§ 36.19     Form 122C-1: Statement of Current Monthly Income
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 36.19, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The concept of “current monthly income”1 (CMI) is destined to rival Debt Relief Agency2 as the most misguided innovation in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. CMI is the computational platform upon which BAPCPA bases the “abuse” test in Chapter 7 cases in § 707(b). BAPCPA makes CMI the starting point for calculation of projected disposable income at confirmation in Chapter 13 cases.3 Current monthly income determines the proposed payment period and applicable commitment period for a Chapter 13 plan.4

[2]

There is no statutory duty that Chapter 13 debtors file a Statement of Current Monthly Income. There is such a requirement for Chapter 7 debtors in § 707(b)(2)(C).5 This is odd because the drafters of BAPCPA packed into § 521 many much less important new debtor duties,6 and CMI is every bit as important in Chapter 13 cases as in Chapter 7.

[3]

Recognizing that CMI is fundamental to many important issues in Chapter 13 cases after BAPCPA, the rules drafters stepped in and Interim Rule 1007(b)(6) provides: “A debtor in a Chapter 13 case shall file a Statement of Current Monthly Income, prepared as prescribed by the appropriate official form.”7 This Statement of Current Monthly Income must be filed with the petition or within 15 days thereafter.8

[4]

New Official Form B22C contains the Statement of Current Monthly Income required of every Chapter 13 debtor by Interim Rule 1007(b)(6).9 As originally drafted by the Advisory Committee on Bankruptcy Rules, Official Form 22 came in several different versions depending on whether the bankruptcy case was filed under Chapter 7, 11 or 13 and depending on what the IRS did with respect to “standards” that were incorporated by BAPCPA into bankruptcy practice in §§ 707(b) and 1325(b).10 For use in Chapter 13 cases, the Advisory Committee drafted alternative versions of Official Form B22C based on different assumptions whether the IRS would break down its Local Standards for Housing and Utilities to reveal the amounts allocated to each component such as utilities, insurance and ownership costs.11

[5]

Just before the October 17, 2005, effective date of BAPCPA, the IRS and the U.S. trustee reached either an agreement or an impasse, depending on your perspective. The IRS did not break the Local Standards for Housing and Utilities into components.12 The IRS posted a “Disclaimer” on its Web page that referred users to the U.S. trustee Program for bankruptcy information. The U.S. trustee posted to its Web site “Local Housing and Utilities Standards” that are divided into mortgage and non-mortgage components.13 The U.S. trustee posted a disclaimer that its recapitulation of the IRS’s Local Standards for Housing and Utilities was not to be used for tax purposes.

[6]

Apparently treating the U.S. trustee’s Local Housing and Utilities Standards as if they were issued by the IRS,14 the Advisory Committee precipitously withdrew several of the alternative Forms 22 and a single Official Form B22C emerged for use in Chapter 13 cases. This original version of Form B22C was further revised in October 2006. At this writing, the Advisory Committee has just issued yet another revision of Form B22C that will likely become effective in December 2007.

[7]

The result of multiple drafts of the form and the early revisions in 2006 is there are several versions of B22C floating around the bankruptcy world and the differences can be material in individual cases. As demonstrated below, the words used by BAPCPA to describe the fundamental income and expense calculations in a Chapter 13 case are confusing, sometimes obscure and often controversial. Translating the statute into Form B22C was an impossible task that the forms drafters further complicated by odd wording, a difficult configuration and innumerable statutory interpretations that are not within the ordinary province of a form.

[8]

The outcome is that Form B22C is a substantial challenge for debtors’ counsel and perhaps an insurmountable barrier for pro se debtors. Unlike any other bankruptcy form, there are many places in Form B22C where counsel must make judgments to depart from the form and dispute the form else the form will lead the filer in a direction not required by the statute. The calculation of CMI is where it all starts.

