In re Brooks

498 B.R. 856

In re Stephanie Arlene BROOKS, Debtor.

No. 12–82224.

United States Bankruptcy Court, C.D. Illinois.

Sept. 11, 2013.

Spencer L. Daniels, Peoria, IL, for Debtor.

Michael Clark, Trustee.

Robert Ropp, Bloomington, IL, for U.S. Trustee.

OPINION

THOMAS L. PERKINS, Bankruptcy Judge.

Before the Court is the confirmation of the amended Chapter 13 plan filed by the Debtor, Stephanie Brooks (DEBTOR), and the objection by Michael D. Clark, Chapter 13 Trustee (TRUSTEE). At issue is how child support payments should be treated on Form 22C for purposes of calculating disposable income.

The DEBTOR, who is divorced with two young children, filed a Chapter 13 petition on October 4, 2012. Because the DEBTOR'S annualized current monthly income exceeds the applicable median family income for a household of three persons residing in the state of Illinois, she is an “above median” debtor, her applicable commitment period is 60 months and the Bankruptcy Code requires her to use the “means test” to calculate the “amounts reasonably necessary to be expended” for her family's maintenance or support.

Official Form 22C, the Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income, as subsequently amended by the DEBTOR, discloses current monthly income of $6,614.50, of which $6,214.50 is attributable to her employment as a nurse manager. In addition to her wages, the DEBTOR receives child support of $400 per month for her two children. The DEBTOR takes a deduction on Line 54 of Form 22C, for the full amount of child support which she receives, as reasonably necessary to be expended for her children's care. According to Line 59, the DEBTOR'S monthly disposable income is $111.46. However, the DEBTOR separately deducts an expense of $141 for day care, as an additional expense claim on Line 60, which directs the debtor to list and describe other expenses required for the health and welfare of the debtor and the debtor's family. Taking that final deduction into account, the DEBTOR is left with a negative disposable income.

On Schedule I, the DEBTOR reported her average monthly income as $4,340, including child support. Her monthly expenses, including $150 for day care, were reported on Schedule J as $4,252. According to those schedules, her monthly net income was $88. The amended Chapter 13 plan filed by the DEBTOR proposes to pay $100 per month for 60 months, for a total of $6,000. From that amount, the amended plan would pay off a mortgage arrearage to Busey Bank of $2,000.¹ The amended plan provides for the assumption of the lease on her vehicle. Unsecured creditors will receive no distribution.

The TRUSTEE objected to confirmation of the amended plan, contending that the amended plan failed to apply all of the DEBTOR'S projected disposable income to the payment of unsecured creditors, as required by section 1325(b)(1)(B). The primary basis of the TRUSTEE'S objection is that by excluding the full amount of the child support that she receives, the DEBTOR is availing herself of double deductions, as most of those expenses are factored into the standard deductions for living expenses allowed elsewhere on Form 22 C. At the DEBTOR'S request, an evidentiary hearing was held on July 23, 2013. The DEBTOR was the only witness to testify. According to her testimony, the annual expenditures for her children total $10,055, or $838 per month.² Following the hearing, the parties filed briefs in support of their positions. In addition to the child support deduction, the TRUSTEE noted that he opposed the following additional deductions taken on amended Form 22C: Line 30—the necessary tax expense should be limited to $1,316.94; Line 47(c)—the $90 insurance expense is duplicative as Line 47(b) already includes homeowners insurance; and Line 60—the daycare expense, properly claimed on Line 35, should be limited to $110.17.

ANALYSIS

Section 1325(b)(1)(B) provides that if a trustee or unsecured creditor objects to confirmation of a chapter 13 plan, the court may not approve the plan unless, as of its effective date, 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.” 11 U.S.C. § 1325(b)(1)(B). Section 1325(b)(2) defines “disposable income” in two parts. The first step focuses upon the income side of the equation and applies to all chapter 13 debtors.³ Disposable income is preliminarily defined by reference to “current monthly income.” “Current monthly income,” as defined in section 101(10A), in addition to a debtor's earnings, includes amounts paid by third parties “on a regular basis for the household expenses of the debtor or the debtor's dependents.” 11 U.S.C. § 101(10A)(B). Based on this broad definition, it has been held that child support payments are encompassed within “current monthly income.” In re Taborski, 2013 WL 211116 (Bankr.W.D.Pa.2013); In re Wise, 2011 WL 2133843 (Bankr.S.D.Ill.2011). The inquiry does not end there, however. For purposes of chapter 13 only, disposable income is defined as “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).” 11 U.S.C. § 1325(b)(2).

