§ 91.3     Reasonably Necessary for Maintenance or Support
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 91.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Projected disposable income is that portion of future income that is “not reasonably necessary . . . for the maintenance or support of the debtor or a dependent of the debtor.”1 What expenses are “reasonably necessary . . .” is a fact question determined in the context of individual debtors and their dependents. On similar facts, outcomes will vary from judge to judge, from jurisdiction to jurisdiction, from one part of the country to another and even over time within the same jurisdiction.

[2]

The debtor’s budget is the starting point to calculate reasonably necessary expenses. Schedules I and J in Official Bankruptcy Form 6 were designated with several goals in mind, only one of which was generating the amount available to fund a Chapter 13 plan.2 The disposable-income-test calculation required by § 1325(b) was not precisely translated into Schedules I and J, but many of the numbers come from those schedules.

[3]

The amount the debtor must pay to fund the plan typically includes payments through the Chapter 13 trustee that are reasonably necessary for the maintenance and support of the debtor but that are not payments to unsecured claim holders. For example, if the debtor owes a home mortgage of $500 per month and proposes to pay it through the trustee, that $500 payment will appear in the plan but mathematically will have been deducted from disposable income as an expenditure on Schedule J. Similarly, excess income at the end of Schedule J may not reflect a monthly deduction for payment on a car because the car payment is in the Chapter 13 plan and debtors are instructed to exclude the payment from Schedule J. If the debtor owns encumbered property that is necessary for maintenance or support, then it is appropriate to make deductions from projected income for the payments to lienholders that will be made through the plan even though the budget that results for disposable-income-test purposes will be mathematically different from the budget in the schedules.

[4]

It is inevitable that some legitimate deductions for reasonably necessary expenses will have the effect of acquiring value for the debtor in property of the estate during the life of the plan. For example, if it is reasonable for the debtor to make a $300-per-month payment on a car during the plan, that $300 per month will not be included in projected disposable income and will not be available to unsecured claim holders even though the payments will eventually acquire the car for the debtor. This is one reason bankruptcy courts look carefully at the value of the items of property that the debtor will keep and pay for through the plan. If the debtor is making $600-per-month payments on a Cadillac and could realize adequate transportation with a $300 payment on a Chevrolet, the $300 difference falls directly to the bottom of the disposable income calculation for distribution to unsecured claim holders. When it appears that an expense claimed by the debtor is actually an investment, the courts are quick to exclude the investment from reasonably necessary expenses.3

[5]

The reasonably necessary prong of the disposable income test becomes tangled with other tests for confirmation and with avoidance powers of the trustee. Imagine a Chapter 13 debtor who wishes to keep a car worth $12,000. Through a 36-month plan with an interest rate of 16 percent, the monthly payment for the car would be $422. If the car is reasonably necessary for the maintenance or support of the debtor, the $422-per-month payment would be deducted to determine disposable income.

[6]

But what if the correct value for the car is $10,000, not $12,000? Or what if the interest rate at cramdown in the district is 10 percent, not 16 percent? Any reduction in value or interest rate with respect to a claim secured by property that is reasonably necessary will reduce the monthly payment to the lienholder and increase projected disposable income. In the example, a change in interest rate from 16 percent to 10 percent frees up $39 per month—$1,404 over the life of a 36-month plan—for distribution to unsecured claim holders. The Chapter 13 trustee has standing4 and arguably an obligation to police the provisions of plans to ensure that payments for reasonably necessary collateral fall within the interest rate and valuation standards for the district. Otherwise, the deals that debtors and creditors put into Chapter 13 plans will not always maximize what unsecured claim holders receive under the projected disposable income test.5

[7]

“Lien stripping” can affect the disposable-income-test calculation. As discussed elsewhere,6 when there is no value in collateral to support a lien, the lienholder does not have an allowable secured claim and confirmation of a plan can strip the unsecured lien off the collateral. Even when the collateral is the debtor’s principal residence and the claim is protected from modification by § 1322(b)(2),7 if there is no value to support the lien, a majority of courts hold that the debtor can strip off the unsecured mortgage and treat the lien as an unsecured claim.8 Lien stripping increases the disposable income because the money that would have been required to satisfy the lienholder under § 1325(a)(5) or § 1322(b)(5) becomes disposable income available to other creditors. It has been held that unsecured claim holders have standing to object to confirmation of a plan that fails to strip off a wholly unsecured mortgage.9 Even when the principal residence is reasonably necessary to the debtor’s rehabilitation, an unsecured creditor can force the debtor to strip off liens to increase projected disposable income.

[8]

Similarly, if the debtor or the Chapter 13 trustee can avoid a lien on collateral that is reasonably necessary for the maintenance or support of the debtor, that claim will become unsecured and the amount that would have been paid on account of the “secured” claim becomes projected disposable income for distribution to unsecured claim holders. It has been held that the Chapter 13 trustee has standing to avoid an unperfected security interest when avoidance will increase disposable income.10

[9]

The lien-avoiding powers of a Chapter 13 debtor under § 522(f) may affect the amount of disposable income available for unsecured claim holders. Discussed in detail elsewhere,11 § 522(f) empowers the debtor to avoid some liens that impair exemptions. Once avoided, the lienholder is an unsecured claim holder. Avoidance of a nonpossessory, non-purchase money lien on an item of personal property that is necessary for the maintenance or support of the debtor eliminates a secured claim and increases disposable income. There are no reported decisions addressing the question whether a Chapter 13 debtor can be required to avoid liens under § 522(f) to maximize disposable income. It has been held that the Chapter 13 trustee has standing to avoid liens that impair exemptions.12 To increase the disposable income available for unsecured creditors may be one of the rare situations in which it makes sense for a Chapter 13 trustee to avoid liens that impair exemptions under § 522(f).13

[10]

Determining whether expenses are reasonably necessary drags the bankruptcy court into approving or disapproving of the debtor’s lifestyle: is it reasonably necessary for the debtor to send children to private schools? to live in a house with a $1,000-per-month mortgage payment? to drive a one-year-old car rather than a five-year-old car? to pay a portion of income to support a church? to own a recreational boat? to belong to a country club? to buy newspapers? to have a small reserve against unexpected expenses? If there is a general rule, reasonably necessary means “adequate” but not “first-class.”14 Luxuries are excluded.15 A convenience is not the same as a necessity.16

[11]

Using different formulations, many reported decisions conclude that the disposable income test requires the bankruptcy court to reduce the debtor’s style of living. As one court explained, “[R]easonably necessary . . . [means] sufficient to sustain basic needs not related to . . . former status in society or the lifestyle to which [the debtor] is accustomed.”17 It has been said that Chapter 13 debtors “are not required to adopt a totally Spartan existence; neither are they permitted to continue an extravagant lifestyle at the expense of creditors. . . . [Section 1325(b)] contemplates some sacrifices or alteration in prepetition consumption levels.”18 Chapter 13 debtors “should not be allowed to continue in the lifestyle that drove them to file bankruptcy.”19 “[M]odification of a debtor’s lifestyle is often the price to be paid for the privilege of obtaining a Chapter 13 discharge.”20

[12]

When debtors seek Chapter 13 relief “the entire family is affected by the sacrifices and special efforts required by the Code. This family may not continue its prepetition lifestyle to the detriment of creditors.”21 One court observed somewhat more gently that bankruptcy judges should not require Chapter 13 debtors to alter their lifestyles to comply with § 1325(b) when there is no “obvious indulgence in luxuries.”22

[13]

The words used by these courts reveal little agreement about the lifestyle standard against which a debtor’s budget is measured for purposes of the disposable income test. “Basic needs” does not convey the same benchmark as “luxuries . . . enjoyed by an average American family.” Analyzing expenses upward from “not spartan” produces a very different picture than measuring downward from “no obvious indulgence in luxuries.” These differences in perspective produce substantial variation in the reported cases with respect to the intensity of scrutiny of expenses for disposable-income-test purposes.

[14]

Several courts have protested that the disposable income test is a limited incursion into the daily personal lives of Chapter 13 debtors. One court noted that it was inappropriate for purposes of § 1325(b) for the bankruptcy court to

inject itself in such inherently personal choices as whether limited funds are spent on charity, movies, cable television, music lessons, sports leagues or health clubs. . . . Chapter 13 debtors should be permitted to budget a reasonable amount for miscellaneous discretionary expenses and the funds may be used for such purposes as debtors may determine. Chapter 13 debtors are not required to live from a poverty level.23

Another court emotionally explained that the disposable income test does not entitle creditors to

[a] pound of flesh. . . . We have seen a few creditors . . .object to the . . . budget for reading material, even the daily paper. While a whole stream of periodicals is one thing, a reasonable amount is necessary for an informed public. The same is true for a reasonable amount for family recreation; not Broadway shows, but something to benefit the family. . . . “All disposable income” does not mean debtor’s prison in a modern sense.24
[15]

One of the better articulations of how bankruptcy courts might determine what expenses are reasonably necessary is this statement by Bankruptcy Judge Arthur Spector:

[T]he decision of whether a particular expense is reasonable is and ought to be based on the judge’s own opinion, for the judge is . . . the hypothetical reasonable person. . . . Even non-discretionary expenditures such as for food and shelter can reflect discretionary lifestyle choices. . . . No matter where the “fat” is hidden, such discretionary expenditures typically have more to do with enhancing one’s quality of life, acquiring spiritual fulfillment or just simply relaxing and enjoying oneself, than with subsistence. Since no two people have the same tastes, interests or philosophical dispositions, these discretionary costs can run the gamut from taking charitable donations to buying a ticket for a tractor-pull event. By lumping all discretionary expenses together, whether they derive from categories more commonly thought of in subsistence terms or from categories commonly thought of as clearly discretionary in nature, the bankruptcy judge will often obviate the need to pass judgment on specific expenditures, that is to say, micromanage the details of a debtor’s life. . . . [T]he proper methodology is to aggregate all expenses projected by the debtor which are somewhat more discretionary in nature, and any excessive amounts in the relatively nondiscretionary line items such as food, utilities, housing, and health expenses, to quantify a sum which, for lack of a better term, will be called “discretionary spending.” . . . If the discretionary expenses in the aggregate allow the Debtors to exceed their basic needs, including a reasonable reserve for recreation and exigencies (the reasonable “cushion”), then their plan cannot be confirmed.25
[16]

Tobacco expenses frame the debate neatly. Cigarettes are not cheap. To some bankruptcy judges, tobacco expenses of $200 or $300 per month are a luxury item, not a reasonably necessary expense. To other judges, tobacco expense is a necessity. Tobacco might be considered an entertainment item, the reasonableness of which would depend on the total entertainment expenses of the debtor. A debtor addicted to cigarettes would not characterize tobacco expense as entertainment—it is more like food or gas for the car, something you just have to have.

[17]

There aren’t many reported Chapter 13 decisions discussing whether tobacco expenses are reasonable and necessary for § 1325(b) purposes. The Bankruptcy Court for the District of Maine took the issue head on in In re Woodman26 and gave this thoughtful assessment of how tobacco fits into § 1325(b):

There are fundamental problems with branding one kind of expenditure or another as “never” reasonably necessary . . . . When it comes to categorical declarations, the courts are divided about morally unambiguous conduct. . . . To eliminate cigarette expenses from permissible expenditures in the disposable income equation (as a matter of law) would effectively outlaw smoking for all Chapter 13 debtors. That argument is better directed at Congress than at the court. . . . Better to consult each cases’s unique facts and circumstances, to consider each Chapter 13 plan on its individual merits, than to attempt a generalized declaration.27
[18]

In consolidated cases, the Woodman court concluded that tobacco expenses of $136 per month (2.1 percent of projected income; 3.4 percent of disposable income) and $240 per month (6.45 percent of projected income; 8.8 percent of disposable income) were reasonable and necessary. The court noted that “[n]either family lives immodestly, let alone lavishly. Their expenses, including their tobacco expenses, are not unreasonable.”28

[19]

It is the experience of many judges that the reasonably necessary test too quickly becomes a nonproductive game of hide and seek in which debtors offer changing combinations of “discretionary” and “essential” expenses with budget amendments to answer every objection.29 A few dollars shifted from haircuts to car insurance or $100 buried in the food budget are easily lost in the calculus. Most Chapter 13 debtors survive at the boundaries of subsistence. Bankruptcy judges recognize that reasonably necessary means that most debtors will just make it on exactly the amount of income available—almost without regard to how that income is ultimately allocated among reasonably necessary uses.30 Micromanagement of the debtors’ budget to ferret out the last few shillings is best reserved for debtors with more substantial incomes when reasonably necessary has meaning worth fighting about.

[20]

Too much magic in the budget is guaranteed to get the debtor and maybe debtor’s counsel in big trouble. An extreme example of that trouble is Handeen v. LeMaire.31 As explained by the U.S. Court of Appeals for the Eighth Circuit, in 1978, Gregory LeMaire “set out to execute Handeen . . . and he very nearly succeeded.”32 LeMaire pleaded guilty to aggravated assault and spent 27 months in prison. After his release, LeMaire graduated from college and earned a doctoral degree in experimental behavioral pharmacology from the University of Minnesota.

