482 B.R. 248
Bankr. C.D. Ill.2012Background
- Debtors filed a voluntary Chapter 13 petition on January 27, 2012 and disclosed over-median income with a 60-month plan via Form B22C.
- Initial Plan proposed $750 monthly payments for 60 months; American Express objected to miscalculated unsecured dividend.
- Amended Plan (May 10, 2012) proposed $800 monthly payments with an anticipated $41,632 dividend to unsecured creditors; AmEx objected again.
- Second Amended Plan (June 8, 2012) keeps $800 monthly payments, adds a commitment to pass through tax refunds over $1,500 to the Trustee, and pays secured creditors directly.
- American Express objects to the Second Amended Plan, contending improper disposable income calculations and vehicle loan treatment.
- Evidence at the confirmation hearing included Mrs. Moore’s testimony about health issues, increased medical costs, new health insurance, higher food expenses, and post-petition medical bills.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plan commits all projected disposable income | American Express contends disposable income is not fully committed. | Moores argue they properly calculated disposable income using line 47 vehicle deductions and standard expenses. | Plan commits all projected disposable income. |
| Treatment of vehicle loan deductions and step-up | AmEx says step-up is required after loans are paid; also disputes vehicle deductions. | Debtors correctly used 60-month vehicle payments and are not required to step up plan payments; deductions proper. | No post-payment step-up required; line 47 deductions and overall disposable income are correct. |
| IRS Local Standard for transportation ownership | AmEx argues no Local Standard deduction for paid-off vehicles should apply. | Debtors may deduct Local Standard for two vehicles after netting loan payments; Ransom does not forbid this. | Deduction for transportation ownership properly allowed. |
| Effect of post-petition changes under Lanning | Changes in income/expenses after filing can affect disposable income at confirmation. | Lanning allows consideration of changes that are virtually certain to occur by confirmation. | Post-petition changes, including health insurance costs and medical bills, properly considered. |
| Post-petition medical expenses and health insurance impact | Increased medical costs and new insurance should be added to disposable income calculation. | Medical expenses can be deducted, and increased insurance and medical bills are properly accounted for in recalculation. | Incorporation of post-petition medical costs and insurance into disposable income is proper. |
Key Cases Cited
- In re Seafort, 437 B.R. 204 (6th Cir. BAP 2010) (limits on step-up requirements after 401(k) loans in disposable income)
- Nowlin v. Peake, 576 F.3d 258 (5th Cir. 2009) (step-up considerations for loan payments in disposable income)
- Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716 (Supreme Court 2011) (debtor with no loan may not claim transportation ownership LST; uncertainty on loaned vehicle deductions)
- Hamilton v. Lanning, 130 S. Ct. 2464 (Supreme Court 2010) (changes in income/expenses not in statutory formulas may be considered for confirmation)
- In re Montiho, 466 B.R. 539 (Bankr. D. Haw. 2012) (discussion of Local Standard deduction post-loan payoff)