Jacqueline R Kucera

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
________________________________________
IN RE:
JACQUELINE R. KUCERA, 	Chapter 13
f/k/a JACQUELINE R. HARTLEY, 	Case No. 08-17304-WCH
DEBTOR
________________________________________
MEMORANDUM OF DECISION
I. INTRODUCTION
The matters before the Court are the Trustee’s Objection to Confirmation of Debtor’s
Chapter 13 Plan (the “Objection”) filed by Carolyn A. Bankowski, Standing Chapter 13 Trustee
(the “Trustee”) and the Opposition to Trustee’s Objection to Confirmation of Debtor’s Chapter
13 Plan (the “Opposition) filed by Jacqueline R. Kucera (the “Debtor”). 	Objecting to
confirmation of the Debtor’s Chapter 13 Plan (the “Plan) under 11 U.S.C. § 1325(b)(1), the
Trustee contends that the Debtor is not applying all of her “projected disposable income” to pay
unsecured creditors. 	For the reasons set forth below, I will enter an order sustaining the
Objection and allowing the Debtor to file an amended Chapter 13 plan.
II. BACKGROUND
The Debtor and Carsten Jessen (“Jessen”) executed a Separation Agreement (the
“Agreement”) in the Massachusetts Probate and Family Court Department (the “Family Court”)
on August 15, 2002. 1 Under the Agreement, Jessen agreed to transfer to the Debtor his interest
in the real property located at 9 Pine Hill Road, Framingham, Massachusetts (the “Property”). In
1 The Agreement was amended on October 7, 2002.
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exchange, the Debtor agreed to either sell or refinance the Property within 5 years and to pay
Jessen $100,000 from the sale proceeds or refinancing funds. On October 2, 2003, Jessen filed a
Complaint for Modification in the Family Court seeking an attachment on the Property in the
amount of $100,000 to secure the Debtor’s obligation to him. 	On November 24, 2003, the
Family Court issued a Writ of Attachment on the Property for $100,000 (the “Lien”).
On September 29, 2008, the Debtor filed a Chapter 13 petition and the Plan. In the Plan,
the Debtor proposes payments of $282 per month for 60 months with a 3.5% dividend to
unsecured creditors. 2 Also in the Plan, Debtor states that she will avoid the Lien pursuant to 11
U.S.C. § 522(f) and will instead treat it as a general unsecured claim subject to discharge
pursuant to 11 U.S.C. §§ 1328(a) and 523(a). 3 The Debtor filed a Motion to Avoid Judicial Lien
on October 30, 2008, and in the absence of an objection, I granted the Debtor’s motion on
December 3, 2008.
On January 8, 2009, the Debtor filed an Amended Chapter 13 Statement of Current
Monthly Income and Calculation of Commitment Period and Disposable Income (“Form 22C”).
Line 14 of Form 22C shows the Debtor’s current monthly income of $7,734.70, which multiplied
by 12, equals the Debtor’s annualized current monthly income of $92,814.40. 	This amount is
substantially greater than the median family income that is applicable to the Debtor. 4 Her
2 In the Plan, the Debtor lists $257, 142.50 as the total amount of general unsecured
claims. The Lien is included in this amount.
3 All future references to section numbers are to the Bankruptcy Reform Act of 1978, as
amended 	by 	the 	Bankruptcy 	Abuse 	Prevention 	and 	Consumer 	Protection 	Act 	of 	2005
(“BAPCPA”), Pub. L. No. 109-8, 119 Stat. 23, 11 U.S.C. § 101, et seq.
4 On the Debtor’s petition date, the Massachusetts median income for 1 wage earner was
$52,633.
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applicable commitment period, therefore, is 5 years, and her disposable income is determined
under § 1325(b)(3).
In calculating her disposable income in Part IV of Form 22C, “Calculation of
Deductions From Income,” the Debtor deducted a monthly payment of $1,666.66 to Jeesen on
Line 48, Subpart C, listing the Property as the security. Line 48 defines the payments that can be
listed on that line in relevant part:
Other payments on secured claims. 	If any debts listed in Line 47 are
secured by your primary residence, a motor vehicle, or other property
necessary for your support or the support of your dependents, you may
included in your deduction 1/60th of any amount (the “cure amount”) that
you must pay the creditor in addition to the payments listed in Line 47, in
order to maintain possession of the property. 5
At the end of Part IV, on Line 52, Subpart D, “Total Deductions from Income,” the
Debtor claims a total deduction of $8,326.02. 6 After taking these deductions, the Debtor reports
negative $591.32 on Line 59, Part VI of Form 22C, “Determination of Disposable Income Under
§ 1325(b)(2),” as her monthly disposable income.