[9]

The “applicable commitment period” check boxes at the top of Form B22C may be inaccurate because of problems in the CMI calculation in Parts I–III of the form, discussed below, and the cross-reference to Line 17 comes too soon in the flow of the form to correct for those problems. The “marital adjustment” in Line 13 (discussed below) is discretionary according to the instructions, but it should be differently worded and not discretionary if the purpose of the adjustment is to correct for the over-inclusion in CMI of a spouse’s income in Part I of the form and to account for the uncertain meaning of “combined” in § 1325(b)(4).15 A married debtor filing separately who chooses not to make the marital adjustment at Line 13 will inaccurately calculate CMI for purposes of Line 17 and then will be referred backwards to the check box at the top of the form, creating a possible error in the applicable commitment period designation. If the changes to Parts I and II discussed below are made, then the applicable commitment period calculation will be corrected and the check boxes can be accurately filled.

[10]

Part I of Official Form B22C is a “Report of Income” that seems intended to start the calculation of CMI to satisfy the requirement in Interim Rule 1007(b)(6) that the debtor file a Statement of Current Monthly Income. Unfortunately, the Report of Income in Official Form B22C for use in Chapter 13 cases does not mirror the CMI calculation required by new § 101(10A).

[11]

Part I of Official Form B22C contains two columns—one for the “debtor’s income” and the other for a “spouse’s income.” The instructions state that a married debtor must complete both columns without regard to whether the spouse is a joint debtor. The statute is clear on this point: § 101(10A) includes in CMI income received by a debtor’s spouse only in a joint case.16 The instructions to Part I of Official Form B22C require miscalculation of CMI for married debtors not filing jointly. “Adjustments” in Lines 13 and 19, discussed below,17 require significant interpretation or modification and, at best, will correct this mistake for some but not all Chapter 13 debtors.

[12]

BAPCPA inconsistently (and incomprehensively) requires the combination of the debtor’s CMI and a nonfiling spouse’s CMI to determine the appropriate “commitment period” and proposed payment period.18 Official Form B22C gets in trouble because it tries to be a Statement of Current Monthly Income, a calculation of commitment period and (for some debtors) a calculation of disposable income. The inclusion of a nonfiling spouse’s income in the Part I Report of Income may be consistent with a debatable interpretation of the commitment period calculation in § 1325(b)(4)19 but it is not even debatably consistent with the proper calculation of CMI for a married debtor not filing jointly.

[13]

Under pre-BAPCPA law, we didn’t much care who was “debtor” and who was “spouse.” In a joint case, we accounted for income and expenses as a family unit.20 In a not-joint case, we captured the income of the nonfiling spouse separately on Schedule I to Official Form 6 and the family expenses on Schedule J.21

[14]

BAPCPA is fundamentally different. The definition of CMI in § 101(10A) makes important distinctions between the income of the debtor and the income of the debtor’s spouse, especially in a not-joint case.22 The expense deductions allowed debtors with CMI greater than applicable median family income variously make distinctions between debtors and spouses23—including not accounting for the dependents of a nonfiling spouse that are not dependents of the filing spouse.

[15]

Chapter 13 debtors’ counsel must now pay attention in joint cases to who is the “debtor” and who is the “spouse.” Counsel may have to work all of Form B22C both ways to see which outcome is most appropriate for married debtors. Several difficult interpretations will be necessary along the way in Form B22C especially if married debtors have separate dependents.24

[16]

For a married debtor not filing jointly, Column B in Part I of Form B22C presents a real challenge. Technically, the only portion of a nonfiling spouse’s income that should be captured as part of a filing debtor’s CMI comes in at Line 7 in Column A.25 The forms drafters took a completely different approach and require a married debtor filing a not-joint case to first include all of the spouse’s income in Column B of Part I and to then “contend” that a marital adjustment is required at Line 13 and/or Line 19. The marital adjustment is a sort of double negative requiring a twisted logic that many debtors will find difficult to comprehend and apply. An alternative is to depart from the instructions in Part I and for a married debtor not filing jointly, fill in only Column A, except at Line 7 as explained below. This approach could be misinterpreted as aggressive rather than corrective logic. If you adopt this approach, explain the corrected math clearly on the face of the form.

