507 B.R. 534
Bankr. W.D. Pa.2014Background
- Debtor filed Chapter 13 after a state equitable distribution order forced asset transfers and alimony obligations.
- Wife objected to confirmation of Debtor’s Second Amended Plan (2nd Amd. Plan) on LAT, disposable income, and good-faith grounds, and separately objected to Proof of Claim 3-3 for alimony arrears.
- The evidentiary hearing focused on whether the Pittsburgh Road (Pgh. Rd.) Property mortgage payments are a necessary business expense or a secured claim reducing disposable income.
- Debtor argues Pgh. Rd. payments are business-related, deductible under 1325(b)(2)(B) or 1325(b)(3), and that post-petition alimony should be treated as priority unsecured to satisfy LAT.
- Court found the Pgh. Rd. Property is not reasonably necessary to Debtor’s business or his support, and post-petition alimony cannot be counted toward LAT; Plan denied for LAT and disposable income reasons, and Debtor’s objections to Claim 3-3 denied but with potential refiling.
- Court ultimately denied confirmation of the 2nd Amd. Plan; good-faith analysis found generally in favor of Debtor, but LAT and disposable income issues prevailed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| LAT compliance for 2nd Plan | McKinney argues Debtor’s plan fails LAT due to nonexempt assets value and improper inclusion of postpetition alimony. | Debtor contends LAT met by total proposed payments to priority/general unsecured creditors. | Plan fails LAT; not confirmable. |
| Disposable income deduction for Pgh. Rd. Property | McKinney contends property not necessary for business or Debtor’s support; postpetition overstates disposable income. | Debtor argues property payments are necessary business secured-debt deduction. | Pgh. Rd. payments cannot be deducted; disposable income insufficient. |
| Good faith of the plan | McKinney argues bad faith due to strategic use of plan to discharge equitable distribution. | Debtor asserts overall plan filed in good faith under totality of circumstances. | Plan generally in good faith; however LAT/disposable income issues control. |
| Alimony arrearage claim (Claim 3-3) | McKinney asserts arrearage amount as of filing date; calculations match state court order. | Debtor presents alternative arrearage amount; dispute unresolved by record. | Debtor’s objection sustained; Claim 3-3 denied without prejudice to refile. |
Key Cases Cited
- In re May, 381 F.3d 498 (Bankr. W.D. Pa. 2008) (Form B22C reflects disposable income; presumed accurate for §1325(b)(1) purposes.)
- In re Amos, 452 B.R. 886 (Bankr. D.N.J. 2011) (Allows discretionary treatment of secured debt payments under §707(b)(2) when determining disposable income.)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (Defines disposable income and supports flexibility in means-testing analysis.)
- In re Young, 497 B.R. 904 (Bankr. W.D. Ark. 2013) (Distinguishes prepetition vs postpetition domestic support obligations for claims.)
- In re Siragusa, 27 F.3d 406 (9th Cir. 1994) (Dischargeability and good-faith considerations in bankruptcy context.)
- In re Edwards, No. 11-80962, 2012 WL 3584769 (Bankr. W.D. La. 2012) (LAT calculations in similar context.)
- Edwards ( Edwards v. Edwards), - (-) (Used to illustrate priority unsecured treatment in LAT.)
- In re Fletcher, 248 B.R. 48 (Bankr. Vt. 2000) (Tax-law analogies supporting business expense scrutiny in 1325(b)(2)(B).)