In re Maxton

In re: TIMOTHY S. MAXTON, Debtor

Case No. 17-13169-MSH

UNITED STATES BANKRUPTCY COURT DISTRICT OF MASSACHUSETTS EASTERN DIVISION

May 16, 2018

Chapter 7

MEMORANDUM OF DECISION ON U.S. TRUSTEE'S MOTION TO DISMISS

Timothy S. Maxton initiated this case by filing a voluntary petition for relief under Chapter 7 of the Bankruptcy Code¹ on August 25, 2017. On October 31, 2017, the United States trustee filed a motion to dismiss Mr. Maxton's case for abuse under Code §§ 707(b)(1), (2)(A) and (b)(3)(B). The U.S. trustee's motion, which Mr. Maxton opposes, asserts a number of grounds to support a finding of abuse. The parties have agreed to bifurcate consideration of the motion to allow for an initial determination of the validity of Mr. Maxton's calculation of current monthly income ("CMI"). Mr. Maxton conceded that a ruling in favor of the trustee on this issue would be dispositive of the issue of whether a presumption of abuse arises under Code § 707(b)(2)(A). The U.S. trustee claims that in the statement of current monthly income filed in support of his bankruptcy petition (Official Form 122A-1), Mr. Maxton improperly failed to include in the calculation of his CMI four items listed on one of his paystubs.²

At a hearing on the motion, the U.S. trustee argued that Mr. Maxton should have included the following items listed on his paystub in the calculation of his CMI: (1) a meal allowance of$6,888; (2) a travel allowance of $19.50; (3) an "attendance lump sum payout" of $1,500; and (4) a corporate profit share of $642. Mr. Maxton argued that these items were properly excluded from the calculation of his CMI because they did not constitute "gross wages, salary, tips, bonuses, overtime, and commissions (before all payroll deductions)," which is all that line 2 of the statement of current monthly income requires.

Subsequent to the hearing, the parties filed a joint pre-trial memorandum, which included statements of agreed facts and legal principles, as well as areas of disagreement and their respective arguments. All facts necessary for a ruling on the paystub dispute have been agreed to by the parties. The U.S. trustee argues that the four items should have been included in the CMI calculation because Code § 101(10A)(A) requires their inclusion, and as between a statute and a form, the statute controls. In support of his position, the U.S. trustee relies on In re Reinhart, 559 B.R. 217 (Bankr. E.D. Wis. 2016). Mr. Maxton on the other hand urges that excluding the four items was proper because they are not "sufficiently stable and regular" within the meaning of Code § 101(30). In addition, Mr. Maxton argues that neither the Bankruptcy Code nor Form 122A-1 requires that the items be included in calculating CMI.³

In evaluating the parties' arguments, I begin as I must with the relevant statute. The term "current monthly income" is defined in § 101(10A) of the Code. Subpart A of § 101(10A) states, in pertinent part, that current monthly income means "the average monthly income from all sources that the debtor receives . . . without regard to whether such income is taxable income, derived during the 6-month period ending on . . . the last day of the calendar month immediatelypreceding the date of the commencement of the case . . . ." 11 U.S.C. § 101(10A)(A). Subpart B adds that it also "includes any amount paid by any entity other than the debtor . . . on a regular basis for the household expenses of the debtor or the debtor's dependents . . . but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity . . . and payments to victims of international terrorism . . . or domestic terrorism . . . ." 11 U.S.C. § 101(10A)(B).⁴

The statute speaks of "income from all sources." 11 U.S.C. § 101(10A)(A). "[W]here . . . the statute's language is plain, 'the sole function of the courts is to enforce it according to its terms.'" U.S. v. Ron Pair Enterprises, 489 U.S. 235 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485 (1917) (additional citations omitted)). "[T]he language of § 101(10A), including in current monthly income 'income received from all sources,' is plain," and "the term 'all' means 'all.'" In re Sjogren, 570 B.R. 1, 3 (Bankr. D. Mass. 2017) (emphasis in original) (citing In re Terzo, 502 B.R. 553, 558 (Bankr. N.D. Ill. 2013)).