[17]

Official Form B22C in its 2005 version instructed that the Part I Report of Income should “reflect average monthly income for the six calendar months prior to the filing.” This instruction omitted the statutory requirements that income must be “received” during the six-month period and “derived” during that six-month period.26 Also, if the debtor did not file a Schedule of Current Income,27 then the six-month calculation is counted backward from a date fixed by the court, not necessarily the petition date.28

[18]

The October 2006 version of Form B22C changed the instruction at Line 1 to read that the report of income should “reflect average monthly income received from all sources, derived during the six calendar months prior to filing the bankruptcy case.”29 This revised instruction more nearly aligns the form with the statutory description of CMI in § 101(10A). There is still no mention in the instructions that the six-month period for measuring CMI can time shift if the debtor does not file a Schedule of Current Income.

[19]

Line 2 of Part I calls for the debtor’s six-month average gross wages, salary, tips, bonuses, overtime and commissions. These sources of income must be both received and derived during the appropriate six-month period. Especially with respect to commissions, bonuses and tax refunds, the “derived” requirement in the statute changes whether an amount received is necessarily reported as income.30 A teacher who receives income for only nine months of the year will report six months of income for CMI purposes only if the six months prior to the month in which the petition was filed happen to fall within the nine months for which the teacher actually received income.31

[20]

Line 3 of Part I of Official Form B22C requires the debtor to calculate income from the operation of a business, profession or farm. The debtor is instructed to state “gross receipts” and then to deduct “ordinary and necessary business expenses” to arrive at business income. There are similar instructions in Line 4 with respect to income from rental property and operating expenses. There is no instruction that business or rental income should not be included in Line 3 or Line 4 if that income was paid to the debtor as wages, salary or commissions included in Line 2.

[21]

More fundamentally, there is no statutory basis for deducting “ordinary and necessary business expenses” or operating expenses to arrive at income from the operation of a business or rental property. CMI as defined in § 101(10A) does not contain any deductions for the expenses of a business or ownership of property that produces income. CMI is not “net” of expenses incurred in the production of income unless an expense reduces income before it is “received” by the debtor. CMI includes income the debtor “received” from a business or rental property without regard to whether that income is taxable.32 CMI includes business income received by the debtor even though some or all of that income is consumed by expenses that would be deductible for tax purposes.

[22]

Expenses “necessary for the continuation, preservation, and operation” of a business are deductions from CMI allowed by § 1325(b)(2)(B) for a debtor engaged in business with CMI less than applicable median family income.33 For a Chapter 13 debtor with CMI greater than applicable median family income, business expenses and property ownership expenses are deductible from CMI within a category of Other Necessary Expenses specified by the IRS under § 707(b)(2)(A)(ii)(I).34 The expense deductions allowed by the statute are not the same for business debtors with CMI less than applicable median family income and those with CMI greater than applicable median family income.35 With respect to all Chapter 13 debtors, business expenses are deducted after CMI is determined.

[23]

Official Form B22C nets out “ordinary and necessary” business expenses at Line 3 and “ordinary and necessary operating expenses” at Line 4 with respect to the ownership of property—both as part of the Report of Income, on the way to determining CMI. Perhaps the drafters were imagining a debtor doing business as a corporation or some other entity that would “receive” business income and deduct business expenses before the debtor received income for CMI purposes. In Chapter 13 cases, the debtor is the business and Lines 3 and 4 of Official Form B22C are misleading. CMI is determined based on income received by the debtor without regard to whether there are deductible expenses for the production of that income that will be allowed to reduce CMI for purposes of determining disposable income.

[24]

Deducting business expenses at the wrong stage of the calculations in Official Form B22C makes a difference. CMI is basic to many important calculations—including the commitment period determination that follows in Official Form B22C itself.36 Departing from the statutory definition of CMI at Lines 3 and 4 will not produce the Statement of CMI for business debtors required by Interim Rule 1007(b)(6) and will distort manipulations of CMI for other purposes during the Chapter 13 case.

[25]

Lines 3 and 4 present difficult dilemmas for debtors’ counsel. If the debtor “received” income from the operation of a business or from the ownership of real property, that income is included in CMI by § 101(10A) before deduction of business or operating expenses—whether ordinary and necessary or otherwise. Obviously, debtors with income from a business or from rental property will have higher CMI if business and operating expenses are not deducted as instructed at Lines 3 and 4 of Official Form B22C. Following the instructions will result in lower CMI for debtors engaged in business or who own income-producing property. Following the statute requires modifying Lines 3 and 4 of Official Form B22C to schedule only the income received from a business and the income received from rental property.

