I. Background
A. Blake's Income, Expenses, and Bankruptcy Plan
Blake is a single mother who lives in subsidized housing with her three dependent children. She has worked as a security officer for more than six years. As a low-income wage earner, Blake consistently qualifies to receive the earned income tax credit.
On July 12, 2016, Blake filed for bankruptcy under Chapter 13. According to her Form 122C-1, Blake's current monthly income ("CMI") is $2,512, or $30,144 annually. 1 This falls well below the median income in Illinois for a household of four, which is $86,921 annually. When calculating her monthly income on her Schedule I, 2 Blake included a pro-rata share of her anticipated earned income tax credit for the following year in the amount of $168.50. Blake also filed a Schedule J 3 listing her ongoing monthly expenses. After subtracting payroll deductions and expenses from her monthly income, Blake was left with $119.91 of disposable income each month to make plan payments to her creditors.
On July 26, 2016, Blake filed her original Chapter 13 plan, which proposed monthly plan payments of $119 for thirty-six months, for a total of $4,284. Her plan also included the following provision:
For each year that the case is pending, Debtor will submit a copy of her federal income tax return to the Trustee by April 30 of each year. Debtor shall tender to the trustee the amount of any federal tax refund within 14 calendar days of receipt, except that Debtor shall be permitted to keep the amount of any earned income tax credit. For tax year2016, Debtor shall tender to the trustee (1/2) of any federal tax refund within 14 days, excluding the earned income tax credit.
On September 8, 2016, the trustee filed a motion to dismiss Blake's case for failing to correctly list her income and expenses and failing to confirm her plan in a timely manner. A week later, Blake filed an amended Schedule I to reflect a decrease in her income due to fewer overtime hours. She also filed an amended Schedule J. After these amendments, Blake's monthly disposable income for plan payments was $74.75. She proposed a new plan under which she would pay the trustee $119 for two months and then $74 for forty-eight months, for a total of $3,790.
B. Trustee's Objection and Bankruptcy Court's Memorandum Order
On January 20, 2017, the trustee objected to confirmation of Blake's plan. Specifically, the trustee argued that Blake was not committing all of her projected disposable income to the plan because she was retaining her tax refund. The trustee argued that the entire tax refund should be turned over to the trustee to be used for additional plan payments. In response, Blake asserted that she should be allowed to keep the earned income tax credit because it does not count as income under the Bankruptcy Code. The bankruptcy court consolidated Blake's case with two other cases to consider the issue of whether a debtor may retain some or all of a tax refund that includes tax credits.
On March 16, 2017, the bankruptcy court issued a memorandum order overruling the trustee's objection. The court explained that the portion of a tax refund attributable to over-withholdings is automatically included in the debtor's income because it is calculated using a debtor's gross income prior to tax withholding. In addition, the court held that tax credits are also considered income under the Bankruptcy Code. Thus, the court required Blake to include a prorated version of her annual tax credit as monthly income on her Schedule I (i.e., the annual tax credit divided by twelve months). At the same time, however, the court allowed Blake to offset that additional income by adding monthly prorated versions of reasonably necessary expenses to be incurred throughout the year on her Schedule J. In effect, this allowed Blake to retain some, or even all, of her tax credit. The court stated that as long as the offsetting expenses were reasonably necessary, it would confirm Blake's plan without requiring payment of expected tax credits.
C. Blake's Amended Schedules and Bankruptcy Plan
Pursuant to the bankruptcy court's order, Blake filed amended schedules on April 4, 2017. In her amended Schedule I, Blake increased her prorated earned income tax credit from $168.50 per month to $311 per month. In addition, Blake added prorated monthly tax over-withholdings of $100. 4 In her amended Schedule J, Blake added the following monthly prorated expenses: $132 for medical and dental expenses; $40 for shoes and clothing for her two sons (down from $85); $104 for new beds and furniture for her sons; and $43 for graduation expenses for her sons (including a school trip and prom). Once these expenses were deducted from her income, Blake had $102 in disposable income each month to make plan payments.
