In Re Bartelini
MEMORANDUM-DECISION AND ORDER
The above-captioned cases are before the Court by virtue of the objections to confirmation of the debtors’ respective Chapter 13 plans made pursuant to
As evidenced by post-BAPCPA case law, the question of how to define and calculate PDI under
When the question is reframed, its complexity is facially evident. As stated by the Tenth Circuit Court of Appeals:
[t]he issue to be resolved is whether the ‘projected disposable income’ referred to in§ 1325(b)(1)(B) is calculated by mechanical application of the definitions of ‘disposable income’ and ‘current monthly income’ set forth in§§ 1325(b)(2) and 101(10A)(A)(i), respectively, or whether it is permissible to adjust the ‘monthly disposable income’ calculated on Form B22C to account for a debtor’s actual ability to fund a plan as of the effective date of the plan.
Hamilton v. Lanning (In re Lanning),
Irrespective of which interpretation this Court deems to be correct, the Trustee’s objections must be denied because of the sacrosanct nature of SSI. As discussed in greater detail
infra,
SSI is statutorily excluded from CMI, and thus also from DI. Because the Court’s present inquiry begins and ends with the income component of DI, under which the Court concludes that Debtors’ cannot be compelled to utilize their exempt SSI for payment of unsecured debt, the Trustee’s narrowly framed
JURISDICTION
The Court has core jurisdiction over the parties and subject matter of these contested matters pursuant to
FACTS
I. Mary Ellen Bartelini 3
Ms. Bartelini filed a voluntary Chapter 13 petition, which included the required Form B22C, Schedule F, entitled “Creditors Holding Unsecured Nonpriority Claims,” Schedule I, entitled “Current Income of Individual Debtor(s),” and Schedule J, entitled “Current Expenditures of Individual Debtor(s),” on March 20, 2009. Ms. Bartelini also filed her original Chapter 13 plan on that date. Schedule F reports general unsecured debt in the aggregate amount of $121,881.00. Schedule I states, in part that: (1) Ms. Bartelini is married; (2) she is employed by New York State as a “Development Aid” and earns current monthly gross wages in the amount of $3,469.40; (3) her monthly payroll deductions include, but are not limited to, $341.77 for a child support obligation; (4) her net monthly take home pay totals $2,170.16; (5) her non-debtor spouse is disabled and receives SSI in the amount of $1,062.50, as well as $2,972.00 in veterans benefits; and (6) their combined average monthly income totals $6,204.66. Schedule J reports average monthly expenses totaling $5,172.00, resulting in monthly net income totaling $1,032.66.
According to Ms. Bartelini’s Form B22C, she is an above-median debtor whose ACP is sixty months. 4 In comparison to Ms. Bartelini’s Schedules I and J, pertinent information reported on her Form B22C includes: (1) Line 2 lists monthly gross wages totaling $3,464.57; (2) Line 9 lists monthly veterans benefits in the amount of $2,972.00; (3) Line 20 lists CMI in the amount of $6,436.57; (4) Line 58 lists the total of all deductions from income in the amount of $6,287.68; and (5) Line 59 lists monthly DI in the amount of $148.89. Accordingly, after subtracting the Form B22C DI amount of $148.89 from Ms. Bartelini’s Schedule J monthly net income total of $1,032.66, Ms. Bartelini’s Schedule J shows excess income equal to $882.77 when her actual household expenses and SSI are considered.
Ms. Bartelini filed an amended plan on May 29, 2009 (the “Bartelini Plan”), which proposes payments of $200.00 per month for a sixty-month term. The Bartelini Plan includes a distribution to general unsecured creditors of at least 7.22 percent. Ms. Bartelini’s case was originally scheduled for confirmation to be heard on August 6, 2009. The Trustee filed his objection to confirmation of the Bartelini Plan on July 30, 2009, citing the large discrepancy between Ms. Bartelini’s
II. Douglas William Earl, Jr. and Susan Dorene Earl
Douglas William Earl and Susan Dorene Earl filed a voluntary Chapter 13 petition, which included Form B22C, and Schedules F, I, and J, and Chapter 13 Plan (“Earl Plan”) on June 29, 2009. Schedule F reports general unsecured debt in the aggregate amount of $38,660.03. Schedule I states, in part: (1) Mr. Earl has been employed as a laborer for the New York State Department of Transportation (“DOT”) since late 2005, and he currently earns monthly gross wages from his DOT position in the amount of $2,716.70, together with monthly income from a part-time job in the amount of $503.33; (2) Mr. Earl also receives monthly retirement benefits in the amount of $81.51; (3) Ms. Earl is unemployed and disabled, and she receives SSI in the amount of $950.00 per month, together with long term disability payments in the amount of $100.00 per month; and (4) the Earls’ combined average monthly income totals $3,515.38. Schedule J lists average monthly expenses totaling $2,575.00, thus, Schedule J reports that the Earls’ monthly net income is $940.38. By comparison, the Earls’ Form B22C at Line 20 lists their CMI as $3,581.90, resulting in annualized CMI under Line 21 in the amount of $42,982.60, which is significantly less than the applicable median family income for a two-person household in New York State. Accordingly, the Earls are below-median debtors and their DI is calculated by reference to their CMI less Schedule J actual expenses, 5 leaving a negative DI once SSI and disability benefits are backed out of the CMI equation.