[26]

Business expenses and operating expenses will be deductions from CMI elsewhere in the calculation of disposable income. For Chapter 13 debtors with CMI greater than applicable median family income, “elsewhere” means somewhere in Parts IV–VI of Official Form B22C.37 For Chapter 13 debtors with CMI less than applicable median family income, business expenses for a debtor engaged in business are deducted from CMI as part of the disposable income calculation in § 1325(b)(2)—a calculation that is not included on Official Form B22C.38

[27]

Business expenses and operating expenses are also addressed in Schedule J to Official Form 6. Line 16 of Schedule J permits all debtors to report “regular expenses from operation of business, profession or farm.”39 The formulation of business expenses allowed as current expenditures by Schedule J in Official Form 6 is different from the “ordinary and necessary” business and operating expenses allowed at Lines 3 and 4 of Form B22C and neither of the forms reflects the business expenses allowed by § 1325(b)(2)(B) for disposable income purposes when the debtor is engaged in business and has CMI less than applicable median family income.

[28]

The multiple confusing presentations of business expenses have not gone unnoticed by the courts. In In re Jackson,40 the bankruptcy court stated it was not appropriate for a debtor with CMI less than applicable median family income to deduct expenses from the operation of a business or profession in both places—on Form B22C and on Schedule J to Form 6. Perhaps more accurately, debtors engaged in business have to take a stand at Lines 3 and 4 on Form B22C with respect to whether and what business expenses are deductions from CMI on the way to calculating disposable income. Lines 3 and 4 are an awkward place to stage this issue given that § 101(10A) does not support deduction of business expenses in the CMI calculation.

[29]

Lines 3 and 4 of Form B22C can be modified to eliminate the deduction of business and operating expenses, but it will not always be in the debtor’s best interest to do so. Obviously, deducting business and operating expenses at Lines 3 and 4 will reduce CMI for business debtors. This will change the commitment period calculation for business debtors and could result in a shorter commitment period.41 On the other hand, there may be cases in which business debtors would prefer to have CMI greater than applicable median family income.42 Lines 3 and 4 of Form B22C are where debtors’ counsel must start addressing these questions for business debtors and for debtors with income-producing property.

[30]

Line 3 is the first of many places where Official Form B22C (boldly) instructs debtors: “Do not include any part of the . . . expenses . . . as a deduction in Part IV.” Discussed in detail later,43 Part IV of Official Form B22C calculates deductions from CMI allowed by § 707(b)(2)(A) and (B) to determine disposable income for a Chapter 13 debtor with CMI greater than applicable median family income. There will be much debate and litigation whether expenses—such as the business expenses reported in Line 3—are separately and cumulatively allowed as deductions from CMI for an over-median-income Chapter 13 debtor when § 1325(b)(3) applies the abuse test from § 707(b)(2)(A) and (B) to determine projected disposable income. The quoted instruction in Line 3 (and throughout Official Form B22C) purports to decide those difficult questions of statutory construction. Debtors’ counsel have a professional responsibility both to respect the Official Form and to zealously represent debtors in Chapter 13 cases. Modifications to Official Form B22C and departures from the instructions may be necessary.

[31]

There are similar issues in Line 4 with respect to rent and other real property income. Debtors are instructed to deduct ordinary and necessary operating expenses from gross receipts to determine rental income. The statute does not calculate CMI this way.

[32]

Line 5 is self-explanatory.

[33]

Line 6 of Official Form B22C calls for “pension and retirement income.” Debtors should not include benefits under the Social Security Act in this or any other line of the CMI calculation.44

[34]

Line 7 is confusing and difficult to align with the statute. In the 2005 version of Form B22C, Line 7 required reporting of “regular contributions to the household expenses of the debtor or the debtor’s dependents, including child or spousal support.” The debtor was instructed not to include contributions from a spouse.

