606 B.R. 410
Bankr. E.D. Cal.2019Background
- Debtors Teofilo and Christy Rodriguez (household of seven) filed a Chapter 13 plan proposing 36 months of payments of projected disposable income; unsecured creditors to receive ~14%.
- Debtors are below-median income; household income ~ $9,000/month from Christy’s wages, Teofilo’s VA benefits, and parents’ Social Security; monthly expenses claimed ≈ $8,100.
- Schedule J includes contested items: $1,300 transportation, $700 utilities/home expenses, $500 entertainment, $150 childcare/children’s education, $110 charitable contributions, $80 contribution to family member, $117 storage, $40 continuing education, etc.
- Trustee objected under 11 U.S.C. § 1325(b)(1)(B), arguing Debtors must apply all projected disposable income and that many expenses exceed IRS National/Local Means Test standards used for above-median debtors.
- Court held an evidentiary record was closed; Trustee carried the initial burden to show plan fails to apply all disposable income, then burden shifts to Debtors to justify contested expenses.
Issues
| Issue | Debtors' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether below-median debtors must conform to §707(b)(2) Means Test amounts when proving "reasonably necessary" expenses | Debtors: Means Test inapplicable; court should evaluate expenses case-by-case and may allow higher amounts given household needs | Trustee: Congress intended IRS standards as a guide; below-median should not be permitted greater deductions than above-median debtors | Court: Means Test does not bind below-median debtors; court rejects limiting below-median debtors to Means Test amounts |
| Allocation of initial burden of proof on disposable income objection | Debtors: Once Trustee objects, Debtors will show expenses are actual and reasonably necessary | Trustee: Trustee has initial burden to show plan fails to apply disposable income | Court: Trustee bears initial burden to show plan is deficient; burden shifts to Debtors to justify expenses |
| Transportation and utilities/home expense deductions | Debtors: Large household, multiple adult drivers, teen drivers, older vehicles needing repairs, higher utility use and deferred maintenance justify amounts | Trustee: Expenses exceed Means Test standards and appear excessive | Court: Debtors proved these expenses are actual and reasonably necessary; allowed |
| Entertainment, childcare/education, and contributions to other family | Debtors: Expenses reflect family needs (drivers’ training, caregiving, modest charitable/support payments) | Trustee: Insufficient proof these are actual and reasonably necessary; some items appear inflated or not for dependents | Court: Disallowed $500 entertainment; childcare/education not adequately documented (uncertain overlap) — limited or disallowed; $80 monthly contribution to nondependent family member disallowed; charitable contributions, storage, and continuing education allowed |
Key Cases Cited
- Chinichian v. Campolongo, 784 F.2d 1440 (9th Cir.) (debtor bears burdens to satisfy §1325 confirmation elements)
- Barnes v. Barnes (In re Barnes), 32 F.3d 405 (9th Cir.) (good faith and confirmation burdens)
- Quarterman (In re Quarterman), 342 B.R. 647 (Bankr. M.D. Fla.) (court discretion in below-median expense reasonableness)
- Powers (In re Powers), 554 B.R. 41 (Bankr. N.D.N.Y.) (below-median debtors not constrained to Means Test amounts)
- Lopez (In re Lopez), 574 B.R. 159 (Bankr. E.D. Cal.) (trustee has initial burden to show disposable income not applied)
- Heath (Itule v. Heath (In re Heath)), 182 B.R. 557 (9th Cir. BAP) (burden-shifting on disposable income objections)
- Bassett (In re Bassett), 413 B.R. 778 (Bankr. D. Mont.) (confirmation and expense reasonableness analysis)