John Aloysius Distler and Janet Eileen Distler

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
FAYETTEVILLE DIVISION
IN RE:
JOHN ALOYSIUS DISTLER,
JANET EILEEN DISTLER,
DEBTORS
CASE NO.
09-00707-8-RDD
ORDER EXCUSING DEBTORS FROM FILING REQUIRED
SCHEDULE “I” AND SETTING ALTERNATIVE
DATE FOR DETERMINING CURRENT MONTHLY INCOME
Pending before the Court is the Motion to Excuse the Requirement of Filing a Schedule I and
for Setting an Alternative Date for Determining Debtors’ Current Monthly Income (the “Motion”)
filed by John Aloysius Distler and Janet Eileen Distler (the “Debtors”) on February 3, 2009 and the
Objection 	to 	the 	Motion 	(the 	“Objection”) 	of 	Queensborough 	National 	Bank 	& 	Trust
(“Queensborough”) filed on February 26, 2009. A hearing on the Motion and Objection was held
on May 7, 2009 in Fayetteville, North Carolina.
Queensborough objects to an alternative date for calculating the Debtors’ currently monthly
income and proposed dividend to be paid to unsecured creditors. Queensborough, the largest
SO ORDERED.
SIGNED this 11 day of June, 2009.
________________________________________
Randy D. Doub
United States Bankruptcy Judge
____________________________________________________________
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unsecured creditor in the Debtors’ case, held a second mortgage on the Debtors’ previous home that
was located in Georgia. Prior to the Debtors’ filing their petition, Chase Mortgage foreclosed on
the note and first deed of trust which was secured by this residence. The foreclosure left an unpaid
balance of $141,000.00 due to Queensborough on its note and second deed of trust. Based upon the
Debtor’s schedules, this amount represents approximately 75% of the Debtors’ unsecured debt.
In support of its Objection, Queensborough asserts that even after the foreclosure on the
residence in Georgia, the Debtors bought a home in North Carolina valued at $475,000.00. The
current residence is subject to three mortgages with a monthly payment amount of $3,724 a month.
In addition to the current residence, Queensborough notes that the Debtors intend to keep three
vehicles on which they owe approximately $70,000.00. Based on the Debtors’ proposed Chapter
13 Plan (the “Plan”), the combined monthly payment for the vehicles is approximately $1,791.07,
including $372.60 per month for a 2005 SAAB, $775.26 per month for a 2007 Chevrolet Silverado,
and $643.21 per month for the 2007 Hummer.
In conjunction with the petition, the Debtors filed their proposed Plan. The Plan proposes
monthly payments of $300.00 for 60 months. This amount, after payment to counsel and the trustee,
will allow for a disbursement of $14,110.00 for unsecured creditors over the life of the plan. As of
the date of the hearing, the Plan had not been confirmed.
Queensborough believes that this dividend is insufficient and that the retention of three
vehicles by the Debtors called into question their true financial situation. Queensborough asserts
that if the Debtors’ were required to file Schedule I, it would reveal specific information regarding
the dependents, the male debtor’s employment situation, and the female debtor’s current earnings.
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DISCUSSION
Pursuant to 11 U.S.C. §521(a)(1)(B)(ii), unless the court orders otherwise, one of the
debtor’s duties in a bankruptcy proceeding is to file a schedule of current income and current
expenditures (Schedule I). Current monthly income is the average monthly income from all sources
received without regard to whether such income is taxable income, derived during the six-month
period ending on the last day of the calendar month immediately preceding the date of the
commencement of the case if the debtor files the required schedule of current income; or, the date
on which current income is determined by the court if the debtor does not file the schedule of current
income. . . . 11 U.S.C. §101(10A)(A)(I)-(ii).
The Debtors timely filed their Schedules and Statements but did not file Schedule I. This
omission was intentional as the Debtors sought to have the court make a determination as to how
the Debtors’ current monthly income should be computed. 11 U.S.C. § 101(10A)(A)(I)-(ii). As of
the petition date, Mr. Distler’s current monthly income was $4,285.56, based on the $25,713.38 in
income he received from Synagro Southwest between July 1, 2008 through December 31, 2008. Mr.