The Earl Plan proposes payments of $150.00 per month for a sixty-month term, notwithstanding that the Earls’ ACP is thirty-six months, which will result in a distribution to general unsecured creditors of at least 5.00 percent. The Trustee filed his objection to confirmation of the Earl Plan on August 27, 2009, on grounds that the Earls improperly failed to include their household SSI as DI, and the Earls, at the time, were one month in arrears, such that the Trustee questioned their ability to make future plan payments. The Earls’ case was originally scheduled for confirmation to be heard on September 3, 2009. The Trustee filed his objection to confirmation of the Earl Plan on August 27, 2009, citing two statutory bases: (1) failure to satisfy
III. Nelson D. Tanner, Jr. and Judy E. Tanner
Nelson D. Tanner, Jr. and Judy E. Tanner filed a voluntary Chapter 13 petition, which included Form B22C, and Schedules F, I, and J, and Chapter 13 Plan (“Tanner Plan”) on July 8, 2009. Schedule F reports general unsecured debt in the aggregate amount of $16,370.62. Schedule I states, in part: (1) Mr. Tanner has been employed as a truck driver for the past sixteen years in private industry, and he currently earns monthly gross wages in the amount of $3,835.39; (2) Ms. Tanner is retired, and she receives SSI in the amount of $794.00 per month, together with other pension or retirement income in the amount of $164.00 per month; and (3) the Tanners’ combined average monthly income totals $3,978.81. Schedule J lists average monthly expenses totaling $3,013.90, leaving the Tanners with monthly net income in the amount of $964.91. By comparison, the Tanners’ Form B22C at Line 20 lists their CMI as $3,494.35, resulting in annualized CMI under Line 21 in the amount of $41,932.20, which is significantly less than the applicable median family income for a two-person household in New York State and, thus, the Tanners are also below-median debtors. The Tanners’ DI is therefore calculated by subtracting their Schedule J expenses from their CMI, 7 leaving DI in the amount of $170.91.
The Tanner Plan proposes payments of $236.56 per month for a sixty-month term, notwithstanding that the Tanners’ ACP is thirty-six months, which will result in a distribution to general unsecured creditors of at least 1 percent. The Tanners’ case was originally scheduled for confirmation to be heard on September 3, 2009. The Trustee filed his objection to confirmation of the Tanner Plan pursuant to
ARGUMENTS OF THE PARTIES
I. The Trustee’s Position
The Trustee contends that Debtors should be required to fund their monthly net income, as reported on Schedule J, for the benefit of unsecured creditors pursu
In support of his position, the Trustee advances several familiar DI arguments, including that the form B22C should be viewed as a “first look” into a debtor’s PDI, and thus that PDI should be measured by a debtor’s financial condition during the ACP as shown on Schedules I and J.
10
The Trustee further argues that allowing Debtors to retain any and all SSI throughout the life of their Chapter 13 cases creates administrative problems and runs afoul of the congressional intent behind the passage of BAPCPA. The “administrative problems” articulated by the Trustee include, but are not limited to: (1) absent the inclusion of SSI, there exists no basis through which the Trustee can determine the appropriate Chapter 13 plan payment for every below-median debtor who receives SSI and, more specifically, failing to include SSI for plan payment determination purposes creates an absurd result where the debtors are able to propose any
il. Ms. Bartelini’s Response
Ms. Bartelini argues that SSI is exempt from the form B22C calculations and, therefore, it is not treated as DI subject to the reach of creditors. She urges the Court to adopt the holdings of prior bankruptcy judges, including the undersigned’s predecessor, Retired Chief Judge Stephen D. Gerling, in finding that Congress specifically excluded SSI from the definition of CMI and DI, thus rendering SSI outside the scope of PDI.
In re Rotunda,
III. The Tanners’ Response
The Tanners’ argument is succinct: the core question is what constitutes DI, and monies received as a benefit of Social Security are statutorily excluded from CMI and hence from DI, irrespective of what adjective may precede the latter term.