[35]

The forms drafters invented the word “contributions” in Line 7 of the 2005 version of Official Form B22C. Section 101(10A)(B) includes in CMI “any amount paid” by another entity on a regular basis for household expenses of the debtor or a dependent of the debtor.45 “Contributions” was too easily misinterpreted as a broader and different notion than an amount paid.

[36]

Line 7 was rewritten in 2006 to require reporting of “any amounts paid by another person or entity, on a regular basis, for the household expenses of the debtor or the debtor’s dependents, including child or spousal support. Do not include amounts paid by the debtor’s spouse.”46 The 2006 version is closer to the statute, but the phrase “including child or spousal support” nowhere appears in § 101(10A)(B). The choice to combine the component of CMI described in § 101(10A)(B) with the reporting of child or spousal support is not compelled by the statute and could be misinterpreted to render child or spousal support subject to the special conditions in § 101(10A)(B) when the statute does not impose those special conditions. In other words, nothing in the statute suggests that child or spousal support is included in CMI only if it is paid on a regular basis and only if it is for the household expenses of the debtor or the debtor’s dependents.

[37]

Child or spousal support received by the debtor (or, in a joint case, received by the debtor and the debtor’s spouse) would be income for CMI purposes under § 101(10A)(A) without regard to whether it is an amount paid on a regular basis for the household expenses of the debtor or a dependent of the debtor.47 Any amount paid by an entity other than the debtor (or, in a joint case, other than the debtor and the debtor’s spouse) on a regular basis for household expenses of the debtor or a dependent of the debtor is separately included in CMI by § 101(10A)(B).48 Line 7 suggests that support is a subset of § 101(10A)(B), but this result, and the limitations it injects, is not compelled by the statute.

[38]

Attempting to follow the instructions for Line 7 while remaining true to § 101(10A) is a twisting experience. A married debtor not filing jointly would list child or spousal support that is paid on a regular basis by any entity (other than the debtor) for household expenses of the debtor or a dependent of the debtor. It is quite likely that this amount will include amounts already accounted for as income to the nonfiling spouse in Column “B.” But then what goes in Column “B” at Line 7 for a nonfiling spouse that is not already included in income elsewhere in Column “B”? The only candidate would seem to be household expenses of the nonfiling spouse regularly paid by an entity other than the debtor if the nonfiling spouse is a dependent of the debtor. Find that in the instructions at Line 7. In a joint case, the spouse might include on Line 7, Column “B,” amounts paid on a regular basis by any entity other than the joint debtor for the household expenses of the spouse without regard to whether the spouse is also a dependent of the debtor.

[39]

For reasons not known, there is no mention in § 101(10A)(A) or (B) of dependents of a debtor’s spouse who are not also dependents of the debtor. In a joint case in which the debtor and the debtor’s spouse do not share all the same dependents, § 101(10A)(B) may pull into income on Line 7 of Official Form B22C different amounts depending on who is the “debtor” and who is the “debtor’s spouse.”49 On the other hand, if the filing spouse in a joint case is misinterpreted to be the “debtor” for purposes of Line 7—an easy mistake given the two-column format—then Line 7 literally would include in the report of income amounts paid by any entity on a regular basis for the household expenses of a spouse’s separate dependents. Nothing in § 101(10A)(B) suggests that amounts paid on a regular basis for the household expenses of a spouse’s dependents would be included in CMI when the debtor and the spouse have separate dependents—a common fact pattern in Chapter 13 cases.

[40]

There is a lot of baggage buried at Line 7 of Form B22C that goes beyond child or spousal support. Detailed elsewhere,50 the conditions on income included in CMI by § 101(10A)(A) are quite different from the conditions on income included in CMI by § 101(10A)(B). As mentioned above, § 101(10A)(A) captures income received and derived by the debtor during the six months before the month in which the petition was filed. Section 101(10A)(B) in contrast imposes conditions that only amounts paid on a regular basis for the household expenses of the debtor or a dependent of the debtor are included in CMI. There is no six-month counting limitation on amounts paid by others on a regular basis for the household expenses of the debtor or a dependent of the debtor. In fact, there is no temporal limitation at all in § 101(10A)(B), and this difference in the statute is sure to be tested when debtors have regular income sources that fall outside the six-month limitation in § 101(10A)(A).

