Calculation of Projected Disposable Income
Recently in the Northern District of Texas, the Judges have brought forward an opinion that was filed with the courts as it relates to Disposable Income as it is related to Debtors who are above median income. Two particular cases were reviewed by the Fort Worth Division Judges and they stated that these two particular cases, the Debtors income well exceeded the median income for their family household size for the state of Texas. For the first particular case, they do not have dependents that live at home; however they are paying child support. The Chapter 13 trustee filed an objection to their Chapter 13 plan stating that they were not paying in their projected disposable income. Their original Chapter 13 plan is set at payments of $410 for 60 months. The Chapter 13 trustee argues that the child support that the Debtors are paying is not for the full 60 months that they will be in their plan, but for only 26 months. Therefore, the Chapter 13 trustee argues that these Debtors are not paying in their projected disposable income and their percentage that is being paid to the unsecured creditors should be changed from 0% and should be required to pay back a larger percentage to their unsecured creditors.
The Judges reviewed another Chapter 13case. In this particular case these Debtors had two dependents, but instead of having child support payments, they have a 401(k) loan that they are paying back at around $800 per month. These Debtors Chapter 13 plan payments are set about $1,185 per month for 60 months and the Chapter 13 plan reflects a 49% pay back to their unsecured creditors. The Chapter 13 trustee objects to confirming their plan based on not providing for all projected disposable income not being provided for. The Chapter 13 trustee argues that the 401(k) loan that the Debtors are paying back will end in April; therefore the unsecured creditors should receive more of a percentage paid back since the 401(k) loan will be paid back in April.
The Judges presiding over these cases discussed what would be best. They discussed that if they decided to allow the Chapter 13 plans to be confirmed and overrule the Chapter 13 trustee’s objection, they feel that the Chapter 13 plan will have to be modified at a later date when the Debtors circumstances change and they are no longer make their child support payments or their 401(k) loan re-payment. One of the Judges had previously ruled in regards to the Chapter 13 trustee>’s position on projected disposable income referring to the Bankruptcy Code, Section 707(b), which ultimately has the other Judge in the division following his suit and agree. As long as the Chapter 13 trustee is certain that the event will occur, the child support ceasing or the 401(k) loan re-payment ceasing, then the Chapter 13 trustee is in the right to object to the Chapter 13 plan.
In reviewing these two cases the Chapter 13 trustee argues that the Debtors tax deductions are too high and there is no reason why they should be an increase. With such an increase in their taxes, this allows for their disposable income to be reduced which is used to determine their pay back to their unsecured creditors. The Debtors argue that based on their preceding six months of income, their taxes were based; therefore they were based in good faith on their part. For this particular objection brought forward by the Chapter 13 trustee, the Judge overrules the Chapter 13 trustee’s objection. The Judge states that there is no reason why the Debtors would propose such an increase if it wasn’t in good faith. However, at the end of the year, if the Debtors did miscalculate, the Chapter 13 trustee or the unsecured creditors could come forward and request for their Chapter 13 plan to be modified based on the miscalculation.
The Judge denied both confirmations of the Chapter 13 plan. The Debtors must go back and recalculate their plan based on the new opinion and figure a percent to pay back to their unsecured creditors based on the projected disposable income with the additions of the child support and the 401(k) re-payment to their loan.
For additional information or concerns as it relates to your case, you should contact your bankruptcy attorney immediately.
For further research you may visit the following site related to bankruptcy:
Connecticut Bankruptcy
Alaska Bankruptcy
Please fill out our free evaluation form to determine if bankruptcy is right for you.
