation rendered by Form B22C, and that Schedules I and J are not relevant to such a determination. If her Schedules I and J are considered by the Court, then the Debtor argues that Section 101(10A)(B) prohibits the Court from considering the Social Security income of the Debtor's non-filing husband. After consideration of the Plan, the evidence presented at the hearing, the arguments of the parties, and the relevant law, the Court will overrule the Trustee's objection and confirm the Plan.

I. JURISDICTION

The Court has jurisdiction over the subject matter of this proceeding pursuant to 28 U.S.C. §§ 151, 157 and 1334, and the General Order of Reference entered by the United States District Court for the Middle District of North Carolina on August 15, 1984. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(L), which this Court has the jurisdiction to hear and determine.

II. FACTS

On March 9, 2007, the Debtor, although married, filed individually for Chapter 13 bankruptcy relief. On April 19, 2007, the Plan was filed. It provides for a plan payment of $750.00 each month for 60 months.¹

The Debtor's original Schedule I showed monthly income, including that of the Debtor's non-filing spouse, less payroll deductions, of $4,850.45. This amount included $1,000.00 of the non-filing spouse's Social Security income and was reduced by, among other things, a voluntary payroll deduction of $514.78 for a Section 403(b) retirement plan. Expenses on the Debtor's original Schedule J totaled $2,878.50, leaving net monthly income of $1,971.95. On July 17, 2007, the Debtor filed amended Schedules I and J. The Debtor's amended Schedule I, still including the non-filing spouse's Social Security income and a voluntary payroll deduction for a Section 403(b) retirement plan of $496.90,² reflects decreased income of $4,668.44.³ The amended Schedule J indicates that the Debtor's monthly expenses increased to $3,258.84. However, this amount included a $345.00 installment payment for an automobile that was already included in the proposed Plan payment. With this adjustment, Schedule J reflects that the Debtor has $1,774.60 available each month to pay her creditors.

The Debtor filed a Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income, Official Form B22C (the "Form B22C"), as required by Federal Rule of Bankruptcy Procedure 1007(b)(6). The Form B22C showed that the Debtor and her non-filing spouse were above median income earners for a household of two,⁴ with a current monthly income ("CMI") of $6,219.70.⁵ The Debtor took $5,827.18 of deductions, which were determined pursuant to Section 707(b)(2)(A) of the Bankruptcy Code. In contrast to Schedule J, Line 58 of the Form B22C shows a monthly disposable income of $392.52. The Debtor is required to pay sixty payments of $392.52 for a total of $23,551.20.

On July 18, 2007, the Plan came before the Court for confirmation. The Trustee objected to confirmation (the "Objection") based on the disposable income requirement of Section 1325(b)(1)(B) of the Bankruptcy Code. The confirmation hearing was continued to allow all parties to file briefs addressing whether the Social Security income received by the Debtor's spouse should be considered by the Court in evaluating whether the Debtor is contributing all of her disposable income to the Plan. The Trustee and the Debtor timely filed briefs.

The net monthly income of the Debtor, as reflected on adjusted Schedule J, is $1,774.60,⁶ which exceeds the proposed monthly plan payment of $750.00 by $1,024.60. Form B22C shows a monthly disposable income of $392.52, which is less than the proposed monthly plan payment. Section 1325(b)(1)(B) requires a plan to provide that all of the Debtor's projected disposable income during the applicable commitment period be applied to pay claims of unsecured creditors. The Trustee urges the Court to consider Schedules I and J, including the Social Security income of the Debtor's non-filing husband, to determine if the Plan complies with Section 1325(b)(1)(B). The Trustee argues that the Debtor is not proposing to commit all of her projected disposable income to the Plan for the benefit of her unsecured creditors. The Debtor argues that any consideration of her Schedules I and J for the purpose of determining projected disposable income would be contrary to clear legislative intent, would render the definition of "disposable income" irrelevant, and would be a strained interpretation of the statute.

III. DISCUSSION

The interpretation of any statute must begin with the language of the statute itself.⁷ If the text of a particular statutory provision is clear and unambiguous on its face, the text must assume overriding importance, and the court is to give effect to the plain meaning of the statute. However, the court should not construe the provision in a vacuum.⁸ It must look to the other relevant provisions of the statute to construe the statutory provision at issue in context. Hartford Underwriters, 530 U.S. at 6-8, 120 S.Ct. 1942.

A. The Statutory Framework

Before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8, 119 Stat. 23 (2005) ("BAPCPA"), bankruptcy courts commonly used bankruptcy schedules I and J as the primary source of evidence of a debtor's disposable income under Section 1325 of the Bankruptcy Code. E.g., Pak, 378 B.R. at 262; In re Kibbe, 361 B.R. 302, 307 (1st Cir. BAP 2007). BAPCPA made significant changes to Section 1325(b), and since then courts across the country have struggled to interpret the statute.

Section 1325 now provides that if the Chapter 13 trustee or an unsecured creditor objects to confirmation of the plan, then the court may not approve the plan unless

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) (2005). The term "projected disposable income" was not changed by BAPCPA. However, BAPCPA changed the definition of "disposable income" in Section 1325(b)(2). Pre-BAPCPA, "disposable income" for an individual debtor was defined as "income received by the debtor and which is not reasonably necessary to be expended" for the maintenance or support of the debtor or a dependent. 11 U.S.C. § 1325(b)(2)(A) (1986). Post-BAPCPA, "disposable income" for an individual debtor is defined as "current monthly income received by the debtor ... less amounts reasonably necessary to be expended" for the maintenance or support of the debtor or a dependent. 11 U.S.C. § 1325(b)(2)(A) (2005).

The term "current monthly income" is completely new. For debtors that file schedule I, it is defined, in relevant part, as "the average monthly income from all sources that the debtor receives ..., derived during the 6-month period ending on ... the last day of the calendar month immediately preceding the date of the commencement of the case." 11 U.S.C. § 101(10A)(A)(I) (2005).⁹ Thus, "disposable income" is calculated historically, during the six months prior to bankruptcy. In re Purdy, 373 B.R. 142, 146 (Bankr. N.D.Fla.2007) ("CMI ... is a snapshot of the debtor's prepetition income.") (quoting Kibbe, 361 B.R. at 308). Congress chose not to rely on schedules I and J. Regardless of the utility of schedules I and J, which would seem to provide more realistic numbers,¹⁰ that is Congress' choice to make. Pak, 378 B.R. at 263 (citing In re Kagenveama, No. 05-28079, slip op. at 5-7 (Bankr.D.Ariz. July 10, 2006) (2006 Bankr.Lexis 2759)).

BAPCPA also added Section 1325(b)(3), which provides that "[a]mounts reasonably necessary to be expended under paragraph (2) ... shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income" that is above the median income¹¹ for a family of the same size. 11 U.S.C. § 1325(b)(3) (2005). Section 707(b)(2) sets forth a means test for determining whether a Chapter 7 case is presumptively abusive. Subsection (A) provides that the

debtor's monthly expenses shall be the...