IV. The Earls ’ Response
The Earls’ arguments largely mirror those of Ms. Bartelini. They too contend that Congress placed SSI beyond the reach of creditors when it enacted BAPC-PA. The Earls also question the Trustee’s reliance on Timothy, and aver that the court’s holding in Timothy is flawed because the court erroneously relied upon pre-BAPCPA case law that no longer has precedential value.
Moreover, in response to the Trustee’s argument that he would be unable to determine an appropriate plan payment for below-median debtors who receive SSI, the Earls contend that Chapter 13 plan payments may be easily ascertained on a case-by-case basis because they must be enough to cover secured debt being paid through the plan, administrative expenses, attorneys’ fees, and the proper amount to unsecured creditors in order to satisfy the best interest of creditors test codified in
Finally, the Earls argue that there is nothing in the Bankruptcy Code that precludes Chapter 13 debtors from voluntarily devoting a portion of their SSI to a Chapter 13 plan for purposes of satisfying the best interest of creditors test or that prevents the Court from considering that income when evaluating plan feasibility.
DISCUSSION
(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—
(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.
(A) ... the average monthly income from all sources that the debtor receives (or in a joint case that the debtor and the debtor’s spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on-
(i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debt- or files the schedule of current income required by section 521(a)(l)(B)(ii) [Form 22C]; or
(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by section 521(a)(l)(B)(ii); and
(B) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor’s spouse), on a regular basis for the household expenses of the debtor or the debtor’s dependents (and in a joint case the debtor’s spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism ... or domestic terrorism ... on account of their status as victims of such terrorism.
The apparent friction between the newly created definition of CMI, which is based on the debtor’s historical income, and the retention of the word “projected” in
The Court, however, need not decide today whether it agrees with the first line of cases favoring a mechanical application of
Admittedly, much of the text of BAPC-PA fails to demonstrate the “clarity of linguistic expression” that should accompany all pieces of legislation.
See
The Honorable Thomas F. Waldron and Neil M. Berman,
Principled Principles of Statutory Interpretation: A Judicial Perspective After Two Years of BAPCPA
81 Am. Bankr.LJ. 195, 197 (2007). Congress, however, in drafting the provisions of BAPCPA that relate to the treatment of SSI, provided a clear directive. This is one instance where the text of BAPCPA “says what it means and means what is says,” thus rendering judicial inquiry complete upon a plain-reading of the statute.
Connecticut Nat’l Bank v. Germain,
While courts cannot agree on the meaning or calculation of PDI, courts fundamentally agree that the determination of DI and, by extrapolation, PDI necessarily include both an income component and an expense component, and specific direction is provided in the text of BAPCPA for the former irrespective of the debtor’s median income. Given
Similarly, as noted by the Honorable Leif M. Clark in
Barfknecht,
even though the court in
Hardacre
concluded that the word “projected” requires courts to consider forward-looking figures and income that the debtor reasonably expects to receive during the term of the plan, the court could not (and should not) ignore the definition of CMI.
In re Barfknecht,
While legislative history may be scarce with respect to BAPCPA generally, and
Social Security benefits traditionally have been, “for the most part, well insulated from the reach of creditors in bankruptcy cases.” Id. at 587. It appears without question that Congress, through BAPCPA, legislatively recognized “the critical role of Social Security benefits as an ultimate safety net for older and disabled Americans” and it acted in accordance with ingrained public policy that “has long sought to shelter those benefits from creditors, even when circumstances thrust beneficiaries into bankruptcy, whether on a voluntary or involuntary basis.” Id. at 586. As succinctly stated by the Honorable Elizabeth W. Magner in Devilliers:
Congress is presumed to know the effect of its acts. For above the means test debtors, social security income may reach $24,636.00 for individuals and $49,272.00 for married couples. Unlikeand unknown or unanticipated change in income, social security benefits are both predictable and certain. It appears that Congress, through BAPCPA, effected a policy decision regardless of income level, a debtor’s social security benefits would be protected from creditor interests. The rationale for this treatment, lies in the exempt nature of the benefits themselves.
In re Devilliers,
Having now determined, in accordance with other bankruptcy courts that have decided the issue, that SSI is afforded sacrosanct treatment under BAPCPA, the Court must now turn to the Trustee’s arguments that SSI is an all or nothing proposition, and that it may never be included as regular income if it is to be excluded in the DI and, ultimately, the PDI inquiries. Preliminarily, the Court believes it is fair to say, especially in this period of economic downturn, that SSI is perhaps more “regular” and stable than other sources of income or forms of compensation.
