In re Wills, Case No. 10-72120

In Re SETH A. WILLS and MELANIE X. WILLS, Debtors.

Case No. 10-72120

UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF ILLINOIS

SIGNED THIS: May 30, 2014

__________

Mary P. Gorman

United States Chief Bankruptcy Judge

Chapter 13

OPINION

Before the Court is a Motion to Modify Chapter 13 Plan filed by Seth A. Wills. Mr. Wills seeks to decrease his monthly plan payments and thereby reduce the dividend to be paid to unsecured creditors under the plan. For the reasons set forth below, the Motion will be granted in part.

I. Factual and Procedural Background

Seth A. Wills and Melanie X. Wills filed their voluntary petition under Chapter 13 on July 2, 2010. At that time, they also filed a Chapter 13 plan along with the required schedules, Statement of Financial Affairs, and Official Form 22C—Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income ("B22C"). Subsequently, the Wills filed Amended Schedules I and J, an Amended B22C, and a First Amended Chapter 13 Plan ("Amended Plan").

On their Amended Schedule I filed on September 28, 2010, the Wills stated that Mr. Wills was earning a monthly gross income of $4740.67 and receiving monthly compensation of $243 from the Department of Veterans Affairs. Mrs. Wills was earning a monthly gross income of $2378.13. From their combined monthly gross income of $7361.80, the Wills itemized $2290.11 in mandatory payroll deductions, resulting in combined monthly net income of $5071.69. On their Amended Schedule J, the Wills listed $5944.10 in monthly expenses and, therefore, stated that their monthly net income after expenses was negative $872.41.

On their Amended B22C, the Wills calculated their "current monthly income"—their average monthly income during the six month period before filing—as $6650.93. Based on these calculations, the Wills' income was higher than the median income for a household of two. On the expense portion of the B22C, the Wills listed $6825.59 in deductions and adjustments, which resulted in negative $174.66 being shown as their monthly disposable income.

The Amended Plan, also filed on September 28, 2010, provided for monthly plan payments of $100 for the first two months and $303 for the remaining fifty-eight months of the plan term, for a total amount of $17,774. From those funds, the Amended Plan provided for payment of the Trustee's compensation, the Wills' attorney's fees, and a priority claim owed to the IRS in the amount of $1145. Although no specific amount was identified, any remaining funds were proposed to be distributed pro rata to unsecured creditors. The Amended Plan required the Wills to make their mortgage payments and auto loan payments directly to the creditors. The Amended Plan was confirmed without objection on October 29, 2010.

In June 2013, the Wills divorced, and Mrs. Wills has since remarried and moved to Texas. Pursuant to the Wills' Judgment of Dissolution, Mr. Wills ("Debtor") was awarded the marital residence and ordered to pay the indebtedness thereon as well as the payments to the Chapter 13 Trustee required by the Amended Plan.

On November 8, 2013, the Debtor filed a Motion to Modify Chapter 13 Plan and Amended Schedules I and J. In his Motion to Modify, the Debtor claims that he can no longer make the $303 monthly plan payment and has been unable to pay his monthly bills on time due to the wage deduction for the plan payment. The Motion to Modify proposes reducing the Debtor's monthly plan payment to $25 for the remaining nineteen months of the plan term, thereby reducing the dividend to unsecured creditors on a pro rata basis.

On his most recently filed Amended Schedule I, the Debtor shows grossmonthly income of $4957.83 plus his VA benefits of $243 per month. He says that he has $1802.92 in deductions for taxes and benefits resulting in net monthly income of $3397.91. Mrs. Wills' income has been removed entirely from the Amended Schedule I. On his most recently filed Amended Schedule J, Mr. Wills claims $3846.45 in expenses which is $2097.65 less than the expenses claimed at the time of plan confirmation. The reduced expenses are largely attributable to the removal of Mrs. Wills' $743 auto loan payment and to reductions in the food, clothing, and transportation expense categories. Netting the Amended Schedules I and J results in negative monthly net income of $448.54 for the Debtor before he makes the $303 monthly plan payment.

