In Re Welsh
MEMORANDUM OF DECISION
Confirmation of Debtors’ Plan (Docket No. 2) is pending in this Chapter 13 case. The Chapter 13 Trustee Robert G. Drum-mond objects to confirmation on the grounds that the Plan is not proposed in good faith as required under
This Court has jurisdiction in this Chapter 13 case under
Sharon and David Welsh (“David”) moved to Montana in 2006. Sharon is employed as a nurse at St. Patrick’s Hospital in Missoula. She testified that David used to work at a golf course, but he suffers from chronic obstructive pulmonary disease (COPD) and his prognosis is that he can remain stable or get worse, but will not get better and he cannot work. David is retired and cоllects social security. Sharon testified that they live in a house on top of a ridge at 3831 Petty Creek Road, Missoula, and their driveway is a mile long with hairpin turns.
Sharon testified that when they first moved to Montana they rented, and finished their house using credit cards. She testified that, after making payments for 18 months, they consolidated their credit card debt with Bank of America at a high interest rate of 15 percent (15%) per an-num, which Bank of America refused to reduce the interest rate.
Because of financial difficulties Debtors filed a voluntary Chapter 13 petition on May 27, 2010, along with their Schedules, Statements, Form B22C, and Plan. Debtors’ Summary of Schedules lists total assets in the sum of $466,230.20 and total liabilities of $590,828.81.
Schedule A lists Debtors’ residence at 3831 Petty Creek Road in Missoula, which they list as having a current value of $400,000, encumbered by a secured claim in the sum of $330,593.66.
Schedule B lists personal property with a total value of $66,230.20. Paragraph 25 of Schedule B lists six motor vehicles, including: a 2005 Ford F-250 with a current market value of $10,000; a 2006 Subaru Outback with a current value of $9,500.00; a 2005 Toyota Matrix with a value of $2,200.00; a 2005 Airstream trailer with a value of $23,000; and two 2007 Honda ATVs valued at $2,700.00 each. Sharon testified that they use one or the other of the ATVs equipped with a snowplow to shovel their long driveway. Ml their vehicles are listed as jointly owned by the Debtors, and all six are encumbered by secured claims. Debtors claim one $204 motor vehicle exemption in the Toyota under Mont. Code Ann. (“MCA”) § 25-13-609(2) on Sсhedule C 2 . Sharon testified that they purchased the Toyota for their daughter, who is a medical resident and cannot afford a car because she owes $150,000 in student loans.
Schedule D lists creditors holding secured claims. Schedule D lists both Honda ATVs are overencumbered. AHFC has a claim secured by one ATV, listed in the amount of $3,065. GE Money Bank (“GE”) has a claim secured by the other ATV, listed in the amount of $4,500. Bank of America has a claim secured by Debtors’ residence listed in the amount of $330,593.66. The 2005 Airstream Trailer, valued at $23,000, is encumbered by a claim of “Citizen’t [sic] Auto Finance” listed in the amount of $39,000. The Subaru is encumbered by a claim listed in the amount of $12,211.00 in the name of JP Morgan Chase Bank NA (“JP Morgan”). The Toyota is encumbered by a claim listed in the amount of $1,996.00 in the name of LGFCU, and LGFCU is listed as having a claim secured by the Ford F-250 in the amount of $18,959.00.
Several secured creditors filed Proofs of Claim. Citizens Auto Finance (“Citizens”) filed Claim No. 2 on June 10, 2010, asserting a claim in the amount of $37,936.22 secured by the Airstream trailer
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. LGFCU filed Claim 10 on June 30, 2010, asserting a claim in the amount of $1,380.58 secured by the Toyota. Claim 10
Schedule F lists unsecured claims totaling $180,504.15, the largest of which are Debtors’ daughter’s 4 student loan debt in the amount of $60,000, based on Debtors’ personal guaranty, and a $50,000 joint debt owed to Bank of America on a line of credit. The remainder of creditors listed on Schedule F are mostly for credit card debt, medical and dental bills.
Schedule I lists Debtors’ monthly income. Sharon’s monthly income as a nurse is stated as $6,975.40, and she lists a pension income in the sum of $1,100.00 at line 12. David’s income is listed as $358.03 from wages, salary and commissions, even though he is retired and unemployed, plus $1,165.00 in social security retirement income (“SSI”). After deductions for taxes, social security and insurance Debtors’ total combined average monthly on Schedule I is $7,692.68.
Schedule J lists Debtor’s current monthly expenditures in the total amount of $7,298.00, including a $2,177 mortgáge payment, $375 for utilities, $125.00 for telephone, $309 for other utilities including cell phone ($85), satellite TV ($106), internet ($90) and garbage disposal ($28). Debtors’ tax expenditures for real estate taxes and vehicle taxes total $350. Debtors list food expenses at $600, transportation at $400.00, charitable contributions at $100.00. Automobile expense is stated as $664, and Debtors list a total of $1,215.00 in “other installment payments” for the Subaru ($375), Toyota Matrix ($150), $113 for one Honda ATV and $158 for the other, and $419 for the RV. Schedules I and J, taken togethеr, show a monthly net income at line 20c in the sum of $394.68.
Debtors completed and filed on May 27, 2010, Form B22C (“Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income”) (Dkt. 3). On Form B22C Debtors blacked in the boxes at the top of page 1 stating that the applicable commitment period for their Chapter 13 Plan is 5 years, and that their disposable income is determined under
Part IV of Form B22C calculates deductions from Debtors’ income for food, apparel, health cаre, housing
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and utilities,
Subpart C lists deductions for debt payments, including at line 47 future payments on secured claims. Debtors list six such monthly payments: $67.50 to AHFC and $147.47 to GE for the two Honda ATVs; a $2,177 home mortgage payment to Bank of America; $425 to Citizens for the 2005 Airstream; $231.25 to JP Morgan for the Subaru; $80 to LGFCU for the Toyota; and $399 to LGFCU for the Ford F-250 7 . Sharon testified that the Debtors are current on all their secured obligations provided for in Form B22C.
The total future payments on secured claims at line 47 is $3,527.22. The Trustee’s fee of $31.20 is added at line 50 and the total deductions for debt payment is stated at line 51 in the amount of $3,558.42. Lines 52, 56 and 58 lists the total deductions from income in the amount of $7,898.19. Deducting that sum from the CMI of $8,116.31 leaves monthly disposable income under
Debtors’ Plan (Dkt. 2) provides for plan payments in the amount of $125.00 per month for 30 months and then increases to $500 per month for 30 months, or $18,750 8 in total plan payments. Sharon testified that the monthly payments on the Subaru, Ford F-250, and Toyota all will cease during the 5 year plan term, and that their Plan payments will increase to $500 as the vehicles are paid off. However, she testified that, after the Subaru is paid off, she will have to buy another vehicle because the Subaru has high mileage and she drives it 75 miles each day, so not all of the surplus funds will be available for incrеased plan payments. Paragraph 2(c) lists unimpaired secured claims of Bank of America, AHFC, Citizens, GE, JP Morgan, and LGFCU along with a description of their respective collateral. Paragraph 2(g) provides that unsecured claims will receive a distribution of at least $14,700. Sharon testified that the Debtors will be able to make their plan payments during the 5-year term.
The Trustee filed objections to confirmation on July 26, 2010, on the grounds that Debtors’ have not proposed their Plan in good faith under
Sharon testified that they have cut back on almost all outside entertainment and changed their lifestyle to reduce expenses. She testified that they have cut back on their cell phone and internet usage, do not have cable TV, cut back on food and clothing and do not go to movies. She testified
Sharon testified that they considered stopping payments on the ATVs, but they need at least one of them to plow their driveway and access their home, and during the winter her Subaru will not make it up their driveway unless they plow it using an ATV. They also use the ATVs to drive on nearby land owned by the Nature Conservancy.
DISCUSSION
It is well established law in this Circuit that for a bankruptcy court to confirm a plan, “each of the requirements of
I. Disposable Income.
Although he withdrew his disposable income objection at Dkt. 30, the Trustee continues to object to confirmation contending Debtors’ Plan fails to satisfy the disposable income requirement of
(b)(1) If the trustee ... 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.
Hamilton v. Lanning, — U.S. -,130 S.Ct. 2464 , 2469,177 L.Ed.2d 23 (2010).
The Trustee cites
Lanning
for the proposition that pre-BAPCPA
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practice included SSI income as a component of projected disposable income and, absent a clear indication that Congress intended a departure from pre-BAPCPA practice, the Supreme Court will not read the Bankruptcy Code to erode that past bankruptcy practice.
Because Congress did not amend the term “projected disposable income” in BAPCPA, the Trustee argues based on
Lanning,
pre-BAPCPA practice requires inclusion of SSI in the calculation of pro-
The Supreme Court in
Lanning
was referring to Congress’ failure to amend the term “projected disposable income” in 2005 when it enacted BAPCPA, and what that failure meant with respect to whether courts may take into account virtually certain changes in debtors’ income and expenses when projecting disposable income.
