Child Support Properly Deducted from Means Test

Posted by NCBRC - July 31, 2014

The debtor properly excluded $400.00/month in child support payments from her calculation of disposable income despite deducting child care expenses elsewhere on the means test. Clark v. Brooks (In re Brooks), No. 14-1031 (C.D. Ill. July 21, 2014).

The bankruptcy court overruled the chapter 13 trustee’s objection to confirmation in which he argued that the debtor failed to commit all her projected disposable income to the plan as required by sections 1325(b)(1)(B) and 1325(b)(3). The trustee appealed.

Because the Code does not define “projected disposable income,” the district court began with the definition in section 1325(b)(2) of “disposable income” which states that  “disposable income means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended—[ ].” The trustee argued that child support payments could not be deducted insofar as they represented expenses also included in the standardized expense deductions in the means test. Under the trustee’s reasoning taking the expense deductions and excluding child support payments resulted in duplicative deductions.

The court found that the trustee’s position was irreconcilable with the plain language of the Code. The Code places two restrictions on the child support deduction: 1) that the support was awarded in accordance with nonbankruptcy law, and 2) that the expenses are reasonably necessary. For a determination of whether the expenses were reasonably necessary the court relied on Illinois law which likewise imposes a “reasonable and necessary” requirement on child support awards. In so holding, the court rejected the trustee’s argument that because section 1325(b)(3) refers to section 707(b)(2) as setting forth federal standards of reasonable necessity, a court should not rely on state law for that determination. The court found that the trustee’s argument failed to consider that section 1325(b)(2) specifically excludes child support payments from the amount to be examined in accordance with section 707(b)(2)’s analysis of the debtor’s expenses. In conclusion, the district court agreed that child support payments are properly excluded from calculation of a debtor’s disposable income unless the trustee “demonstrates that the child support payments are not reasonably necessary to be expended for such child.”

Brooks CD Ill opinion

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