Killough, Matter of

• Decision Date: 04 May 1990
• Docket Number: No. 89-4626,89-4626
• Parties: 23 Collier Bankr.Cas.2d 472, 20 Bankr.Ct.Dec. 725, Bankr. L. Rep. P 73,368 In the Matter of Mickey McClain KILLOUGH, Debtor. COMMERCIAL CREDIT CORPORATION, Appellant, v. Mickey McClain KILLOUGH, Appellee. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 61

900 F.2d 61

23 Collier Bankr.Cas.2d 472, 20 Bankr.Ct.Dec. 725,

Bankr. L. Rep. P 73,368

In the Matter of Mickey McClain KILLOUGH, Debtor.

COMMERCIAL CREDIT CORPORATION, Appellant, v. Mickey McClain KILLOUGH, Appellee.

No. 89-4626

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

May 4, 1990.

Kenneth Michael Wright, Lake Charles, La., for appellant.

Gerald J. Casey, Morris & Casey, Lake Charles, La., for Killough.

Keith A. Rodriguez, Lafayette, La., Trustee.

Appeal from the United States District Court for the Western District of Louisiana.

Before REAVLEY, KING and JOHNSON, Circuit Judges.

PER CURIAM:

Plaintiff-appellee, Mickey McClain Killough (Killough), filed a petition for bankruptcy under Chapter 13. After a hearing, her Chapter 13 plan, providing for the partial repayment of her creditors, was approved over the objection of the defendant-appellant, Commercial Credit Corporation (Commercial Credit). Commercial Credit appealed the bankruptcy court's determination, and the district court affirmed the judgment of the bankruptcy court. Commercial Credit now appeals to this court, and we affirm the district court's judgment.

I. Facts and Procedural Background

Killough, a registered nurse at St. Patrick Hospital, filed a petition for relief under Chapter 13 of the Bankruptcy Code. Originally, on November 30, 1988, Killough proposed a Chapter 13 plan wherein she would pay $301 per month toward her debts for 60 months. Subsequently, Commercial Credit filed two proofs of claim: one for $3000, the other for $5389.91. On January 31, 1989, Killough filed an amended plan, which provided that the security for the $3000 claim--a 1982 Oldsmobile Delta Royale--would be valued at $3000 and returned to satisfy the creditor's secured claim. The amendments also reduced the duration of Killough's plan from 60 months to 48 months. The monthly payment under the plan, however, remained at $301.

According to Killough's plan, she had an estimated future monthly income (net of taxes) of $1695.32 and fixed expenses of $1394.32 per month ¹ for herself and her son. However, such monthly income estimate does not include any overtime payments to be received by her. ² Testimony at the confirmation hearing showed that the option of working overtime had frequently been available to Killough and that she had availed herself of it.

On February 17, 1989, a confirmation hearing for Killough's plan was held. Evidence of Killough's income in 1988 and 1989 was presented and Killough testified about her expenses and income. At the confirmation hearing, Commercial Credit objected to Killough's plan because, among other reasons, of its failure to reflect money to be earned by Killough for overtime. Commercial Credit argues that such income--because of the regularity with which it had been earned in the past--should redound to the benefit of creditors. The bankruptcy court concluded that, as Killough admitted, the expenses in the plan were understated, but the bankruptcy court found no evidence of bad faith on the part of Killough. Hence, in a ruling from the bench, the bankruptcy court commented that it would not require Killough "to endanger her health and her mental well being by working overtime to satisfy the unsecured creditors." Moreover, the bankruptcy court noted that such overtime was not always available to Killough. For these reasons, the bankruptcy court confirmed Killough's amended plan and overruled Commercial Credit's objection.

Commercial Credit appealed the plan confirmation to the district court, claiming, inter alia, that the bankruptcy court erred in confirming the plan in light of the failure of the plan to include money to be earned by working overtime. After hearing argument on July 19, 1989, the district court affirmed the judgment of the bankruptcy court. The district court stated that insufficient evidence existed to support "Appellant's claim that the Bankruptcy Court's opinion was clearly erroneous." The district court pointed to the paucity of evidence indicating bad faith on the part of Killough. In addition, the district court highlighted the bankruptcy court's conclusion that overtime hours might not be available to Killough in the future and, thus, it would be "unfair" to require the Killough's Chapter 13 plan to encompass possible future overtime earnings.

Commercial Credit appeals, and we affirm the judgment of the district court.