[41]

For example, in In re Foster,51 the debtor typically received bonuses in February or March of each year, but February and March were not within six months of the Chapter 13 petition filed in November. The bankruptcy court noted that the bonuses might be dragged into CMI by § 101(10A)(B): “Those bonuses were deposited in the debtors’ bank account and may well have been used to pay the debtors’ household expenses.”52 Truthfully filling in the box at Line 7 without a temporal limitation is a challenge created by the statute. The combination of thoughts at Line 7 contributes to the difficulty.

[42]

Part I of Official Form B22C acknowledges at Line 8 that there may be controversy whether unemployment compensation is a benefit under the Social Security Act for purposes of the CMI calculation.53 Debtors are instructed to list unemployment compensation separately and to exclude it from income if the debtor contends that unemployment compensation is a benefit under the Social Security Act.

[43]

Not all Chapter 13 debtors will want to exclude unemployment compensation from income on Official Form B22C. As explained elsewhere,54 the bizarre new disposable income test may actually work to the advantage of some debtors if current monthly income drifts over median family income and the § 707(b)(2) version of the test applies under § 1325(b)(3). For debtors with CMI that will remain under median family income, there is no obvious advantage to including unemployment compensation in income.

[44]

Line 9 calls for income from all other sources, not already included in Column “A” or “B.” The instructions remind debtors not to include benefits under the Social Security Act.

[45]

Lines 10 and 11 total the debtor’s and spouse’s columns of income, without regard to whether the spouse is a joint debtor. This is not consistent with the definition of CMI in § 101(10A) if the spouse is not a joint debtor.

[46]

The “Report of Income” ends at Line 11, but it does not purport to be the Statement of Current Monthly Income required by Interim Rule 1007(b)(3). Instead, Form B22C switches gears at Line 12 and heads off in a different direction altogether: The calculation of applicable commitment period described in § 1325(b)(4).55

[47]

This is a confusing choice by the forms drafters. Commitment period under § 1325(b)(4)56 and CMI under § 101(10A)57 are different calculations under BAPCPA. They relate because CMI determined under § 101(10A) is a component of the commitment period calculation in § 1325(b)(4). Part II of Official Form B22C beginning at Line 12 is an effort to combine the Statement of Current Monthly Income required by Interim Rule 1007(b)(6) and a calculation of the applicable commitment period contemplated by § 1325(b)(4). These two calculations do not easily combine in the way attempted by Form B22C.

[48]

Applicable commitment period in § 1325(b)(4) is ambiguously based on “current monthly income of the debtor and the debtor’s spouse combined.”58 There are many possible interpretations of the word “combined” in this context.59 Part II of Form B22C stakes out a peculiar statutory interpretation of “combined” by “annualizing” CMI at Line 15. The problem is there is no accurate calculation of CMI in Form B22C at any point prior to Line 15 and annualizing an inaccurate calculation of CMI is then the basis for “combined” CMI in the applicable commitment period calculation. The annualized CMI at Line 15 is not CMI as defined in § 101(10A). Instead, it is the forms drafters’ vision of “combined” CMI for a debtor and the debtor’s spouse that will not be accurate without adjustments discussed below.60

[49]

The trail to CMI picks up again in Part III of Official Form B22C at Line 18. Line 18 instructs debtors to carry over the amount from Line 11 which is the total of income reported by the debtor and the debtor’s spouse. As indicated above, especially with respect to a married debtor not filing jointly, the total at Line 11 includes substantial components of income that are not part of CMI as defined by § 101(10A).