[21]

In the meantime, Handeen obtained a civil judgment against LeMaire for more than $50,000. Handeen began garnishing LeMaire. LeMaire consulted a law firm and filed a Chapter 13 petition. Confirmation of LeMaire’s Chapter 13 plan was eventually reversed by the Eighth Circuit en banc on a finding of lack of good faith.33

[22]

After dismissal of the Chapter 13 case, Handeen sued LeMaire, LeMaire’s parents, and the law firm that represented LeMaire in the Chapter 13 case, alleging an “intricate scheme” to fraudulently obtain a discharge of Handeen’s judgment and to manipulate the bankruptcy system:

As part of this plot, the Firm and the Lemaires contrived to minimize whatever reduced recovery Handeen might achieve via the bankruptcy process. To this end, the Firm instructed Gregory to inflate the amount of his debts by agreeing to pay his parents rent and by executing a false promissory note payable to the elder Lemaires. Gregory listed his parents as creditors on schedules he filed with the bankruptcy court, and the Firm relied on the parents’ claims when preparing proposed repayment plans. Of course, to the extent the bankruptcy court recognized this “indebtedness,” it would reduce Handeen’s pro rata share of any Chapter 13 distributions. Indeed, the cabal enjoyed success in this venture, for the bankruptcy court in substantial measure approved the parents’ petitions against the estate. As such, Gregory’s parents received a portion of the sums he paid under the approved plan, and they compounded the fraud by transferring much of this money back to Gregory. . . . The intrigue, however, does not end there. In 1989, while Handeen was appealing the bankruptcy court’s confirmation of the Chapter 13 plan, Gregory found a new job which required him to relocate from Minneapolis to Houston, Texas. This employment significantly enhanced Lemaire’s income. . . . Lemaire did not wish to reveal his increased wages to the bankruptcy trustee. Consequently, Lemaire, his parents, and the Firm formulated an artifice to avoid rousing the trustee’s attention. Specifically, the ruse called for Lemaire to mail his father a parcel every month. Within that package would be an envelope addressed to the bankruptcy trustee and containing a check representing Lemaire’s monthly payment under the plan. Lemaire’s father would, in turn, place the enclosed envelope in the mails, and the trustee would thus receive a letter postmarked from Minneapolis rather than Houston.34
[23]

On a motion for summary judgment, the Eighth Circuit held that these allegations stated a cause of action against the LeMaires and their bankruptcy attorneys for civil RICO.35 With respect to participation in a racketeering enterprise by the law firm, the Eighth Circuit explained:

If the Complaint is to be believed, as it must, . . . Handeen’s proof could show that the Firm and the Lemaires joined in a collaborative undertaking with the objective of releasing Gregory from the financial encumbrance visited upon him by Handeen’s judgment. . . . The attorneys . . . may have suggested that Chapter 13 bankruptcy . . . offered the most propitious opportunity to reach the desired result. . . . [T]he Complaint could support a showing that the Firm navigated the estate through the bankruptcy system. Under this postulation, the Firm directed Gregory and his parents to enter into a false promissory note and create other sham debts to dilute the estate, the Firm represented the elder Lemaires and defended their fraudulent claims against objections, the Firm prepared Lemaire’s filings and schedules containing erroneous information, the Firm formulated and promoted fraudulent repayment plans, and the Firm participated in devising a scheme to conceal Gregory’s new job from the bankruptcy trustee. . . . If Handeen’s evidence is up to this challenge, we are comfortable that he will have succeeded in proving that the attorneys conducted the bankruptcy estate. In that event, this would not be a case where a lawyer merely extended advice on possible ways to manage an enterprise’s affairs. . . . Nor would this be a situation where counsel issued an opinion based on facts provided by a client . . . . Instead, if the Firm truly did associate with the enterprise to the degree encompassed by the Complaint, we would not hesitate to hold that the attorneys “participated in the core activities that constituted the affairs of the [estate],” . . . namely, the manipulation of the bankruptcy process to obtain a discharge for Lemaire. In that instance, . . . we could safely say that the lawyers participated in the operation or management of the estate . . . . [W]e conclude that the Complaint could justify a finding that the Firm participated in the conduct of the alleged RICO enterprise.36
[24]

The facts alleged in LeMaire are extreme, but not so extreme. LeMaire should be a wake-up call for debtors’ attorneys lulled into (mis)treating the budget in Chapter 13 cases as a process of fitting estimated (made up?) numbers into categories required by a form. Concocting debts even if the resulting expense items would be reasonably necessary for purposes of § 1325(b) is dishonest and dangerous. Without regard to whether Handeen prevails at trial, the Eighth Circuit’s point is well taken: great care and complete honesty in the presentation of income and expense information are the standards against which debtors and their lawyers will be measured.

[25]

There is some confusion in the case law whether the “reasonably necessary . . .” test in § 1325(b) applies to all of a Chapter 13 debtor’s expenses. Although § 1325(b)(2) is worded plainly to require that all expenses must be “reasonably necessary . . . for the maintenance or support of the debtor or a dependent of the debtor,”37 at least three courts have held that only recurring expenses for food, clothing and shelter that would normally be paid directly by the debtor are subject to the test.38 This interpretation of § 1325(b)(2) leads to the conclusion that the reasonably necessary test does not apply to items of expense that the debtor will pay through the Chapter 13 plan. For example, if the debtor proposes to pay an ongoing mortgage directly to the mortgage company, but to pay for a car through the Chapter 13 trustee, these courts would measure the house payment against the “reasonably necessary . . .” standard in § 1325(b), but the car payment would be excluded from the projected disposable income test altogether. These courts would allow or disallow the car payment under other confirmation tests, such as the good-faith test in § 1325(a)(3).

[26]

This interpretation of the disposable income test avoids most of the discomfort of lifestyle review by the bankruptcy courts, but it is not obviously supported by the language of § 1322(b)(2). The “reasonably necessary . . .” expenses that are deducted from income to determine disposable income are expenses “for the maintenance or support of the debtor or a dependent of the debtor.”39 The section does not say that expenses are deducted only if paid directly by the debtor or only if paid for certain kinds of necessaries. Expenses for maintenance or support include food, clothing and shelter; but also included are expenses for transportation, recreation, education, insurance and many other items. Payments on the family car to a secured claim holder may be “necessary to be expended—for the maintenance or support of the debtor or a dependent of the debtor,” without regard to whether the payments are made directly by the debtor or are made through the Chapter 13 trustee.

[27]

The view that limits § 1325(b)(2) analysis to recurring living expenses paid directly by the debtor permits manipulation of confirmation criteria by simply providing for payment through the Chapter 13 trustee as part of the plan. For example, a debtor making a $2,000-per-month house payment directly to the mortgage holder would be subject to the “reasonably necessary . . .” test, but a debtor paying that same $2,000-per-month mortgage through the Chapter 13 trustee would not. The debtor who wants to keep a luxury automobile with a large monthly payment might avoid § 1325(b) scrutiny by proposing to make payments directly to the holder of the car note.40 It is no solace that acquisition of a luxury automobile might be subject to scrutiny under other tests for confirmation, such as the already overburdened good-faith test in § 1325(a)(3).41 It is more logical that the “reasonably necessary . . .” test in § 1325(b) applies to all expenses of the debtor, without regard to whether those expenses are recurring, are prepetition debts, are paid directly by the debtor or are paid by the Chapter 13 trustee. Other courts have correctly read § 1325(b)(2) to test the reasonableness and necessity of all expenses.42

[28]

There are reported decisions holding that food expense of $650 per month is “higher than the IRS standards . . . for a family of four,”43 $515 per month is too much for food for a family of four,44 $300 per month is too much food for a single person with no dependents45 and $175 per month is too little food for a family of five.46 Seven hundred dollars per month for food for the debtor, his spouse and four children “is more likely to be an accurate figure” than the $850 food expense urged by the debtor.47 When the debtor’s job required two or three meals per day outside her home, $400 per month for food was reasonable and necessary.48 A physical laborer who lives far from a population center reasonably spends $700 per month to feed a family of four that includes two teenage children.49

[29]

In Flint, Michigan, in 1986 “basic transportation costs” during the life of a Chapter 13 plan should not exceed $10,000—a 1984 Corvette is not reasonably necessary, but a 1984 Cavalier passes the test.50 A four-wheel-drive Blazer is an extravagance.51 In the Southern District of Florida in 2002, monthly lease payments for a car of $445 and transportation expense of $200 per month are “excessive.”52 In the Eastern District of Missouri in 1992, a 1991 Cadillac Deville and a 1991 Corvette are luxury items that are not reasonable for a Chapter 13 debtor unable to pay unsecured claim holders in full.53 In the Eastern District of Missouri in 1997, $450 per month for a nonfiling spouse’s car is excessive, but $366 per month for a 1991 Mercedes is okay because “debtors need a vehicle that can accommodate his family of five . . . . The monthly payment . . . roughly approximates what it might cost him to purchase or rent a used car large enough for his family.”54 The reasonably necessary test might allow a monthly payment of $272 for a 1989 Chrysler LaBaron convertible, but a debtor’s proposal to accelerate payments to $460 per month has the impermissible effect of building equity in the car at the expense of other creditors and is not reasonable or necessary.55 A seven-year-old Porsche would normally be a luxury item, but it is reasonably necessary when driven by the nonfiling spouse; and a GMC Suburban with an $871.66 monthly payment survives § 1322(b) because the loan will be retired in a year and the monthly payment will then be available for distribution to other creditors.56 One car is necessary, but not two when only one debtor is employed.57 Three hundred eighteen dollars per month for a car payment is not reasonable and necessary when the installment contract will be paid in full shortly after confirmation and the debtors have not proved they will need to replace the car when it is paid for.58

[30]

Every Chapter 13 debtor can expect medical and dental expenses. In some districts, health insurance is a mandatory expense item. However, even medical and dental expense must be reasonably necessary for § 1325(b) purposes. One court found that $120 per month for medical and dental expenses was excessive when the debtors had “full medical and dental insurance coverage” and there was no evidence of any “unusual health problems.”59 Another court found $1,585 per month for medical expenses was reasonable and necessary based on uncontradicted testimony from a physician that the debtor’s 12-year-old suffered from Attention Deficit Hyperactive Disorder and a Generalized Anxiety Disorder.60 Fertility treatments costing $833.74 per month were not reasonably necessary: “While having children is a major life activity, it is not a necessary one, or one that cannot be postponed. . . . [I]t is simply another lifestyle choice.”61

[31]

A home mortgage payment of $1,677 per month was not reasonable because the debtors could find adequate rental housing for significantly less than $1,000 a month in the Eastern District of North Carolina.62 A monthly housing cost of $989 was too much for a family of four in Minnesota in 1985.63 A housing payment of $1,267 a month that includes insurance and taxes is reasonably necessary in 1996 in the Northern District of Florida.64 A vacation home is not reasonable or necessary for purposes of § 1325(b).65 Accelerated payment of a home mortgage when unsecured creditors will receive only 44 percent is not reasonably necessary.66

[32]

Chapter 13 debtors who own homes can budget a reasonable amount for utilities, cleaning and maintenance. One court found $300 per month for home maintenance unreasonable because the debtors intended to use the money for “cosmetic repairs to the house.”67 One hundred fifty dollars per month for home maintenance is unreasonable when the plan payment is only $166.68 One hundred dollars per month for home maintenance appeared high for debtors living in an almost new mobile home.69 Another court held it was reasonably necessary to spend $4,000 to repair the debtors’ roof, but new kitchen cabinets, a sink, disposal and new faucets were “improvements and not maintenance or repair items.”70 A debtor with five acres of land proved that a John Deere riding lawn mower was a reasonably necessary expense.71 A debtor with a one-acre homestead lost the argument for a $10,000 lawn tractor.72

[33]

Maybe every Chapter 13 debtor can prove the reasonableness and necessity of a telephone. But long-distance service and special features are not always reasonable or necessary. In the Middle District of Florida, a single debtor with no dependents was allowed $75 per month for telephone service, not the $150 budgeted by the debtor.73 In the Eastern District of Pennsylvania, cellular telephone expense for the debtor’s wife was not reasonably necessary: “[H]is wife is unemployed. There is, therefore, no need for her to have her own cellular phone.”74 Four telephones—two cell phones, one business line and one home phone—were too many phones for the Bankruptcy Court for the Middle District of Pennsylvania.75

[34]

Dry-cleaning expense of $200 per month and $120 per month for haircuts are not reasonable or necessary when “one year’s worth of dry cleaning exceeds the $1,965.90 which unsecured creditors would receive.”76 Health club memberships are out.77 Country club dues are out.78 Newspapers are out79 or in80 perhaps depending on where you live. Cable TV is not a reasonable or necessary expense in the Southern District of Indiana;81 $50 per month is a reasonable and necessary expense for cable in the Eastern District of Pennsylvania.82

[35]

Campers are a lightning rod for trouble under the “reasonably necessary . . .” test.83 Veterinary expenses, even for all the right reasons, are a hard sell for debtors: “The debtor is in the unfortunate position of owning several horses and dogs, which are elderly . . . . It is commendable that the debtor is willing to care for these animals . . . . As between the debtor’s elderly horses and dogs and his creditors, I think that the creditors should be paid first.”84

[36]

A recreational boat is not reasonably necessary for maintenance or support.85 A $62,000 “recreational” tractor and hay baler are not reasonably necessary when farming generated less than $25 per month in net income.86 Two hundred fifteen dollars per month for recreation was excessive when the debtor proposes a plan payment of $475 per month;87 $50 per month for recreation was not “reasonably necessary . . .” when the monthly payment into the plan was only $100.88 Music lessons at an annualized expense of $3,720 are a luxury, unnecessary for § 1325(b) purposes.89

[37]

Six hundred dollars per month was more than many reputable day care facilities would charge for child care expenses in 1986 in the Eastern District of North Carolina.90 United Way is out at $202.75 per month91 or at $1.50 per week.92 Section 1325(b) does not permit voluntary payroll deductions for a savings account.93

[38]

The courts have fractured with respect to whether contributions to a pension fund, retirement account or employee stock purchase plan are reasonably necessary expenses. Sometimes citing the “voluntary” nature of the contributions, a majority of the reported decisions hold that pension or retirement contributions are not deductible expenses for § 1325(b) purposes.94 A few courts, including the U.S. Court of Appeals for the Second Circuit, exclude retirement contributions from disposable income or find that the reasonableness and necessity of retirement contributions turns on the facts of each Chapter 13 case—the voluntary or mandatory nature of the contribution is one factor for the bankruptcy court to consider.95

[39]

The repayment of loans from pension or retirement plans has also split the courts. Led by the U.S. Court of Appeals for the Sixth Circuit, a strong majority of reported decisions hold that repayment of loans from a retirement or pension plan is not a reasonable and necessary expense for § 1325(b) purposes.96 A few courts have concluded that the facts and circumstances of individual Chapter 13 cases must be considered to determine whether pension loan repayment is a reasonable and necessary expense.97

[40]

Mandatory deductions for membership in a union have been allowed for § 1325(b) purposes.98

[41]

The reported decisions find that life insurance premiums sometimes are and sometimes are not reasonable and necessary expenses for Chapter 13 debtors. Whole-life and similar products are both insurance and an investment vehicle. Most term life insurance is purely death protection without any investment content. Some debtors have dependents who need the protection of life insurance. Some debtors are financially unable to pay creditors and pay for a death benefit. When the debtor had a history of medical problems, disability insurance costing $51.13 per month was reasonably necessary and a term life insurance premium of $18.72 per month was permitted because it was “not an investment asset.”99 The Bankruptcy Appellate Panel for the Ninth Circuit rejected a per se rule of exclusion of life insurance policies for § 1325(b) purposes in favor of case-by-case analysis of the type of insurance and the circumstances of debtors:

Some types of life insurance are indeed mainly estate planning devices which ought to be treated as retirement contributions. However, other types of life insurance are intended to legitimately protect the debtor’s dependents from destitution if the debtor were to die. Like other budget items, whether a life insurance premium is a necessary expense is a matter which must be determined on a case-by-case basis. . . . The bankruptcy court in this case made no finding that the debtors’ life insurance policies had retirement benefits at all. Assuming some residual benefits, the focus of its inquiry must nonetheless be whether the policies are reasonably necessary for the support of the debtors’ dependents. In cases where the debtors have very young or handicapped dependents, the absence of a budget for life insurance may call a Chapter 13 plan into question. . . . This is a matter for the exercise of sound discretion by the court; a per se rule is error.100
[42]

In the Eastern District of Pennsylvania, $175 per month for out-of-state parochial school tuition is not a reasonable, necessary expense.101 Debtors with “strong religious beliefs” were allowed $590 per month for private religious school tuition in the Middle District of Florida.102 Five hundred sixty-seven dollars per month for religious school tuition is not reasonably necessary in the Western District of North Carolina when the monthly payment to the Chapter 13 trustee is only $450.103 In the District of Minnesota, $246 per month for parochial school tuition was a “relatively small payment,”104 but $500 per month for college tuition and $500 per month for secondary school tuition are not reasonably necessary to sustain the basic needs of a Chapter 13 debtor.105

[43]

Six hundred fourteen dollars per month for tuition and rent expenses for the debtor’s daughter’s senior year at a state university is reasonable and necessary in the Eastern District of Virginia.106 In the Eastern District of Michigan, $300 per month and $400 per month for living expenses for the debtors’ undergraduate daughters are reasonable and necessary expenses; $260 per month for a masters program for one of the debtors is an “investment in herself . . . not different in kind from other discretionary expenses such as recreation.”107 Private college expenses of $560 per month are “hardly a basic need of the debtor or his family, particularly when it appears that a similarly high quality education is available from either of two local state universities.”108

[44]

Private high school tuition of $395 per month is not reasonably necessary when the debtor’s daughter can attend a public high school, notwithstanding that honors courses and cheerleading opportunities are better at the private school.109 Pennsylvania debtors living in a “safe, suburban setting” could not prove the reasonableness or necessity of $760 per month to send their children to private schools.110 Debtors in an Illinois district where “average standardized test scores at the public school are below those of the State as a whole” were allowed $260 per month for private Catholic school tuition.111 Two-thousand-dollars-per-month private school tuition for a child needing special education is not reasonably necessary when the debtor fails to prove that special education is not available at public expense.112 Five hundred fifty dollars per month is reasonable and necessary for special education expenses for a medically diagnosed hyperactive child, and the debtor need not prove that a local school district is failing to meet the child’s special needs to satisfy § 1325(b)(2).113

[45]

In dicta, one court allowed criminal restitution payments to be subtracted to determine disposable income under a Chapter 13 plan.114 Another court, also in dicta, indicated that fines for failing to file tax returns are expenses necessary for the maintenance of the debtor under § 1325(b).115 These cases may be blurring the line between expense deductions to reach disposable income and the allowance of unsecured claims that are paid through the plan. Prepetition claims for restitution and fines are unsecured claims that may be paid through the plan along with other unsecured claims. If entitled to priority under § 507, the fines might be separately classified for full payment to satisfy § 1322(a)(2).116 Fines and restitution are not expenses for the maintenance or support of the debtor or a dependent of the debtor for § 1325(b)(2) purposes. They are ordinary prepetition claims that share in payments from projected disposable income through the Chapter 13 plan.

[46]

A modest reserve for “unexpected” expenses is reasonably necessary for the maintenance and support of the debtor. Seventy-five dollars per month was approved as a reserve in the Central District of California in 1986.117 In the Eastern District of Virginia, $117 a month was an appropriate “cushion of money . . . to guard against life’s unexpectancies.”118 The appropriate reserve in the Eastern District of Pennsylvania has been described as “a small cushion”119 and as a “reasonable” amount.120 In the Eastern District of North Carolina, $376 is too much uncommitted income to pass the disposable income test.121 A cushion of $469 per month out of a disposable income of $1,380 is excessive.122 A small reserve is not an invitation to pad the budget or to hide money for a use that would not pass the reasonably necessary test.123 Debtors can build into the budget a little leeway for expenses that are difficult to project but inevitable during the life of a Chapter 13 plan.124

[47]

Ongoing alimony or support obligations are a line item in Schedule J to Official Bankruptcy Form 6125 and are routinely deducted as necessary expenses to calculate disposable income. This is an appropriate outcome but not altogether consistent with other sections of the Code. A postpetition support payment would not be an allowable claim under § 502(b)(5),126 but its payment from postpetition wages is allowed by deducting the required amount in the budget to arrive at disposable income. This result is mimicked in districts that permit the payment of support claims through the plan127 like an ordinary prepetition debt.

[48]

The management of charitable contributions as an expense item for disposable income test purposes has been a chronic headache for the bankruptcy courts. Congress has twice enacted legislation that complicates this aspect of Chapter 13 practice.

[49]

Prior to June 19, 1998, § 1325(b) of the Code said nothing in particular about the deductibility of charitable contributions to determine disposable income. The issue arose in many reported decisions involving church contributions by Chapter 13 debtors. The courts that dared to tackle the tithing question failed to reach a consensus whether contributions to a church are reasonably necessary for the maintenance or support of a Chapter 13 debtor.

[50]

For example, confirmation was denied when an ordained minister employed as a teacher by a church proposed voluntary contributions to his employer of almost half his disposable income.128 Tithes of $65 per month,129 $140 per month,130 $267.58 per month,131 $300 per month,132 $400 per month,133 $470 per month134 and $540 per month135 were excessive and not reasonably necessary; $43 per month was “not so inappropriate.”136 Some courts have found a constitutional aspect to this issue. At least two reported decisions conclude that denial of confirmation solely on the ground that tithing fails the disposable income test violates the free exercise clause of the First Amendment.137 Other courts have held that refusing to confirm a plan that budgets a tithe did not violate the First Amendment’s establishment clause or the free exercise clause.138 One court held that a 10 percent contribution to the Mormon Church was reasonably necessary for the debtor’s maintenance and support and was not properly subjected to disposable-income-test scrutiny.139

[51]

Several courts prior to 1998 treated religious contributions like any other expense item for § 1325(b) purposes and examined reasonableness and necessity in the context of all the debtor’s circumstances.140 These cases were on a healthy track. A per se rule allowing or disallowing all church contributions was inconsistent with the statutory prescription that reasonable and necessary expenses are deducted to arrive at disposable income. If every contribution to a church is unreasonable and/or unnecessary, it follows that all items of discretionary expense must be eliminated in Chapter 13 cases.

[52]

It is generally recognized that some level of discretionary expense—sometimes labeled as “recreation” or “entertainment” in the budget—is a necessary component of the maintenance and support of the debtor and the debtor’s family in a Chapter 13 case. Most bankruptcy courts approve a small monthly allowance for recreation without presuming to dictate whether the debtor can buy cigarettes or go see Terminator 2 at the movies. In the same sense, there is some level of church contribution that is probably reasonable and necessary in some Chapter 13 cases. It cannot be fixed at the same amount or the same percentage of income in all cases. A case-by-case approach to the tithing problem was most consistent with the statute and with court interpretations with respect to other expense items under the disposable income test. It made sense until Congress changed the rules.

[53]

In 1993, for reasons that have nothing directly to do with bankruptcy,141 Congress enacted the Religious Freedom Restoration Act.142 At risk of oversimplification, RFRA states that governments can “substantially burden” the exercise of religion only in furtherance of “a compelling government[al] interest” and must use the “least restrictive means” to further that interest.143 RFRA applies to all federal and state law.

[54]

In 1996, the U.S. Court of Appeals for the Eighth Circuit, in a Chapter 7 case, held that RFRA prohibited a Chapter 7 trustee from recovering prepetition contributions to a church that were fraudulent transfers under § 548 of the Bankruptcy Code.144 After the Eighth Circuit’s decision, in a nonbankruptcy case, the Supreme Court declared portions of RFRA unconstitutional as applied to state law.145 The Eighth Circuit’s opinion barring recovery of church contributions by a Chapter 7 trustee was vacated in light of the Supreme Court’s action.146 On remand, the Eighth Circuit concluded that the Supreme Court’s invalidation of RFRA as applied to state law was not controlling and RFRA was constitutional as applied to the Bankruptcy Code.147 Accordingly, the Eighth Circuit reinstated its decision that a Chapter 7 trustee could not recover a fraudulent conveyance to a church.

[55]

RFRA as interpreted by the Eighth Circuit could insulate tithing from disposable-income-test analysis in Chapter 13 cases. Before and after the Supreme Court addressed the constitutionality of RFRA, bankruptcy courts concluded that RFRA would be unconstitutional if it required measuring the sincerity of Chapter 13 debtors’ religious practices in the context of § 1325(b).148 These decisions refuse to apply RFRA to the tithing debate under § 1325(b) based on principles of separation of powers. Some of these decisions interpret the Supreme Court’s invalidation of RFRA more broadly than did the Eighth Circuit on remand.

[56]

To further complicate the picture, in 1998 Congress amended § 1325(b)(2)(A) of the Bankruptcy Code to specifically deal with charitable contributions in the disposable income test. The Religious Liberty and Charitable Donation Protection Act of 1998149 amended 11 U.S.C. § 1325(b)(2)(A) to read as follows:

(2) For purposes of this subsection, “disposable income” means income which is received by the debtor and which is not reasonably necessary to be expended—
(A) for the maintenance or support of the debtor or a dependent of the debtor, including charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to a qualified religious or charitable entity or organization (as that term is defined in section 548(d)(4)) in an amount not to exceed 15 percent of the gross income of the debtor for the year in which the contributions are made;150 . . . .
[57]

The 1998 amendment to § 1325(b)(2)(A) is applicable to all Chapter 13 cases pending or commenced on or after June 19, 1998.151 The cross-references to § 548(d)(3) and (d)(4) import into the disposable income test convoluted statutory definitions of “charitable contribution” and “qualified religious or charitable entity or organization.”152

[58]

After the 1998 amendment, qualifying charitable contributions up to 15 percent of gross income are included in “maintenance or support of the debtor or a dependent of the debtor;” but at first blush it is arguable that the “reasonably necessary” test in the introductory sentence of § 1325(b)(2) still applies.153 Put another way, the 1998 amendment of § 1325(b)(2)(A) signals that some charitable contributions are deductible to determine disposable income at confirmation; however, Congress did not clearly eliminate the requirement that charitable contributions be reasonably necessary for the maintenance or support of the debtor or a dependent of the debtor.

[59]

The first appellate court to consider the issue concluded that the 1998 amendment creates an across-the-board exception to the reasonably necessary test with respect to charitable contributions up to the 15 percent limit. In Drummond v. Cavanagh (In re Cavanagh),154 the original schedules listed monthly net income of $2,056 and monthly expenses of $1,691, no portion of which was allocated to charitable contributions. The Statement of Financial Affairs revealed no charitable contributions of $100 or more within the year preceding the petition. The plan provided 39 monthly payments of $365. The debtors moved from Montana to North Dakota and one of the debtors received a promotion. The debtors filed amended schedules to increase net income to $2,643 and to increase expenses to $2,259, including for the first time a monthly charitable contribution of $234 to their church. The amended plan provided for three monthly payments of $365 and 33 monthly payments of $385. The Bankruptcy Appellate Panel for the Ninth Circuit rejected a disposable income test objection to confirmation of the amended plan explaining that the proposed charitable contribution was not subject to the reasonably necessary test:

Section 1325(b)(2)(A) was amended by the Religious Liberty and Charitable Donation Protection Act of 1998, . . . . The 1998 Act was intended to “protect[ ] the rights of debtors to continue to make religious and charitable contributions after they file for bankruptcy relief.” H.R. Rep. No. 105-556 (105th Cong.), . . . . The . . . statutory language is clear and unambiguous and is not demonstrably in conflict with congressional intentions. A debtor need not pledge income that is reasonably necessary for the debtor’s maintenance and support. Maintenance and support is plainly intended to include charitable contributions that do not exceed fifteen percent. Accordingly, a court is not supposed to engage in a separate analysis to determine whether charitable contributions up to fifteen percent are reasonably necessary for the debtor’s maintenance and support. . . . The [In re Buxton, 228 B.R. 606 (Bankr. W.D. La. 1999)] approach of superimposing a reasonableness standard over the fifteen percent limitation is inconsistent with congressional will as expressed in § 1325(b)(2)(A). Under § 1325(b)(2)(A), annual charitable contributions of up to fifteen percent of the debtor’s gross income are deemed reasonably necessary for the maintenance and support of the debtor.155
[60]

Cavanagh is not likely to be the last word on the question whether § 1325(b)(2)(A) excepts charitable contributions from the reasonably necessary test up to 15 percent of gross income. If Cavanagh is correctly decided, there is a 15 percent wildcard in the budget for every Chapter 13 debtor that could be used to exhaust a substantial portion of the disposable income that unsecured claim holders received in Chapter 13 cases prior to the 1998 amendment. For the time being, the case law discussed above struggling to determine the reasonableness and necessity of tithing remains relevant after the 1998 amendments to § 1325(b)(2)(A). Cases precluding all tithing and cases allowing all tithing without regard to the character of the recipient or the amount of the contribution are probably overruled by the 1998 amendments.156

[61]

The 15 percent cap in § 1325(b)(2)(A) is a huge amount. Chapter 13 budgets that reveal charitable contributions rarely even approximate the 10 percent tithing concept. Fifteen percent of a debtor’s gross income would exceed the total projected distribution to unsecured creditors in many Chapter 13 cases. The 15 percent provision will encourage Chapter 13 debtors to budget large charitable contributions. Every dollar budgeted to charity comes right out of the pockets of unsecured claim holders. There is no clue in the amendment or legislative history how trustees or creditors will police debtor’s assertions of charitable largesse.