II. Standard of Review

We review the findings of the bankruptcy court just as we would findings from a trial in the district court. See, e.g., In re Commercial W. Finance Corp., 761 F.2d 1329, 1333 (9th Cir.1985) ("Because we are in as good a position as the district court to review the findings of the bankruptcy court, we independently review the bankruptcy court's decision."). Hence, we will not overturn findings of fact unless they are clearly erroneous, In re Killebrew, 888 F.2d 1516, 1519 (5th Cir.1989), but we review issues of law de novo, In re Compton, 891 F.2d 1180, 1183 (5th Cir.1990).

In the case sub judice, we review issues relating to the approval of a Chapter 13 plan. As we find that the instant case turns on factual findings by the bankruptcy court, our review is under the clearly erroneous standard. Thus, if "we are not left with the definite and firm conviction that a mistake has been committed[,]" we will not reverse. In re Texas Extrusion Corp., 844 F.2d 1142, 1164 (5th Cir.), cert. denied, --- U.S. ----, 109 S.Ct. 311, 102 L.Ed.2d 330 (1988).

III. Discussion

Commercial Credit appeals the judgment below on two related grounds:

1. Whether the bankruptcy and district courts committed error by not requiring Killough, who (in Commercial Credit's view) had a history of both pre- and post-petition overtime income, to place all, or a portion of, her post-petition overtime income into her plan for the repayment of her creditors.

2. Whether the bankruptcy and district courts committed error by finding that Killough had satisfied her burden of proving that all of her disposable income would be paid into the plan in accordance with 11 U.S.C. Sec. 1325(b)(1). ³

We read Commercial Credit's brief to assert, in essence, that the amounts Killough receives in overtime compensation should be included in her payments under her Chapter 13 plan because she works some overtime with regularity and such income constitutes income over and above the expenses listed in her plan. ⁴ To assess the merit in this contention, we turn to section 1325 of the Bankruptcy Code, which controls the confirmation of Chapter 13 plans. 11 U.S.C. Sec. 1325. In particular, the pertinent portion of section 1325(b)(1), which sets the standards for confirming plans in situations like the one at hand--where an unsecured creditor objects to the confirmation--states:

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan--

. . . . .

(B) the plan provides that all of the 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. Sec. 1325(b)(1)(B); see generally E. Warren & J. Westbrook, The Law of Debtors and Creditors 309-10 (1986).

Following the dictates of the relevant statutory language, in confirming the plan over Commercial Credit's objection, the bankruptcy court was called upon to determine whether Killough's plan met the requirements of section 1325(b)(1)(B). That is, the bankruptcy court had to find that her proposal devoted her entire "projected disposable income" for the three years following her first payment toward her plan. The bankruptcy court must take two steps in relation to this process. Initially, it must project the income of the debtor "over the next three years." Collier on Bankruptcy p 1325.08[a] (15th ed. 1985). For practical purposes, this task is usually accomplished by multiplying the debtor's monthly income by 36. Next, the bankruptcy court must assess the amount of the debtor's income that is "disposable." See generally id.

The budget filed by Killough envisioned her making less per year than she did in 1988 ⁵ and, indeed, less each month than she has usually made since she filed her Chapter 13 statement. ⁶ These facts make Commercial Credit's arguments for including overtime income in the Chapter 13 plan facially appealing. After all, at the confirmation hearing, both Killough and her attorney admitted to some inaccuracy in the budget. However, Commercial Credit's argument ignores two key findings by the bankruptcy court.

First, although Killough has worked significant amounts of overtime at some points in the past and testimony by Ron McKeever--an Administrative Assistant at St. Patrick Hospital--indicated that such overtime was frequently available for registered nurses, the bankruptcy court accepted testimony by Killough that overtime might not always be available to her. In addition, the bankruptcy court noted that Killough's health might not withstand her working as much overtime as she had in the past. Specifically, the bankruptcy court made the following oral finding:

[R]ight now [Killough's] saying, not only ... would [overtime] perhaps jeopardize her health, but ... also that the work is not available; they're sending people, the work is not available for her to have.

Thus, while cases exist where overtime has been included as projected income for Chapter 13 purposes, ⁷ in this case, the bankruptcy court appears to have determined that the potential for Killough to work overtime in the future was not definite enough to follow this route. ⁸ Given Killough's testimony on this point and our perusal of the record, we hold that such determination was not clearly erroneous. See Education Assistance Corp. v. Zellner, 827 F.2d 1222, 1226 (8th Cir.1987) (court ...