This Research Guide tackles the following:

• attempts to collect all the cases discussing the calculation of projected disposable income insofar as the discussion is specific to Chapter 13
• review how a court applies § 1325(b) to the numbers generated by the debtor under § 101(10A) and § 707(b)(2)
• collects the cases discussing the treatment of a Chapter 13 debtor’s retirement plan contributions and loan repayments, and those cases determining the classes of unsecured creditors comprehended by Code § 1325(b)(1)(B), requiring a debtor to pay all of his or her projected disposable income to “unsecured creditors” if those creditors are not paid in full.

Robin has graciously allowed me to make this guide available to my readers and visitors. I think you’ll find it a useful tool in your Chapter 13 practice.

Download the guide by clicking here.

11 U.S.C. § 1325(b) requires when an objection to a Plan is filed, a debtor must either pay all claims in full or dedicate sufficient funds to the plan as measured by so much of “disposable income” as is received during the applicable commitment period. There, the Chapter 13 Trustee filed an Objection to the Debtors’ Plan alleging that a monthly expense of $200 spent toward educating an adult daughter and $240 are not necessary.

By way of explanation, Section 707(b)(2)(A)(ii)(1) states that when determining disposable income, the debtors in an over-median situation are permitted to deduct their monthly expenses. Those monthly expenses are the applicable monthly expense amounts specified under the Internal Revenue Service’s 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, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent.

The Trustee in this case claimed that the Debtors wrongfully deducted expenses of $200 a month for their daughter who is a freshman in college in line 59 on their B22C means test form.

Mrs. Boyd testified that her nineteen year old daughter was attending a state university and was paying for her tuition and room and board through loans. She stated that although the loans covered room and board, it did not cover her daughter’s books, supplies, a portion of her meals, nor did it cover other small necessities like toothpaste and toiletries. Mrs. Boyd further testified that her daughter was taking a full course load and that she was unable to maintain a job because of the rigorous schedule.

The court looked to Section 707(b)(2)(A), which includes a provision allowing the actual expense, up to $1500 per year, for educating a minor child in a public or private elementary or secondary school. Using this as a starting point, the court decided that Congress would not deem that expense necessary, considering that the statutorily approved expenditure is a smaller amount than the requested amount, deals with a dependent minor child rather than an adult, and references those critical elementary and secondary school years, as opposed to undergraduate education.

It’s useful to remember that these debtors were requiring their daughter to attend a state university (less expensive than a private one) and to take out the maximum amount for student loans. She took a full courseload, and had not time to work part-time. So this wasn’t a case of parents buying their daughter a super-luxury education and allowing her to live like a queen. The family wasn’t trying to game the system, they were looking to work within it. For their honesty and frugality, they got slapped by the bankruptcy system.

There’s an old saying that one should not revisit the sins of the father on the son, but that’s exactly what happened here. The parents went into bankruptcy court with the intention of paying back what they could afford, and instead were told that they could not avail themselves of the system unless their daughter either dropped out of college (for $240 a month!) or sacrificed her studies by working in addition to a full schedule of classes.

Not a great way to ensure that our children are prepared for life in the working world, is it?