[62]

The 15 percent cap is also oddly worded. “Gross income” ordinarily means the debtor’s income before deductions for such things as taxes. “The year in which the contributions are made” presumably means postconfirmation years during the Chapter 13 plan. Because gross income can’t be known until the end of the postconfirmation year, calculation of the cap in § 1325(b)(2)(A) is not possible until after the fact, based on records that can only be gathered from the debtor. Chapter 13 practitioners will have to consult the Internal Revenue Service to determine whether the recipients of charitable contributions qualify for purposes of the disposable income test.

[63]

The definition of “charitable contribution” in the 1998 amendment is bound to cause some problems. The cross-reference to § 548(d)(3) and (d)(4), reproduced above, defines charitable contribution in terms of the recipient and not the purpose of the contribution. It was only a matter of time before someone would argue, for example, that parochial school tuition was a charitable contribution for purposes of § 1325(b)(2)(A) and not an ordinary expense item that would be measured against the reasonably necessary test in § 1325(b). So far, the reported decisions resist this interpretation of charitable contribution and continue to measure parochial school tuition against the reasonable and necessary standards of the disposable income test.157

[64]

The 1998 amendment to § 1325(b)(2)(A) compounds the difficulties charitable contributions create at confirmation of Chapter 13 plans. There is a specific statement in the 1998 legislation that the Religious Liberty and Charitable Donation Protection Act does not limit the applicability of RFRA.158 The large gray area in which the bankruptcy courts have struggled to determine whether charitable contributions are reasonable and necessary is not clarified by the 1998 amendment except with respect to the recipients that can be paid and the maximum contributions that can be made.

[65]

Also, as the Ninth Circuit BAP recognized in Cavanagh, the 1998 amendment to § 1325(b)(2)(A) did not create a charitable contribution exception to any of the other tests for confirmation. The good-faith test in § 1325(a)(3) still applies to assess the propriety of plan provisions for charitable contributions in Chapter 13 cases. In Cavanagh, the BAP found evidence of good faith to support the initiation of monthly contributions to a church.159 This will not always be the case. For example, in In re Stanley,160 the debtors’ proposed charitable contribution of $100 per month was less than 15 percent of gross income and survived § 1325(b) analysis; but because the $100.00 to charity “is more than one-half of debtor’s proposed plan payment of $166.00”161 the charitable contribution failed good faith analysis under § 1325(a)(3).

[66]

In this regard, it might be noted that the same 1998 legislation that amended § 1325(b)(2)(A) also amended § 707(b)—the “substantial abuse” bar to Chapter 7 relief.162 Section 707(b) was reworded, that the bankruptcy court to state “may not take into consideration whether a debtor has made or continues to make, charitable contributions.”163 The 1998 amendment to § 1325(b)(2)(A) excludes from disposable income “charitable contributions . . . not to exceed 15 percent” without mention whether the debtor “has made or continues to make” charitable contributions. Does this lack of parallelism signal any legislative intention with respect to a debtor’s history of charitable contributions and the (undisturbed) good-faith test for confirmation in § 1325(a)(3)?164

[67]

Some things remain generally true about the disposable income test: Frugality is rewarded. Few courts will permit Chapter 13 debtors to surround themselves with luxury or entertain themselves at the expense of creditors. One bankruptcy judge was heard to say, “[R]easonably necessary means . . . that the debtor drives the same car that I do . . . a six-year-old Chevrolet.”165 The debtor is best positioned to survive a disposable-income-test challenge by eliminating everything from the budget that might be characterized as living too well. The reported decisions are mostly empty of market data or expert testimony to prove the cost of basic needs, notwithstanding that several courts have postured that they know the appropriate numbers when they see them. Statistical information from the Census Bureau, from the Department of Housing and Urban Development or from a state department of human services might be useful to demonstrate the reasonable cost of necessary services.

[68]

A creditor challenging confirmation on disposable income grounds may need to develop some evidence of the cost of alternative housing, the cost of food for a family the size of the debtor’s, the cost and availability of alternate transportation if the debtor proposes to keep an expensive car and so forth. These are matters not easy to demonstrate in a courtroom. The Chapter 13 trustee might be qualified to give evidence on the range of expenses presented in Chapter 13 cases in the district.


 

1  11 U.S.C. § 1325(b)(2)(A) (emphasis added).

 

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

 

3  See, e.g., In re Anes, 195 F.3d 177, 180–81 (3d Cir. 1999) (“Voluntary contributions to retirement plans . . . are not reasonably necessary for a debtor’s maintenance or support and must be made from disposable income. . . . ‘[a]lthough investments may be financially prudent, they certainly are not necessary expenses for the support of the debtors or their dependents. Investments of this nature are therefore made with disposable income; disposable income is not what is left after they are made.’ Debtors’ proposed payments, regardless of their financial prudence, must be understood as being made out of ‘disposable income’ under the terms of their proposed plans.” (internal citations omitted)); In re Williamson, 296 B.R. 760, 765–66 (Bankr. N.D. Ill. 2003) (“The non-Debtor spouse’s whole life insurance policy in this case is an investment vehicle as the policy builds cash value . . . . [T]he whole life insurance policy . . . is not ‘reasonably necessary’ and the amount of the monthly policy premium for that policy should be included in the Debtor’s disposable income.”); In re Hansen, 244 B.R. 799, 801–02 (Bankr. N.D. Ill. 2000) (The voluntary portion of pension contributions is an investment and is not reasonably necessary for maintenance or support. “While investing for retirement is financially prudent, it is not a necessary expense for the support of debtors. . . . Such investments are made with disposable income; disposable income is not what is left after debtors contribute to retirement or pension accounts.”); In re McKown, 227 B.R. 487 (Bankr. N.D. Ohio 1998) ($133-per-month mortgage payment on real property that is not the debtors’ principal residence is not reasonably necessary. However, debtors satisfy the disposable income test by extending the plan to 60 months.); In re Presley, 201 B.R. 570, 575 (Bankr. N.D. Fla. 1996) (“[E]xpenses are not reasonably necessary for the maintenance of the debtor . . . where the expenses are for luxury goods and services, investments, investment property, or where the expenses are clearly excessive.”); In re Cardillo, 170 B.R. 490, 491 (Bankr. D.N.H. 1994) (A condominium on Lake Winnipesaukee and a second residence are not reasonably necessary. The difference between the $500-per-month rental income from the condominium and the $900-per-month mortgage is available for creditors. “[T]o allow the debtor to keep the condominium on Lake Winnipesaukee, which has a negative cash flow of at least $400.00 per month, . . . would be to approve a windfall to the debtor to the detriment of the debtor’s creditors.”); In re Webster, 165 B.R. 173, 176 (Bankr. W.D. Va. 1994) (Confirmation is denied on good-faith and disposable-income-test grounds where the debtor proposed to pay nothing to unsecured claim holders and $20,000 to the holder of a mortgage on real property that contained the debtor’s principal residence until it was destroyed by fire before the petition. “[R]etention of nonessential or luxury items in a chapter 13 plan to the detriment of unsecured creditors fails the disposable income test, requiring denial of confirmation. . . . In the instant case debtor wishes to retain investment property while paying nothing to unsecured creditors. The plan violates § 1325(b)(1) and cannot be confirmed.”); In re Gonzales, 157 B.R. 604, 609 (Bankr. E.D. Mich. 1993) ($260 per month for a master’s program for one of the debtors is not reasonably necessary. The master’s program is an “investment in herself” by the debtor, and generally investments are not reasonably necessary for the maintenance or support of the debtor. Pursuit of an advanced degree “is a discretionary expenditure not different in kind from other discretionary expenses such as recreation.”); In re Schnabel, 153 B.R. 809 (Bankr. N.D. Ill. 1993) (Debtor’s proposal to pay $460 per month for a 1989 Chrysler LeBaron convertible is not reasonable and necessary where the contract payment for the car is $272 and the effect of the debtor’s proposed increased payment will be to accelerate the rate at which the debtor builds equity in the car at the expense of creditors.); In re Lindsey, 122 B.R. 157, 158 (Bankr. M.D. Fla. 1991) (Payments through the Chapter 13 trustee to the holder of a mortgage on nonresidential real property, though enhancing the debtor’s financial condition, are properly measured against the reasonable necessity test. Debtor is not permitted to increase equity in investment property at the expense of unsecured claim holders. Although an investment may be financially prudent, an investment is not a necessary expense for the support of the debtor or the debtor’s dependents. “Investments . . . are therefore made with disposable income; disposable income is not what is left after they are made.”).

 

4  See §§ 58.5 [ Appear and Be Heard with Respect to Confirmation of a Plan ] § 53.6  Appear and Be Heard with Respect to Confirmation of a Plan, 58.6 [ Appear and Be Heard with Respect to the Value of Collateral ] § 53.7  Appear and Be Heard with Respect to the Value of Collateral and 219.1 [ Standing to Object ] § 116.1  Standing to Object.

 

5  See In re Dingley, 189 B.R. 264, 273 (Bankr. N.D.N.Y. 1995) (Denies confirmation on good-faith grounds where debtor proposes to pay undersecured claim holder 11% interest but discount factor necessary to satisfy present value requirement is only 8.84%. “Because the amount of Debtors’ disposable income, i.e., all funds above necessary expenses which are devoted to payments under the plan . . . is in theory a fixed monthly sum, each dollar paid to CCC on its secured claim in excess of that required to provide it with present value, deprives unsecured creditors of a dollar to which they are collectively entitled. This amounts to the preferential treatment of one creditor at the expense of the class of unsecured creditors. . . . As the court views the Debtors’ instant plan as inconsistent with the basic tenants [sic] of the Code it must conclude that it was not proposed in good faith and does not satisfy Code § 1325(a)(3).”).

 

6  See § 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1  Valuation, Claim Splitting and Dewsnup.

 

7  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

8  See § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA.

 

9  See § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA. See, e.g., In re Barrios, 257 B.R. 626 (Bankr. S.D. Fla. 2000) (Unsecured creditor has standing to object to confirmation on the ground that the lien of a wholly unsecured second mortgage holder can be stripped off under Tanner v. FirstPlus Financial, Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000).).

 

10  McRoberts v. Transouth Fin. (In re Bell), 194 B.R. 192, 196–98 (Bankr. S.D. Ill. 1996) (“Chapter 13 trustee has both statutory and constitutional standing to avoid unperfected liens under § 544(a) when such avoidance would increase the amount of disposable income to be allocated among unsecured creditors and thus benefit the estate. . . . [A]lthough the debtors in these Chapter 13 cases will retain the subject vehicles following bankruptcy, they will have ‘purchased’ them by paying into the plan an amount of money equal to their value as of the effective date of the plan. This amount will be distributed among unsecured creditors of the estate.”). See In re Brennan, 208 B.R. 448, 454 (Bankr. S.D. Ill. 1997) (In dicta, although debtor need not pay interest on the value of a car that is recovered by the Chapter 13 trustee from an unperfected security interest to satisfy best-interests-of-creditors test, “[t]here may, of course, be instances in which a debtor’s proposed plan payment is sufficient to pay interest on the secured creditor’s claim, and, following avoidance of the creditor’s lien, the debtor would be required to pay the same amount into the estate under the ‘disposable income’ requirement of 11 U.S.C. § 1325(b).” In this case, it was undisputed that the debtor was not able to pay interest.).

 

11  See discussion of lien avoidance beginning at § 49.1  Available in Chapter 13 Cases.

 

12  See Tower Loan of Miss. Inc. v. Maddox (In re Maddox), 15 F.3d 1347, 1356 (5th Cir. 1994) (“A Chapter 13 trustee has standing to avoid liens under § 522(f).”).

 

13  See § 60.1 [ Avoidance and Recovery Powers ] § 53.12  Avoidance and Recovery Powers.

 

14  In re Easley, 72 B.R. 948 (Bankr. M.D. Tenn. 1987); In re Kitson, 65 B.R. 615 (Bankr. E.D.N.C. 1986); In re Tinneberg, 59 B.R. 634 (Bankr. E.D.N.Y. 1986).

 

15  In re Tinneberg, 59 B.R. 634 (Bankr. E.D.N.Y. 1986). Accord In re MacDonald, 222 B.R. 69, 77 (Bankr. E.D. Pa. 1998) ($175 per month for out-of-state parochial school tuition is “less like merely sending a child to a religious school and more like sending the child to a private boarding school, which normally would be considered a luxury expense.”); In re Zaleski, 216 B.R. 425, 432 (Bankr. D.N.D. 1997) ($416 per month for a 1996 Blazer “is an absurd luxury.”); In re Cardillo, 170 B.R. 490, 491 (Bankr. D.N.H. 1994) (“Although section 1325 does not define what expenses are not reasonably necessary for maintenance or support, section 523(a)(2)(C) may, by analogy, be of some help. This section states that ‘“luxury goods or services” do not include goods or services reasonably acquired for the support or maintenance of the debtor or a dependent of the debtor.’”).

 

16  In re Walsh, 224 B.R. 231 (Bankr. M.D. Ga. 1998) (Only one of the two cars the debtors propose to pay for through the plan is necessary for the maintenance or support of the debtor for purposes of the disposable income test. One of the cars is used by one of the debtors to go to and from work. The other car was used by an unemployed debtor to drive grandchildren to and from school and to babysit the grandchildren. The court found that the second car was a convenience or “a matter of preference rather than urgent family necessity.” To keep the car and satisfy the disposable income test, court instructed the debtors to consider extending duration of the plan beyond 36 months.).

 

17  In re Jones, 55 B.R. 462, 466 (Bankr. D. Minn. 1985). Accord In re McDaniel, 126 B.R. 782, 784 (Bankr. D. Minn. 1991) (“Debtors in Chapter 13 cases are not entitled to maintain their former lifestyles and statuses in society at the expense of their creditors.”).

 

18  In re Gleason, 267 B.R. 630, 633 (Bankr. N.D. Iowa 2001). Accord In re Webb, 262 B.R. 685, 693 (Bankr. E.D. Tex. 2001) (“While Chapter 13 debtors are not required to make drastic reductions in their living standards and adopt a totally spartan existence, neither are they permitted to ‘continue in the lifestyle that drove them to file bankruptcy and at the expense of their creditors.’”); In re McNichols, 249 B.R. 160, 168 (Bankr. N.D. Ill. 2000) (“[D]ebtors may not maintain their prepetition lifestyles at the expense of their creditors. . . . This test prohibits a debtor from proposing to pay for luxury items, investments and other unnecessary items at the expense of payments to unsecured creditors.”).