The Trustee objected to the Debtor's Motion claiming that, based on their schedules, the Wills had shown significant negative disposable income at the time of confirmation and that the plan payments included in the confirmed Amended Plan were the result of a compromise he had entered into with the Wills. He also asserts that Mrs. Wills' departure from the household removed more expenses than income from the household budget, resulting in an improved — albeit still negative — financial situation. The Trustee requested that the Motion be denied in its entirety.

After completing discovery, the Trustee and the Debtor entered into a Stipulation. They agreed that the Debtor's deduction for "health benefits pretax" should be $186.14 rather than $299.69, that his VA benefits were $258.83 per month rather than $243, that his "thrift" deduction of $52.17 was a payment on a post-petition retirement loan, that his $13 deduction for spousal healthinsurance was taken in error, and that his deductible transportation expenses were $746 per month rather than the $750 he claimed. Making adjustments for all of the stipulated items other than the post-petition retirement loan results in the Debtor having negative monthly income of $302.16 before making his $303 plan payment.

The Debtor was the only witness called to testify at the hearing. He testified that he is employed by the Federal Aviation Administration. Although he lives in Decatur, Illinois, he generally works at the Springfield airport which is about an hour's drive each way. Occasionally he is assigned to work at the Quincy airport which involves a commute of several hours each way. His travel expenses to get to his work assignments are not reimbursed. The Debtor testified that, as a federal employee, he was impacted by both the sequestration in the Spring of 2013 and the government shutdown last Fall. He was furloughed for three days and had at least one paycheck reduced by half from his normal pay. Ultimately, all of his pay was restored, but he experienced some cash flow problems and stress from the situation.

In an effort to reduce expenses, the Debtor has refinanced his home and reduced his monthly mortgage payment by $56.45. However, he also incurred an expense to fix the water pump on his well in the amount of $1750. He financed that expense by borrowing from his "thrift" plan at work and now has the monthly deduction of $52.17 to pay back that loan. He also incurred significant repair expenses for his vehicle over the last year and recently filed a motion to incur debt to purchase a newer vehicle. With the allowance of the motion, the Debtor'spayment on the newer vehicle is approximately the same as his prior payment, but he is hopeful that the newer vehicle will be more reliable and he will not incur as many repair bills.

The Debtor testified that he cut back on his cable services, reducing the expense by approximately $90 per month when he was concerned about getting paid, but he intends to restore the cable service in the near future. He also stated that, on his Amended Schedule J, he had underestimated his water, sewer, and garbage expenses by about $75. But he acknowledged that he had also overestimated his expenses for telephone, food, clothing, and pet care by about $220. After considering the reduced mortgage payment and the adjustments upward for utilities and downward for his expenses other than cable service, the Debtor remains about $100 short each month before making his plan payment.

The Debtor testified that he had recently experienced some health problems and had been briefly hospitalized. He did not yet know the amount of any uncovered medical expenses. He also testified that during a recent work evaluation, he had been advised that he might be required to receive additional training to continue his employment. He was unsure of the extent of the training and did not know whether the training would be provided by his employer or would have to be undertaken at his own expense.

The Trustee called no witnesses but offered into evidence a pro forma B22C which he had prepared to provide a calculation of the Debtor's disposable income if the Debtor had filed a new case in March 2014 as a single person. The Trustee calculated that, under his assumptions, the Debtor would have $409 per monthin disposable income but admitted in his Stipulation that if adjustments were made to use a household size of two for housing and utilities, the disposable income would be reduced to $219. The Debtor objected to the introduction of the pro forma B22C into evidence questioning the relevance of the document. The Court stated that it would consider the admissibility of the document along with the other issues to be taken under advisement.

At the conclusion of the hearing, the Court heard arguments from the Debtor and the Trustee. All matters are now ready for decision.

II. Jurisdiction

This Court has jurisdiction over the issues presented here pursuant to 28 U.S.C. §1334. Issues regarding the modification of a confirmed Chapter 13 plan are core proceedings. See 28 U.S.C. §157(b)(2)(A),(L),(O).

III. Legal Analysis

Modification of a confirmed Chapter 13 plan is governed by the provisions of §1329. 11 U.S.C. §1329. Modifications may be made at any time before the completion of plan payments, and may be proposed by a debtor, the trustee, or the holder of an allowed unsecured claim. Id. In a recent decision, this Court discussed the statutory framework for properly prosecuting a motion to modify. See In re Powers, 507...