THIS MATTER came before the Court to consider confirmation of the Chapter 13 Plan of Debtor and the Objection thereto filed by the Chapter 13 Trustee. The Objection asserts the Debtor’s plan does not satisfy the requirements of 11 U.S.C. § 1325(b). The parties ask the Court to determine “[w]hether the Social Security income paid to a non-debtor, who is not the debtor’s spouse or child or a child of debtor’s spouse, is includable in the calculation of a debtor’s net projected disposable income, and, if so, whether the failure to do so is an indicator that debtor has not proposed the plan in good faith.”
Debtor filed a Chapter 13 petition, Schedules and Statements, and a plan on August 7, 2017. On that same day, his mother Loretta (“Mother”), also filed for Chapter 13 relief. Debtor and Mother share a residence, and Mother is the co-debtor for almost all of his secured debts (including the mortgage on their co-owned real estate/residence and the second mortgage/line of credit on that property). All income sources, including Social Security, are adequately disclosed in both bankruptcy cases. Debtor and Mother deposit their income in a joint account and pay expenses from that account.
Debtor’s Schedule J indicates Mother is eighty-three (83) years old. That schedule includes total monthly household expenses of $3,859.00. The expenses are not excessive and the Court cannot determine, nor did Trustee argue, that any expense would be lower if scheduled for a household of one. Schedule I lists Debtor’s income and also indicates Mother’s income of approximately $1,785.00, of which $1,502.00 is income from Social Security. Mother’s Chapter 13 plan was confirmed on October 13, 2017, and requires monthly payments of $200.00 for 60 months in addition to the scheduled expenses mentioned above. Her plan does not commit this payment to any specific secured or priority debt, so it appears the funds will be paid to her unsecured creditors. Debtor proposes monthly Chapter 13 plan payments of $290.00 for 60 months, with $143.00 or more of this amount paid to a debt secured by the household car. Debtor’s plan states that he is current on the mortgage payments and that he will pay less than 100%. Trustee estimates a distribution to Debtor’s unsecured creditors of approximately 6.7%.
Debtor completed and filed Official Forms 122C-1 and 122C-2 (collectively, “Disposable Income Test”). Although disclosed and included on Schedule I, Debtor did not include Mother’s Social Security income in the Disposable Income Test. Debtor calculated his expenses based on guidelines for a household size of two. Because his income was above-median for a household of that size in this state, in order to complete the Disposable Income Test, Debtor utilized the National and Local Standards issued by the Internal Revenue Service to determine certain deductible expense amounts. See 11 U.S.C. §§ 707(b)(2) & 1325(b)(3). Debtor’s end result is a monthly deficit of $645.50. Although negative, Debtor’s plan proposes payment to unsecured claims. Trustee recalculated Debtor’s figures and asserts his monthly projected disposable income should be $1,109.11 after including Mother’s Social Security income.