D. The Bankruptcy Court's Confirmation Order
On May 3, 2017, the bankruptcy court held a hearing on the confirmation of Blake's plan. During the hearing, Blake's counsel explained that the monthly prorated furniture expense was necessary because Blake's two nineteen-year-old sons had previously been sleeping on air mattresses, their bed frames and mattresses are in "incredibly poor condition," and they do not have any dressers. The court noted that "[i]t's a pretty skinny budget overall." The trustee again objected to confirmation. The court overruled the trustee's objection, stating:
I think the kids are entitled to sleep on beds that aren't falling apart. And I think that overall the budget as proposed is pretty skimpy and thin. So I think prorating these will be in the best interest of the estate, the best interest of the debtor in terms of hopefully having a plan that actually at the end of the day she can get a discharge. And, meanwhile, creditors will be getting a little.
On the same day, the bankruptcy court entered an order confirming Blake's plan.
E. Motion for Certification For Direct Appeal
On May 16, 2017, the trustee filed a notice appealing the bankruptcy court's confirmation order. At the same time, the trustee filed a motion to certify the order for direct appeal to this Court. On June 15, 2017, Blake filed her objection to the certification motion.
On July 5, 2017, the bankruptcy court denied the certification motion without prejudice. The bankruptcy court held that that, because more than thirty days had passed since the notice of appeal was filed, the matter was no longer "pending" in the bankruptcy court, but rather in the district court. As a result, the bankruptcy court concluded that, under Federal Rule of Bankruptcy Procedure 8006(b), it lacked power to certify the order for direct appeal. However, the bankruptcy court noted that if the district court remanded the case, it was prepared to enter an order certifying the case for direct appeal. On July 27, 2017, the district court remanded the case to the bankruptcy court for further proceedings.
On August 28, 2017, the bankruptcy court entered an order certifying the case for direct appeal to this Court. The court determined that certification was appropriate because there is no controlling decision from the Supreme Court or the Seventh Circuit as to whether tax credits are disposable income under the Bankruptcy Code. We subsequently authorized a direct appeal.
II. Discussion
We review questions of our jurisdiction de novo.
A. Jurisdiction
As a threshold issue, Blake argues we lack jurisdiction to hear this direct appeal because: (1) this case does not actually involve the legal question certified for direct appeal; (2) the trustee failed to file a petition for permission to appeal as required by Federal Rule of Appellate Procedure 5 ; and (3) the bankruptcy court lacked authority to certify the direct appeal because it did not do so within the time limit in Federal Rule of Bankruptcy Procedure 8006(f). These arguments fail.
1. This Case Involves the Legal Question Certified for Direct Appeal
We have jurisdiction to hear direct appeals "if the bankruptcy court ... certif[ies] that ... the judgment, order, or decree involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme Court of the United States ... and if the court of appeals authorizes the direct appeal."
Nevertheless, Blake maintains that we lack jurisdiction to review the confirmation order. Blake initially argued that her earned income tax credit was not income under the Bankruptcy Code, but the bankruptcy court rejected that argument in its March 2017 memorandum order. As a result, Blake included her earned income tax credit as income in her amended Chapter 13 plan. Therefore, Blake argues that, by the time her plan was confirmed in May 2017, this case no longer "involved" the legal question that the bankruptcy court certified for direct appeal.
Blake's argument fails for two reasons. First, our jurisdiction under § 158(d)(2)(A) turns on whether the bankruptcy court certified that the order involves a question of law that warrants a direct appeal. In other words, under § 158(d)(2)(A), the bankruptcy court gets to determine which legal questions are implicated by its own orders and whether those legal questions warrant certification. Given the bankruptcy court's familiarity with its own orders, it is in the best position to make this determination. Here, by granting certification, the bankruptcy court implicitly determined that its confirmation order involved the legal question of whether Blake's earned income tax credit was income under the Bankruptcy Code.
Second, to the extent we get to weigh in on whether certification was appropriate by "authoriz[ing] the direct appeal," we agree that the bankruptcy court's order confirming Blake's plan "involves" the legal question certified.
Federal Rule of Appellate Procedure 5
7
requires a party to file a petition for permission to appeal in the circuit court that includes the legal question presented, the relief sought, the reasons why the appeal should be allowed, a copy of the order appealed, and a copy of the district court's order granting permission to appeal. Fed. R. App. P. 5. We have generally said that the requirements for perfecting an appeal, including those imposed by court rule, "are important and should be complied with."
In re Turner
,
However, we have excused the failure to file a Rule 5 petition if the party filed a timely notice of appeal and "no one is harmed by the failure."
The material that the bankruptcy court transmitted to this court contained everything that the petition for review would have contained .... It contained information concerning the identity of the parties and the order being appealed that the petition would have contained, plus the reasons why this court should grant leave to appeal-for they were the same reasons that the trustee, in the request for certification that he had filed with the bankruptcy court, had presented to that court when it asked that court to certify the case for direct appeal to this court.