 

19  In re Sutliff, 79 B.R. 151 (Bankr. N.D.N.Y. 1987). Accord In re Huntebrinker, 224 B.R. 405, 408 (Bankr. E.D. Mo. 1997) (“[T]his bankruptcy is the result of Debtor’s excessive and some might say extravagant lifestyle. . . . The plan Debtor proposes seeks to perpetuate such a lifestyle and yet pay his creditors less than half of what he owes them. Such a plan does not represent Debtor’s best efforts.”); In re Zaleski, 216 B.R. 425, 432 (Bankr. D.N.D. 1997) ($416 per month for a 1996 Blazer “is an absurd luxury bordering on the lifestyles of the rich and famous rather than the reasonable lifestyle of a Chapter 13 Debtor.”); In re Gillead, 171 B.R. 886, 890–91 (Bankr. E.D. Cal. 1994) (“There are certain facts in almost every case that makes [sic] the case unusual. In this case, it is the Debtors’ substantial ‘take home,’ or discretionary income. Very few debtors need to decide how to dispose of over $7,000 per month on two adults and a ‘part time’ child. Also of note is the type of assets and debt listed by the Debtors. Unpaid income taxes, an expensive house [$235,000], high priced cars [a 1989 Peugeot valued at $5,375 and a 1990 Audi valued at $13,725], luxury items such as 50€ TV sets and motorcycles, and unsecured debt consisting of credit card charges, extensively used lines of credit, and under-collateralized secured debt, all indicate a considerable lack of financial discipline. It appears that these Debtors have ‘mortgaged their future’ and spent their way into bankruptcy. However, both debtors in this case are working professionals and their expenses are obviously higher than those of the average family. While cognizant of that fact, that reason alone is insufficient to justify allowing them to substantially maintain their prepetition lifestyle. . . . Their total unsecured debt of approximately $44,300 could be paid off in 36 months with monthly payments of $1,353. . . . That would still leave $4,740 per month to live on, which is certainly more than sufficient for a reasonable life style, even for professionals.”); In re Whitelock, 122 B.R. 582, 593 (Bankr. D. Utah 1990) (“[T]he inclusion of cumulatively generous amounts for recreation, home maintenance, clothing, and personal grooming, demonstrate the [debtors’] unwillingness to modify their lifestyle to satisfy their obligations.”).

 

20  In re McGilberry, 298 B.R. 258, 260 (Bankr. M.D. Pa. 2003) (Plan fails disposable income test because debtor made no effort to modify lifestyle and many expense items are overstated. “The tenor of [the debtor’s] testimony was one of defiance, not sacrifice or even cooperation.”).

 

21  In re Gleason, 267 B.R. 630, 635 (Bankr. N.D. Iowa 2001).

 

22  In re Fries, 68 B.R. 676 (Bankr. E.D. Pa. 1986). Accord In re Gonzales, 297 B.R. 143, 148–49 (Bankr. D.N.M. 2003) (“Congress decided not to legislate specific budget numbers. . . . [I]t inevitably leads parties and courts to apply their own standards as best they can. . . . To begin with, the spirit of (at least mild) sacrifice called for by the legislative history is not a requirement for a reduction of prepetition spending in every case.”); In re Hansen, 244 B.R. 799, 801–02 (Bankr. N.D. Ill. 2000) (“‘[R]easonably necessary’ probably means adequate, but not first class, and luxury items are excluded. . . . While judges should not allow debtors to continue in a lifestyle that drove them into bankruptcy, courts should not require debtors to alter their lifestyle where there is no obvious indulgence in luxuries.”); In re Nicola, 244 B.R. 795, 797–99 (Bankr. N.D. Ill. 2000) (“While judges should not allow debtors to continue in a lifestyle that drove them into bankruptcy, courts should not require debtors to alter their lifestyle where there is no obvious indulgence in luxuries. . . . Expenses may amount to an obvious indulgence in luxuries when a debtor is enjoying luxuries that are not enjoyed by an average American family.”).

 

23  In re Anderson, 143 B.R. 719, 721 (Bankr. D. Neb. 1992).

 

24  In re Riegodedios, 146 B.R. 691, 692 (Bankr. E.D. Va. 1992).

 

25  In re Gonzales, 157 B.R. 604, 607–09 (Bankr. E.D. Mich. 1993). See also In re Gillead, 171 B.R. 886, 890 (Bankr. E.D. Cal. 1994) (“[N]o bright line rules exist for testing the reasonableness of any specific item of expense listed by debtors in their monthly budget. Nevertheless, there are some broad guidelines. . . . [T]he standard requires that reasonably necessary expenses be determined on a case by case basis. Second, the standard must be flexible to allow a debtor some latitude with regard to what can be claimed as a discretionary expense and in what amounts. Although some discretionary expenses are necessary for maintenance and support . . . the amount claimed must be subject to a reasonableness limitation. Finally, the court would agree that a debtor with a high income who is paying substantial amounts into the plan may retain a greater dollar amount for discretionary expenses than a debtor of more modest income who proposes little or no payment to unsecured creditors.”).

 

26  287 B.R. 589 (Bankr. D. Me. 2003).

 

27  287 B.R. at 592–93.

 

28  287 B.R. at 597–98.

 

29  See, e.g, In re Bohrer, 266 B.R. 200, 201 (Bankr. N.D. Cal. 2001) (Debtor cannot satisfy § 1325(b)(1) by amending schedules to increase expenses to eliminate income surplus discovered by the trustee. Original schedules understated monthly income by several hundred dollars. When discovered by the Chapter 13 trustee, the debtor twice amended the schedules to increase expenses, resulting in no change in the proposed plan payment. “Bohrer represented to the court, under penalty of perjury, that he needed no money for recreation expenses. He later amended this figure to $70.00 per month, and then again to $100.00 per month. . . . [T]he figure was increased to cover the increased income discovered by the trustee. . . . [T]he first two versions of Bohrer’s monthly expenses identified $200.00 for transportation. In the final version, this amount is $230.00. Bohrer does not argue that he forgot some item of transportation expense.”); In re Hendricks, 250 B.R. 415, 421 (Bankr. M.D. Fla. 2000) (“Rather than providing an honest or reasonable list of expenses, the Debtor apparently first looked at her income and contrived to find a way to ‘spend’ all her monies . . . . The expenses are not reasonable living expenses for two people with no mortgage or car payments. Rather, they reflect an attempt by the Debtor to avoid paying legitimate claims of her creditors and an abuse of the bankruptcy system.”); In re Wyant, 217 B.R. 585, 587 (Bankr. D. Neb. 1998) (Original budget showed $1,100-per-month alimony payment. Prior to confirmation, ex-spouse died and debtor amended budget to show increase in income of $1,100 and increase in monthly expenses that nearly exhausted the increased projected income. “[T]he increases in projected monthly expenses are attributable to an unwarranted attempt to offset his increase in income, and that . . . increase in expenses is not reasonable.”).

 

30  See, e.g., In re McCray, 172 B.R. 154, 157–58 (Bankr. S.D. Ga. 1994) (In the context of a trustee’s postconfirmation motion to retain a tax refund, “[t]he Court’s obligation to perform a disposable income analysis cannot consist simply of concluding that the funds in question are disposable income because Debtor has been able to subsist without the benefit of those funds for more than a year. . . . In the disposable income analysis it is reasonable to inquire into the totality of the circumstances as an additional gauge to determine the sufficiency of Debtor’s financial commitment to the reorganization of the plan. These proportions cannot be defined with mathematical certainty. . . . There is a minimum level of expense which this Court must recognize as reasonable and necessary for an individual debtor who is responsible for his own housing, utilities, food, clothing, laundry, medical care, transportation and insurance. At this minimal level, it is a matter of marginal consequence how the debtor allocates the funds among the different categories. It is a zero-sum exercise. Any category with an allocation of an amount which might be greater than normal would only deplete another equally deserving category. In such a case it is clear that the debtor is simply adjusting his living circumstances to a point that is low enough to subsist on the funds which remain from his or her earnings after funding the minimum payment necessary to achieve confirmation of the Chapter 13 plan. At this income level, close analysis of the Schedule I and Schedule J information yields very little useful information. Having determined that such a minimum income level exists, it remains for the level to be determined on a case by case basis. In this case it is clear that Debtor subsists below that level. It is equally clear that Debtor would continue to subsist below that level if the tax refund were allocated to Debtor’s income on a monthly basis.” Debtor was permitted to retain $1,698 tax refund in a case where debtor lives on $716 per month.).

 

31  112 F.3d 1339 (8th Cir. 1997).

 

32  112 F.3d at 1343.

 

33  Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346 (8th Cir. 1990) (en banc).

 

34  112 F.3d at 1344.

 

35  18 U.S.C. § 1962(c); (d).

 

36  112 F.3d at 1350–51.

 

37  11 U.S.C. § 1325(b)(2).

 

38  See In re Reese, 281 B.R. 735, 740 (Bankr. M.D. Fla. 2002) ($2,300 monthly payment for a $330,000 house purchased seven months before petition “is protected from the disposable income scrutiny,” but “its excessiveness evidences a lack of good faith.”); In re Burgos, 248 B.R. 446, 449 (Bankr. M.D. Fla. 2000) (Applying “[t]he minority position . . . that as long as debtors are using all of their disposable income to fund the plan, Section 1325(b)(1)(B) is satisfied and the propriety of the debt should be analyzed within the confines of the good faith standard of § 1325(a)(3),” bankruptcy court holds that $590 per month for private religious school tuition is proposed in good faith.); In re Smith, 196 B.R. 565, 571 (Bankr. M.D. Fla. 1996) (Citing In re Humphrey, 165 B.R. 508 (Bankr. M.D. Fla. 1994), “§ 1325(b)(1)(B) only requires that a debtor use all of his disposable income to fund the plan, and that the value judgment of what types of debts should be paid through the plan is best determined under the good faith requirement of § 1325(a)(3).” The test in § 1325(b) is satisfied if the debtor proposes to pay on balance all disposable income. Expenses are evaluated under § 1325(a)(3).); In re Humphrey, 165 B.R. 508, 510 (Bankr. M.D. Fla. 1994) (Approving and applying In re Jones, 119 B.R. 996 (Bankr. N.D. Ind. 1990), good faith rather than disposable income is the appropriate test against which to measure the propriety of debts to be paid through the Chapter 13 plan. “Two lines of authority have emerged under the disposable income test. The majority of courts have held that the disposable income test requires [that] the court assess the debt to determine whether it is reasonably necessary for the maintenance or support of debtor or debtor’s dependents. . . . The minority position holds that as long as the debtors are using all of their disposable income to fund the plan, § 1325(b)(1)(B) is satisfied and the propriety of the debt should be analyzed within the confines of the good faith standard of § 1325(a)(3). . . . This Court finds that the minority view is the better view because it comports with the plain language of the code which only requires [that] the debtors use all of their disposable income to fund the plan and does not refer to the type of debt that may be paid through the plan. . . . [T]he good faith inquiry is better suited to address the merit of a debt. The good faith inquiry requires the court to make a value judgment just as the inquiry into whether a debt is of a type that should be paid through a chapter 13 plan requires the court to make a value judgment. Thus the good faith determination is better suited to assess the propriety of a debt than is the disposable income analysis. . . . Applying the definition of disposable income to this case, the Court finds that the non-residential property cannot be considered reasonably necessary for the maintenance or support of the debtors or a dependent of the debtors. Thus the income used to pay the mortgage is disposable income. However, all that § 1325(b)(1)(B) requires is that debtors use all their disposable income to fund the plan. Debtors have complied with this requirement because the mortgage on the non-residential property is paid with disposable income through the plan. Accordingly, the trustee’s objection to confirmation based on violation of the disposable income test is overruled.” Debtors’ plan proposed to pay the regular monthly mortgage payment on a five-acre tract of non-income-producing, nonresidential real estate and only 38% of unsecured claims. If the debtors surrendered the nonresidential real property, the plan would pay unsecured claim holders 74%. Court rejected both disposable-income and good-faith objections to confirmation.); In re Cordes, 147 B.R. 498, 502 (Bankr. D. Minn. 1992) (Courts that have applied § 1325(b) to deny confirmation of plans that propose to keep expensive automobiles or luxury boats have mistakenly analyzed the disposable income test. “These courts . . . overlook the basic accounting format that §§ 1325(b)(1)(B) and 1325(b)(2)(A) establish: in calculating ‘disposable income,’ the court is to reduce the debtor’s received after-tax income by the amount of the debtor’s statutorily-qualified living expenses. . . . Once it isolates that value, the court is to compare it to the sum which the debtor proposes to commit to payments to creditors under his plan. . . . If the plan incorporates secured debt payments into its general treatment of creditors’ claims, those payments necessarily are ‘under the plan,’ whether the trustee is to pay them or not. . . . Such payments, then, are not to be considered as line-entries for the household budget used in the calculation of ‘disposable income’; this would retroject them into the wrong stage in the calculation under the statutory test. As a result, the reasonableness-and-necessity criteria of § 1325(b)(2) should not be applied to them.” However, the good-faith test in § 1325(a)(3) prohibits this debtor from paying for a 16-foot recreational boat while paying unsecured claim holders only 46%.); In re Jones, 119 B.R. 996, 1001 (Bankr. N.D. Ind. 1990) (The “reasonably necessary . . .” test in § 1325(b) applies only to recurring expenses for food, clothing and shelter that are paid directly by the debtor. The reasonable necessity test does not apply to obligations that a debtor is attempting to repay through the plan. Section 1325(b) “was not enacted to discriminate between debtors whose financial problems arose out of an inability to pay for the necessities of life and those whose problems are attributable to more conspicuous consumption. . . . [I]n [In re Reyes, 106 B.R. 155 (Bankr. N.D. Ill. 1989) and In re Rogers, 65 B.R. 1018 (Bankr. E.D. Mich. 1986),] the courts analyzed the payments on the debtor’s vehicles to determine if they were reasonably necessary. Yet these payments were not part of the debtor’s monthly living expenses. They were to be made by the trustee as part of the payments to creditors under the plan. By considering the payments in the context of disposable income, these decisions incorrectly imposed a reasonable necessity requirement on the plan’s payments to prepetition creditors. . . . While the concerns which motivated the inquiries along these lines are things the bankruptcy courts should be sensitive to, they are not part of the disposable income test of § 1325(b). They are more appropriately addressed in the broader context of the good faith analysis required by § 1325(a)(3).” A $21,800 Cadillac does not violate the disposable income test when the value of the Cadillac is to be paid in full through payments to the Chapter 13 trustee. However, the plan that proposes to pay for the Cadillac and little else is not proposed in good faith.). But see In re Helms, 262 B.R. 136, 139–40 (Bankr. M.D. Fla. 2001) (Rejecting “minority approach” previously used in the district, every expense item is evaluated for reasonableness and necessity to satisfy the disposable income test. “[T]he minority approach to the disposable income test ignores the plain language of § 1325(b)(2) . . . . By framing the disposable income inquiry in terms of permissible expenses, Congress logically intended courts to inquire into the necessity of each of the debtor’s questionable proposed expenses. . . . [I]t is inadvisable to maintain the deficient minority standard in situations where proposed expenses are paid through a plan rather than outside it. The through a plan/outside a plan distinction is legally inoperative. The distinction seems to arise from a misreading of § 1325(b)(1). . . . If § 1325(b)(1) is properly read as requiring that all disposable income be applied to plan payments, then the through a plan/outside a plan distinction disappears, because plan payments will always be made through a plan.”); In re Padro, 252 B.R. 809, 811 (Bankr. M.D. Fla. 2000) (Although court usually follows the minority position that “as long as debtors are using all of their disposable income to fund a plan, the propriety of the debt should be analyzed pursuant to the good faith standard of § 1325(a)(3),” because the debtor proposes to pay retirement loan “outside of the plan,” loan repayment will be analyzed individually for reasonableness and necessity, essentially in the manner the majority courts use for analyzing expenses under the disposable income test.).