A split of authority exists on the applicability of the
Lanning
decision to SSI benefits. The Trustee cites Utah bankruptcy cases,
In re Timothy,
This Court observes that
Cranmer
recognized that “[tjhere is no dispute that SSI is statutorily excluded from both the calculation of CMI under
The first is
(a) The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the moneys paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.
(b) No other provision of law, enacted before, on, or after the date of the enactment of this section, may be construed to limit, supersede, or otherwise modify the provisions of this section except to the extent that it does so by express reference to this section.
(c) Nothing in this section shall be construed to prohibit withholding taxes from any benefit under this title, if such withholding is done pursuant to a request made in accordance with section 3402(p)(l) of the Internal Revenue Code of 1986 by the person entitled to such benefit or such person’s representative payee.
See Cranmer,
The court in
Cranmer
noted the debtor’s response relying on
This Court included the reference to subsections 407(b) and (c) above to demonstrate that Congress knew how to limit the application of 407(a) to limit or modify its provisions, by requiring express reference to
This Court construed
In the instant case the Trustee has not identified any express reference to
Courts must presume that a legislature says in a statute what it means and means in a statute what it says there.
Connecticut National Bank v. Germain,
The second statute is
(A) means the average monthly income from all sources that the debtor receives (or in a joint сase 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 is the debtor files the schedule of currentmonthly required by section 521(a)(l)(B)(ii); 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 the 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 dependеnts (and in a joint case the debtor’s spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act....
(Emphasis added).
The Trustee’s statutory interpretation based on
Lanning
and
Cranmer
conflicts with basic canons of statutory construction. One such canon is that when the language of a statute is plain, the sole function of the courts is to enforce it according to its terms unless the disposition required by the text is absurd.
Lamie v. U.S. Trustee,
Next the Trustee argues that
Lanning’s
forward-looking approach, which requires courts to measure projected disposable income as of the effective date of the plan, means that this Court should include Debtors’ “actual” SSI to determine disposable income because it is certain to exist in the future, notwithstanding the plain language of
As the Tenth Circuit recognized in this case, a court taking the forward-looking approach should begin by calculating disposable income, and in most cases, nothing more is required. It is only in unusual cases that a court may 11 go further and take into account other known or virtually certain information at the time of confirmation.
Lanning,
The Supreme Court noted: “BAPCPA left the term ‘projected disposable income’
With SSI income excluded from CMI by
The Supreme Court held “that when a bankruptcy court calculates a debt- or’s projected disposable income, the court may account for changes in the debtor’s income or expenses that are known or virtually cеrtain at the time of confirmation.”
The Trustee argues that Debtors ask to apply the mechanical approach which was specifically rejected in Lanning. The above-quoted passage in Lanning, however, states plainly that in most cases nothing more is required than simply calculating disposable income, which is what the mechanical test does, and “only in unusual cases” go further. Id.
The Trustee does not explain how the instant case is an unusual case, and does not explain what changes in the Debtors’ income or expenses are known or virtually certain at the time of confirmation. David’s SSI income has not been shown to increase or decrease during the term of the Plan. The Debtors already have accounted for changes in their Plan and increased plan payments as their vehicles are paid off and the payments freed up.
The Trustee contends that
Lan-ning
rejected the mechanical approach to calculating projected disposable income, and so this Court should reject the mechanical approach and take into account Debtors’ social security income because it is known or virtually certain, and avoid the “senseless results” which would occur by not including Debtors’ social security income in their projected disposable income. “The fact that Congress may not have foreseen all of the consequences of a statutory enactment is not a sufficient reason for refusing to give effect to its plain meaning.”
Union Bank v. Wolas,
The effect of
Lanning
is to increase this Court’s discretion under
Heeding
banning,
this Court begins by calculating disposable income from Debtors’ Form B22C, and in most cases nothing more is required,
banning,
The Trustee has not shown that this case is unusual, and has not shown any changes in Debtors’ income or expenses that are known or virtually certain at the time of confirmation, which are not already reflected in Debtors’ Plan.
See Lanning,
II. Good Faith.
The Trustee objects that Debtors’ Plan has not been proposed in good faith as required by
No evidence exists in the record, and the Trustee does not argue, that Debtors misrepresented facts in their plan or unfairly manipulated the Code. No history of filings and dismissals by these Debtors is shown by the evidence, and no evidence exists that the Debtors’ intended to defeat state court action. Three of the four
Leavitt
factors weigh in favor of a finding that Debtors’ proposed their Plan in good faith under
Notwithstanding, the Trustee argues that the totality of circumstances weighs against confirmation because Debtors’ Plan will pay only approximately 8.5% of unsecured claims, while Debtors continue to make payments on claims secured by the Airstream, two ATVs and three automobiles. The Trustee characterizes these payments as for luxury items not necessary for the maintenance of their home, which appears to parallel his disposable income objection. The Trustee contends that the payments for luxury items and
The facts in
Covino
which gave rise tо a finding of bad faith included filing a Chapter 13 ease in an attempt to circumvent a penalty imposed on the debtors for inappropriate conduct in a prior bankruptcy case, including concealment of assets.
