Georgia Bankruptcy Blog

In this case, Judge Massey overruled the Chapter 13 trustee's objection and confirmed a Chapter 13 plan based on actual disposable income of the debtor, and not income based upon the six month pre-petition average.  Judge Mullins has come to the same conclusion.

In In re Grady, No. 06-60726, 2006 Bankr. LEXIS 1121 (Bankr. N.D. Ga. June 21, 2006), the debtor spouse was unable to work post-petition due to a health problem, thereby making their actual post-petition disposable income less than the six month pre-petition average.  The debtors proposed a plan based upon the new circumstances and the Chapter 13 trustee objected based upon the debtors' alleged failure to pay the full amount of their disposable income as calculated by line 58 of the CMI form.

Judge Mullins disagreed with the trustee's position, following the same general analysis as Judge Massey --

The plain language of section 1325(b)(1)(B) provides that the term "projected disposable income," is different from the term "disposable income" under section 1325(b)(2). The term "projected disposable income" in section 1325(b)(1)(B) is not defined in the Bankruptcy Code and is a pre-BAPCPA term. However, Congress redefined disposable income in BAPCPA as current monthly income less reasonable expenses. 11 U.S.C. § 1325(b)(2). The term "current monthly income" is an average of gross monthly wages of the six calendar months preceding the petition date. 11 U.S.C. § 101(10A). Instead of defining the amount to be paid to unsecured creditors as "disposable income," Congress did not revise the language of section 1325(b)(1)(B) "projected disposable income" to "disposable income." Congress' continued use of the additional term "projected" in section 1325(b)(1)(B) indicates a difference from "disposable income" in section 1325(b)(2). If Congress wanted the plan payment amount under section 1325(b)(1)(B) "to be synonymous with section 1325(b)(2)" definition of disposable income, then "projected" would of been deleted from section 1325(b)(1)(B). In re Kibbe, 2006 Bankr. LEXIS 793, *7 (Bankr. D. N.H. 2006) (internal citations omitted).
....
A debtor needs the ability to fund a plan that he or she can afford based on his or her circumstances at the current time. "Chapter 13's overall policy is to facilitate adjustments of the debts of individuals with regular income through flexible prepayment plans funded primarily from future income." In re Hoggle, 12 F.3d 1008, 1011 (11th. Cir. 1994)(emphasis added). The Bankruptcy Code requires Courts to evaluate a debtor's financial circumstances from a flexible and forward looking perspective when deciding whether they are paying a sufficient amount of disposable income to unsecured creditors. Considering that the Bankruptcy Code permits a debtor to modify the confirmed plan if his financial condition changes, it appears Congress, by using the term "projected disposable income" in section 1325(b)(1)(B), intended courts to consider a debtor's disposable income at the time of confirmation. It is not logical for BAPCPA to limit a debtor to a plan based upon disposable income averaged over the six months preceding the petition date, when the debtor's financial condition is dramatically different at the time of confirmation. If the Debtors are required to pay the disposable income as calculated on the CMI form only, they would not be able to modify the plan under section 1329(a). If BAPCPA is interpreted in this fashion, these Debtors will not be able to voluntarily repay a portion of their debts through a Chapter 13 plan. Certainly the proponents of BAPCPA did not intend to close the bankruptcy court doors to debtors who voluntarily,  and in good faith, seek to repay creditors with the funds they actually have on hand each month. The policy of a "fresh start" for "honest but unfortunate debtors" is not fulfilled by such a result.

(emphasis added).

A comment and question. I live in Spalding County and I filed a chapter 13 in November 2007. It has been confirmed and payments of $300. have been taken out of my check since September 30, 2007. My concern is that now that I actually see my check after all deductions I have $1243. left over every month to pay rent, utilities (elec, natural gas), car insurance, college loan, phone and cable. I have $128.00 left over each month. That translates into $31.00 a week for groceries (2 people in home- (my son and I), toiletries (male and female), detergents, cleaning supplies, oil changes for car, my car tires are in horrible condition, I need to get certified for my job and the state exam is $165.00 to take. I can not live like this for 3-5 years. What is the big deal about the trustee wanting my tax refund (Total $3207. w/$2800. being EITC). I could get some food in the house, take my state exam and get new tires so I can get to work. Notice I have not even mentioned gasoline for the car? Approx. $32.00 needed to fill tank on a weekly basis. If I do not get to work noone gets paid. Need some feedback. I can never reach my attorney nor his paralegal. "Away from desk or on other line or vacation" I have left countless messages for last two weeks and no return calls to me. What can I do. I am considering dismissing my case but then I will not have my tax refund to get a cheap used car that runs like mine. My car is the only secured creditor on my chapter 13. Please, at least discuss my situation. I would appreciate this. Thank you.