 

39  11 U.S.C. § 1325(b)(2).

 

40  See In re Wyant, 217 B.R. 585, 588 (Bankr. D. Neb. 1998) (Disposable income test prohibits plan provision to pay attorney fees directly by the debtor if they are not approved by the court. “Such a provision . . . circumvents the disposable income requirement. . . . [A]ttorney fees may be paid from monthly income only if the court determines that such expenditures for attorney fees are reasonable and necessary for the maintenance of the debtor or the debtor’s dependents.”).

 

41  See § 196.1 [ Income, Expenses, Lifestyle and Luxuries ] § 108.4  Income, Expenses, Lifestyle and Luxuries.

 

42  In re Elrod, 270 B.R. 258, 260 (Bankr. E.D. Tenn. 2001) (Reasonably necessary standard applies to all payments to creditors and requires more extensive inquiry than superficial question whether money is being used to make payments under the plan. Proposal to pay mortgage holder $25 more per month than prepetition contract is subject to reasonably necessary test in § 1325(b) notwithstanding that the extra $25 will be used “to make payments under the plan.”); In re Helms, 262 B.R. 136, 139–40 (Bankr. M.D. Fla. 2001) (Rejecting “minority approach” previously used in the district, every expense item is evaluated for reasonableness and necessity to satisfy the disposable income test. “[T]he minority approach to the disposable income test ignores the plain language of § 1325(b)(2) . . . . By framing the disposable income inquiry in terms of permissible expenses, Congress logically intended courts to inquire into the necessity of each of the debtor’s questionable proposed expenses. . . . [I]t is inadvisable to maintain the deficient minority standard in situations where proposed expenses are paid through a plan rather than outside it. The through a plan/outside a plan distinction is legally inoperative. The distinction seems to arise from a misreading of § 1325(b)(1). . . . If § 1325(b)(1) is properly read as requiring that all disposable income be applied to plan payments, then the through a plan/outside a plan distinction disappears, because plan payments will always be made through a plan.”); In re Padro, 252 B.R. 809, 811 (Bankr. M.D. Fla. 2000) (Although court usually follows the minority position that “as long as debtors are using all of their disposable income to fund a plan, the propriety of the debt should be analyzed pursuant to the good faith standard of § 1325(a)(3),” because the debtor proposes to pay retirement loan “outside of the plan,” loan repayment will be analyzed individually for reasonableness and necessity, essentially in the manner the majority courts use for analyzing expenses under the disposable income test.); In re MacDonald, 222 B.R. 69, 75 (Bankr. E.D. Pa. 1998) (“[W]e allied ourselves with the majority view that the disposable income test of § 1325(b)(1)(B) requires a determination that a challenged expenditure is reasonably necessary for the support or maintenance of the debtor and the debtor’s dependents, as opposed to merely examining whether the debtor uses all of the debtor’s disposable income to fund a Chapter 13 plan and relegating the reasonable necessity of expenditures to an aspect of the good faith requirement of 11 U.S.C. § 1325(a)(3). . . . [W]e believe that the minority view imposing a good faith analysis improperly expands the focus of § 1325(a)(3) and cannot be used to improperly disregard the ban on sua sponte § 1325(b)(1)(B) objections.”); In re Rothman, 204 B.R. 143, 157 (Bankr. E.D. Pa. 1996) (“The majority of courts believe that the disposable income test requires a court to determine whether a debt is reasonably necessary for the support and/or maintenance of the debtor and the debtor’s dependents. . . . The minority holds that, if a debtor uses all of his or her disposable income to fund the Chapter 13 plan of reorganization, then § 1325(b)(1)(B) is satisfied and the appropriateness of the debt should be assessed pursuant to the good faith standard of 11 U.S.C. § 1325(a)(3). . . . [T]his court has implicitly followed the majority view . . . . We continue to do so.”); In re Gonzales, 157 B.R. 604, 608 (Bankr. E.D. Mich. 1993) (“[T]he phrase ‘maintenance or support’ includes expenses for items or activities other than those which, such as food, clothing and the like, are clearly essential. . . . Indeed, the expense budget form prescribed by the Official Forms (Schedule J) recognizes that a family cannot live by bread alone. It acknowledges that there ought to be some allocation for ‘recreation, clubs, entertainment, newspapers, magazines, etc.’ and even ‘other.’ As with the debtor’s other expenditures, of course, the statute limits this spending to that which is ‘reasonably necessary.’”); In re Gibson, 142 B.R. 879 (Bankr. E.D. Mo. 1992) (The disposable income test is appropriately applied to determine whether a Chapter 13 debtor can retain a luxury car while paying unsecured claim holders less than 100%. “[A]nalysis under § 1325(b)(1)(B) is appropriate because both pre-petition debts and post-petition expenses affect a debtor’s disposable income. . . . A Chapter 13 debtor who uses post-petition income to pay for a luxury vehicle, whether he pays for that vehicle ‘inside’ or ‘outside’ of the plan, does not apply all of his disposable income to payments of other debts under the plan. . . . [A] Chapter 13 debtor who is not able to pay its unsecured creditors in full should be expected to demonstrate a degree of belt tightening. . . . The Court is mindful that it may not use denial of confirmation to impose its values on a debtor’s spending habits . . . nor should the Court ‘squeeze the last dollar’ from a debtor to fund his or her Chapter 13 plan. . . . However, debtors in Chapter 13 cases are not entitled to maintain their former lifestyles and statuses in society at the expense of their creditors.” 1991 Cadillac Deville and 1991 Corvette triggered the court’s analysis.); In re Rybicki, 138 B.R. 225, 227–28 (Bankr. S.D. Ill. 1992) (“This court disagrees with the [In re Jones, 119 B.R. 996 (Bankr. N.D. Ind. 1990),] court’s analysis. . . . [D]isposable income is affected by a debtor’s payment of both pre-petition debts and post-petition expenses. A pre-petition debt affects disposable income because payment of the debt through the plan reduces the amount of disposable income otherwise available for the remaining pre-petition debts. . . . Disposable income is also affected by a debtor’s payment of a post-petition expense because the expense is included in the debtor’s list of budgeted expenses and subtracted from the debtor’s gross income. . . . § 1325(b) does not explicitly distinguish between pre-petition debts and post-petition expenses. . . . By applying the statute to pre-petition debts, . . . all debtors and creditors proceed on a level playing field, because all debtors, no matter how they got into bankruptcy, may only incur expenses or pay debts on items that are reasonably necessary for their support. Under the Jones analysis, a debtor could pay a debt on an unnecessary item purchased prior to bankruptcy through his or her plan to the detriment of the unsecured creditors, as long as the debtor showed he or she proposed the plan in good faith.”); In re Lindsey, 122 B.R. 157, 158 (Bankr. M.D. Fla. 1991) (That payments for the financial benefit of the debtor are made through the Chapter 13 trustee rather than directly by the debtor is not a reason to exclude the payments from the reasonable necessity test of § 1325(b)(1). Payments through the Chapter 13 trustee to the holder of a mortgage on nonresidential real property, though enhancing the debtor’s financial condition, are properly measured against the reasonable necessity test. Debtor is not permitted to increase equity in investment property at the expense of unsecured claim holders. Although an investment may be financially prudent, an investment is not a necessary expense for the support of the debtor or the debtor’s dependents. “Investments . . . are therefore made with disposable income; disposable income is not what is left after they are made.” If In re Jones, 119 B.R. 996 (Bankr. N.D. Ind. 1990), is correct that luxury items paid for through a Chapter 13 plan are not measured against the reasonable necessity test in § 1325(b)(1)(B), but instead are included in the circumstances properly considered for purposes of good faith under § 1325(a)(3), then a plan that proposes to rescue investment property from foreclosure without meaningful payment of unsecured creditors fails the good-faith test.).

 

43  In re Gleason, 267 B.R. 630, 634 (Bankr. N.D. Iowa 2001).

 

44  In re Jones, 55 B.R. 462 (Bankr. D. Minn. 1985). Compare In re Smith, 222 B.R. 846, 859 (Bankr. N.D. Ind. 1998) (“The court finds that the allotment of $525.00 per month for food is reasonable for the debtors’ family of four.”).

 

45  In re Reyes, 106 B.R. 155 (Bankr. N.D. Ill. 1989). Accord In re McGovern, 278 B.R. 888, 898 (Bankr. S.D. Fla. 2002) (“$625.00 on food each month . . . is excessive, considering that the Debtor is single with no dependents.”), rev’d on other grounds, 297 B.R. 650 (S.D. Fla. 2003); In re Williams, 201 B.R. 579, 581 (Bankr. M.D. Fla. 1996) (For a single debtor with no dependents, “[t]he $450 budgeted monthly for food” is excessive and not reasonably necessary. “Debtor’s food expense should be reduced by $100.”).

 

46  In re Foster, 61 B.R. 492 (Bankr. N.D. Ind. 1986).

 

47  In re Rothman, 206 B.R. 99, 107 (Bankr. E.D. Pa. 1997).

 

48  In re Presley, 201 B.R. 570, 575 (Bankr. N.D. Fla. 1996).

 

49  In re Gonzales, 297 B.R. 143, 149–50 (Bankr. D.N.M. 2003) (“Another consideration is what it is that is comprehended by the term ‘food’ . . . . Obviously bananas and milk are ‘food.’ But what of toothpaste, aspirin, paper towels, hair care products, or makeup for a teenage girl? . . . Given the physical labor that occupies Debtor, that Mildred Gonzales is probably on her feet almost all day, and that Gonzales and Reyna are teenagers, a $700 monthly food budget does not seem unreasonable. . . . [T]he relatively remote location of Ruidoso Downs from big population centers that feature competitively priced food retailers, and the question of whether this family even has the resources to make purchases in large enough quantities to save money, all raise the issue of whether the $700 was a sufficient sum for food.”).

 

50  In re Rogers, 65 B.R. 1018 (Bankr. E.D. Mich. 1986). See In re Jones, 119 B.R. 996 (Bankr. N.D. Ind. 1990) (A $21,800 Cadillac does not violate the disposable income test when the value of the Cadillac is to be paid in full through payments to the Chapter 13 trustee. However, the plan that proposes to pay for the Cadillac and little else is not proposed in good faith.).

 

51  In re Reyes, 106 B.R. 155 (Bankr. N.D. Ill. 1989). Accord In re Zaleski, 216 B.R. 425, 432 (Bankr. D.N.D. 1997) (A 1996 Blazer costing $416 per month “is an absurd luxury bordering on the lifestyles of the rich and famous rather than the reasonable lifestyle of a Chapter 13 Debtor.”).

 

52  In re McGovern, 278 B.R. 888 (Bankr. S.D. Fla. 2002), rev’d on other grounds, 297 B.R. 650 (S.D. Fla. 2003).

 

53  In re Gibson, 142 B.R. 879 (Bankr. E.D. Mo. 1992).

 

54  In re Huntebrinker, 224 B.R. 405, 407 (Bankr. E.D. Mo. 1997).

 

55  In re Schnabel, 153 B.R. 809 (Bankr. N.D. Ill. 1993).

 

56  In re Williamson, 296 B.R. 760, 765–66 (Bankr. N.D. Ill. 2003) (“[T]he non-filing spouse drives the Porsche. . . . Although a Porsche auto is usually considered a luxury item, the non-filing spouse in this case uses the seven-year-old Porsche as his means of transportation. . . . [I]t is therefore reasonably necessary. . . . [T]here was no preponderant evidence to show that the [GMC Suburban] will necessarily break down and be undriveable when the loan is paid off in November 2004. . . . [A]fter the loan payments are completed . . . the monthly payment of $871.66 will be disposable income at that time and therefore must now be included in the Plan so as to provide for increased monthly payments at that time.”).

 

57  See In re Walsh, 224 B.R. 231 (Bankr. M.D. Ga. 1998) (Only one of the two cars the debtors propose to pay for through the plan is necessary for the maintenance or support of the debtor for purposes of the disposable income test. One of the cars is used by one of the debtors to go to and from work. The other car was used by an unemployed debtor to drive grandchildren to and from school and to babysit the grandchildren. The court found that the second car was a convenience or “a matter of preference rather than urgent family necessity.” To keep the car and satisfy the disposable income test, court instructed the debtors to consider extending duration of the plan beyond 36 months.).

 

58  In re Rothman, 206 B.R. 99 (Bankr. E.D. Pa. 1997).

 

59  In re Cavanaugh, 175 B.R. 369, 373 (Bankr. D. Idaho 1994). Accord In re Zaleski, 216 B.R. 425 (Bankr. D.N.D. 1997) (A $40 expense for a nonexistent dental insurance policy is not necessary.); In re Rothman, 206 B.R. 99, 108 (Bankr. E.D. Pa. 1997) ($500 per month for health insurance is not reasonable and necessary because “the Debtor is a doctor himself . . . . Since the Debtor did not have any health insurance for his family in the past, it is difficult to understand how there could be such an urgent need for such insurance now. . . . $500 monthly medical insurance appears to be a luxury which a Chapter 13 debtor, especially one whose family has indicated no special needs, must simply forego as an aspect of ‘belt-tightening.’”).

 

60  In re Webb, 262 B.R. 685 (Bankr. E.D. Tex. 2001).

 

61  In re Bayless, 264 B.R. 719, 721 (Bankr. W.D. Okla. 1999).

 

62  In re Kitson, 65 B.R. 615 (Bankr. E.D.N.C. 1986). Accord In re Nissly, 266 B.R. 717, 720–21 (Bankr. N.D. Iowa 2001) (“[T]otal payments each month on the mortgage and for taxes would be $1,960.00. In the court’s opinion, this amount is excessive in light of the small amount of equity in the home. It prevents Nisslys from making their best effort to pay creditors.”); In re Huntebrinker, 224 B.R. 405, 408 (Bankr. E.D. Mo. 1997) (“The reasonable rent of a home or apartment large enough to house Debtor and his family likely would be much less than the more than $1,600 (mortgage plus insurance plus taxes) a month it will cost them to remain in their current home. Such housing is available for much less than their current monthly housing expenses in clean, safe sections of St. Louis County which are not as wealthy as the area where Debtor presently resides. The liquidation of Debtor’s home will yield creditors a significant sum and will greatly reduce the family’s future cost of housing which will enable Debtor to pay his creditors more during each month of his sixty-month Chapter 13 plan.”).

 

63  In re Jones, 55 B.R. 462 (Bankr. D. Minn. 1985).

 

64  In re Presley, 201 B.R. 570 (Bankr. N.D. Fla. 1996).

 

65  In re Dick, 222 B.R. 189, 191 (Bankr. D. Mass. 1998) ($742-per-month mortgage payment on a vacation house is not necessary for the maintenance or support of the debtor and must be included in disposable income. Citing In re Cardillo, 170 B.R. 490 (Bankr. D.N.H. 1994), “maintaining a non-income producing vacation house goes far beyond maintaining a debtor’s basic needs. . . . [T]he mortgage payments on the Property are disposable income.”).

 

66  In re Crussen, 264 B.R. 723, 726 (Bankr. W.D. Okla. 2001) (Proposed plan accelerated second mortgage by paying $1,125 per month for 36 months instead of the contractual payment of $475 per month. “There is no evidence before the Court that the prepayment of the second mortgage is reasonably necessary for the support of the Debtor’s family.”). See also § 145.1 [ Accelerating Payment of a Home Mortgage ] § 85.4  Accelerating Payment of a Home Mortgage.

 

67  In re Cavanaugh, 175 B.R. 369, 373 (Bankr. D. Idaho 1994). Accord In re McGilberry, 298 B.R. 258, 260 (Bankr. M.D. Pa. 2003) (“The tenor of [the debtor’s] testimony was one of defiance, not sacrifice or even cooperation. For example, he testified that part of his schedule of expenses includes an allowance for replacing the deck on his home.”); In re Stephens, 265 B.R. 335, 338 (Bankr. M.D. Fla. 2001) (“The Court finds that the re-carpeting and the re-vinyling of Debtors’ house is not reasonably necessary for their maintenance or support.”); In re Zaleski, 216 B.R. 425 (Bankr. D.N.D. 1997) (A budget reserve of $150 per month for unspecified home repairs is not necessary.).

 

68  In re Stanley, 296 B.R. 402 (Bankr. E.D. Va. 2002).

 

69  In re Gleason, 267 B.R. 630 (Bankr. N.D. Iowa 2001).

 

70  In re Jackson, 173 B.R. 168 (Bankr. E.D. Mo. 1994). See In re Burris, 208 B.R. 171, 177 (Bankr. W.D. Mo. 1997) ($442 allowance for home maintenance is reasonable and necessary when home is in “deteriorating condition” because debtor’s husband was ill and unable to repair the home before his death just before the petition. Debtor testified that she needed to spend $15,850 to make necessary repairs. “[T]he repairs proposed by Ms. Burris are reasonably necessary to prevent further damage to her home and to permit her to safely continue to live in her home.”).

 

71  In re Presley, 201 B.R. 570 (Bankr. N.D. Fla. 1996).

 

72  In re Zaleski, 216 B.R. 425 (Bankr. D.N.D. 1997).

 

73  In re Williams, 201 B.R. 579 (Bankr. M.D. Fla. 1996). Accord In re McGovern, 278 B.R. 888, 898 (Bankr. S.D. Fla. 2002) (“[T]he Debtor lists his personal telephone expense at $120.00 per month. This amount is clearly excessive.”), rev’d on other grounds, 297 B.R. 650 (S.D. Fla. 2003).

 

74  In re Weiss, 251 B.R. 453, 463 (Bankr. E.D. Pa. 2000).

 

75  In re McGilberry, 298 B.R. 258, 261 (Bankr. M.D. Pa. 2003) (Plan fails disposable income test because debtor made no effort to modify lifestyle and many expense items are overstated. “Debtor plans to continue to incur substantial monthly expenses for four telephones—two cell phones, one business line and one home phone.”).

 

76  In re Webb, 262 B.R. 685, 693 (Bankr. E.D. Tex. 2001). Accord In re McGovern, 278 B.R. 888, 898–900 (Bankr. S.D. Fla. 2002) (“$162.00 per month for laundry and dry cleaning . . . . [H]e must be dry cleaning his suits virtually every time he wears them, and he must be sending his other clothing out to be laundered . . . . [M]onthly expenses for haircuts and grooming as $75.00. This amount appears to be an obvious indulgence.”), rev’d on other grounds, 297 B.R. 650 (S.D. Fla. 2003); In re McNichols, 249 B.R. 160, 171 (Bankr. N.D. Ill. 2000) (“[T]he annualized expenses for luxury, unnecessary items for § 1325(b) purposes such as . . . manicures at $720.00, hairdresser at $2,220.00 . . . are not reasonable or necessary given the small estimated dividend of approximately 10% to general unsecured creditors.”).

 

77  In re Williams, 201 B.R. 579 (Bankr. M.D. Fla. 1996).

 

78  In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987).

 

79  In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987).

 

80  In re Tinneberg, 59 B.R. 634 (Bankr. E.D.N.Y. 1986).

 

81  In re Ferrell, 227 B.R. 706 (Bankr. S.D. Ind. 1998).

 

82  In re Weiss, 251 B.R. 453 (Bankr. E.D. Pa. 2000). Accord In re Stanley, 296 B.R. 402, 408–09 (Bankr. E.D. Va. 2002) (“The court is satisfied with debtor’s justification for the cable expense as debtor lives in a remote area and is unable to receive a television signal . . . . [T]he court finds the $31.00 cable expense to be reasonably necessary.”). See also In re McGilberry, 298 B.R. 258 (Bankr. M.D. Pa. 2003) (Debtor’s “itemized personal expenses” including cable television of $35 per month and Internet service of $24 per month should have been included in the $150 entertainment allowance in the budget.).

 

83  In re Rybicki, 138 B.R. 225 (Bankr. S.D. Ill. 1992) (A camper is not a reasonably necessary expense.). Accord In re Brooks, 241 B.R. 184 (Bankr. S.D. Ohio 1999) (Because motor home is used by the debtors for purely recreational purposes, 25% plan fails disposable income test that proposes to pay $8,000 claim secured by the motor home.).

 

84  In re Wyant, 217 B.R. 585, 587 (Bankr. D. Neb. 1998). Accord In re Weiss, 251 B.R. 453, 463 (Bankr. E.D. Pa. 2000) (Miscellaneous expense item of $220 per month that included pet care is not reasonably necessary because the debtor’s wife is unemployed and “there is . . . no need for her . . . not to perform, with the debtor’s assistance, . . . pet care.”).

 

85  In re Hedges, 68 B.R. 18 (Bankr. E.D. Va. 1986). Accord In re Kasun, 186 B.R. 62 (Bankr. E.D. Va. 1995) (Confirmation was denied on good-faith and disposable-income-test grounds where the debtor proposes to pay $600 per month for slip rental, insurance and a loan secured by a luxury boat and only 34.9% to general unsecured claim holders. “Payment for luxury property is not necessary for the maintenance or support of debtor.”).

 

86  In re Lindsey, 243 B.R. 30 (Bankr. E.D. Tenn. 1999).

 

87  In re Anderson, 143 B.R. 719 (Bankr. D. Neb. 1992). See In re McGilberry, 298 B.R. 258 (Bankr. M.D. Pa. 2003) ($150.00 entertainment allowance is inconsistent with the separate itemization of personal expenses of $35 per month for cable television, $24 per month for Internet service and $22 per month for reading .); In re McGovern, 278 B.R. 888 (Bankr. S.D. Fla. 2002) (Recreational expense of $150.00 per month is excessive.), rev’d on other grounds, 297 B.R. 650 (S.D. Fla. 2003); In re Nissly, 266 B.R. 717, 720–21 (Bankr. N.D. Iowa 2001) (“Recreation expenses are also too high. Recreation, children’s activities, internet costs, cable TV costs and gifts to family members total $370.00 per month. Some amount of these expenses is reasonable. But debtors would spend a total of $13,320.00 in these areas over the three-year life of the plan while at the same time, they would provide only $7,920.71 for division among their unsecured creditors.”); In re McNichols, 249 B.R. 160, 171 (Bankr. N.D. Ill. 2000) ([T]he annualized expenses for . . . recreation at $8,628.00 . . . are not reasonable or necessary given the small estimated dividend of approximately 10% to general unsecured creditors.”); In re Zaleski, 216 B.R. 425 (Bankr. D.N.D. 1997) ($97 per month for unspecified recreation is not necessary in the context of a debtor with gross family income of $7,145 and a plan that pays only 11.5% of unsecured claims.).

 

88  In re Jones, 55 B.R. 462 (Bankr. D. Minn. 1985).

 

89  In re McNichols, 249 B.R. 160 (Bankr. N.D. Ill. 2000).

 

90  In re Kitson, 65 B.R. 615 (Bankr. E.D.N.C. 1986). See In re Weiss, 251 B.R. 453, 463 (Bankr. E.D. Pa. 2000) ($220 monthly expense that included child care is not reasonable when the debtor’s wife is unemployed and there was “no need for her . . . not to perform, with the debtor’s assistance, child care . . . along with care of the youngest child and the other children when they are not in school.”).

 

91  In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987). See discussion of charitable contributions below in this section.

 

92  In re Red, 60 B.R. 113 (Bankr. E.D. Tenn. 1986). See discussion of charitable contributions below in this section.

 

93  In re Ward, 129 B.R. 664 (Bankr. W.D. Okla. 1991) (Voluntary wage deduction for savings account at credit union is not reasonably necessary for the maintenance or support of debtors and must be included in disposable income.); In re Red, 60 B.R. 113 (Bankr. E.D. Tenn. 1986) (Section 1325(b) failed when plan indicated a weekly payroll deduction of $12.50 for credit union savings.).

 

