466 B.R. 539
Bankr. D. Haw.2012Background
- Chapter 13 plan proposes about $640/month to HIUSA on two auto loans, with last payments due April 2012, and $346/month to trustee for unsecured claims.
- HIUSA also holds a second mortgage (~$70,000) and $5,800 in credit card debt; second mortgage treated as unsecured due to insufficient collateral.
- HIUSA objects to confirmation, arguing plan must devote all projected disposable income to unsecured creditors, increasing payments when car loans are paid off.
- Supreme Court decisions in Hamilton v. Lanning and Ransom v. FIA Card Services address when projected disposable income may be adjusted for known future events.
- Debtors contend adjustments should occur only in unusual cases and rely on administrative efficiency to avoid plan modification now.
- The court agrees that plan payments must step up when the secured car loans are paid off, denying confirmation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Must plan payments step up when secured car loans are paid off? | Montiho/HIUSA: yes, known/virtually certain; increases necessary. | Montiho: only in unusual cases; plan should not adjust now. | Yes; plan must step up; confirmation denied. |
| May the plan deduct automobile ownership expense after car payments end? | Debtors rely on Ransom to limit vehicle ownership expense. | Ransom precludes ownership expense once car payments are zero. | No ownership expense after payoff; deduction not allowed. |
| Should efficiency concerns override statutory means-test considerations in this case? | Debtors argue administrative efficiency supports confirming as filed. | Efficiency cannot override the statutory requirements and case law requiring step up. | Too compelling to override; must adjust plan as required by law. |
Key Cases Cited
- Hamilton v. Lanning, 130 S. Ct. 2464 (2010) (allows adjustments for known or virtually certain future changes in income/expenses)
- Ransom v. FIA Card Services, N.A., 131 S. Ct. 716 (2011) (no vehicle ownership expense deduction when car payments are zero)
- In re Darrohn, 615 F.3d 470 (6th Cir. 2010) (step-up not allowed for surrendered property context)
- In re McCullers, 451 B.R. 498 (Bankr. N.D. Cal. 2011) (plan payments must step up on final payoff of secured loan)
- In re Wing, 435 B.R. 705 (Bankr. D. Col. 2010) (cannot deduct second mortgage if debtor intends to strip off)
- In re Scott, 457 B.R. 740 (Bankr. S.D. Ill. 2011) (expense allowances may be capped or fixed depending on court)
- In re Rezentes, 368 B.R. 55 (Bankr. D. Haw. 2007) (debtor's deduction of allowances vs actual expenses varies by court)
- In re Owsley, 384 B.R. 739 (Bankr. N.D. Tex. 2008) (limits on ownership expense when auto payments cease)
- Musselman v. eCast Settlement Corp., 394 B.R. 801 (E.D.N.C. 2008) (discusses treatment of allowances vs actual expenses)