In re Sires, 13–12147.

511 B.R. 719

In re Tony L. SIRES, Debtor.

No. 13–12147.

United States Bankruptcy Court,

S.D. Georgia,

Augusta Division.

Signed June 4, 2014.

Lee Ringler, Augusta, GA, for Debtor.

OPINION AND ORDER

SUSAN D. BARRETT, Chief Judge.

Before the Court is an objection to confirmation filed by the Chapter 13 Trustee (“Trustee”) asserting that Tony L. Sires (“Debtor”) is not devoting all his disposable income to the plan. Specifically, the Trustee objects to Debtor taking an “old car” allowance as an “operating expense” and an “ownership expense” for a vehicle encumbered by a non-purchase money security interest. The Court has jurisdiction under 28 U.S.C. § 1334 and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L). For the following reasons, the Trustee's objection is sustained.

FINDINGS OF FACT

Debtor filed a chapter 13 bankruptcy petition on November 12, 2013. Debtor has a household of one with no dependents. Dckt. No. 1, Sch. I. Debtor's average monthly income is $3,028.70 and his monthly expenses are $2,739.50 yielding a net monthly income of $289.20. Dckt. No. 1, Sch. J. Debtor values his 2006 Ford Taurus (“the Vehicle”) with approximately 151,000 miles at $4,000.00. The Vehicle is encumbered by the non-purchase money security interest in favor of Wells Fargo Bank. Dckt. No 1, Sch. D. Debtor's amended plan proposes to pay $290.00/month for a minimum of 36 months with a 0% dividend to unsecured creditors. Dckt. No. 23.

According to his most recent means test, Debtor is above-median with an applicable commitment period of five years. Dckt. No. 38. Debtor's means test calculation includes a $200.00 “old car operating expense” along with the $244.00 standard IRS Local Transportation Expense for this region. Dckt. No. 38, Line 27A. Debtor also deducts $517.00 as an “Ownership Cost” pursuant to IRS Local Transportation Standards; and $74.10 as the average monthly payment to Wells Fargo. Dckt. No. 38, lines 28(a) and 28(b). Subtracting the $74.10 from the $517.00, gives a net “Ownership Cost” deduction of $442.90. Id., line 28(c). With these deductions, Debtor's means test reflects a negative $121.56 monthly disposable income allowing Debtor to propose a plan to pay his unsecured creditors 0%. Dckt. Nos. 23 and 38. According to the Trustee, if her objection is sustained, the monthly disposable income would require a 100% dividend to general unsecured creditors.

CONCLUSIONS OF LAW

There are two main issues raised by the Trustee's objection to confirmation. The first issue is whether Debtor is entitled to a $200.00 “old car” deduction on line 27A of the means test for an operating expense. The second issue is whether Debtor may take an “ownership cost” deduction on line 28 of the means test for a vehicle encumbered by a non-purchase money security interest. The Court holds Debtor cannot claim such deductions.

In a chapter 13 bankruptcy case an individual may obtain a discharge of many of his debts if he pays all of his disposable income into the chapter 13 plan during the life of the plan. See11 U.S.C. § 1325(b)(1)(B) and § 1328. Under 11 U.S.C. § 1325(b)(1), a debtor must commit all of his “disposable income” to unsecured creditors or pay all claims in full. 11 U.S.C. § 1325(b)(1). “Disposable income” is defined in pertinent part as “current monthly income” less “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)(i). With the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress instituted a means test which provides a formula to calculate a debtor's disposable income. “For a debtor whose income is above the median for his State, the means test identifies which expenses qualify as ‘amounts reasonably necessary to be expended.’ ” Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 131 S.Ct. 716, 721–22, 178 L.Ed.2d 603 (2011). In this chapter 13 case, it is undisputed that Debtor is above-median and therefore 11 U.S.C. § 1325(b)(3) applies to determine his disposable income.

Pursuant to 11 U.S.C. § 1325(b)(3) “amounts reasonably necessary to be expended” for above median debtors must be determined pursuant to 11 U.S.C. § 707(b)(2)(A) and (B) which provides in pertinent part:

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....

11 U.S.C. 707(b)(2)(A)(ii)(I) (emphasis added).

Operating Expense.

“The IRS publishes tables providing national and local expense standards. The Local Standards include ownership and operating expense deductions for debtors. Tables provide different operating expense allowances, based on the number of vehicles the debtor owns and the region in which the debtor lives.” In re Wilhite, 2011 WL 5902487, at *2 (Bankr.N.D.Ga. Nov. 17, 2011) ( citing In re VanDyke, 450 B.R. 836, 841 (Bankr.C.D.Ill.2011)). The IRS also publishes an Internal Revenue Manual (the “IRM”), “to guide IRS agents in interpreting and applying the Standards.” Id. at *2.

