Judge Utschig:
Current monthly income must be based on actual income
By
David Ziemer, david.ziemer@wislawjournal.com
By
David Ziemer
david.ziemer@wislawjournal.com
Sept.
24, 2007
|
What
the court held
Case:
In re Mancl, No. 06-10764-13.
Issue:
Is “current monthly income” to be based on circumstances
at the time of filing, or current conditions?
Holding:
Current conditions, if the Form B22C does not reasonably
project future income.
Attorneys:
For Debtors, George B. Goyke, Wausau; Trustee, Leslie Brodhead
Griffith, Madison.
|
A
debtor’s “current monthly income” (CMI) should
be based on actual current income, rather than income at the time
of filing, U.S. Bankruptcy Judge Thomas S. Utschig held on Aug.
24.
However,
the issue is one that has divided bankruptcy courts around the
country, and the opinion won’t be the final word on the question.
For now, however, it creates a split of authority, not just with
other bankruptcy courts around the nation, but within Wisconsin.
When
debtors file for bankruptcy in the Western District and the case
is assigned to Judge Utschig, CMI will be based on actual current
income and expenses. If they file in the Eastern District, CMI
will be based on income and expenses at the time of filing —
at least if the case is assigned to Judge Susan V. Kelley.
In
the case at bar, Daniel and Carol Mancl filed for bankruptcy under
chapter 13 in the Western District of Wisconsin. For six months
prior to filing, Daniel had been injured and unable to work. He
was receiving disability payments substantially less than his
normal wages.
Daniel
has since returned to work, and his real income is now higher
than the current monthly income used on the Form B22C.
As
a result, the trustee objected to confirmation of their plan,
and Judge Utschig sustained the objection.
The
court began by noting the split of authority on the issue.
Several
courts have concluded that the Form B22C is not conclusive of
a debtor’s projected disposable income, and that a court
may consider actual income and expenses. In re Slusher, 359 B.R.
290 (Bankr.D.Nev. 2007); In re Jass, 340 B.R. 411 (Bankr.D.Utah
2006); and In re Hardacre, 338 B.R. 718 (Bankr. N.D.Tex. 2006).
Others,
including a court in Wisconsin, have concluded that income and
expenses are determined at the time of filing. In re Guzman, 345
B.R. 640 (Bankr.E.D.Wis. 2006); In re Hanks, 362 B.R. 494 (Bankr.D.Utah
2007); In re Barr, 341 B.R. 181 (Bankr.M.D.N.C. 2006); and In
re Alexander, 344 B.R. 742 (Bankr.E.D.N.C. 2006).
Judge
Utschig joined those courts to have held that the B22C is not
conclusive of projected income, reasoning, “Blind adherence
to the Form B22C for the determination of a debtor’s income
could lead to arbitrary results based solely on the timing of
a petition, potentially penalizing both debtors and creditors
unfairly.”
As
an example, the court cited a case in which a debtor’s disposable
income decreased after filing because of medical problems not
reflected at the time of filing. In another, the debtor suffered
a heart attack and loss of income after filing.
As
in those cases, Utschig found that “current monthly income”
at the time of filing was “an economic aberration rather
than either a historical norm or a realistic future forecast.”
The
court noted that, were the situation reversed, the Mancls “would
undoubtedly ask the Court to consider their actual income rather
than the historical ‘snapshot’ contemplated by the means
test.”
Accordingly,
the court adopted the following standard, recently set forth in
the case of In re Arsenault, 2007 WL 1956277 (Bankr.M.D.Fla 2007):
the Form B22C should be the basis for projected disposable income
unless there is evidence that simply using the historic six-month
snapshot does not form a reasonable basis for projecting income
forward.
Because
there is such evidence in this case, the court sustained the trustee’s
objection to confirmation of the plan.
David
Ziemer can be reached by email.
