534 B.R. 126
Bankr. E.D.N.C.2015Background
- Debtors Gregory and Laura Fields filed a joint Chapter 13 petition and submitted Official Form 22C showing above‑median current monthly income.
- Form 22C claimed various deductions: IRS Local Standards for housing and transportation (including differences between Local Standards and their secured loan payments), actual secured debt payments to Flagstar (mortgage), Chase Auto, Carmax, Ally, and a payment to ISPC for a water purification system.
- Trustee objected, arguing (1) Local Standards deductions cannot be used to augment or cap secured‑debt deductions (Lines 25B, 28, 29), (2) secured payments may be capped by Local Standards, (3) Vehicle 3 payments should be disallowed because the son (nondependent) uses it, and (4) ISPC payments should be disallowed because the Debtors intend to surrender the collateral.
- Court held secured debt payments are governed by 11 U.S.C. § 707(b)(2)(A)(iii) and the Notwithstanding sentence in § 707(b)(2)(A)(ii)(I) excludes debt payments from the National/Local Standards; Local Standards thus do not apply to secured‑debt deductions on Lines 25B/28/29.
- Court allowed secured debt deductions on Lines 47/48 for Flagstar, Chase Auto, and Carmax (after applying necessity review), disallowed the Ally (Vehicle 3) deduction because the son (nondependent) exclusively uses the vehicle, and disallowed the ISPC deduction because Debtors intend to surrender the collateral. The court ordered an amended Form 22C.
Issues
| Issue | Trustee's Argument | Debtors' Argument | Held |
|---|---|---|---|
| Applicability of National/Local Standards to secured debt payments | Local Standards should limit or be applied instead of secured‑debt deductions; Debtors cannot use difference between payment and Local Standard | Form 22C instructions permit deducting difference; Local Standards apply to housing/vehicle items listed | Notwithstanding sentence excludes "payments for debts" from Standards; secured debts must be claimed under §707(b)(2)(A)(iii) (Lines 47/48), not Lines 25B/28/29 |
| Whether Local Standards cap secured payments or create a floor | Local Standards should cap or limit deductions for home/vehicle payments | Debtors claim full secured payment amounts on Line 47; Local Standards don't apply to secured debts | Local Standards are inapplicable to secured‑debt deductions; court retains discretion to disallow secured payments that are not "for maintenance or support" |
| Necessity of collateral (luxury/high payment vehicle) for deduction | Trustee: payments exceeding Local Standard may be unreasonable; court should disallow if not necessary | Debtors: vehicles are necessary; full secured payments permitted | Court may evaluate whether secured collateral is "for maintenance or support" under §1325(b)(2); allowed deduction for 2007 Mercedes (Vehicle 1) and 2011 Routan (Vehicle 2); disallowed deduction for Vehicle 3 used solely by nondependent son |
| Deductions for collateral intended to be surrendered and Form 22C consistency | Trustee: cannot deduct payments for collateral to be surrendered; Form 22C misapplies §707 | Debtors relied on Form 22C instructions and took various Standard deductions | If debtor intends to surrender collateral (ISPC water system), payments cannot be deducted; Form 22C is inconsistent with Code and should be amended (Lines 25B/28/29 should not reference mortgage/ownership when secured debt exists); limit deductions to actual expense or Standard, whichever is less when Standards apply |
Key Cases Cited
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (explaining the means test and applicability of National and Local Standards)
- Ron Pair Enters., Inc. v. United States, 489 U.S. 235 (1989) (statutory interpretation begins with plain language)
- Morris v. Quigley (In re Quigley), 673 F.3d 269 (4th Cir. 2012) (debtor's intent to surrender collateral affects projection under means test)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (projection of future income and adjustments based on relevant factors)