Here, as in Turner , the trustee's failure to file a separate petition for permission to appeal was harmless. The bankruptcy court clerk transmitted the necessary materials to this Court just ten days after the bankruptcy court issued the certification order, well before the deadline to file a notice of appeal had elapsed. As in Turner , these materials contained all the information that a petition for review would have contained. 8 Moreover, although Blake objected to the certification request in this case, she filed a brief opposing that request below in the bankruptcy court. Thus, like the appellant in Turner , she had an opportunity to challenge our jurisdiction.
3. The Bankruptcy Court Had Authority to Certify The Direct Appeal
Rule 8006(f) provides that a request to certify for direct appeal under § 158(d)(2)(A)"must be filed with the clerk of the court where the matter is
Here, the trustee filed her notice of appeal and certification request in the bankruptcy court on May 16, 2017. However, the bankruptcy court did not issue a ruling on the request until July 6, 2017. At that point, more than thirty days had elapsed since the notice of appeal was filed. As a result, the matter was no longer "pending" in the bankruptcy court under Rule 8006(b). Accordingly, the bankruptcy court denied the certification request without prejudice. However, the bankruptcy court indicated its intention to grant the certification motion if the district court remanded for that purpose. The district court subsequently remanded the matter back to the bankruptcy court, which then entered the certification order on August 28, 2017. Blake argues that this was an improper end-run around Rule 8006 's "crystal-clear" thirty-day deadline.
Blake's argument is unpersuasive. Rule 8008 explicitly states that, "[i]f a party files a timely motion in the bankruptcy court for relief that the court lacks authority to grant because of an appeal that has been docketed and is pending, the bankruptcy court may ... state that the court would grant the motion if the court where the appeal is pending remands for that purpose." Fed. R. Bankr. P. 8008(a)(3). If the bankruptcy court so indicates, "the district court ... may remand for further proceedings." Id. 8008(c). That is exactly what happened here. This result promotes the purpose of Rule 8006, which is to "give the bankruptcy judge, who will be familiar with the matter being appealed, an opportunity to decide whether certification for direct review is appropriate." Fed. R. Bankr. P. 8006 advisory committee's note to 2014 amendments.
For all these reasons, we have jurisdiction to hear the direct appeal.
B. Tax Credits Are Income Under the Bankruptcy Code
If the trustee objects to confirmation of the bankruptcy plan, the court may not approve the plan unless the debtor pays all of their "projected disposable income" into the plan during the applicable commitment period.
9
current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended ... for the maintenance or support of the debtor or a dependent of the debtor ....
In turn, the Code defines "current monthly income" as "the average monthly income from all sources that the debtor receives ... without regard to whether such income is taxable income" in the six-month period before the bankruptcy petition
Bankruptcy courts in this Circuit agree that tax credits are income under the Bankruptcy Code.
See
In re Morales
,
Moreover, the earned income tax credit statute provides that the credit "shall not be treated as income" for the purposes of several other federal statutes that provide public assistance benefits.
C. Below-Median Income Debtors May Prorate Their Annual Income Tax Refund And Associated Expenses
Just because tax credits are included in CMI, however, does not mean the debtor must pay the entire tax credit to the trustee as disposable income. After all, disposable income equals CMI minus the "amounts reasonably necessary to be expended ... for the maintenance or support of the debtor or a dependent of the debtor."
The trustee argues that income tax refunds should be turned over to the trustee to make additional plan payments. To the extent a debtor wants to retain some or all of the tax refund for reasonably necessary expenses, the debtor must move to modify the plan under
The bankruptcy court here adopted this practice for a couple reasons. First, the court wanted to alleviate the burdens that the motion-to-modify process imposes on trustees, debtors' counsel, and the court. 12 Second, the court sought to promote consistency across trustees who often have different practices as to whether a debtor may retain a portion of their tax refund. 13
The trustee argues that this approach is inconsistent with § 1325(b) of the Bankruptcy Code and the Supreme Court's interpretation of "projected disposable income" in
Hamilton v. Lanning,
1. The Bankruptcy Court's Holding Is Consistent With § 1325(b) and the Supreme Court's Interpretation Of "Projected Disposable Income"
Because the trustee objected to the confirmation of Blake's plan, the court could only confirm the plan if it "provide[d] 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."
