In re Ponce, No. 1-08-bk-04048 RNO (Bankr. M.D. Pa. 10/19/2009), 1-08-bk-04048 RNO.

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IN RE: ROLANDO PONCE and Chapter 13, MYRNA GARCIA, Debtors CHARLES J. DEHART, III, STANDING Chapter 13 Trustee, Movant, v. ROLANDO PONCE and MYRNA GARCIA, Respondents.

No. 1-08-bk-04048 RNO.

United States Bankruptcy Court, M.D. Pennsylvania.

October 19, 2009.

OPINION¹

ROBERT N. OPEL II, Bankruptcy Judge

This contested matter was commenced by an objection to confirmation filed by the Chapter 13 Trustee ("the Trustee"). Following a hearing on confirmation of the Chapter 13 plan, an Opinion was rendered by this Court on June 22, 2009. Pursuant to that decision, this Court held an evidentiary hearing to determine the projected disposable income of Rolando Ponce and Myrna Gracia (hereinafter "the Debtors"). Following the evidentiary hearing, the matter was again taken under advisement. Presently before this Court are two questions. First, whether this Court should adjust the Debtors' means test calculations in determining the Debtors' projected disposable income. Second, whether the Debtors' Chapter 13 plan satisfies the requirements of 11 U.S.C. § 1325(b)(1)(B). For the reasons set forth below, the Trustee's objection is sustained.

I. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and § 157(b)(1)&(2)(A)(B). This is a core proceeding under 28 U.S.C. § 157(L).

II. History and Facts

The Debtors filed a Chapter 13 voluntary petition on October 30, 2008. A Chapter 13 plan was filed on December 10, 2008. The plan proposes payments of $274.06 per month for sixty months. The Trustee filed an objection to the plan's confirmation on February 9, 2009. At the March 12, 2009, confirmation hearing, the dispute was narrowed to an issue of whether the Debtors' plan provided for the Debtors' projected disposable income received in the applicable commitment period. Also, at that hearing, the parties stipulated that the monthly disposable income as calculated pursuant to Form B22C is $501.36.

At a subsequent evidentiary hearing, one of the Debtors, Myrna Garcia ("Garcia") testified in support of the Debtors' Chapter 13 plan. Garcia testified that at the time of filing, she had full-time employment. Hr'g Tr. 5, Aug. 5, 2009. She also testified that prior to filing bankruptcy, she had other additional employment. Hr'g Tr. 6. This other employment consisted of a part-time job that yielded an additional $350.00 a month. Hr'g Tr. 6-7. Garcia stated that the reason for obtaining this part-time job was to supplement the household income while her husband was on disability for six months. Hr'g Tr. 6.

Garcia discussed certain circumstances that led to an increase in her expenses. She testified that, in December 2007, her adult daughter became pregnant. Hr'g Tr. 7. She testified that her grandson was born in September, 2008. Hr'g Tr. 8-9. This increased the number of people living in her home to five, including the Debtors, their son, their daughter, and their grandson. Hr'g Tr. 7. Garcia testified that she provides 100 percent of the support to her son, her daughter, and her grandson. Hr'g Tr. 7. She stated that she left her position at her part-time job so that she could care for her daughter toward the end of her daughter's pregnancy. Hr'g Tr. 8. Garcia also mentioned that she had started suffering from tendinitis which was affected by certain work at her part-time job. Hr'g Tr. 9-10.

Following the birth of her grandson, Garcia explained that she chose to stay home to babysit her grandson so that her 21-year-old daughter could go back to being a full-time student.² Hr'g Tr. 8, 32. She explained that her daughter had attempted to pursue child support from her grandchild's father. Hr'g Tr. 10. Garcia testified that, at the support review hearing, it was determined that the father had no money that could be given as support.³ Hr'g Tr. 10-11. Garcia stated that her daughter had tried to obtain Welfare but was ineligible as Garcia's dependent. Hr'g Tr. 11. She elaborated that, because of her help to her daughter, the agency evaluated her daughter's eligibility based on Garcia's income rather than her daughter's income. Hr'g Tr. 11.

Garcia also described efforts to find alternative care for her grandchild. Hr'g Tr. 12. She stated that such care would cost $420.00 or more for two or three days per week. Hr'g Tr. 12; Hr'g Tr. 17. Garcia explained that the reason she filed bankruptcy was because of default judgments obtained by certain creditors. Hr'g Tr. 11. She also noted that providing payments higher than those proposed in the Debtors' Chapter 13 plan would be difficult because her husband's employment had been reduced from 40 hours each week to 40 hours one week and 32 hours the next week. Hr'g Tr. 12. She said this had the effect of reducing his paycheck by two days each month. Hr'g Tr. 12.