[50]

The “marital adjustment” at Line 19 is an attempt to correct for the over-inclusion of income in CMI in Part I. Line 19 states:

If you are married, but are not filing jointly with your spouse, enter the amount of the income listed in Line 10, Column B that was NOT paid on a regular basis for the household expenses of you or your dependents. If you are unmarried or married and filing jointly with your spouse, enter zero.61
[51]

This marital adjustment is intended to back out of the Report of Income all income other than amounts paid on a regular basis for the household expenses of the debtor or a dependent of the debtor. This is correcting for the over-inclusion of income in CMI for married debtors not filing jointly that results from the “combined” CMI approach in Parts I and II of Form B22C. There is a tangled double negative here that would be better served to be reversed by the forms drafters: eliminate Column B from Part I of Form B22C and simply add to the debtor’s income amounts paid by any entity on a regular basis for the household expenses of the debtor or a dependent of the debtor. Backing out amounts not paid on a regular basis for the household expenses of the debtor or the debtor’s dependents at Line 19 is not a reliable methodology to produce a Statement of CMI at Line 20.

[52]

Line 20 on Official Form B22C is the line that should be called Statement of Current Monthly Income. Don’t forget that without the adjustments discussed above at Lines 3 and 4, even after the marital adjustment at Line 19, Line 20 will not accurately state CMI for business debtors or debtors with rental property income.

[53]

The rest of Part III of Form B22C (Lines 21–23) takes the CMI calculated at Line 20, annualizes that amount and then compares it to applicable median family income to determine which form of the disposable income test applies to the debtor. Detailed elsewhere,62 debtors with CMI greater than applicable median family income complete Parts IV, V and VI of Official Form B22C, but debtors with CMI less than applicable median family income are instructed at Line 23 to skip Parts IV, V and VI.

[54]

The calculation of CMI is absolutely fundamental to all of Chapter 13 practice. It is the platform for the disposable income calculation63 and a critical component of the applicable commitment period calculation.64 CMI for every Chapter 13 debtor should emerge prominently and predictably from Form B22C. At this writing, the form doesn’t do that, especially for married debtors not filing jointly. Debtors’ counsel must either modify the Official Form or interpret the boxes and instructions to force an accurate Statement of Current Monthly Income in Part III of the form.

 


 

1  11 U.S.C. § 101(10A), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

2  See 11 U.S.C. § 101(12A), discussed in § 366.1 [ WARNING! You Are a Debt Relief Agency ] § 4.1  WARNING! You Are a Debt Relief Agency.

 

3  See 11 U.S.C. § 1325(b), discussed in §§ 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

4  See 11 U.S.C. §§ 1322(d) and 1325(b)(4), discussed in §§ 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation and 500.1 [ Length of Plan ] § 112.2  Length of Plan after BAPCPA.

 

5  In a Chapter 7 case, the Statement of Current Monthly Income is prescribed by 11 U.S.C. § 707(b)(2)(C) as “part of the schedule of current income and expenditures required under section 521.” The drafters of BAPCPA were apparently confused by their own use of similar words to describe very different concepts. The rules drafters (perhaps wisely) ignored § 707(b)(2)(C) and drafted a separate Official Form B22A for the Statement of Current Monthly Income in a Chapter 7 case. The Schedules of Current Income and Expenditures required by § 521(a)(1)(B)(ii) are still found as Schedules I and J to Official Form 6.

 

6  See, e.g., the new duties listed in § 387.1 [ New Filing Requirements and Other Duties: A List ] § 42.1  Filing Requirements and Other Duties: A List.

 

7  Interim Bankr. R. 1007(b)(6).

 

8  Interim Bankr. R. 1007(c).

 

9  New Official Form B22C is found in App. D and App. UU. The Report of Income portion of the new form is discussed line by line below in this section. The Commitment Period and Disposable Income portions of the new form are discussed in §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

10  See 11 U.S.C. §§ 707(b)(2) and 1325(b)(3), discussed in §§ 475.1 [ National Standards ] § 95.2  National Standards477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

11  The need for this dissection of the IRS Local Standards for Housing and Utilities is discussed below in this section and in § 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

12  See www.irs.gov/business/small/article.

 

13  See www.usdoj.gov/ust/bapcpa/bci_housing_charts.

 

14  This is a dubious assumption with important implications for Chapter 13 practice. See § 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

15  See discussion of applicable commitment period in 11 U.S.C. § 1325(b)(4) below in this section and in § 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation.

 

16  See 11 U.S.C. § 101(10A), discussed in §§ 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline and 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses.