In
Lanning
, the Supreme Court adopted a "forward-looking approach" to the question.
The
Lanning
Court provided several reasons for this flexible approach. First, the Court relied on "the ordinary meaning of the term 'projected.' "
Id.
at 513,
The
Lanning
Court also found that the trustee's mechanical approach "clashe[d] repeatedly with the terms of
As a practical matter, the
Lanning
Court noted that the trustee's approach "would produce senseless results" in cases where "a debtor's disposable income during the 6-month look-back period is either substantially lower or higher than the debtor's disposable income during the plan period."
The trustee points out that Blake is a below-median income debtor, whereas the debtor in Lanning was an above-median income debtor. Although the Bankruptcy Code treats these two kinds of debtors differently in at least one respect, 14 the trustee fails to explain why Lanning 's holding would not apply equally to below-median income debtors. As the trustee herself acknowledges, this case is similar to Lanning in that Blake's CMI during the six-month look-back period did not accurately represent her post-confirmation income. Thus, the Lanning Court's reasoning applies with equal force to below-median income debtors.
Here, the bankruptcy court properly followed
Lanning
to calculate Blake's projected disposable income. Although Blake did not receive a tax refund during her six-month look-back period, it is virtually certain that she will be entitled to an earned income tax credit each year during her commitment period. The earned income tax credit statute provides a refundable credit as a percentage of every dollar earned, and the percentage received depends on the number of qualifying children.
See
Next, the trustee argues that, "because the funds are received annually and not on a monthly basis," prorating the annual tax refund in this way artificially inflates the debtor's income. However, the Code's definition of "current monthly income" is not limited to income that is received on a monthly basis.
15
Rather, the Code defines CMI as "the
average
monthly income from all sources that the debtor receives" during the six-month look-back period.
16
The trustee's real complaint is not that the court allowed Blake to prorate her annual tax refund as monthly income. After all, the trustee wants to use that additional income for plan payments. Rather, the trustee objects to the court's approach because it allows Blake to deduct reasonable expenses, thus potentially negating the amount that could otherwise be used to make plan payments.
But the statutory language and the
Lanning
decision support the bankruptcy court's approach on the other side of the ledger as well. To calculate disposable income, "Chapter 13 utilizes a multi-part equation, containing both an income component and an expense component."
In re Brooks
,
Moreover, because we are dealing with
projected
disposable income,
Lanning
gives bankruptcy courts discretion "in unusual cases" to "go further and take into account other known or virtually certain information about the debtor's future income
or expenses
."
The trustee does not argue that Blake's prorated expenses were not reasonably necessary. Instead, she argues that they "do not actually exist at the time the schedules are filed," and debtors "cannot demonstrate that they will actually spend the refunds on that expense." She asserts
These arguments fail for two reasons. First, § 1325(b)(2) says nothing of "actual" expenses; it merely describes "amounts
reasonably necessary
to be expended ... for the maintenance or support of the debtor or a dependent of the debtor."
Second, the trustee's argument is just another version of the rigid mechanical approach the Supreme Court rejected in
Lanning
. Historical practice is not dispositive in every case. Thus, the word "projected" implies more than merely multiplying past expenses by the amount of time in the commitment period.
See
Lanning
,
2. The Bankruptcy Court's Holding Is Consistent With The Good Faith Requirement Under § 1325(a)(3)
Next, the trustee argues that, if debtors are allowed to prorate in this manner to comply with § 1325(b), their schedules and plans will not comply with the good faith requirement in § 1325(a).
Before the court may confirm a bankruptcy plan, the debtor must also show the requirements in § 1325(a) have been met. Section 1325(a)(3) requires that the plan be "proposed in good faith."
The trustee argues that when courts prorate the annual tax refund and associated expenses on a monthly basis, the debtor's expense schedule is "subject to manipulation" in violation of the good faith requirement. The trustee questions the accuracy of Blake's projected expenses in this case, especially because she filed an amended expense schedule four times.
By confirming Blake's plan, the bankruptcy court implicitly found, based on the totality of the circumstances, that her plan was proposed in good faith. Moreover, the trustee never objected to confirmation of Blake's plan in the bankruptcy court on the ground that it was proposed in bad faith, and does not point to anything in the record on appeal to suggest that Blake was trying to thwart her creditors.
