In Re Casey
MEMORANDUM DECISION RE: CONFIRMATION OF PLAN
This case challenges the Court to define the role to be played by the Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income (Form B22C) in determining whether a Chapter 13 debtor has proposed a plan which will pay all projected disposable income as required by
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (hereinafter “BAPCPA”) in
As to above-median income debtors, the means test defines a debtor’s expenses based upon a formula found in
The debtor’s monthly expenses shall be the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent. Such expenses shall include reasonably necessary health insurance, disability insurance, and health savings account ex *522 penses for the debtor, the spouse of the debtor, or the dependents of the debtor. Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts. In addition, the debtor’s monthly expenses shall include the debt- or’s reasonably necessary expenses incurred to maintain the safety of the debtor and the family of the debtor from family violence as identified under section 309 of the Family Violence Prevention and Services Act, or other applicable Federal law. The expenses included in the debtor’s monthly expenses described in the preceding sentence shall be kept confidential by the court. In addition, if it is demonstrated that it is reasonable and necessary, the debtor’s monthly expenses may also include an additional allowance for food and clothing of up to 5 percent of the food and clothing categories as specified by the National Standards issued by the Internal Revenue Service.
Subsequent subparts of
The Form B22C filed by this debtor calculates monthly expenses of $5,505.90, however the debtor’s actual monthly expenses according to Schedule J are $4,780.32. In this District, it is common that application of the Internal Revenue Service standards required by the means test will result in expenses which are greater than the actual expenses of debtors. The Trustee’s objection to confirmation is based primarily upon the argument that by requiring unsecured creditors be paid “projected disposable income” under
1. What constitutes projected disposable income under
Congress has defined the term “disposable income.” Not all disposable income must be devoted to payment of unsecured creditors, but only the type of disposable income which falls within the definition of “projected.” The addition of the adjective “projected” in
This Court is in agreement with the analysis of “projected disposable income” required under
The Court believes that the language of§ 1325(b)(1)(B) is dear and unambiguous —section 1325(b) (l)(B) ’s requirement that a plan propose to pay “projected disposable income” means that the number resulting from Form B22C is a starting point for the Court’s inquiry only. Sedion 1325(b)(2) defines “disposable income” but§ 1325(b)(1)(B) requires that a debtor propose a plan paying “projected disposable income.” (emphasis added). The Court must give meaning to the word “projected,” as it obviously has independent significance. The word “projected” means “to calculate, estimate, or predict (something in the future), based on the present data or trends.” Thus, the word “projected” is future-oriented. By definition under§ 1325(b)(2) , the term “disposable income” is oriented in historical numbers. By placing the word “projected” next to “disposable income” in§ 1325(b)(1)(B) , Congress modified the import of “disposable income.” The significance of the word “projected” is that it requires the Court to consider both future and historical finances of a debtor in determining compliance with§ 1325(b)(1)(B) .
To require all debtors to propose plans paying the number resulting from Form B22C would essentially ignore the word “projected” and give meaning only to the term “disposable income.” The only way for the word “projected” to have independent significance is if the word modifies the term “disposable income.”
Thus, the Court concludes that the plain meaning of§ 1325(b) is dispositive of this issue. Under the clear meaning of the statute, a debtor must propose to pay unsecured creditors the number resulting from Form B22C, unless the debtor can show that this number does not adequately represent the debtor’s budget projected into the future.
Jass, supra,
at 415-416 (footnotes omitted) (emphasis added); see also
In re Fuller,
After examining the new statute and case law concerning§ 1325(b)(1) and (b)(2), this court determines to follow the clearly emerging line of authority. It finds that the historical “disposable income” calculation newly created under§ 1325(b)(2) is not dispositive of the “projected disposable income” amount needed to fund a chapter 13 plan. It agrees with those cases finding that “projected disposable income” is different from “disposable income” and that Congress, by leaving the word “projected” in§ 1325(b)(1)(B) , intended a distinction between the terms.