The Debtor’s Schedule I - Current Income of Individual Debtor(s) (“Schedule I”), filed
on September 29, 2008 and later amended on January 9, 2009, and Schedule J - Current
5 Form 22C, Line 48. I note that Line 48 is not the appropriate line on which the Debtor
listed the Lien. Line 47 is the applicable line, which in pertinent part, reads:
Future payments on secured claims. For each of your debts that is secured by an
interest in property that you own, list the name of the creditor, identify the property
securing the debt, and state the Average Monthly Payment. . . . The Average Monthly
Payment is the total of all amounts scheduled as contractually due to each Secured
Creditor in the 60 months following the filing of the bankruptcy case, divided by 60.
6 The Debtor’s deductions are composed of $4,009.04 in “Total Expenses Allowed under
IRS standards” on Line 38, $2,574.48 in “Future payments on secured claims” on Line 47, and
$1,743.40 for “Other payments on secured claims” on Line 48, with the Lien payment
comprising $1,666.66 of the Line 48 amount.
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Expenditures of Individual Debtor(s) (“Schedule J”), filed on September 29, 2008, reflect a
different financial situation. 	Schedule I reveals an average monthly income of $5,538.75, and
Schedule J reveals average monthly expenses of $5,273.15, for a total monthly net income of
$265.60. The Debtor does not list the Lien as an expense on Schedule J.
On November 24, 2008, the Trustee filed the Objection, asserting that the Debtor was not
applying all of her projected disposable income to pay unsecured creditors. The Debtor filed the
Opposition on December 2, 2008, and the Trustee filed a reply on December 9, 2008. 	I held a
hearing on the Objection on January 8, 2009. At the hearing’s conclusion, I took the Objection
under advisement. Following the hearing, both the Trustee and the Debtor filed briefs in support
of their respective positions.
III. POSITIONS OF THE PARTIES
A. The Trustee
Citing § 1325(b)(1)(B), the Trustee contends that the Court may not approve the Plan
because the Debtor is not devoting all of her “projected disposable income” to pay unsecured
creditors. 	The Trustee disputes the Debtor’s Lien deduction as a secured debt expense on Line
48 of Form 22C because the Debtor stated in the Plan that she will, and ultimately did, avoid the
Lien . 	If the Lien payment deduction is omitted from Line 48, the Debtor’s projected monthly
disposable income on Line 59 would equal $1,075.34. 	Multiplied by 60, this amount would
generate $64,520.40 available to pay unsecured creditors.
Relying on Kibbe v. Sumski, where the United States Bankruptcy Appellate Panel for the
First Circuit held that the income side of § 1325(b)(1)(B)’s projected disposable income equation
is forward-looking and based on reality, the Trustee argues that the expense equation of
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projected disposable income is also forward-looking. 7 Further, the Trustee contends, the Chapter
13 plan creates a new agreement between the debtor and the creditor, so the term “contractually
due” under 707(b)(2)(A)(iii)(I) is defined with reference to the plan and not to the original
contract.
In the alternative, the Trustee argues that the Court cannot confirm the Debtor’s plan
because the Debtor is not making a good faith effort to repay her unsecured creditors under §
1325(a)(3). 	The Trustee maintains that the Debtor’s deduction of the Lien on Line 48 of Form
22C is an “extraordinary circumstance” that justifies a factual inquiry of the claimed expense.
By avoiding the Lien, the Trustee argues that the Debtor has declared that it is not an actual
expense, so the Debtor cannot deduct it as an expense.
B. The Debtor
In opposition, the Debtor claims that she properly calculated her projected disposable
income. The Debtor maintains that the term “projected disposable income” is the equivalent of
“disposable income,” which is defined as the debtor’s “current monthly income” under §
1325(b)(2). 8 In calculating her current monthly income, the Debtor argues that she is permitted
to deduct the Lien as an expense on Line 48 of Form 22C because the Lien is a secured
obligation that was contractually due when she filed her petition. 	The Debtor concedes,
however, that if the petition date is not the measuring date, and the confirmation date is, the Lien
deduction would not be proper.
Additionally, the Debtor maintains that the Trustee’s good faith argument cannot be
7 Kibbe v. Sumski (In re Kibbe), 361 B.R. 302 (B.A.P. 1st Cir. 2007).
8 In her brief, the Debtor cites to § 1322(b), but because § 1322(b) is not relevant to the
Debtor’s opposition, I construe it as an error and provide § 1325(b) as the intended citation.
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considered because she did not raise it in her initial objection to the Plan. Moreover, the Debtor
argues, the Trustee’s good faith argument has been made in bad faith because the Debtor’s
compliance with the statute’s plain language and its statutory scheme is not an “extraordinary
circumstance” justifying the Court’s inquiry of the Debtor’s expense deduction.
IV. DISCUSSION
Section 1325(b)(1) provides:
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—
(A) the value of the property to be distributed under the plan on account of
such claim is not less than the amount of such claim; or
(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. 9
Because the Plan proposes only a 3.5% dividend to unsecured creditors, its confirmation depends
on the Debtor applying all of her “projected disposable income” to pay unsecured creditors.