Debtor argues he should be allowed to take an additional $200.00 “old car” expense deduction because his car is more than six years old and has more than 150,000 miles on it. Debtor cites support for this deduction in the IRM, Chapter 5.8 which states:

In situations where the taxpayer has a vehicle that is currently over six years old or has reported mileage of 75,000 miles or more, an additional monthly operating expense of $200 will generally be allowed per vehicle (up to two vehicles when a joint offer is submitted).

IRM 5.8.5.22.3, 2007 WL 8097387;see also Babin v. Wilson (In re Wilson), 383 B.R. 729, 734 (8th Cir. BAP 2008); In re Howell, 366 B.R. 153, 158 (Bankr.D.Kan.2007); In re Oliver, 350 B.R. 294, 301 (Bankr.W.D.Tex.2006); In re Barraza, 346 B.R. 724, 729 (Bankr.N.D.Tex.2006).

The Trustee opposes this deduction arguing this old car expense is not allowed because it is not part of the IRS “National” or “Local” Standards sections of the IRM which identify, describe and interpret the National and Local Standards for the means test, and are set forth in IRM (Financial Analysis Handbook) sections 5.15.1.1, 5.15.1.7–5.15.1.10. See In re Luedtke, 508 B.R. 408, 411 (9th Cir. BAP 2014)(setting forth the relevant sections of the IRM for interpreting the Local Standards). The Trustee argues the plain language of 11 U.S.C. § 707(b)(2)(A)(ii) dictates that Debtor's monthly expenses “shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards issued by the Internal Revenue Service.” 11 U.S.C. § 707(b)(2)(A)(ii). Since the “old car” deduction is not listed in the tables that comprise the National and Local Standards, the Trustee argues it is not deductible on the means test.

As the Trustee states, the plain language of 11 U.S.C. § 707(b)(2)(A)(ii) controls the issue before the Court. The “old car” deduction is located in the part of the IRM that aids agents in offers to compromise, and is not in the part of the IRM that identifies the National and Local Standards. CompareIRM 5.8.5.22.3withIRM 5.15.1.1, 5.15.1.7–5.15.1.10; see also In re Luedtke, 508 B.R. at 414 (“because the older vehicle operating expense is not set forth or referenced in the National Standards, in the Local Standards, or in the IRM commentary identifying and interpreting those standards, it was improper for the bankruptcy court to allow the older vehicle operating expense for purposes of calculating the [debtors'] disposable income.”); In re Wilhite, 2011 WL 5902487, at *2 (Bankr.N.D.Ga. Nov. 17, 2011)(“[T]he Bankruptcy Code's directive is clear: the debtor's monthly ‘expenses shall be’ defined by IRS standards.”); In re VanDyke, 450 B.R. 836, 841 (Bankr.C.D.Ill.2011)(same). Because the Bankruptcy Code requires Debtor's monthly expenses to be defined by the National and Local Standards, Debtor may not take an additional $200.00 “old car” deduction.

The Supreme Court in Ransom, provided guidance on how the IRM should be utilized by bankruptcy courts:

Although the statute does not incorporate the IRS's guidelines, courts may consult this material in interpreting the National and Local Standards; after all, the IRS uses those tables for a similar purpose—to determine how much money a delinquent taxpayer can afford to pay the Government. The guidelines of course cannot control if they are at odds with the statutory language.

Ransom, 131 S.Ct. at 726 (emphasis added). Ransom instructs that the IRM may be a useful tool to “interpret” the National and Local Standards, but not to “create” a deduction. Id. Allowing the $200.00 “old car” operating expense would be utilizing the IRS's guidelines to “create” a deduction rather than to “interpret” the Local Standards and therefore is inappropriate. In re Luedtke, 508 B.R. at 415 (“nothing in Ransom supports the proposition that bankruptcy courts may look to other aspects of IRS policy and procedure in order to interpret and supplement the National Standards and Local Standards.”); In re Sisler, 464 B.R. 705, 708–10 (Bankr.W.D.Va.2012) (the debtors “seek to use the Internal Revenue Manual to create an otherwise unlisted deduction. To allow this would be to give the Internal Revenue Manual guidelines the same effect as the Bankruptcy Code. The Supreme Court's opinion in Ransom expressly states to the contrary.”); In re Luban, 2012 WL 694515, at *2 (Bankr.S.D.Fla. March 1, 2012) (the debtors cannot use the Internal Revenue Manual to create a deduction that does not exist in the IRS standards or the Bankruptcy Code); In re Wilhite, 2011 WL 5902487 at *3 (same); In re Schultz, 463 B.R. 492, 498 (Bankr.W.D.Mo.2011) (same); In re Hargis, 451 B.R. 174, 178 (Bankr.D.Utah 2011) (same); ...