*524
In re Foster,
The conclusion that the term “projected disposable income” has a meaning different than the term “disposable income” is required by the long-standing rule of statutory construction that every word in a statute is to be given effect.
Northwest Forest Resource Council v. Glickman,
In the situation now under consideration, absent one item addressed below, there is no indication that the debtor’s financial circumstances will change. Thus, the “disposable income” reflected on the debtor’s Form B22C, as adjusted below, will in reality be the debtor’s “projected disposable income.”
The Trustee correctly argues that it has been the experience in this District that above-median income debtors will pay less to unsecured creditors under BAPCPA than under the prior law. In this District, many of the standard expenses allowed by
2. What are the proper calculations to be made regarding specific line items on Form B22C?
The Trustee also objects to confirmation based upon his belief that certain expenses shown on the Form B22C have not been properly calculated. The Trustee alleges amounts entered on lines 24, 28, 29, 33, 49 and 52 of the Form B22C relating to allowed expenses are incorrect.
Line 24:
Line 24 allows the debtor to deduct an expense for food, clothing, personal care, etc., based upon the IRS National Standards for Allowable Living Expenses. To determine the amount of this expense, one refers to the table provided as part of the national standards and does a purely mathematical calculation based upon the number of people in the debtor’s household and the debtor’s gross income. On the Form B22C, the debtor’s calculation of monthly income of $4,965 appears on lines 9,10,11, 12,14,18 and 20.
However, the debtor has not used the monthly income figure of $4,965 appearing on the Form B22C to calculate the expense allowed on line 24. In performing the calculation of the allowed expense under the IRS table, the debtor utilizes a monthly gross income figure of $6,761, which is his actual income as revealed on the Schedule I. Neither Form B22C nor BAPCPA utilize actual monthly income to determine disposable income. Use of the higher actual income amount rather than the lesser amount of income calculated in accordance with Form B22C and BAPCPA results in a larger allowed expense under the IRS table. Utilizing the actual monthly income figure on the Schedule I, debtor claims an expense under the IRS table of $1,306, whereas use of the monthly income amount calculated in accordance with *525 Form B22C and BAPCPA would result in an expense of $904.
The debtor argues that he is entitled to use gross income from Schedule I because the IRS table refers to “gross income,” and Form B22C does not specifically refer to “gross income.” However, it is obvious that the entries on those lines are gross income as the amounts on the relevant lines are “income” (as defined under BAPCPA) before any deductions.
The calculation of the amount of a debt- or’s “current monthly income,” which results in the calculation of a debtor’s disposable income, is to be made by use of Form B22C. Debtors may not “mix and match” forms. Debtor attempts to manipulate the calculations required by Form B22C and BAPCPA in his favor by using the amount of his actual monthly income rather than “current monthly income” as required by BAPCPA. The expenses under Form B22C are related to the income reflected on Form B22C, not some other amount of income reflected on a different form and which is defined differently than the income on Form B22C.
The appropriate amount of the expense deduction is $904.
Lines 28 and 29:
Lines 28 and 29 deal with the Local Standards for Transportation ownership/lease expenses. Use of the appropriate standard results on Line 28 in an average monthly payment for the first car of $471. The average monthly payments for the second car on line 29 is $332. Debtors are to list the 60 month average of their contractually required monthly payment and then deduct the lesser of the monthly payment under the IRS standard or the average contractual payment. If the average contractual payment is greater than the IRS standard, the debtor is to deduct zero.
Debtor has two vehicles, a 2004 TX Honda motorcycle requiring average contractual payments of $219.64 and a 2004 Chevy Silverado 2500 pickup requiring average contractual payments of $855.19. Debtor lists his motorcycle as the first car and the pickup as the second car. Lines 28 and 29 on the Form B22C thus claim the following deduction for vehicle ownership expense:
IRS Standard First Car $471.00
Contractual Payment $128.12
Expense Allowed $342.88
IRS Standard Second Car $332.00
Contractual Payment $855.19
Expense Allowed $- 0 -
Total Deduction for Car Ownership $342.88
The Trustee argues that debtor has again improperly manipulated the line items on Form B22C to the debtor’s advantage. It is difficult to believe that a motorcycle would be the most important or frequently used vehicle for a two-person family living in a climate such as this. Whatever the debtor’s opinion as to the importance of the motorcycle, the Trustee is correct that the form itself requires that the more expensive vehicle be considered the first car. The appropriate calculation should be:
IRS Standard First Car $471.00
Contractual Payment $855.19
Expense Allowed $- 0 -
IRS Standard Second Car $332.00
Contractual Payment $128.12
Expense Allowed $203.88
Total Deduction for Car Ownership $203.88
Line 33:
Line 33 allows, as an expense, court-ordered payments to a debtor’s ex-spouse or dependants. The debtor lists the amount of $600 as the court-ordered monthly payment, but admits that those payments will cease on the 24th month of the plan. However, 11 U.S.C. 707(b)(2)(A)(iv) states that “the debtor’s expenses for all priority claims (including priority child support and alimony claims) *526 shall be calculated as the total amount of debts entitled to priority, divided by 60.” Although the debtor argues that the total amount remaining due for support ($600 x 24 = $14,400) should not be amortized over 60 months, the statute so requires. The appropriate deduction for this line item should be $224.39.
This result is also mandated by the requirement of
Line 49:
Line 49 reveals a monthly payment of $256.55 to satisfy the priority claim of the Internal Revenue Service. This would equal $15,393 over 60 months, but fortunately for the debtor, the Proof of Claim filed by the Internal Revenue Service reflects a total priority claim of only $13,463.33. Averaged over 60 months, that equals $224.39, a $32.16 difference. The debtor agrees that $224.39 is the appropriate amount for the expense item on line 49. 2
Line 52:
This line is the total of all deductions and must be modified due to the above analysis. Once expense deductions are properly calculated on Form B22C, the debtor’s total deductions will decrease, potentially resulting in greater plan payments.
3. Does
The final basis for the Trustee’s objection to confirmation is that the debtor has not, but is required to, propose a five (5) year plan. The plan proposed by these above-median income debtors is for a term of three (3) years and will pay nothing to unsecured claims. Subsection (b) of
Despite the clarity of
This Court perceives no ambiguity in
The debtors in
In re McGuire,
The
McGuire
decision cites to the earlier decision of
In Re Schanuth,
First and foremost, the plain language of§ 1325(b)(1) and (4) supports a temporal interpretation of ACP. The term itself, “applicable commitment period,” uses a word with temporal meaning: “period” means a “chronological division.” The length of that chronological division is described in temporal terms — 3 years or 5 years. And, perhaps most telling of all,§ 1325(b)(4)(B) , the provision that specifically contemplates plans shorter than 3 or 5 years, uses the same temporal terms — a debt- or’s ACP “maybe less than 3 or 5 years ... but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period. ”
When a statute’s language is plain, the sole function of the court is to enforce it according to its terms. Here, the Court finds that the plain language used to describe and define the scope of the commitment a debtor must make of disposable income in a chapter 13 plan clearly indicates that that commitment is temporal in nature.
In re Schanuth, supra, at 607 (footnotes omitted).
The temporal requirement contained in (b)(4), which is applicable to above-median income debtors, is five (5) years. A plan which provides less than full payment to unsecured creditors and is for a period of less than five (5) years cannot be con *528 firmed. The debtors in this case must propose a plan with a length of five (5) years.
CONCLUSION
“Projected disposable income,” as referenced in
Notes
. There may be situations where a debtor's financial circumstances changed during the six month period preceding commencement of the case. If so, the Form B22C calculation of income may not be a reliable indication of anticipated future income. That situation does not exist in the current controversy, and this opinion does not address any issues which might arise in such a situation.
. Line 50 — The Trustee discovered a mathematical error made by the debtor, which error disfavored the debtor as it reduced the amount of the deduction to which the debtor was entitled. The calculation appearing on this line will change, however, due to the changes in certain lines referenced above.