See Pellegrino v. Boyajian (In re Pellegrino),
Inasmuch as this Court agrees with the observations of Judge Preston in Upton, the Court must reject the Trustee’s arguments that seemingly characterize SSI as an all or nothing proposition as being without merit. As Judge Preston aptly observed,
[excluding SSI from [the “projected disposable income”] analysis ... does not necessarily preclude its consideration in determining whether a plan is feasible.... Thus, if a debtors’ Schedules I and J indicate the net monthly income after excluding any SSI is less than the proposed plan payment, the SSI may still be considered by the Court ... to overcome the appearance that the plan is not feasible.
In re Upton,
CONCLUSION
For the foregoing reasons, the Court must overrule the Trustee’s objections to the Bartelini, Earl, and Tanner Plans under
Based on the foregoing, it is hereby
ORDERED, that the Chapter 13 Trustee’s objections to confirmation of the Bar-telini, Earl, and Tanner Plans are hereby overruled; and it is further
ORDERED, that the Earls’ case is restored to the Court’s confirmation calendar scheduled to be held on June 8, 2010, at 1:00 p.m. in Binghamton, New York, in order to ensure that their Chapter 13 case is otherwise administratively upright and presently confirmable; and it is further
ORDERED, that the Tanners’ case is restored to the Court’s confirmation calendar scheduled to be held on June 8, 2010, at 1:00 p.m. in Binghamton, New York, in order to ensure that their Chapter 13 case is otherwise administratively upright and presently confirmable.
IT IS SO ORDERED.
Notes
. Unless otherwise indicated, all statutory references herein are to the United States Bankruptcy Code, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”),
. Due to BAPCPA’s changes to
. The facts of this case are drawn from the parties' stipulation filed with the Court on September 9, 2009, and the case docket.
. Unless a plan provides for payment in full of all allowed unsecured claims over a shorter period of time, the ACP for a below-median debtor is three years, while the ACP for an above-median debtor is five years.
See
. See supra text accompanying note 2.
. Review of the record in this case shows that on January 19, 2010, the Earls filed a purported amended Chapter 13 plan dated October 23, 2009. The Court has compared the two plans and the only discernible difference between them seems to be with respect to the valuation of Wells Fargo's secured claim. The Earl Plan lists at Paragraph 3 the scheduled debt in the amount of $964.00, the value of the collateral for such debt as $50.00, and the interest rate at 6 percent. The amended plan, which does not appear to have been noticed, lists at Paragraph 3 the same debt, but with a value of the collateral for such debt as $775.00, and an interest rate of 0 percent. Fortunately, the amended plan does not impact the Court's resolution of the questions presented in the matters sub judice.
. See supra text accompanying note 2.
. As set forth in the Facts above, Ms. Barteli-ni’s spouse's monthly SSI exceeds her net monthly income by $29.84, and the Earls’ SSI exceeds their net monthly income by $9.62, but the Tanners’ Schedule J net monthly income exceeds their SSI by $170.91.
.
Timothy
involved above-median joint debtors who had negative DI under the means test analysis and Form 22C, but whose Schedules I and J showed sufficient monthly net income to fund a Chapter 13 plan that would pay all of their secured debt proposed to be paid through the plan, all Chapter 13 administrative expenses, all attorneys' fees to be paid through the plan, and provide a return to their unsecured creditors equal to or greater than the amount that the unsecured creditors would have received in a Chapter 7 case.
In re Timothy,
Here, the Trustee also brought to the Court's attention during oral argument the October 6, 2009 oral bench ruling of the Honorable Margaret Cangilos-Ruiz, U.S. Bankruptcy Judge for the Northern District of New York, Syracuse Division, in the Chapter 13
case of Charles C. Harrington, Case No. 09-30398, wherein Judge Cangilos-Ruiz adopted the holding of In re Timothy. Based upon the Court's review of the transcript submitted by the Trustee, which was not filed in the dockets of the cases sub judice, Judge Cangilos-Ruiz reasoned that:
While the definition of current monthly income precludes the use of social security income for the purposes of calculating the applicable commitment period and for above-the-median debtor’s monthly disposable income, if debtors choose to use Social Security income as disposable income to propose a plan, the Social Security income shall be included in the projected disposable income analysis of [11 U.S.C. §] 1325(b)(1)(B).
For the reasons that follow, this Court respectfully disagrees with and rejects both the reasoning and holdings of Timothy and Harrington.
.This argument necessarily adopts the holdings by those courts that find that DI and PDI are separate and distinct concepts, and that Congress must have intended something other than annualized DI when it retained the pre-BAPCPA PDI language in
. Section 109(e) dictates that “only an individual with regular income may be a Chapter 13 debtor.”
. The Trustee contends in his Amended Memorandum of Law that CMI is based on a debtor's pre-petition income, while PDI is based on a debtor's estimated future, post-petition income. The Trustee suggests that other Bankruptcy Code sections support this future-oriented interpretation of