The second part of the “disposable income” determination, addressing the expense component of the equation, provides for the deduction of amounts “reasonably necessary to be expended ... for the maintenance or support of the debtor or a dependent of the debtor....” 11 U.S.C. § 1325(b)(2)(A). While the expenses of a below median debtor are determined by the same standard which was employed prior to BAPCPA, the deduction of expenses for an above median debtor is to be determined by application of the chapter 7 formulaic “means test.”

The issue before the Court is the interpretation and application of the parenthetical exclusion from disposable income of “child support payments ... for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child” in section 1325(b)(2). The interpretationof a statute begins with the language of the statute. Precision Industries, Inc. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th Cir.2003). If the language is plain, the only function of the court is “to enforce it according to its terms.” U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). The plain meaning of a statute is conclusive unless “literal application will produce a result demonstrably at odds with the intentions of its drafters.” Id. The interpretation of a statute is guided not just by a single sentence or sentence fragment, but by the language of the whole law, and its object and policy. Brach v. Amoco Oil Co., 677 F.2d 1213 (7th Cir.1982).

Section 1325(b)(2)'s parenthetical excludes three types of payments: child support, foster care payments and disability payments for a dependent child. The exclusion is subject to two conditions: (1) the payments are made in accordance with applicable nonbankruptcy law; and (2) the payments are excludable only to the extent reasonably necessary to be expended for such child. Keeping in mind that the exclusion is made in the context of the “income side” of the calculation, the Court will briefly examine the nature and character of child support, the category of payments at issue here, before addressing the contentions of the parties.

Under section 505(a) of the Illinois Marriage and Dissolution of Marriage Act, the trial court may order either or both of the parents to pay child support in an amount that is “reasonable and necessary.” 750 ILCS 5/505(a). The Act provides guidelines for determining the minimum amount of child support. 750 ILCS 5/505(a)(1). A deviation from the guidelines may be made upon a determination that it would be appropriate after considering the best interest of the child in light of the evidence, including, but not limited to, the financial resources and needs of the child and both parents, the standard of living the child would have enjoyed had the marriage not been dissolved, and the physical, mental, emotional, and educational needs of the child. 750 ILCS 5/505(a)(2). The trial court is justified in making a downward departure from the guideline amount where the incomes of the parents are more than sufficient to provide for the reasonable needs of the children of the marriage. In re Marriage of Hubbs, 363 Ill.App.3d 696, 707, 300 Ill.Dec. 220, 843 N.E.2d 478 (Ill.App. 5 Dist.2006). An award of child support is not meant to be a windfall to the custodial parent. In re Keon C., 344 Ill.App.3d 1137, 1142, 279 Ill.Dec. 674, 800 N.E.2d 1257 (Ill.App. 4 Dist.2003). It is equally true that a child is not required to subsist at a minimal level of comfort while the noncustodial parent is living a life of luxury. In re Marriage of Bussey, 108 Ill.2d 286, 297, 91 Ill.Dec. 594, 483 N.E.2d 1229 (1985). Support is for the benefit of the child, not the parent or stepparent of the child, nor the step-siblings of the child. In re Marriage of Edwards, 369 Ill.App.3d 1035, 1039, 308 Ill.Dec. 455, 861 N.E.2d 1020 (Ill.App. 5 Dist.2006).

Although it is only the exclusion for child support at issue here, the other exclusions provided by the statute, for foster care payments and disability payments, are similar in their purpose and are regarded as subject to the same restriction that the payments be expended for the child. In Bryant v. Bryant, 218 S.W.3d 565 (Mo.App. E.D.2007), the court summarized the nature of foster care payments, stating:

Foster care payments triggered by foster children's presence in a foster home are intended to...