Cite as: Keith M. Lundin, Lundin On Chapter 13, § 12.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
Sometimes it is hard to point to any one job or single source of regular income for the debtor. It is not uncommon for a Chapter 13 debtor to be working two or three jobs, each contributing to regular income.
Regular income for eligibility purposes can be established from multiple sources. A debtor with odd jobs often can prove aggregate regular and stable income.1 A debtor with multiple sources of income may have an additional burden to demonstrate that the odd jobs will continue and that the sum of all sources of income will fund a plan. In one reported decision, a debtor failed to demonstrate that a flea market would produce regular income.2
Debtors who work for temporary employment services present special eligibility problems. They may not know how often they will be called by the agency, how long their work will last or at what wage the work will be performed. A history of significant income from temporary employment should be adequate to prove regular income despite the absence of a specific regular job.
Seasonal employment can constitute regular income. Farm workers, construction workers, schoolteachers who are paid on a nine-month basis—all experience several months during the year when paychecks are slimmer or nonexistent. Real estate salespersons, typically working on commissions, have seasons during which they are more likely to sell houses. Although the income of seasonal employees is not regular throughout the year, sufficient regularity and stability can be established for eligibility purposes if the aggregate of income available through the year will fund a Chapter 13 plan.3 Typically, larger payments are made to creditors during a season of more robust employment.
To avoid eligibility and confirmation problems, the irregularity of income of a seasonal employee should be part of the proposed plan from the beginning. If it is revealed that the debtor intends to fund the plan predominantly during part of the year, the trustee and creditors will be less likely to challenge eligibility or to seek conversion or dismissal during the periods when only smaller payments are available.
Detailed elsewhere,4 the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)5 substantially modified the projected disposable income test at confirmation by creating a new platform, “current monthly income” (CMI).6 CMI is the income component of the projected disposable income test, and in most Chapter 13 cases, CMI will be an average of the debtor’s income during the six months before the month in which the petition is filed.7 After BAPCPA, for debtors with seasonal or irregular employment, the projected disposable income test will calculate CMI based on an average of six months of income which may cut across the periods in which the debtor has income and the periods in which the debtor has less or no income. The resulting average of income will then determine the entitlement of unsecured creditors at confirmation under § 1325(b).8
BAPCPA thus provides some new support for an argument that individuals employed seasonally or irregularly can have “regular income” for eligibility purposes. Given that the test for confirmation in § 1325(b) now uses an average of six months of the debtor’s income to determine the entitlement of unsecured creditors at confirmation, it can be argued that the “regular income” sufficiently regular and stable to fund a plan should also be based on a less-time-constricted notion of when income must be available.
Notice also that the six months’ average of income BAPCPA imposed on the projected disposable income test at confirmation will interact in strange ways with the irregular income pattern of a debtor with seasonal income. For example, a schoolteacher with nine months of income will have more or less disposable income for confirmation purposes depending on whether the six-month counting period for CMI in § 101(10A) includes some or all of the months in which the debtor had no income from teaching. The resulting calculation under the disposable income test as reconfigured by BAPCPA will require the debtor to pay more or less to unsecured creditors to accomplish confirmation. Courts inclined to work backward from confirmation to define the “plan” with respect to which the debtor must have regular income9 will find logic buried here that should enhance eligibility for individuals with irregular or seasonal employment.
1 See In re Kelly, 217 B.R. 273 (Bankr. D. Neb. Dec. 19, 1997) (Minahan) (Graduate student working toward Ph.D. who also works as a clerk at a liquor store 32 hours per week and earns $5.85 per hour has regular income and is eligible for Chapter 13.); In re Moore, 17 B.R. 551 (Bankr. M.D. Fla. Jan. 22, 1982) (Paskay); In re Cole, 3 B.R. 346 (Bankr. S.D. W. Va. Apr. 4, 1980) (Flowers). But see In re Hickman, 104 B.R. 374 (Bankr. D. Colo. Sept. 14, 1989) (Brooks) (Debtor’s income was not sufficiently regular or stable when debtor was employed as a seasonal sprinkler system installer from April through October. The debtor received unemployment compensation between October and March, and the debtor would obtain intermittent employment at odd jobs when possible.).
2 In re Corey, 19 B.R. 76 (Bankr. S.D. Ala. Feb. 2, 1982) (Caffey).
3 See, e.g., In re Widdicombe, 269 B.R. 803, 808 (Bankr. W.D. Ark. Nov. 29, 2001) (Fussell) (“[Debtor] is a real estate salesperson . . . . [H]er income varies from month to month depending on her sales . . . . Debtor possesses ‘regular income’ for purposes of § 109(e).”).
5 Pub. L. No. 109-8, 119 Stat. 23 (2005).
6 See 11 U.S.C. § 101(10A), discussed in § 36.19 Form 122C-1: Statement of Current Monthly Income and § 92.3 Current Monthly Income: The Baseline.
7 See 11 U.S.C. § 101(10A)(A), discussed in § 92.3 Current Monthly Income: The Baseline.