True, Blake amended her expense schedule multiple times. However, Bankruptcy Rule 1009 allows a debtor to amend her schedules "as a matter of course at any time before the case is closed." Fed. R. Bankr. P. 1009(a). This "precludes an inquiry into the Debtor's good faith" based solely on the filing of amended schedules.
In re Padula
,
Moreover, the "nature and timing" of Blake's amendments do not suggest bad faith.
Cf.
In re Powers
,
The trustee argues that Blake's prior bankruptcy case also demonstrates a lack of good faith. Blake filed a previous bankruptcy case that was dismissed within one year of the filing of this matter due to Blake's failure to make plan payments. As a result, this case was presumed to have been filed in bad faith.
Finally, the trustee argues that the bankruptcy court was required to hold an evidentiary hearing so the trustee could cross-examine Blake about the accuracy of her expenses. However, "[n]othing in the statutes or case law requires a hearing every time the issue of good faith is raised in a Chapter 13 proceeding. The bankruptcy court, exercising its sound discretion, is in the best position to determine when an evidentiary hearing on the issue of good faith is necessary."
Noreen v. Slattengren
,
3. The Bankruptcy Court's Holding Is Consistent With The Feasibility Requirement in § 1325(a)(6)
In addition to satisfying the good faith requirement, the debtor's plan must be feasible.
See
The trustee argues that, because debtors only receive their tax refund once a year as a lump sum, and not in monthly installments, debtors will not have sufficient cash flow to make their monthly plan payments. As a result, the trustee claims that prorating the debtor's annual tax refund and associated expenses in this way will necessary result in plans that are not feasible.
This argument fails for two reasons. First, feasibility turns on the "particular circumstances of the plan and the case."
Olson
,
Second, even if per se rules were appropriate, bankruptcy courts have rejected the trustee's argument that prorating an annual tax refund and associated expenses will automatically render plans unfeasible.
See, e.g.,
Morales
,
Thus, the bankruptcy court's approach does not make debtor's plans less feasible. If anything, this approach makes the debtor's plan
more
feasible because it gives the debtor more flexibility in their budget to account for additional expenses throughout the year.
See
4. The Bankruptcy Court's Holding Promotes The Purposes of Chapter 13
In light of the analysis
supra
, we need not delve into the purposes behind Chapter 13 or public policy arguments. In this context, we have said that "[r]ights depend ... on what the Code provides rather than on notions of equity."
Sunbeam Prod., Inc. v. Chi. Am. Mfg., LLC
,
Nevertheless, the bankruptcy court's holding also promotes the underlying purposes of Chapter 13, "which are to allow the debtor a fresh start where it is possible to do so without liquidating the debtor's assets ..., while at the same time ensuring that the debtor devotes all of her disposable income during the life of the plan to repaying creditors."
Germeraad v. Powers
,
III. Conclusion
For the foregoing reasons, we AFFIRM the judgment of the district court.
Manion, Circuit Judge, concurring in part and concurring in the judgment.
I join the vast majority of the court's well-written opinion, but write separately out of concern that this case should not have been here on direct appeal. Particularly, there are two things that future panels should watch for when a case comes here on direct appeal from a bankruptcy court. First, it's important that we not grant direct appeal in the absence of a petition filed in accordance with Federal Rule of Appellate Procedure 5. And second, we should not grant such a petition if there is no dispute between the parties on the issue that prompted the bankruptcy court to certify the case in the first place.
This court has jurisdiction over a direct appeal from bankruptcy court if (1) the bankruptcy court certifies that the judgment involves a question of law that we
This is the type of case that probably should have gone through the normal process of appeal to the district court first. There was simply no compelling reason to grant direct review here. If we had required the trustee to file a petition, we would have seen that the parties were in agreement on the only issue the bankruptcy court deemed certifiable: whether the earned income tax credit counts as income under the Bankruptcy Code. The lack of adversarial briefing on this question makes the present case a poor vehicle for its resolution. See
City & Cty. of San Francisco v. Sheehan
, --- U.S. ----,
All that being said, what's done is done. We have agreed to hear this case and there is no reason to send it back at this point. I join all but Parts II-A and II-B of the court's well-reasoned opinion because it correctly holds that the bankruptcy court did not abuse its discretion in overruling the trustee's objections to the debtor's Chapter 13 plan. Because we have no adverse briefing on the issue and its resolution would not affect the outcome, I would express no opinion on whether the earned income tax credit qualifies as income under the Bankruptcy Code. Since we have already agreed to take jurisdiction, I concur in the judgment to affirm the decision below.
