In re Young

• Decision Date: 08 August 2008
• Docket Number: No. 08-10012-WCH.,08-10012-WCH.
• Citation: 392 B.R. 6
• Parties: In re Darrin W. YOUNG, Debtor.
• Court: U.S. Bankruptcy Court — District of Massachusetts

392 B.R. 6

In re Darrin W. YOUNG, Debtor.

No. 08-10012-WCH.

United States Bankruptcy Court, D. Massachusetts, Eastern Division.

August 8, 2008.

COPYRIGHT MATERIAL OMITTED

Michael J. Splaine, Attorney at Law, Salem, MA, for Debtor.

MEMORANDUM OF DECISION

WILLIAM HILLMAN, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are the Objection to Confirmation of Amended Chapter 13 Plan filed by eCAST Settlement Corporation ("eCAST"), as an agent for FIA Card Services, a/k/a Bank of America (the "Objection"), and the Response filed by Darrin W. Young (the "Debtor"). eCAST objects to the Debtor's plan asserting, inter alia, that the Debtor has understated his projected disposable income by claiming expense deductions on Form 22C to which he is not entitled. For the reasons set forth below, I will enter an order overruling the Objection.

II. BACKGROUND

The Debtor filed a voluntary Chapter 13 petition with all schedules on January 2, 2008. On February 28, 2008, he filed an Amended Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income ("Form 22C"). On line 20 of Form 22C, the Debtor reported current monthly income of $4,828.43. This is consistent with the current monthly gross income reported on his Schedule I-Current Income of Individual Debtor(s) ("Schedule I"). Line 21 of Form 22C reflects that the Debtor's annualized current monthly income is $57,941.16. Because this amount exceeds the applicable median family income for debtors in this state, specifically $51,176, the Debtor is an above median income debtor with an applicable commitment period of five years pursuant to 11 U.S.C. § 1325(b)(4). As an above median income debtor, he was then required to calculate his "disposable income" with reference to the deductions allowed under 11 U.S.C. § 707(b)(2) using National and Local Standards of the Internal Revenue Service (the "Local Standards"). The following table summarizes and compares the deductions claimed on Form 22C to his monthly expenses as reflected in Schedule J—Current Expenditures of Individual Debtor(s) ("Schedule J").

                         Expense                      Schedule J    Form 22C   Expense Deduction                                 Line
                  T1    Rent/Mortgage Payment             $850       $1,144   Mortgage/Rent Expense                             Line 25B
                                                      __________
                  T2    Electricity/Heating Fuel         $280         $477   Housing and Utilities; Non-Mortgage Expenses        Line 25A
                                                                  _________
                  T3    Telephone                          $65
                  T4    Cable                              $12
                  T5    Home Maintenance                  $100
                                                      __________
                  T6    Food                              $500         $494   Food, Apparel, Housekeeping Supplies, Personal    Line 24A
                                                                 ___________
                  T7    Clothing                          $100                Care, and Misc
                  T8    Laundry/Dry/Cleaning               $40
                  T9    Recreation                        $200
                                                      __________
                  T10   Medical/Dental                     $54          $54   Out-of-Pocket Health Care                         Line 24B
                  T11   Transportation                    $220         $412   Vehicle Operation/Public Transportation Expense   Line 27A
                  T12   Charitable Contributions           $20          $20   Charitable Contributions                          Line 45
                  T13   Auto Insurance                    $150          N/A*
                  T14   Auto Payment                      $296         $296   Secured Payment for Vehicle 1                     Line 47
                  T15   Time Share Fee                     $75          N/A
                  T16   Storage                            $82          $82   Storage                                           Line 60b
                  T17   Health Club                        $49          $49   HealthClub                                        Line 60a
                  T18                                                  $182   Transportation Ownership Expense - Vehicle 1      Line 28
                  T19                                                  $182   Transportation Ownership Expense - Vehicle 2      Line 29
                  T20   Taxes (Schedule I)           $1,412.18    $1,412.18   Taxes                                             Line 30
                                                    ___________
                  T21   "Insurance" (Schedule I)        $12.52       $72.22   Health Insurance                                  Line 39
                                                                 ___________
                  T22   "Med Pretax" (Schedule I)       $62.24
                  T23   "Vision" (Schedule I)            $3.46
                                                    ____________
                  T24                                                 $9.40   Chapter 13 Administrative Expense                 Line 50
                  T25   401k (Schedule I)              $144.86         $0**   Qualified Retirement Deduction                    Line 55
                  T26   Life Insurance (Schedule I)      $6.41         $0**          Personal Life Insurance                           Line 32
                                                    _______________________                                                    ________
                  T27   Total Expenses               $4,734.67    $5,181.80   Total Deductions                                  Line 52***
                

