David Anthony Jones and Lorie Wilson Jones

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UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
WILSON DIVISION
BARBARA ANN BRASWELL 	06-00318-8-JRL
GLADYS PARKER BULLUCK 	06-00149-8-JRL
CLEVELAND RUDOLPH FOSTER, BRENDA BELL FOSTER 	06-00300-8-JRL
DAVID ANTHONY JONES, LORIE WILSON JONES 	05-10597-8-JRL
ROBIN WAYNE NORDAN 	05-10699-8-JRL
DARLICIA CATRINA POPE 	06-00027-8-JRL
GERALDINE RICHARDSON 	06-00049-8-JRL
JESSE JAMES RUDD 	06-00064-8-JRL
TINA LOUISE WATSON 	05-10612-8-JRL
RICHARD DEAN WEBB, CRYSTAL DAWN WEBB 	06-00098-8-JRL
Debtors. 	Chapter 13
______________________________________________________________________________
ORDER
These cases are before the court on the debtors’ motions for reconsideration of the court’s
order entered June 30, 2006. The June 30 order dealt with a number of difficult issues involving
confirmation requirements under BAPCPA, the bulk of which are not challenged here. At issue is
only the subsidiary holding that in determining the expenses of below-median income debtors, the
court would look to Schedule J. On August 10, 2006, the court conducted a hearing on these matters
in Wilson, North Carolina.
SO ORDERED.
SIGNED this 23 day of August, 2006.
________________________________________
J. Rich Leonard
United States Bankruptcy Judge
____________________________________________________________
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The court has considered the new arguments made at the hearing regarding the calculation
of disposable income for below-median debtors under 11 U.S.C. § 1325(b)(2). The debtors assert
that, for purposes of plan feasibility, the debtors “squeeze” their expenses and live at a level of
subsistence. Thus, the debtors argue that their expenses 	reported on Schedule J are below the
standard of what is “reasonably necessary” for purposes of calculating disposable income under §
1325(b)(2). For this reason, they argue that they should be allowed to increase their expenses when
calculating disposable income. The court rejects this argument. In order for the bankruptcy system
to function, it is necessary for the court and the trustees administering a case to have a truthful
snapshot of a debtor’s expenses at the inception of the case. While there is no rigid test for
determining what is “reasonably necessary,” courts have found that, for purposes of “maintenance
and support,” it is “an amount sufficient to sustain basic needs not related to the debtor’s former
status in society or the lifestyle to which he is accustomed.” In re Stanley, 296 B.R. 402, 408 (Bankr.
E.D. Va. 2002); see In re Jones, 55 B.R. 462, 466 (Bankr. Minn. 1985)(stating debtor should be left
with sufficient money to pay basic living expenses). It is somewhat incongruent to suggest that a
debtor can artificially inflate his actual expenses to reach a hypothetical level deemed “reasonably
necessary,” when the plain meaning of the word “necessary” means “impossible to do without.”
Merriam-Webster Online Dictionary, http://www.m-w.com (last visited Aug. 21, 2006).
While cutting corners may be necessary for some debtors, a debtor is not required to reduce
his expenses to a level that will deprive him of “adequate food, clothing, shelter and other necessities
of life.” In re Collins, No. 03-12750C-7G, 2004 WL 3510107 at *2 (Bankr. M.D.N.C. 2004). If a
debtor is forced to live in impoverished conditions in order to show that he can fund a Chapter 13
plan, then he is likely not a good candidate for Chapter 13. A debtor completes Schedule J under
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penalty of perjury “by estimating the average monthly expenses of the debtor and the debtor’s
family.” The court finds no authority for allowing a debtor to propose one set of expenses for
purposes of feasibility and another set for purposes of calculating disposable income.
The court, however, does take stock in the debtors’ argument that some reasonably necessary
expenses are found outside Schedule J. A number of courts, including this one, have addressed the
below-median income calculation of disposable income under the new law and have stated that
reasonably necessary expenses are extracted from Schedule J. In re Alexander, 344 B.R. 742, 746
(Bankr. E.D.N.C. 2006)(“To arrive at a disposable income figure for a below-median income debtor,
one takes the debtor’s current monthly income from Part I of Form B22C and subtracts the total
monthly expenses from Schedule J”); In re McGuire, 342 B.R. 608, 611 (Bankr. W.D. Mo.
2006)(“[F]or below median debtors, the income side of the equation is now calculated as a historical
average rather than being based on actual numbers, but the determination of what constitutes
reasonably necessary expenses for purposes of determining projected disposable income to be paid
into the plan is the same post-BAPCPA as it was pre-BAPCPA: it is based on the actual expenses
identified in Schedule J and is subject to the court’s discretion as to the reasonableness of the
claimed expenses.”); see also In re Fuller, ___ B.R. ____, 2006 WL 2096484 at *4 (Bankr. S.D. Ill.
2006)(“If her income is lower than the median, she calculates her expenses by subtracting from her
current monthly income the expenses specified in § 1325(b)(2)—in other words, her Schedule J
expenses.”).
The statute itself, however, does not limit reasonably necessary expenses to those listed on
Schedule J. 11 U.S.C. § 1325(b)(2). As a result of debtors’ attorneys and Chapter 13 trustees in this
district gaining more familiarity with the new law, they are acknowledging that other expenses
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1 At the hearing, the debtors’ attorney discussed related issues, including the need for
early termination language in a plan where there is no projected disposable income and thus no
applicable commitment period. In addition, the trustees appearing at the hearing inquired
regarding whom should bear the burden of monitoring the early termination of these cases so that
debtors do not pay more than required. The court urges further discussion of these issues. In the
event no resolution can be reached, the court will entertain them in the future upon request.
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should be taken into consideration when calculating disposable income for below-median debtors.
The court finds that, in addition to the expenses set forth in Schedule J, the payroll deductions set
forth at line 4 of Schedule I should also be considered when determining the reasonably necessary
expenses of a debtor. Such expenses consist of payroll taxes, social security, insurance, union dues,
and other amounts deducted from a debtor’s pay check by his employer.
Prior to BAPCPA, a debtor dedicated his disposable income to plan payments for the benefit
of all creditors. In re Tucker, 220 B.R. 359, 361 (Bankr. W.D. Tenn. 1998). Now, the debtor’s
projected disposable income is used to pay unsecured creditors only. 11 U.S.C. § 1325(b)(1)(B).
Accordingly, when calculating disposable income under BAPCPA, the below-median debtor may
deduct the monthly amount needed to pay the trustee to meet the secured, priority, and
administrative obligations of his plan as a reasonably necessary expense. That amount should be
listed at line 17 of Schedule J, or in any other fashion that satisfies the Chapter 13 trustee.
Aside from these modifications regarding the calculation of disposable income for below-
median debtors, any plan to be confirmed in these cases must be in accordance with In re Alexander,
344 B.R. 742 (Bankr. E.D.N.C. 2006). 1
“END OF DOCUMENT”
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