449 B.R. 182
Bankr. D.P.R.2011Background
- Debtors filed a Chapter 13 petition on January 31, 2010 in Puerto Rico.
- Debtors are above the median income for a two-person household in Puerto Rico, per Form 22C and Schedule I.
- Debtors’ amended Form 22C and Schedules I & J show a combined monthly income of $3,972.85 and net monthly income of $350 after expenses, with mortgage removed in later amendments.
- Plan proposes 57 monthly payments of $350, 3 monthly payments of $430, and $1,000 yearly from Christmas bonuses over 60 months.
- Trustee objects to confirmation, arguing expenses are not properly allocated and that projected disposable income is miscalculated under 707(b)(2) and 1325.
- Stipulated facts establish past mortgage relief, income sources, and disclosed Christmas bonuses totaling about $2,000 per year.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are Christmas bonuses income for disposable income calculations? | Miranda argues bonuses are not disposable income under 101(10A). | O'Neill argues bonuses are income and must be included in CMI and projected disposable income. | Bonuses are income and must be included in disposable income. |
| May above-median debtors deduct full IRS National/Local Standards despite lower actual expenses? | Trustee argues standards may be applied; actual expenses may not control. | Debtors may deduct full standards whether or not actual expenses exceed them. | Debtors may deduct full applicable standard amounts if they have some expense in that category. |
| Should the expense side use Form 22C and IRS standards to determine disposable income? | Trustee asserts forward-looking adjustments allowed but not contrary to means test. | Debtors contend that means test controls which expenses are deductible; forward adjustments only for unusual cases. | Means test expense component governs, with National/Local Standards and Other Necessary Expenses as applicable. |
| Is the amended plan proposed in good faith under 11 U.S.C. § 1325(a)(3)? | Trustee claims plan overstates expenses reducing distributions to creditors, indicating bad faith. | Debtors rely on good faith despite lower distributions; not required to contribute more than §1325(b)(1). | Good faith found; partial denial due to specific expense issues (food/clothing) not fully allowed. |
| May Debtors claim additional 5% food/clothing allowances under 707(b)(2)(A)(ii)(I) without demonstrating reasonableness? | Trustee seeks to limit to standard amounts without extra allowance unless reasonable. | Debtors seek additional 5% allowance as reasonable under Standards when applicable. | Debtors not entitled to the extra 5% without showing reasonable necessity. |
Key Cases Cited
- Hamilton v. Lanning, 130 S. Ct. 2464 (2010) (forward-looking approach for projected disposable income; unusual cases may adjust)
- Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716 (2011) (debtor may deduct National/Local Standards; includes discussion of when standards apply)
- In re Kibbe, 361 B.R. 302 (1st Cir. BAP 2007) (dispute over income vs. expense side of projected disposable income; expenses regulated by 707(b)(2))
- In re Padilla, 2009 WL 2898837 (Bankr. D.P.R. 2009) (addressed forward-looking approach and means test in this district)
- In re Young, 392 B.R. 6 (Bankr. Mass. 2008) (Local Standards treatment for above-median debtors; some allowance of actual expenses limited)