As reflected on line T1 of the above table, the Debtor claimed a rental expense deduction of $1,144.00, the full amount available under the IRS "Local Standards: housing and utilities; mortgage/rent expense" (the "IRS Housing Standards").¹ Schedule J indicates, however, that the Debtor's monthly rent payment is only $850, $294 less than the claimed deduction.²

On Form 22C, the Debtor claims an "ownership expense" for two vehicles. On Schedule B—Personal Property, the Debtor discloses ownership interests in a 1997 Ford F-150 Pickup with trailer (the "150") and a 2006 Harley Motorcycle (the "Harley"). Schedule D—Creditors Holding Secured Claims ("Schedule D"), reveals that there is a lien against the Harley and that the F-150 is not subject to liens. On line 28(a) of Form 22C, the Debtor claims an expense of $478 under the "IRS Transportation Standards, Ownership Costs" (the "IRS Transportation Standards") reduced on line 28(b) by his average monthly payment of $296 for a debt secured by "Vehicle 1," in this case the Harley, for a net ownership expense of $182 on line 28(c).³ On line 29, he again claims an expense under the IRS Transportation Standards in the amount of $478 for "Vehicle 2," presumably for the F-150.⁴ Consistent with Schedule D, this expense is not reduced by any secured debt payment on the vehicle.⁵ On line 47(a), the Debtor claims an additional expense related to the Harley as a future payment on a secured claim in the amount of $296 per month.⁶

The total of all deductions claimed by the Debtor, as listed on line 52 of Form 22C, is $5,050.80. This total, however, does not include the $131 in additional expense claims listed on line 60.⁷ Including these expenses, the new total is $5,181.80.⁸ When this amount is subtracted from the Debtor's current monthly income of $4,828.43, it yields monthly disposable income of negative $353.37. Despite negative monthly disposable income as calculated under 11 U.S.C. § 1325(b)(3) on Form 22C, Schedule J reveals that the Debtor has actual monthly net income of $93.76.

The Debtor's First Amended Chapter 13 Plan (the "Plan"), filed contemporaneously with Form 22C, provides for monthly payments of $94 over a term of sixty months. Through the Plan, the Debtor does not provide for payment of any secured or priority claims, although he proposes to pay TD Banknorth directly outside the plan on account of a claim secured by the Harley. In addition to an administrative claim in the amount of $1,274 for Debtor's counsel's fees, the Debtor proposes to pay the holders of general unsecured claims a dividend of not less than 7.55%, totaling $50,371.16.

eCAST, the holder of over 75% of the total value of unsecured claims filed in this case, filed the Objection on the grounds that the Debtor fails to devote all of his projected disposable income received during the commitment period to the unsecured creditors, and that the amount of property to be received under the Plan is less than the amount of its claim. eCAST's objection asserts, inter alia, that the Debtor's projected disposable income is understated due to the Debtor's claiming of "phantom" expense deductions to which he is not entitled. The Debtor filed a general response disputing eCAST's allegations.

I conducted a hearing on the Objection on May 15, 2008. At the conclusion of oral arguments, I took the matter under advisement. Afterwards, both parties, as well as the Chapter 13 trustee (the "Trustee"), filed briefs.

III. POSITIONS OF THE PARTIES

eCAST

As stated above, eCAST asserts that the Debtor understated his projected disposable income on Form 22C by taking deductions to which he is not entitled. eCAST agrees that the Debtor properly determined the current monthly income component of the disposable income calculation, but contends that the sum of his expense deductions on Form 22C is properly calculated to be $3,800.80, not the $5,050.80 stated. Specifically, eCAST asserts that the Debtor's housing expense deduction is overstated and that he is not entitled to expense deductions with respect to his two vehicles.

From the outset, eCAST urges that I be mindful of the guidance that the United States Bankruptcy Appellate Panel for the First Circuit expressed in Kibbe v. Sumski⁹ There, the Panel concluded that Congress' primary intent in enacting the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") was to "ensure that debtors repay creditors the maximum they can afford."¹⁰ As such, eCAST argues that above median income debtors are required to use the means test expenses, with appropriate...