No definition of “egregious” exists in
The facts shown by the record in the instant case are not comparable to Opper. Debtors’ Plan proposes $14,700 in payments to unsecured creditors. Their ATV’s are not a luxury, since at least one is required for Sharon to plow her driveway in the winter in order to reach her home. David is the owner of the Toyota, on which they make payments but let their daughter use, and the secured creditor filed a claim in this case which has been allowed without objection showing David is the borrower. Their retention of the Airstream, by itself, is not enough to find egregious conduct.
The Trustee’s good faith objection based on their payments to secured claims ignores the fact that payments to secured claims are authorized in the means test at
The Trustee contends that the Court should extend the reasoning of student loan dischargeability cases to the instant case because Debtors have not sought to minimize their expenses, citing
In re Hamilton,
The Trustee next argues that Debtors’ failure to utilize David’s SSI income to increase their plan payments to creditors is an indicia of egregious behavior sufficient to find bad faith. The Trustee contends that Debtors can apply their SSI to their basic needs and offset other income currently being used, and free up money for plan payments, citing
in re Hall,
The Trustee cites
In re Rodgers,
On the issue of good faith the court in
Rodgers
applied a list of non-exclusive factors from the Eleventh Circuit in determining whether the plan was proposed in good faith, including the amount of the debtor’s income from all sources and the living expenses of the debtor and his deрendents. This Court follows the Ninth Circuit analysis from
Leavitt
and, while the Court considers David’s SSI benefits as one of the totality of the circumstances, the Court does not consider the SSI benefits probative of a lack of good faith in proposing the Plan under
Courts generally avoid construing one provision in a statute so as to suspend or supersede another provision.
Rake v. Wade,
Debtors cite the Eighth Circuit case
In re Thompson,
CONCLUSIONS OF LAW
1. This Court has jurisdiction of this case under
2. Confirmation of Debtor’s Plan is a core proceeding under
3. Debtors satisfied their burden of proof under
4. Current monthly income defined under BAPCPA,
5. The Trustee failed to show, and there is no evidence in the record, that this was an unusual case which would allow the Court to go further and take into account changes or other known or virtually certain information about the Debtors’ future income or expenses.
Hamilton v. Landing,
6. Debtors satisfied their burden of proof under
IT IS ORDERED that separate Orders shall be entered in conformity with the above (1) overruling the Trustee’s objections; and (2) confirming Debtors’ Chapter 13 Plan (Dkt. 2).
Notes
. Paragraph 2 of the Trustee's objection (Dkt. 15), based on the disposable income requirement of
. Schedule C does not list a homestead exemption.
. Citizens filed a second Claim No. 7, which was disallowed as a duрlicate of Claim 2.
. Schedule H lists Debtors' daughter Lauren N. Welsh as codebtor to Sallie Mae.
. Sharon's income is listed in Column A of Form B22C, and David's income in Column B. They list their income in the opposite order on.Schedule I.
.At line 25B Debtors list their $2,177 monthly mortgage payment below the IRS standard for mortgage or rent, and because their actual payment exceeds the IRS standard they entered $0.
. Under cross examination Sharon overestimated the Subaru payment in the amount of $375 per month, and the truck payment as $600 per month.
. By contrast, 60 monthly payments of $218.12 monthly disposable income calculated at line 59 of Form B22C would result in $13,087.20, a difference of $5,662.80 less than the total payments under Debtors’ proposed Plan.
.The Trustеe withdrew the disposable income objection on September 23, 2010. Dkt. 30. In reviewing Trustee's Objection filed on July 26, 2010, dkt. 15, he cites to
. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 119 Stat. 23.
. The Trustee’s quote at page 8 of his supplemental brief, Dkt. 31, omits all the language from the passage before this footnote, which removed crucial context.
. Under BAPCPA and § 1322(f) repayment of a 401(k) loan is now authorized.
Egebjerg,
. Based upon specific exceptions to
. Memorandum of Decision, Docket No. 50. At pages 9 and 10 this Court quoted extensively
Austin,
. Memorandum of Decision, Docket No. 31. As in
Chavez
the Court at pages 28-31 quoted
Austin,