Distler is a senior operations manager at Synagro Southwest handling their projects in the
southeastern United States. Mr. Distler testified that over the past few years, Synagro Southwest
has not only seen a reduction in workforce, but has also asked its employees to take salary
reductions in order to stay in business.
In September 2008, Mr. Distler noticed some changes in his health and in December, doctors
found a tumor on his bladder. In late December, he was diagnosed with an aggressive form of
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bladder cancer. On March 4, 2009, Mr. Distler had an experimental procedure performed to combat
the cancer. He also had his gall bladder removed. Since that time, Mr. Distler has been in and out
of the hospital because of complications from the surgery and for the treatment of his cancer.
As of the hearing date, Mr. Distler is unable to work and has exhausted any accrued sick and
vacation leave benefits. These benefits were paid to Mr. Distler at his regular rate of pay during the
early months of 2009. He is currently out of work under the Family Medical Leave Act and is
receiving short term disability payments in the amount of $581.00 per week. Should he be out of
work for an extended period, Mr. Distler may be eligible for long term disability benefits. However,
Mr. Distler testified that he hoped to go back to work at the conclusion of his treatment.
Mrs. Distler is a veterinarian and previously owned a private practice in Georgia. Prior to
moving to North Carolina, she sold her practice and, as part of that sale, was restricted by a non-
compete agreement. She is currently employed as an associate veterinarian at Highland Animal
Hospital earning $120,000.00 a year and may be eligible for a $12,000.00 bonus. Mr. Distler stated
his wife’s income is stable.
The Distlers also have one daughter who is enrolled in private school. Mr. Distler stated that
his daughter has a health condition that needs regular monitoring. The private school setting offers
smaller class sizes to allow teachers a better opportunity to supervise and provide the care that his
daughter needs.
A court should consider the good faith request of the debtor, as well as the totality of the
circumstances surrounding the request in determining the date for computation of a debtor’s current
monthly income. In re Hoff, 2009 WL 798870 (Bankr. E.D.N.C. 2009). In this case, Mr. Distler’s
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health has continued to decline since the filing of the petition. In addition, since that time, he has
exhausted all of his vacation and sick leave and is currently receiving short term disability. Mr.
Distler is not voluntarily unemployed. In fact, he hopes to return to work. However, even if his
health will allow him to do so, the fledgling economy may limit his ability to earn the same amount
as he earned prepetition. Mrs. Distler continues to work full-time and her salary primarily supports
the family.
Given the fact that Debtors’ financial situation deteriorated significantly during the six
months prior to the filing of the petition and has continued to decline based on the limited funds Mr.
Distler receives in connection with his short term disability payment, the Debtors request that the
Court modify the date of the commencement of the six month look back period to July 31, 2009.
Based upon their current financial situation and short term forecast of the Distlers’ income
producing ability, if they were required “to use the pre-petition six-month average as their current
monthly income [when there is a significant, involuntary decrease in actual income], their plan
would not be feasible...” In re Hoff, 2009 WL 798870 * 2 (citing In re Ingram, 2006 WL 6070518
*1 (Bankr. E.D.N.C. 2006). 	Therefore, the Court finds, based on the totality of the circumstances
and the Debtors’ good faith, the Debtors’ current monthly income under Section 101(10A)(A)(ii)
shall be calculated for the six month period prior to June 30, 2009. This date takes into account
several months where Mr. Distler received his salary through payment of his sick leave and vacation
benefits, as well as several months based on the amount received by Mr. Distler in connection with
his short term disability. The Court finds that the totality of the circumstances and the unknown
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impact that Mr. Distler’s health may have on his earning capacity warrants the modification of the
date to be used by the Debtors’ for calculation of their current monthly income.
SO ORDERED.
END OF DOCUMENT
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