Justin Thompson Krenitsky and Jennifer Lynn Krenitsky
Butler, PA
Attorney for the Debtors
Owen W. Katz, Esq.
Office of the Chapter 13 Trustee
Pittsburgh, PA
Attorney for the Ronda Winnecour
MEMORANDUM OPINION
Since Schedule J requires an “estimate” of ongoing monthly expenses, debtors Justin and Jennifer Krenitsky provided averages of the Internal Revenue Service‘s National and Local Standards for allowable living expenses.1 The result is monthly net income of $2.39
they are wrong for several fairly obvious reasons outlined below.6 Therefore, the Court will sustain the trustee‘s objection and, among other things, order the Debtors to file an amended Schedule J.
I. JURISDICTION
This Cоurt has authority to exercise jurisdiction over the subject matter and the parties under
II. DISCUSSION
Under section
the plan provides that all of the debtor‘s projected disposable income to be received in the applicable commitment period . . . will be applied to make payments to unsecured creditors under the plan.7
Given its devotional requirements, “this section is also known as the ‘best efforts test.‘”8 Because the Debtors’ income is below median for the Commonwealth of Pennsylvania,
“disposable income” means current monthly income [subject to certain exclusions not relevant here] less amounts reasonably necessary to be expended—for the maintenance or support of the debtor or a dependent of the debtоr . . . .”9
As cogently explained in In re Turner:
Because
11 U.S.C. § 1325(b) . . . uses the same phrase to describe permissible maintenance and support that existed prior to [the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA“)], many courts havе concluded that BAPCPA did not change the standard as applied to below median income debtors.Prior to BAPCPA, “reasonably necessary” expenses were evaluated on a cаse
by case basis. Rather than establishing strict guidelines, courts instead sought to “strike a balance between debtors being required ‘to adopt a totally spartan existence’ and allowing thеm to ‘continue an extravagant lifestyle at the expense of creditors.‘” Generally, courts construed “reasonably necessary” as a standard of adequacy, supporting basic needs, and not related to the lifestyle to which one was accustomed.10
While below-median income debtors’ expenses receive individual consideration, those above-median must undergo the “Means Test” to determine their “disposable income” using expenses largely dictated by the IRS’ National and Local Standards.11
The logical starting point for determining the reаsonable necessity of a chapter 13 debtor‘s expenses when not subject to the Means Test has always been Schedule J.12 After all, section
income and current expenditures.”13 Bankruptcy Rule 1007(b) adds that the debtor‘s “schedule of current income and expenditures” must be “prepared as prescribed by the appropriate Official Form.”14 Official Form 106J, captioned “Schedule J: Your Expenses,” instructs the filer to “[e]stimate your expenses as of your bankruptcy filing date” under the heading “Estimate Your Ongoing Monthly Expenses.”15 In fact, the word “your” is used 36-times on the form, nine of which directly precede “expenses.”16 The first line also cautions the filer to “[b]e as complete and accurate as possible.”17
Rather thаn taking cues from the ubiquitous use of “your” or the need to be “accurate,” the Debtors instead focus on the directive to “estimate . . . monthly expenses.”18
Practically, the Debtors are essentially arguing that the IRS’ National and Local Standards should be presumptively “reasonably necessary” and therefore universally appropriate
for Schedule J without regard to actual expenses. This is apparent from their acknоwledgment on Schedule J that the amounts supplied were not estimates of actual expenses.21 Yet the Code does not provide a presumptive safe harbor for expensеs, and sections
[T]he maximum good faith estimate of anticipated necessary expense should be used. Generally, expenses that do not exceed those permitted by the chapter 7 means test will not be questioned as unreasonable.22
Plainly, this quote only suggests that good faith estimates of anticipated expenses will likely not raise alarms if under the amount permitted by the Means Test. It does not endorse the view that debtоrs can opt out of estimating their own expenses in favor of plug-in statistics.
Finally, the Debtors dubiously liken their approach to the accepted practice of “cushioning” a dеbtor‘s expenses on Schedule J against anticipated fluctuations over the life of the plan.23 Admittedly, that is where the concept of estimating comes in. The flaw in their position is that it is unclear how much of their stated expenses are cushion—the amount above the actual expense—or whether they are reasonable. Again, the Debtors seem to be advоcating for a brightline amount that is antithetical to the Code‘s express treatment of below-median income debtors.
Bottom line: just as they have for decades, all debtors must estimate thеir actual expenses on Schedule J.
III. CONCLUSION
In light of the foregoing, the Court will sustain the chapter 13 trustee‘s objection to confirmation and, inter alia, require the Debtors to file an amended Schedule J. This opinion constitutes the Court‘s findings
ENTERED at Pittsburgh, Pennsylvania.
GREGORY L. TADDONIO
CHIEF UNITED STATES BANKRUPTCY JUDGE
Dated: April 7, 2025
Case administrator to mail to:
Debtors