III. Discussion

In my earlier Opinion ("Ponce I"), In re Ponce, 406 B.R. 490 (Bankr. M.D.Pa. 2009), I outlined the procedure by which I would consider making adjustments to means test formulations to determine projected disposable income:

When should a court consider pre-confirmation changed circumstances? I will employ the following analysis. First, would accounting for the change result in an increase or decrease of the monthly disposable income, per the Means Test, of twenty percent or greater? If so, the presumption in favor of use of the Means Test to calculate projected disposable income would be rebutted. If the presumption has been rebutted, then this Court will consider the following illustrative and non-exclusive factors to determine a debtor's projected disposable income:

1. Was the change in circumstances due to voluntary actions by the debtor? (e.g., finding a new job or quitting a current position)

2. Was the change in circumstances due to the actions of a third party? (e.g., employer promotes or terminates the debtor)

3. Was the change in circumstances due to a significant change in the debtor's health or pre-existing medical condition? (e.g., diagnosis of a heart condition with work-related limitations or surgical correction of a previously limiting back condition)

4. Is an increase or reduction in post-petition expenses due to the debtor's own choices? (e.g., purchasing a new car or surrendering an over-encumbered vehicle)

5. Is an increase or reduction in the post-petition expenses due to the actions of a third party? (e.g., significant increase or decrease in real property tax assessment or insurance premium)

6. How forthcoming has the debtor been with the court and his creditors since the bankruptcy petition was filed?

7. How much will taking into account the post-petition change in circumstances affect the distribution to unsecured creditors in the case?

I believe that after weighing these factors, the Court can reasonably determine whether the calculation of projected disposable income in a particular case will or will not require consideration of the post-petition changes in the debtor's personal or financial circumstances.

These factors are similar to some of the pre-BAPCPA "good faith" concerns courts had in determining a debtor's "projected disposable income". See, e.g., In re Arrigo, 399 B.R. 700, 707 (Bankr. D.Colo. 2008) (citing factors outlined by the Tenth Circuit in Flygare v. Boulden, 709 F.2d 1344 (10th Cir. 1983)); In re Chaffin, 836 F.2d 215, 216 (5th Cir. 1988) (considering factors including whether plan payments reflected the ability to pay and projected future income, whether the debtor is likely using bankruptcy to avoid repayment, whether creditors have challenged the proposed plan); In re Rimgale, 669 F.2d 426, 432-433 (7th Cir. 1982) (listing factors focusing in on whether the proposed payments were fundamentally fair to the creditors and the accuracy of statements regarding the debtor's debts, expenses, and repayment as well as the nature of any inaccuracies and deficiencies); In re Terry, 279 B.R. 240, 245-246 (Bankr. W.D.Ark. 2002).

In re Ponce, 406 at 498.

In the present case, Garcia's testimony shows significant changes in her circumstances that are not considered in her means test calculations. Garcia has stopped working at her part-time job to care for her new grandson. The Debtors are now also paying all of their grandson's living expenses. Additionally, Garcia has stated that her husband's work hours have been reduced during some weeks. It is for these reasons, the Debtors argue, that I should look beyond the means test in determining the projected disposable income to be paid in the Debtors' Chapter 13 plan.

As noted above, a determination of projected disposable involves a look at any changes through the lens of a "good faith" analysis. In Ponce I, I listed seven illustrative, non-exclusive factors to be employed in this analysis. I will now consider the record to determine if any changes from disposable income, as calculated by the means test, are required. First, I will note that I received very little testimony or evidence regarding the husband's employment. Garcia testified that in some weeks, her husband worked 32 hours rather than 40 hours. Hr'g Tr. 12. No documentation or additional information was provided to this Court to help quantify what, if any, effect this had upon the Debtors' income. Nor did the husband appear to testify firsthand as to his employment status and terms.

In the context of Chapter 13 plan confirmations, the ultimate burden of persuasion is on the debtor. In re Sheaffer, 2008 WL 2858452, 3 (Bankr. M.D.Pa. 2008); In re Foley, 2008 WL 5411070, 7 (Bankr. E.D.Pa. 2008); In re Martorana 2008 WL 1745784, 2 (Bankr. E.D.Pa. 2008). Having recently decided Ponce I, I have not yet commented on the evidentiary burden imposed when a party suggests that projected disposable income be calculated by deviating from the means test. Within this circuit, Judge Fox observed that generally "[t]hose courts considering the section 1325(b)(2) definition of disposable income as relevant to the meaning of projected...