Notes
CMI is the debtor's average monthly income during the six-month "look-back" period before they filed their bankruptcy petition. The Form 122-C is used to determine whether a debtor's income is above-median or below-median and which commitment period is required.
Schedule I requires the debtor to report gross monthly income from all sources. The income listed on Schedule I is not the same as a debtor's CMI because (1) it includes income from sources like social security benefits, which are expressly excluded from CMI, and (2) it does not reflect an average of the debtor's gross income during the six months before the petition date.
See
In re Morales
,
Schedule J requires debtors to estimate their monthly expenses for themselves and their dependents as of the date they file for bankruptcy.
Blake estimated these amounts based on her 2015 tax refund, in which she received an earned income tax credit of $4,050 and tax over-withholdings of $2,661. However, she noted that she expected her earned income tax credit to be reduced in coming years due to the age and student status of her qualifying dependents.
On April 27, 2017, Blake filed another amended plan solely to add the following language regarding future income tax returns:
On or before April 20th of the year following the filing of the case and each year thereafter, Debtor shall submit a copy of the prior year's filed federal tax return to the Chapter 13 trustee. Debtor shall be permitted to retain any tax refund (including EITC) up to $4,942. Debtor shall tender to the Trustee the amount of any tax refund in excess of $4,942. Payment of any tax refund (as applicable) to the Trustee shall be treated as additional payment into the plan and must be submitted with 7 (seven) days of receipt of such refund by the Debtor.
Although the bankruptcy court certified the confirmation order based on the income classification issue, it acknowledged that this Court "has jurisdiction over the entire certified order." This is evident from the text of § 158, which gives us jurisdiction over "final judgments, orders, and decrees," not just the narrow legal issue certified.
Rule 5 applies to direct appeals of bankruptcy orders under § 158(d)(2). See Fed. R. App. P. 6(c)(1).
Specifically, the bankruptcy court clerk transmitted the order being appealed, the notice of appeal, the certification order, and a copy of the entire bankruptcy court docket.
Because Blake is a below-median income debtor, her applicable commitment period is three years.
The bankruptcy court correctly noted that, unlike tax credits, tax over-withholdings do not represent additional income that must be used for plan payments. This is because CMI is calculated from a debtor's gross income prior to tax withholdings.
Forbish
,
Although the bankruptcy court gave below-median income debtors the option to prorate the income and expenses related to their tax return, it did not require them to do so. The court made clear in its certification order that it "would not force debtors to prorate their tax-refund related income and expenses if the trustee did not object to another form of treatment in the plan and the parties were in agreement."
The court explained that below-median income debtors often propose plans with "extremely tight" budgets that do not consider all expenses to be incurred during the commitment period. As a result, when these debtors receive their tax refunds, they move to modify their plans so they can use that money for necessary expenses. In fact, the court noted that, of the 554 motions to modify it received between January 1, 2016 and February 14, 2017, approximately 24% requested retention of tax refunds. Not surprisingly, then, the number of motions to modify increases significantly around tax season. According to the bankruptcy court, the top three reasons for debtors wishing to keep their refunds were car repairs, household expenses, and medical/dental expenses, and the court granted the vast majority of those motions (only 2% were denied).
For example, the trustee in this case requires that debtors turn over the entire tax refund, but two other trustees in the Northern District of Illinois allow debtors to keep $2,000 of their tax refunds and do not try to recover tax credits from low-income debtors.
"[T]he disposable income calculation under § 1325(b)(2) for below-median debtors differs slightly from the calculation for above-median debtors."
In re Brooks
,
Indeed, if it were, an annual tax refund would not even be included in CMI. Accordingly, this argument is in tension with the trustee's argument that an annual tax refund must be included in CMI.
Again, although Blake did not receive her tax refund within the six-month look-back period, the Supreme Court made clear in Lanning that courts may consider changes in the debtor's income and expenses that are known or virtually certain to occur during the applicable commitment period, even if they differ from income or expenses during the look-back period.
The trustee argues that, "[w]here the language of the Code is at odds with the form," the statute prevails. However, in this case, the statutory text and the official forms do not conflict. To the contrary, both require proration. Thus, we need not choose between them.
Other bankruptcy courts in this Circuit have done the same. For example, in
Royal
, the court noted that the debtor had an "extremely tight" budget and "strongly suspect[ed] that [the debtor] defer[red] certain expenses, those that [could] wait until she receive[d] her yearly earned income tax credit."