 

17  See below in this section, and see § 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

18  See 11 U.S.C. §§ 1322(d) and 1325(b)(4), discussed in §§ 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation and 500.1 [ Length of Plan ] § 112.2  Length of Plan after BAPCPA.

 

19  See 11 U.S.C. § 1325(b)(4), discussed in § 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

20  See, e.g., the discussion of projected disposable income in § 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income.

 

21  See § 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16  Schedules I and J—Income and Expenditures.

 

22  See 11 U.S.C. § 101(10A), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

23  See § 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses. See, e.g., In re Lara, 347 B.R. 198 (Bankr. N.D. Tex. 2006) (Spouses are a “unit” for purposes of the transportation expense deduction in the Local Standards allowed for debtors with CMI greater than applicable median family income.).

 

24  See below in this section, and see §§ 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation and 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses.

 

25  See below in this section, and see § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

26  See 11 U.S.C. § 101(10A)(A), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

27  Schedule I to Official Form 6. See § 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16  Schedules I and J—Income and Expenditures.

 

28  See 11 U.S.C. § 101(10A)(A)(ii), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

29  Official Form B22C (Oct. 2006).

 

30  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

31  See In re Beasley, 342 B.R. 280 (Bankr. C.D. Ill. 2006) (Part I of Form B22C correctly included the debtor’s nonfiling spouse’s income only for the six-month period preceding the month in which the petition was filed; that the nonfiling spouse’s nine months of income from teaching was not fully included in the CMI calculation is not an ambiguity in the statute or in Form B22C, it is simply the legislative choice.).

 

32  See 11 U.S.C. § 101(10A)(A), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

33  See 11 U.S.C. § 1325(b)(2)(B), discussed in § 470.1 [ Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Applicable Median Family Income ] § 93.1  Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Median Family Income.

 

34  See § 477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

35  See §§ 470.1 [ Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Applicable Median Family Income ] § 93.1  Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Median Family Income and 477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

36  See 11 U.S.C. § 1325(b)(4), discussed in §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation, 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

37  Unfortunately, the drafters of Official Form B22C chose to delete from the list of deductions allowed in Part IV of Official Form B22C the categories of Other Necessary Expenses specified by the IRS that include business expenses. See § 477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

38  See 11 U.S.C. § 1325(b)(2)(A) and (B), discussed in § 470.1 [ Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Applicable Median Family Income ] § 93.1  Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Median Family Income.

 

39  Schedule J to Official Form 6, discussed in § 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16  Schedules I and J—Income and Expenditures. See also §§ 31.1 [ Special Information Needs ] § 33.1  Special Information Needs In Business Cases and 36.8 [ Statement of Financial Affairs for Debtor Engaged in Business ] § 36.31  Statement of Financial Affairs for Debtor Engaged in Business.

 

40  353 B.R. 849 (Bankr. E.D.N.C. 2006).

 

41  See 11 U.S.C. § 1325(b)(4), discussed in §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

42  See §§ 469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3) and 494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

43  See § 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

44  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline. See, e.g., In re Beasley, 342 B.R. 280 (Bankr. C.D. Ill. 2006) (Part I of Form B22C correctly excludes the debtor’s social security income from current monthly income.).

 

45  11 U.S.C. § 101(10A)(B), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

46  Line 7, Official Form B22C (Oct. 2006).

 

47  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

48  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

49  See § 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses.

 

50  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

51  No. 05-50448 HCD, 2006 WL 2621080 (Bankr. N.D. Ind. Sept. 11, 2006).

 

52  2006 WL 2621080, at *7.

 

53  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

54  See 11 U.S.C. § 1325(b), discussed in §§ 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

55  Applicable commitment period and 11 U.S.C. § 1325(b)(4) are discussed in more detail in §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

56  See §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

57  See above in this section, and see § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

58  11 U.S.C. § 1325(b)(4) (emphasis added), discussed in §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

59  See § 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

60  See § 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation.

 

61  Line 19, Official Form B22C (Oct. 2006).

 

62  See §§ 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation and 466.1 [ In General ] § 92.1  In General469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3).

 

63  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

64  See §§ 379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.