511 B.R. 696
Bankr. N.D. Ga.2014Background
- Debtors Nicholas Kuwik (self‑employed media producer) and Tatjana Krause (wage‑earner) filed Chapter 13; plan proposed 3 years of $350/month (later amended to $390).\
- Form 22C and Schedule I reported the Husband’s gross business receipts of $4,407.28 and ordinary business expenses of $3,081.83, yielding $1,325.45 net business income; annualized household income fell below Georgia median per Debtors.\
- Trustee objected, arguing business expenses should not be deducted when calculating "current monthly income" under 11 U.S.C. § 101(10A), which determines whether the applicable commitment period under § 1325(b)(4) is three or five years.\
- Debtors argued "income" should be net of business expenses (i.e., use net profit); Trustee and several authorities argued "income" means gross receipts and business expenses are deducted later when computing disposable income under § 1325(b)(2)(B).\
- Court held a confirmation hearing, allowed briefs and an itemized list of business expenses, and reserved ruling on whether current monthly income for a sole proprietor is gross or net of business expenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "income" in § 101(10A) for a sole proprietor means gross receipts or net income after business expenses | Debtors: income should be net of ordinary and necessary business expenses so applicable commitment period reflects economic reality | Trustee: income means gross receipts; business expenses are deductible later under § 1325(b)(2)(B); otherwise § 1325(b)(2)(B) is superfluous or double deductions would result | Court held "income" means gross receipts (pre‑expense) for § 101(10A); business expenses remain deductible only in computing disposable income under § 1325(b)(2)(B), so applicable commitment period is determined from gross income |
Key Cases Cited
- Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (discusses statutory interpretation and BAPCPA policy of maximizing creditor repayment)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (statutory interpretation and respect for pre‑amendment practice)
- Whaley v. Tennyson (In re Tennyson), 611 F.3d 873 (11th Cir. 2010) (applicable commitment period is minimum plan duration)
- Drummond v. Wiegand (In re Wiegand), 386 B.R. 238 (9th Cir. BAP 2008) (current monthly income for self‑employed debtors is gross receipts)
- In re Harkins, 491 B.R. 518 (Bankr. S.D. Ohio 2013) (analyzes gross‑receipts approach and statutory harmony between §§ 101(10A) and 1325(b)(2)(B))