In Re Bacon
MEMORANDUM OPINION AND ORDER
On June 21, 2010, Lori Kaye Bacon, the debtor (“debtor”), obtained confirmation of her plan of reorganization. Thereafter, the debtor sought to modify her plan. Mark T. McCarty, the Chapter 13 Standing Trustee (“trustee”), filed his Objection to Confirmation of Plan as Modified, Post-Confirmation on 11/2^/2010 (“Objection”). For the reasons stated below, the Objection is sustained.
This court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L). The following opinion constitutes findings of fact and conclusions of law in accordance with Federal Rules of Bankruptcy Procedure 9014 and 7052.
II. Findings of Fact
The debtor filed her Chapter 13 voluntary bankruptcy petition and initial plan on March 25, 2010. (Trustee Ex. 1.) The debtor is married. Her husband, however, did not file. 1 In her schedules, the debtor listed $110,514 in unsecured credit card debt. (Trustee Ex. 3 at 17-18.) The debt- or’s schedules and statements further reflect that she is an above-median income debtor. (Trustee Exs. 3, 4.)
Also on March 25, 2010, the debtor filed her initial Chapter IS Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income (“First Statement”). (Trustee Ex. 4.) The debtor listed her monthly income at $5,641.77 and her husband’s monthly income at $6,991.01. (Trustee Ex. 4 at 38.) The resulting calculations reflected a section 1325(b)(2) monthly disposable income of $1,141.87. (Trustee Ex. 4 at 44.) The debtor’s initial plan proposed a monthly payment of $1,625 and suggested an unspecified pro rata percentage distribution to unsecured creditors. (Trustee Ex. 5 at 1.)
On April 28, 2010, the trustee objected to this initial plan, specifically the determination of disposable income. (Trustee Ex. 6.) Shortly thereafter, on May 21, 2010, the debtor filed amended Schedules I and J, an amended form 22C (“Amended Statement”), and a Modification of Chapter IS Plan (“First Modification”). (Trustee Exs. 7, 8, 11.) The Amended Statement reflected a revised monthly disposable income under section 1325(b)(2) of $1,534.17. (Trustee Ex. 7 at 7.) The First Modification proposed to pay $1,745 per month until August 2012. (Trustee Ex. 8.) Thereafter, the debtor’s payments would increase incrementally: $2,645 a month beginning September 2012, until May 2013; $3,020 in June 2013; and then $3,330 a month beginning August 2013, until plan completion. 2 (Trustee Ex. 8.) The court confirmed this First Modification on June 21, 2010, and it became the operative plan (“Plan”). (Trustee Ex. 1 at 5.)
On November 24, 2010, approximately five months after confirmation of her Plan, the debtor filed a second Modification of Chapter IS Plan (“Second Modification”). (Trustee Ex. 9.) The Second Modification sought to reduce the step payments as follows: $1,085 per month until August 2012; thereafter $1,985 through May 2013; June and July 2013 payments of $2,360 each; then, beginning August 2013, payments of $2,670 a month until plan completion. (Trustee Ex. 9.) This proposed Second Modification results in a less than 100% payout to unsecured creditors. The trustee again objected.
In his Objection, the trustee calculates that the Second Modification reduces the dividend to unsecured creditors to approximately 70%. The trustee now scrutinizes the debtor’s expenses; he had not done so previously based on the anticipated 100% distribution. The questioned expenses fall
Second, the trustee questions post-confirmation expenses occasioned by the debt- or’s husband purchasing a 2010 Cadillac CTS. Specifically, the debtor’s aggregate insurance increased from $171 a month to $300 a month. (Trustee Ex. 11 at 3; Ex. 12 at 3.) Also, her husband obligated himself to a $529.56 monthly car payment for six years, an increase in expenses for which the debtor now correspondingly seeks to reduce her plan payments. (Trustee Ex. 12 at 4.)
The Second Modification is a direct result of the purchase of the Cadillac CTS. At filing, the debtor’s husband drove a 1993 Chevrolet Lumina with 90,000 miles. (Trustee Ex. 3 at 12.) The debtor’s Schedules B and C noted ownership by “salvage title.” (Trustee Ex. 3 at 12.) The debtor listed the vehicle as jointly held with $500 representing her one-half value. (Trustee Ex. 3 at 12.)
At the time of filing, the debtor owned a 2005 GMC Yukon XL. (Trustee Ex. 3 at 12.) She purchased the GMC Yukon XL because she needed more room for baby strollers; she previously drove a 2005 Cadillac Escalade. The debtor’s husband purchased a Cadillac CTS in September 2010, less than three months after confirmation of the debtor’s Plan. (Trustee Ex. 12 at 4.) The debtor’s husband made the purchase without any meaningful discussion with the debtor. He simply alluded to the fact that he was looking at cars and subsequently bought the Cadillac CTS without the debt- or’s direct knowledge. Neither the debtor nor the debtor’s husband made an effort to review their budget or determine the fiscal appropriateness of the purchase. The debtor testified that she did not think her husband put any money down at the time of purchase.
