In re Hernandez

588 B.R. 186

IN RE: Felipe HERNANDEZ, Debtor

CASE NO: 17-10473

United States Bankruptcy Court, S.D. Texas, Brownsville Division.

Signed June 18, 2018

Marcos Demetrio Oliva, Leigh Ann Tognetti, Oliva Law, McAllen, TX, for Debtor.

MEMORANDUM OPINION CONFIRMING DEBTOR'S CHAPTER 13 PLAN

Eduardo V. Rodriguez, United States Bankruptcy Judge

I. INTRODUCTION

"The beginning of wisdom is the definition of terms."¹ As a matter of first impression, the question before this Court is whether an above-median income earner must, on Official Form 122C-2, account for his actual monthly rent expense in calculatinghis net rent expense for purposes of determining his monthly disposable income.

II. FINDINGS OF FACT

This Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed. R. Bankr. P. 7052, which incorporates Fed. R. Civ. P. 52, and 9014. To the extent that any Finding of Fact constitutes a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is adopted as such.

On December 21, 2017, Felipe Hernandez ("Debtor ") filed his chapter 13 petition. ECF No. 1. Along with the petition, Debtor filed his Official Forms 122C-1 and 122C-2, otherwise known as the Means Test. ECF No. 4. As determined by the Means Test, the applicable commitment period is 5 years and the monthly disposable income was listed as $310.20. Id. Additionally, Debtor filed his Uniform Plan and Motion for Valuation of Collateral which proposed sixty monthly payments in the amount of $350.00 and an estimated 4.35% dividend to the general unsecured class of creditors or $6,678.91. ECF No. 2. Finally, Debtor listed a $600.00 rental or home ownership expense on Schedule J and a monthly net income of $353.95. ECF No. 1

On March 6, 2018 the Court conducted a hearing on confirmation at which time the Court, sua sponte , questioned Debtor's counsel regarding several entries on the Means Test and reset confirmation to April 4, 2018.

On March 19, 2018, Debtor amended his Schedule I and J, which indicates an increased net disposable income of $403.95. ECF No. 29 at 5. Additionally, Debtor filed an amended Means Test which lists $678.00 on Line 9a as the local standard for mortgage or rent expenses. ECF No. 32. However, on Line 9b, Debtor does not list any payments as "total average monthly payment for all mortgages and other debts secured by your home." Id. Thus, Debtor's current listed "net mortgage or rent expense" on Line 9c is $678.00. Id. As a result, Debtor's monthly disposable income is calculated to be $82.11. Id. at 10. Additionally, on March 19, 2018, Debtor filed an amended Uniform Plan and Motion for Valuation of Collateral ("Plan "), which proposes three monthly payments in the amount of $350.00 and fifty seven monthly payments in the amount of $400.00 with an estimated 9.24% dividend or $5,211.17 available for unsecured creditors. ECF No. 30.

On April 4, 2018, this Court held a hearing on confirmation of Debtor's Plan in which the Chapter 13 Trustee ("Trustee ") recommended confirmation. This Court questioned Debtor's Counsel and Trustee as to whether Debtor is required to list his monthly rent on Line 9b of Form 122C-2 and ordered briefing on the issue. On May 3, 2018, Debtor and Trustee submitted a joint brief in support of confirmation, which argued that Form 122C-2 does not require Debtor to list his rent on Line 9b because it is not a mortgage or debt secured by his home. ECF No. 39. Briefing has now closed and the matter is ripe for consideration.

III. CONCLUSIONS OF LAW

A. Jurisdiction & Venue

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides "the district courts shall have original and exclusive jurisdiction of all cases under title 11." Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter. 28 U.S.C. § 157(a) ; see also In re: Order of Reference to Bankruptcy Judges, Gen. Order 2012-6 (S.D. Tex. May 24, 2012). This is a core matter as it concerns confirmation of Debtor's Plan. § 157(b)(2)(L) ; see also In Re Southmark Corp. , 163 F.3d 925, 930 (5th Cir. 1999).²

This Court may only hear a case in which venue is proper. 28 U.S.C. § 1408. Debtor resides in San Benito, Texas. ECF No. 1 at 2. Therefore, venue is proper.