“Projected disposable income” is not defined in the Bankruptcy Code. 	The term
“disposable income,” however, is defined in § 1325(b)(2). In pertinent part, § 1325(b)(2) reads:
“[f]or purposes of this subsection, the term “disposable income” means current monthly income
received by the debtor...less amounts reasonably necessary to be expended. . . .” 10 The first step
to this disposable income equation is to calculate Debtor’s “current monthly income.” 	Current
monthly income is defined in § 101(10A). 	Generally, it is the amount of income the debtor
9 11 U.S.C. § 1325(b)(1) (emphasis added).
10 11 U.S.C. § 1325(b)(2) (emphasis added).
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received during the six full months prior to the month the debtor filed the bankruptcy petition. 11
As the Trustee does not dispute this amount, I will not consider whether the Debtor properly
calculated her current monthly income.
Next, “amounts reasonably necessary to be expended” is subtracted from the Debtor’s
current monthly income. 	For above-median income debtors, “amounts reasonably necessary to
be expended . . . shall be determined in accordance with subparagraphs (A) and (B) of section
707(b)(2) . . . .” 12 Section 707(b) is the Chapter 7 means test, which is used to determine “if the
granting of relief” under Chapter 7 “would be an abuse of the provisions” of that Chapter. 13
Under § 707(b)(2)(A)(iii), a debtor may deduct contractual secured debt obligations. 	In
relevant part, it provides:
(iii) The debtor’s average monthly payments on account of secured debts shall
be calculated as the sum of–
(I) the total of all amounts scheduled as contractually due to secured creditors
in each month of the 60 months following the date of the petition . . .
divided by 60. 14
The resolution of this case turns upon the statutory construction of § 707(b)(2)(A)(iii)(I).
Resolution of a dispute over the meaning of a statute begins with the language of the statute
itself. 15 “[W]hen the statute’s language is plain, the sole function of the courts-at least where the
11 11 U.S.C. § 101(10A).
12 11 U.S.C. § 1325(b)(3).
13 11 U.S.C. § 707(b)(1).
14 11 U.S.C. § 707(b)(2)(A)(iii) (emphasis added).
15 United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d
290 (1989) (citing Landreth Timber Co. v. Landreth, 471 U.S. 681, 685, 105 S.Ct. 2297, 103
L.Ed.2d 692 (1985)).
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disposition required by the text is not absurd-is to enforce it according to its terms.” 16 Following
this command, the United States Bankruptcy Appellate Panel of the First Circuit, in Morse v.
Rudler, 	examined 	the 	competing 	interpretations 	among 	the 	courts 	regarding 	the 	phrase
“scheduled as contractually due.” 17 Rejecting the interpretation that “scheduled as contractually
due” refers only to the debts identified on the debtor’s bankruptcy schedules, the Panel
interpreted the phrase to refer to those debts that the debtor is required to pay under the
contract. 18
The expense deduction under § 707(b)(2)(A)(iii)(I), however, is not for all amounts that a
debtor is required to pay under the contract. 	Rather, the deduction is limited to those amounts
that are “scheduled as contractually due to secured creditors. 19 Section 707(b)(2)(A)(iii)(I),
therefore, differentiates between voluntary secured debts, such as mortgage and security
agreements, and involuntary secured debts, such as judgment liens and statutory liens. 20 Under
the statute, voluntary liens can be deducted but involuntary liens cannot.
Here, the Lien was not created by contract, but by judicial decree, so it is an involuntary
lien that the Debtor improperly deducted under § 707(b)(2)(A)(iii)(I). 21 As the Debtor is not
16 Lamie v. United States, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004)
(quoting Hartford Underwriters Ins. Co. v. Union Planters Banks, N.A., 530 U.S. 1, 6, 120 S.Ct.
1942, 147 L.Ed.2d 1 (2000); Ron Pair, 489 U.S. at 241, 109 S.Ct. 1026, 103 L.Ed.2d 290;
Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917)).
17 Morse v. Rudler, 388 B.R. 433 (B.A.P. 1st Cir. 2008).
18 Id. at 437-438.
19 11 U.S.C. § 707(b)(2)(A)(iii) (emphasis added).
20 In re Anderson, 383 B.R. 699, 707 (Bankr. S.D. Ohio 2008).
21 The outcome would be the same if I substituted the Plan as the applicable contract,
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applying all of her “disposable income” to the Plan, it is unnecessary for me to discuss further
whether she is applying all of her “projected” disposable income to the Plan under §
1325(b)(1)(B) or whether she proposed the Plan in good faith under § 1325(a)(3).
V. CONCLUSION
In light of the foregoing, I will enter an order sustaining the Trustee’s objection to the
Plan. I will allow the Debtor 30 days from the date of the order to file an amended Chapter 13
plan.
______________________________
William Hillman
United States Bankruptcy Judge
Dated: March 12, 2009
which the Trustee urges that I do.
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