In addition to the new car payment, the debtor’s car insurance expenses increased. The increased insurance premium is either a result of the purchase of the Cadillac CTS or a residual effect of the husband’s three pre-petition DUIs. 3 The record is not completely clear on this point, but the debtor did testify that the rate did not go up until after the purchase of the Cadillac CTS. Patricia Davis, a Modification Specialist with the trustee’s office, testified that an insurance premium of $225 to $250 a month, which is less than the sum now paid by the debtor, is generally more appropriate for a two-adult home.
Although the debtor’s husband is not currently in a bankruptcy proceeding, the record reflects that he is in a rather precarious financial condition. Specifically, his gross monthly income is $7,008.28. (Trustee Ex. 12 at 1.) His standard deductions result in an average monthly income of $4,128.42. (Trustee Ex. 12 at 1.) His payroll deductions include miscellaneous deductions of $1,201.88, which encompass $473 in child support and at least one 401(k) loan payment of $309.42. (Trustee Ex. 12 at 1, 4.) The debtor’s husband also budgets $800 a month for his credit card payments. This figure represents his min
The court held a hearing on the trustee’s Objection on April 13, 2011, and took the matter under advisement.
III. Discussion
In the present case, the debtor seeks to modify her Plan pursuant to 11 U.S.C. § 1329. Section 1329(a) governs the modification of chapter 13 plans and provides as follows:
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to—
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan[.]
11 U.S.C. § 1329(a)(1) (2011). “Section 1329(a)(1) contemplates modified plans based on changed circumstances that may increase or decrease payments to unsecured creditors.”
In re Ireland,
In
Nelson,
the bankruptcy court analyzed a debtor’s contention that “due to [an] unanticipated and adverse change in circumstances” she should be able to modify her plan “in accordance with 11 U.S.C. § 1329.”
Prior to determining whether the debtor’s Second Modification meets the “unanticipated substantial change in circumstances” standard, the court must analyze what changes have occurred posteon-firmation that now render the debtor’s Plan unfeasible. At trial, the debtor testified that she incurred additional expenses associated with the purchase of the 2010 Cadillac CTS three months after her Plan confirmation. This purchase produced a new monthly car payment of $529.56 and increased the debtor’s monthly car insurance.
Although the debtor’s husband is not currently in a bankruptcy proceeding, his income and expenses affect the success of the debtor’s Plan. “When a debtor seeks Chapter 13 relief, ‘the entire family is affected by the sacrifices and special efforts required by the Code. [A] family may not continue its prepetition lifestyle to the detriment of creditors.’ ”
In re Trimarchi,
In the present case, the debtor’s Second Modification was occasioned by the debt- or’s husband purchasing a 2010 Cadillac CTS to replace his 1993 Chevrolet Lumina, which needed repair but was still in working condition. The purchase directly affected the debtor’s ability to perform under her Plan due to the new monthly car payment and the increased car insurance premiums. The debtor’s husband neglected to engage in detailed discussions with the debtor concerning the purchase. Her husband ignored the obvious and immediate effects this purchase would have on the debtor’s ability to meet her Plan obligations. The deliberate decision to purchase the Cadillac CTS did not result from an unanticipated substantial change in circumstances. Rather, the increased expenditures are the direct result of the debtor’s husband purchasing a luxury item in an attempt to continue living the lifestyle to which he is accustomed without any regard for the debtor’s financial obligations set forth in the Plan.
This is not to suggest that a debtor or non-filing spouse is forever bound by the terms of a plan and thus proscribed during a three to five year period from purchasing a new vehicle or incurring some other reasonably appropriate and necessary expenses. In this instance, the debtor’s husband purchased the vehicle very shortly after confirmation of the Plan — a plan carefully drafted with all the necessary and appropriate attendant calculations. If
The debtor’s increased expenditures are occasioned by the voluntary conduct and decision making of the debtor and the debtor’s husband — not an unanticipated set of changed circumstances. Their actions are consistent with their pre-bank-ruptcy financial immaturity, a pattern the Plan now legally constricts.
IV. Conclusion
For the reasons stated herein, the trustee’s Objection is sustained.
IT IS SO ORDERED.
Notes
. Neither the debtor nor the trustee identified the debtor's husband as anything other than "Mr. Bacon” or the debtor’s "husband.”
. Although the First Modification states that the unsecured creditors “are to be paid a pro-rata dividend[J” the testimony at trial was that the step payments would result in a 100% distribution to unsecured creditors. (Trustee Ex. 8 ¶ 3.)
. Following her husband's DUI and the tem-poraiy suspension of his driver’s license, the debtor and her husband sold his Mercedes and purchased the Chevrolet Lumina. The Chevrolet Lumina was subsequently fitted with an alcohol detection device for her husband’s use once his license was reinstated.