B. Constitutional Authority to Enter a Final Order

This Court has an independent duty to evaluate whether it has the constitutional authority to sign a final order. Stern v. Marshall , 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). But see Wellness Int'l Network v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1938-39, 191 L.Ed.2d 911 (2015) (holding that parties may consent to jurisdiction on non-core matters). Plan confirmation "is a quintessential issue created by federal bankruptcy law," and thus, this Court possesses the constitutional authority to enter a final order confirming Debtor's plan. See In re Villarreal , 566 B.R. 859, 866 (Bankr. S.D. Tex. 2017) (citing Bullard v. Blue Hills Bank , ––– U.S. ––––, 135 S.Ct. 1686, 1692, 191 L.Ed.2d 621 (2015) ).

C. Rent Payments are not Included on Line 9b of Form 122C-2.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA ") was "intended to address what Congress perceived to be certain abuses of the bankruptcy process." In re Hardacre , 338 B.R. 718, 720 (Bankr. N.D. Tex. 2006). One of the changes instituted by BAPCPA was to create the "means test" under 11 U.S.C. § 707(b) to determine, inter alia , if there is a presumption of abuse in filing a chapter 7 bankruptcy rather than a chapter 11 or 13. Id. at 721. "If the debtor's annual income exceeds the median family income for similarly sized households in her state, then the debtor's expenses must be determined in accordance with the means test in section 707(b)(2)." Id. at 721–22 (citing 11 U.S.C. § 1325(b)(3) ). The Supreme Court is specifically required to "prescribe a form for the statement required under section 707(b)(2)(C) of title 11 and may provide general rules on the content of such statement. 28 U.S.C. § 2075. Official forms that are "prescribed by the Judicial Conference of the United States shall be used without alteration." Fed. R. Bankr. P. 9009(a). Form 122C-2 of the Means Test is the current version of the form promulgated by the Supreme Court that serves as a calculation of a debtor's expenses in accordance with § 707(b)(2).

This Court is required to interpret the Means Test in a manner consistent with the Code. In re Lopez , 574 B.R. 159, 162 (Bankr. E.D. Cal. 2017) (finding it "unnecessary to venture beyond the plain meaning of § 707(b), the Official Form supplemented with corroborating legislative materials, and court decisions" to determine a requirement of the Means Test). See also Fed. R. Bankr. P. 9009(c) ("The forms shall be construed to be consistent with these rules and the Code."). A basic canon for statutory interpretation is that if the language of the statute is plain, courts must enforce it as is written. In re Lively , 467 B.R. 884, 891 (Bankr. S.D. Tex. 2012) ("If a text is unambiguous on its face, does not produce absurd results, and fits coherently into the statute's overarching structure, the statutory interpretation exercise is complete."); see also Demarest v. Manspeaker , 498 U.S. 184, 190, 111 S.Ct. 599, 112 L.Ed.2d 608 (1991) (finding that courts "follow the plain meaning of a statute unless it would lead to a result so bizarre that Congress could not have intended it"). When interpreting statutes, courts must reference "both specific context of language and the context of the entire statute." In re Sierra , 560 B.R. 296, 302 (Bankr. S.D. Tex. 2016) (citing In re Raygoza, 556 B.R. 813, 821 (Bankr. S.D. Tex. 2016) ); see also Yates v. United States , ––– U.S. ––––, 135 S.Ct. 1074, 1081, 191 L.Ed.2d 64 (2015). Further, "[i]t is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant." TRW, Inc. v. Andrews , 534 U.S. 19, 31, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001) (quoting Duncan v. Walker , 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) ).

The Code provides that a debtor's current monthly income shall be reduced by a debtor's monthly expenses as determined by local standards, "average monthly payments on account of secured debts," and "expenses for payment of all priority claims." § 707(b)(2)(A). As to a debtor's monthly expenses, section 707(b)(2)(A)(ii)(I) provides:

The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent ... Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts.

(emphasis added). The Code defines "debt" as "liability on a claim." 11 U.S.C. § 101(12). A "claim" is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured." § 101(5)(A). Accordingly, this Court finds that "debts" must be excluded from the calculation of a debtor's monthly expenses pursuant to § 707(b)(2)(A)(ii)(I).

The specific issue in this case is whether Debtor's monthly rent expense is a mortgage or other debt secured by his home that should be listed on Line 9b. Rent is defined as "consideration paid, periodically, for the use or occupancy of...