669 B.R. 152
Bankr. W.D. Pa.2025Background
- Debtors Justin and Jennifer Krenitsky filed for Chapter 13 bankruptcy and submitted Schedule J, listing their ongoing monthly expenses as averages based on IRS National and Local Standards rather than their actual expenses.
- The reported expenses led to a very low net monthly income, resulting in a Chapter 13 plan that offered no payments to general unsecured creditors.
- The Chapter 13 Trustee objected to confirmation of the plan, arguing that the Debtors' use of generalized IRS statistics, rather than their actual expenses and unsubstantiated income, prevented the Trustee from evaluating whether the Debtors were making their "best efforts" under 11 U.S.C. § 1325(b)(1)(B).
- The Debtors argued that using IRS statistical averages constituted a legitimate method of "estimating" their expenses as required by the bankruptcy forms and law.
- The Court found that, for below-median income debtors, expenses must be based on actual projections rather than generic IRS estimates, and thus ordered the Debtors to file an amended Schedule J with their actual estimated expenses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Schedule J expenses can be based on IRS statistical averages rather than actual estimates | Krenitsky: IRS stats are the best estimate for expenses | Trustee: Only actual, debtor-specific expenses are proper | Court: Debtors must estimate their own actual expenses |
| Whether plan meets "best efforts" test under § 1325(b) | Krenitsky: Averages are adequate for "best efforts" | Trustee: Can't assess best efforts w/o real numbers | Court: Plan doesn't pass best efforts without real data |
| Whether IRS standards provide a safe harbor for expense estimates | Krenitsky: IRS data should be presumptively reasonable | Trustee: No legal or statutory safe harbor exists | Court: No safe harbor for using only IRS standards |
| Whether good faith allows for use of statistical averages | Krenitsky: Cites treatise support and good faith | Trustee: Good faith requires actual estimates | Court: Good faith doesn't allow for generic estimates |
Key Cases Cited
- In re Miller, 361 B.R. 224 (Bankr. N.D. Ala. 2007) (before BAPCPA, Schedules I and J were primary evidence for disposable income test in § 1325(b))
- In re McKinney, 507 B.R. 534 (Bankr. W.D. Pa. 2014) (Means Test presumed accurate for above-median income; not for below-median)
- U.S. Tr. v. Kubatka (In re Kubatka), 605 B.R. 339 (Bankr. W.D. Pa. 2019) (Means Test uses fixed national standards for above-median debtors, not below-median)