Mr. Maxton's reliance on the Code's definition of an individual with regular income in § 101(30) to impose a "stable and regular" gloss on the definition of CMI in § 101(10A) is unsupportable. Code § 101(30) defines an "individual with regular income" as an individual "whose income is sufficiently stable and regular to enable such individual to make payments under a plan under chapter 13 . . . ." Putting aside the fact that this is a chapter 7 case and § 101(30) applies only in chapter 13, whether Mr. Maxton is an "individual with regular income"has no relevance in determining the amount of his "current monthly income" for purposes of Code § 707(b)(2)(A).

As for Mr. Maxton's contention that the paystub items did not need to be included in the CMI calculation because Official Form 122A does not itemize them on line 2, such argument lacks merit. It is axiomatic that when an official form and the Bankruptcy Code are in conflict, the Bankruptcy Code controls. See, e.g., In re Harkins, 491 B.R. 518, 543 (Bankr. S.D. Ohio 2013) (citing Harman v. Fink (In re Harman), 435 B.R. 596, 599 (B.A.P. 8th Cir. 2010) and In re Arnold, 376 B.R. 652, 653 (Bankr. M.D. Tenn. 2007)). As such, Mr. Maxton cannot exclude the four items from his CMI calculation on the basis that the Official Form does not require their inclusion.⁵

While there is no controlling decisional authority in the First Circuit on point, case law from other circuits supports the U.S. trustee's position that the items in question should be included in CMI. With respect to meal and travel allowances, the Reinhart court held that both should be included in calculating a debtor's CMI. 559 B.R. at 220 ("Resting on the plainlanguage and lack of relevant exclusion in section 101(10A)(A), the court is persuaded that employer-paid reimbursements are income that must be included in the CMI calculation.").⁶ See also In re Tinsley, 428 B.R. 689, 692 (Bankr. W.D. Va. 2010) (citing In re Martin, 189 B.R. 619 (Bankr. E.D. Va. 1995) and In re Hornung, 425 B.R. 242 (Bankr. M.D.N.C. 2010) in finding that "reimbursements are income for purposes of § 101(10A)(A)"). Though there is no case that specifically addresses whether the "attendance lump sum payout" or corporate profit share should be included in CMI, I find that that the plain language of § 101(10A)(A) is sufficiently broad to require their inclusion in Mr. Maxton's CMI calculation. See Reinhart, 559 B.R. at 220 (citing Blausey v. United States Trustee, 552 F.3d 1124, 1132 (9th Cir. 2009) for the proposition that "unless a source of income is specifically excluded from the CMI calculation, Congress meant for it to be included").

Given the language of § 101(10A) and the fact that Mr. Maxton has not presented any persuasive authority as to why the four items should not be included in his CMI calculation in their full amounts, the U.S trustee's motion to dismiss with respect to the paystub issue is meritorious. At the hearing on the U.S. trustee's motion, Mr. Maxton conceded that a presumption of abuse would arise under Code § 707(b)(2)(A) if he were required to include the four items in his CMI calculation. It is not clear, however, whether Mr. Maxton wishes to attempt to rebut that presumption.⁷ I will, therefore, defer allowing the U.S. trustee's motion for fourteen days to afford Mr. Maxton time to seek further relief consistent with my ruling. Absentany further action on the part of Mr. Maxton before then, an order allowing the U.S. trustee's motion and dismissing this case shall issue.

Dated at Boston, Massachusetts this 16th day of May, 2018.

By the Court,

/s/_________

Melvin S. Hoffman

U.S. Bankruptcy Judge

Counsel Appearing: Gary W. Cruickshank, Esq.

The Law Offices of Gary W. Cruickshank

Boston, Massachusetts

for the debtor, Timothy S. Maxton

Eric K. Bradford, Esq.

United States Department of Justice

Boston, Massachusetts

for William K. Harrington, United States Trustee

1. All references to the Bankruptcy Code or Code refer to title 11 of the United States Code, 11 U.S.C. 101 et seq.

2. The paystub was for the pay period of June 25 to July 1, 2017. The parties stipulated as to the authenticity and admissibility into evidence of this paystub.

3. Mr. Maxton mentions in paragraph 52 of the...