The Cooks filed a Chapter 13 bankruptcy and, being above median income, were required to calculate their "projected disposable income" using Official Form 122C-2. As their plan provided for the retention of their home and cure and maintenance of the on-going mortgage, they deducted their monthly mortgage payment of $2,233.34 from the Means Test, despite the IRS Local Standard for mortgage expenses being only $1,098.00.
The Trustee objected, following In re Harris, 522, B.R. 804 (Bankr. E.D.N.C. 2014), which held that “that the home and vehicle allowances serve only to operate as a ‘cap’ on the amount the Debtors may deduct, when their average monthly secured home and vehicle payments exceed the Standard amounts.”
Here, however, the bankruptcy judge rejected that reasoning, finding that "[i]n enacting the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) in 2005, Congress intentionally withdrew the discretion of bankruptcy judges to determine what expenses were “reasonable” for above-median-income debtors." As such, 11 U.S.C. §707(b)(2)(A)(iii) was unambiguous when it directs that:
The debtor’s average monthly payments on account of secured debts shall be calculated as the sum of—
(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the filing of the petition . . .. (Emphasis added.)
Accordingly, despite the "occasional peculiarity", as Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) described this potential outcome, this deduction was mandated by Congress and it was "not the function of this court to mold its decisions to policy concerns."
This was one of the last decisions by Judge Stephani Humrickhouse before her retirement and, to the extent that it created a split within the Eastern District case law (and this case has been certified for direct appeal to the 4th Circuit), the consumer bar is grateful, as it is for all of her years of service.
For a copy of the opinion, please see: