In Re Reed
454 B.R. 790
Bankr. D. Or.2011Background
- Debtors have income above median but show negative current monthly disposable income on Form B22C.
- Debtors propose a 43-month plan paying unsecured creditors nothing; trustee argues for 60 months and full or greater dividend.
- Supreme Court Hamilton v. Lanning allows forward-looking projection of disposable income with known changes; Kagenveama held no applicable commitment period when zero/negative projected disposable income.
- Court must determine how to project disposable income under Lanning and whether Lanning/Ransom overrule Kagenveama on the five-year commitment period.
- Debtors’ Schedule I includes adjustments (raise and anticipated annual bonus); adoption assistance ends after June 2011; Form B22C expenses use IRS standards; trustee identifies calculation errors and potential adjustments.
- Judge concludes debtors have negative projected disposable income; panel votes to confirm a 43-month plan under Ninth Circuit precedent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How to calculate projected disposable income | Reed | Turner | Projected income is negative; deviations require known changes only; Form B22C used with adjustments for known changes. |
| Whether Lanning/Ransom overruled Kagenveama on applicable commitment period | Reed | Trustee says overruling; court should adopt five-year period | Supreme Court decisions did not effectively overrule Kagenveama; no five-year period required. |
| Impact of known changes to income/expenses on projection | Reed | Trustee | Adjust for Mrs. Reed's raise and annual bonus; exclude ending adoption assistance; overall projection remains negative. |
Key Cases Cited
- Kagenveama v. United States Trustee, 541 F.3d 868 (9th Cir. 2008) (no applicable commitment period when projected disposable income is zero or negative)
- Hamilton v. Lanning, 130 S. Ct. 2464 (U.S. 2010) (forward-looking projection allowed for known changes in income/expenses)
- Ransom v. FIA Card Services, 131 S. Ct. 716 (U.S. 2011) (means-test expenses only if actually incurred; purpose to ensure repayment to creditors)
- Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011) (discusses interplay of plan duration and projection under §1329(a))
- Hamilton v. Lanning, 130 S. Ct. 2464 (S. Ct. 2010) (reiterates forward-looking approach to projected disposable income)