94  See § 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income. See, e.g., In re Anes, 195 F.3d 177, 180 (3d Cir. 1999) (In dicta, “[v]oluntary contributions to retirement plans, however, are not reasonably necessary for a debtor’s maintenance or support and must be made from disposable income.”); In re Prout, 273 B.R. 673 (Bankr. M.D. Fla. 2002) (Nonmandatory $650 monthly contribution to 401(k) retirement plan is not reasonable or necessary for 56-year-old debtor with a gross annual income of more than $91,000 when 36-month plan will pay $3,000 or approximately 5% of unsecured claims.); In re Merrill, 255 B.R. 320 (Bankr. D. Or. 2000) (Ninety-six-dollar-per-month voluntary contribution to profit sharing plan is not reasonably necessary for the maintenance or support of the debtor.); In re Hansen, 244 B.R. 799, 801–02 (Bankr. N.D. Ill. 2000) (The voluntary portion of pension contributions is not reasonably necessary for maintenance or support and is included in disposable income. The debtor’s schedules indicated $600 per month to a retirement account. The debtor was required to contribute only $100 per month. “[T]here is an overwhelming consensus among courts that a debtor’s voluntary payment into a pension or retirement plan is not an expenditure reasonably necessary for the debtor’s maintenance and support while the Chapter 13 plan is pending. . . . [M]ost courts perceive an inherent unfairness in allowing a debtor to pay herself by funding her pension plan while paying creditors only a fraction of their claims. . . . While investing for retirement is financially prudent, it is not a necessary expense for the support of debtors. . . . Such investments are made with disposable income; disposable income is not what is left after debtors contribute to retirement or pension accounts.”); In re Nation, 236 B.R. 150, 152–55 (Bankr. S.D.N.Y. 1999) (Mandatory payroll deductions for pension contributions are projected disposable income; supremacy clause supports order that pension contributions cease during Chapter 13 case. “Money paid or contributed by a debtor into any type of account, fund, plan or other repository for the debtor’s own present or future benefit for savings, pension or similar purposes is on its face ‘not reasonably necessary to be expended . . . for the maintenance or support of the debtor or a dependent of the debtor.’ If such money were ‘necessary for the maintenance or support of the debtor,’ obviously the debtor could not put it in a savings or pension account.” “[T]he great majority of courts have held under Section 1325(b) that funds contributed to savings or pension plans constitute ‘disposable income’ that must be paid to creditors under a plan if the plan is to be confirmed. . . . [S]everal decisions have held that contributions to pension plans are to be included in the calculations of disposable income ‘as long as they are not mandatory.’ . . . [I]t is by no means clear that the debtor’s pension contribution and repayments are ‘mandatory’ in any material, consequential sense. Nevertheless, the [New York] regulations on their face do require the payroll deductions, and it appears that Respondents deduct the amount in question from the debtor’s paycheck irrespective of the debtor’s wishes . . . . The statute and regulations at issue directly conflict with the Bankruptcy Code’s requirement that all property listed under Sections 541 and 1306 be included as property of the estate, as well as Section 1325’s requirement that all disposable income be included in the plan. . . . The Supremacy Clause requires that state statutes and regulations be preempted by the Bankruptcy Code . . . . Preemption is appropriate in this instance and the pension contribution deductions must be disallowed and the money previously deducted for them included in the debtor’s disposable income.”), probably overruled by New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124, 126–27 (2d Cir. 2001); In re Jaiyesimi, 236 B.R. 145 (Bankr. S.D.N.Y. 1999), aff’d sub nom. New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 248 B.R. 37, 41–42 (S.D.N.Y. 2000) (District court affirms bankruptcy court holding that mandatory retirement deductions are a form of forced savings that is included in disposable income.), rev’d, 243 F.3d 124 (2d Cir. 2001); In re Smith, 222 B.R. 846, 861 (Bankr. N.D. Ind. 1998) (“This court expressly holds that to the extent that the debtors in this case are contributing any portion of their paychecks to a retirement or 401(k) savings plan, those contributions must cease during the life of the amended plan and be devoted to plan payments.”); In re Cornelius, 195 B.R. 831, 835 (Bankr. N.D.N.Y. 1995) (Non-mandatory contributions to a pension plan and to a credit union are disposable income. “Debtor concedes that ‘contributions to pension plans and/or savings plan [sic] are improper for a debtor in a chapter 13 plan’ and as long as the contributions are not mandatory, they should be included in the Debtor’s income.”), probably overruled by New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124 (2d Cir. 2001); In re Delnero, 191 B.R. 539, 542–43 (Bankr. N.D.N.Y. 1996) (Contributions to a retirement plan that are not a condition for employment are projected disposable income. “According to the description of the Retirement Plan provided to the Court . . . contributions are voluntary . . . . Therefore, the $263.50 in monthly contributions to the Retirement Account should be included in any determination of disposable income. . . . [T]hat the property may be exempt under state law does not prevent it from being included as disposable income of the Debtor.”), probably overruled by New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124 (2d Cir. 2001); In re Cavanaugh, 175 B.R. 369 (Bankr. D. Idaho 1994) (Voluntary contribution of $356 per month to a 401k plan is disposable income under § 1325(b).); In re Fountain, 142 B.R. 135 (Bankr. E.D. Va. 1992) (Voluntary monthly contribution of $177.54 to pension fund is not necessary for the maintenance or support of the debtor.); In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987) (An individual retirement account is not reasonably necessary to a Chapter 13 debtor.); In re Festner, 54 B.R. 532 (Bankr. E.D.N.C. 1985) (Section 1325(b) failed when plan preserves deductions for a voluntary retirement program and to purchase stock in the debtor’s employer.).

 

95  See § 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income. See, e.g., New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124, 126–27 (2d Cir. 2001) (Addressing only the pension contributions question, “[i]t is within the discretion of the bankruptcy court judge to make a decision, based on the facts of each individual case, whether or not the pension contributions qualify as a reasonably necessary expense for that debtor. . . . [T]he bankruptcy judge may consider any factors properly before the court, including but not limited to: the age of the debtor and the amount of time until expected retirement; the amount of the monthly contributions and the total amount of pension contributions debtor will have to buy back if the payments are discontinued; the likelihood that buy-back payments will jeopardize the debtor’s fresh start; the number and nature of the debtor’s dependents; evidence that the debtor will suffer adverse employment conditions if the contributions are ceased; the debtor’s yearly income; the debtor’s overall budget; who moved for an order to discontinue payments; and any other constraints on the debtor that make it likely that the pension contributions are reasonably necessary expenses for that debtor. Administrative inconvenience to NYCERS and NYCHA, however, is not to be considered. The impact on the administrator of the fund is irrelevant in determining whether or not the pension contribution is a reasonably necessary expense to an individual debtor.”); In re Osborne, No. 02-24999-HRT, 2003 WL 1960375, at *2–*4 (Bankr. D. Colo. Apr. 8, 2003) (unpublished) ($90-per-month contribution to 401(k) plan is not reasonably necessary when total payment to unsecured creditors in 36-month plan will be $200 for a dividend of 2% and forgoing the voluntary pension contribution would increase the dividend to 27%. “[T]his Court will make a case-by-case determination of whether pension plan contributions are reasonably necessary . . . . [T]he Court would not anticipate encountering numerous circumstances where it will be reasonable and necessary for a debtor to divert funds into a retirement plan for his or her own benefit while paying little or nothing to unsecured creditors under a Chapter 13 plan.”); In re Mendoza, 274 B.R. 522, 525 (Bankr. D. Ariz. 2002) (“[E]xcept in those instances where a debtor can demonstrate that a failure to make a retirement contribution will result in an actual adverse consequence to their support and maintenance, such as loss of employment, the court concludes that retirement contributions are not reasonably necessary for a debtor’s support and should be included in the calculation of disposable income.”); In re Tibbs, 242 B.R. 511, 517–21 (Bankr. N.D. Ala. 1999) (Mandatory deductions for state retirement program are reasonably necessary for the debtor’s maintenance or support. The debtor was an assistant principal at a public high school. The 22% plan was based on a monthly payment of $471. The Alabama State Teachers Retirement System automatically deducted $225.82 per month from the debtor’s paycheck. “This Court agrees with existing case law which has consistently held that . . . voluntary contributions to a retirement or pension fund should be included as disposable income. . . . Debtor’s contributions to the Retirement System are involuntary. . . . [T]he Debtor would not be able to keep his current employment if he was not part of the Retirement System. . . . [U]nder Alabama law the monthly deduction from the Debtor’s paycheck is a mandatory condition of the Debtor’s employment and not a voluntary contribution.” “However, § 1325(b) does not excuse those expenses which are merely involuntary. Therefore, even an ‘involuntary’ expense must be considered in light of each debtor’s unique circumstances to determine whether it is reasonably necessary. . . . In determining whether the involuntary contribution is reasonably necessary in light of the circumstances, the Court will examine and balance several factors. These include: (1) whether the debtor is seeking to shelter income through the retirement contributions; (2) the debtor’s ability to find similar or better employment elsewhere; (3) the harm to creditors if the contributions are excluded from disposable income; (4) the type of unsecured debt to be paid; (5) the purpose or reason for which the debt was originally incurred; (6) other reasonably necessary expenses of the debtor; and (7) the types of assets the debtor owns and/or for which he is paying. . . . Considering all of the above factors, this Court concludes the contributions to the Retirement System are essential for the Debtor to keep his job and thus are ‘reasonably necessary’ and should not be included as part of the Debtor’s disposable income.”); In re Davis, 241 B.R. 704, 707–09 (Bankr. D. Mont. 1999) (Mandatory deductions for retirement contributions are not projected disposable income. Debtor worked for county. Payroll deductions included $142 per month to Montana Public Employees Retirement System. Citing In re Nation, 236 B.R. 150 (Bankr. S.D.N.Y. 1999), “I do not agree that the disposable income requirement of § 1325(b) is directly in conflict with the PERS provisions of the Montana Code mandating the retirement deductions. . . . Charlton has no control over the PERS deductions, and they are required to be deducted from his wages . . . . Charlton’s employment by Yellowstone County is reasonably necessary to the support of the Debtors and their three minor children. . . . [T]his Court does not view Montana’s PERS requirements as actually conflicting with federal law . . . . [T]he Debtors never receive as income to pay current debts or expenses the PERS deductions . . . . [U]nder Montana law the creditors cannot reach the retirement contributions by levy or attachment outside bankruptcy since they are exempt . . . . PERS deductions are part of a pension trust fund to pay benefits to all eligible members . . . . The employer can be compelled to make up the shortfall and pay a penalty. . . . Section 1325(b)(1) requires that the Debtors pay their disposable income into the Plan, but it cannot be read to require that Charlton’s employer subsidize Debtors’ Plan by making up for the shortfall in his PERS deductions so that they can be paid to creditors instead of PERS members.”); In re Fields, 190 B.R. 16, 18–19 (Bankr. D.N.H. 1995) (“[P]roviding for retirement is recognized as a valid deduction as long as the deduction is a reasonable amount inasmuch as everybody has to look ahead for their retirement these days, particularly with Congress indicating that entitlement plans may be cut substantially in the future.”).

 

96  See § 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income. See, e.g., In re Anes, 195 F.3d 177, 179–182 (3d Cir. 1999) (For purposes of the disposable income test in § 1325(b)(1), debtors are not entitled to deduct the repayment of loans from their pension plans. Citing Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995), “[t]he payments, even if classified as debt payments, therefore, will increase their retirement benefits rather than repay the retirement systems or ensure the viability of either pension system. In effect, the payments are contributions to the Debtors’ retirement accounts. Voluntary contributions to retirement plans, however, are not reasonably necessary for a debtor’s maintenance or support and must be made from disposable income. . . . [T]he loan payments . . . do not constitute recoupment. New York City, for example, would have a right to recoup Anes’ loan obligation from her salary only if Anes’ obligation to repay the loan and the city’s obligation to pay her salary arose from the same transaction. . . . The respective retirement systems also may not continue to deduct loan payments in preference to unsecured creditors under the law of setoff. . . . Anes’ debt to the Retirement System (if debt it was) arose when she obtained the loan, before she entered bankruptcy. The city, however, has no obligation to pay Anes’ salary until she performs the services for which she is employed. . . . Because the salary reductions are neither a recoupment nor a valid setoff under § 553(a), we agree with those courts that have held that a bankruptcy court may order an employer to stop deducting a debtor’s payments on a loan from the debtor’s retirement account from the debtor’s salary.”); Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995) (Loan repayments to ERISA-qualified profit sharing account are not reasonably necessary for the debtor’s maintenance or support under § 1325(b).); In re Herndon, 289 B.R. 629, 633 (Bankr. E.D. Mich. 2003) (Citing Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995), and Mullen v. United States (In re Mullen), 696 F.2d 470 (6th Cir. 1983), ERISA-qualified retirement fund is not property of the Chapter 13 estate and automatic stay does not prohibit the fund from offsetting loan balances and notifying taxing authorities of the distribution; debtor “cannot make payments on her retirement loans through her Chapter 13 plan because she is paying her unsecured creditors only a 10% dividend.”); In re Aliffi, 285 B.R. 550 (Bankr. S.D. Ga. 2002) (Voluntary repayment of loan from a 401(k) retirement fund is not reasonably necessary for the current maintenance or support of the debtor or a dependent.); In re Helms, 262 B.R. 136, 141 & n.1 (Bankr. M.D. Fla. 2001) (Repayment of 401(k) loans is not a reasonable, necessary expense for § 1325(b) purposes. “This Court follows the majority view that voluntary 401(k) loan repayment expenditures are per se not necessary for the maintenance or support of a debtor or of a debtor’s dependents under the strict disposable income standard.” In a note, “[t]he Court acknowledges the recent decision of the United States Court of Appeals for the Second Circuit in New York City Employees’ Retirement System v. Sapir (In re Taylor), 243 F.3d 124 (2d Cir. 2001). . . . The Court finds the Taylor court’s logic unpersuasive because it cannot imagine any situation wherein voluntary 401(k) loan repayment could possibly be necessary for maintenance or support. It is conceivable that failure to repay a 401(k) loan might injure a debtor financially; however, avoidance of purely economic injury such as tax penalties does not rise to the level of necessity for maintenance or support.”); In re Estes, 254 B.R. 261, 263–66 (Bankr. D. Idaho 2000) (Repayment of 401(k) retirement fund loans is voluntary and is not reasonably necessary for the maintenance or support of the debtor. Citing In re Cavanaugh, 175 B.R. 369 (Bankr. D. Idaho 1994), “repayment of a loan taken from a 401K fund . . . is not ‘mandatory’ in the sense there discussed. . . . [R]epayment of the loan is voluntary, not required by law or contract. . . . [T]he overwhelming majority of decisions favor the conclusion that when repaying loans taken from pension funds is not mandatory or a condition of continued employment, those payments are not reasonably necessary for the debtor’s support and must be included when calculating disposable income. . . . [T]hat she will be subjected to income tax and tax penalties . . . [is] not sufficient to make these payments ‘mandatory’ and therefore excluded from the calculation of disposable income.”); In re Padro, 252 B.R. 809, 811 (Bankr. M.D. Fla. 2000) (“It is well settled that voluntary repayments to retirement plans are not reasonably necessary for the maintenance of debtors. . . . [A]dverse tax consequences resulting from a debtor’s failure to repay a retirement fund loan do not justify the allowance [of] such a repayment in derogation of § 1325(b).”); In re Johnson, 241 B.R. 394, 399–402 (Bankr. E.D. Tex. 1999) ($500 per month to repay loans from 401k type retirement plan not reasonable or necessary in the context of a plan paying $470 per month and less than 1% to general unsecured creditors. “Other than the situation in which a debtor has borrowed more money from a pension or retirement plan than he has actually contributed to it, it is difficult to imagine a scenario under which a debtor’s plan proposal to repay a pension ‘loan’ could escape a characterization as an improper item of discretionary spending, which is not reasonably necessary for the maintenance and support of the debtor, and which is therefore precluded by § 1325(b), absent a 100% payment to unsecured creditors.”); In re Nation, 236 B.R. 150, 152 (Bankr. S.D.N.Y. 1999) (Mandatory payroll deductions for pension loan repayments are not reasonably necessary.), probably overruled in part on other grounds by, New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124, 126–27 (2d Cir. 2001); In re Jaiyesimi, 236 B.R. 145 (Bankr. S.D.N.Y. 1999), aff’d sub nom. New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 248 B.R. 37, 41–42 (S.D.N.Y. 2000) (District court affirms bankruptcy court holding that repayment of a pension plan debt is not deductible in arriving at disposable income. Citing New York City Employees Retirement System v. Villarie, 648 F.2d 810 (2d Cir. 1981) and Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995), “A debtor’s obligation to repay a retirement loan is not a debt dischargeable in bankruptcy. . . . [P]ension loan repayments ‘may represent prudent financial planning, but [are] not necessary for the “maintenance or support” of the debtors’ and are therefore, treatable as disposable income.”), rev’d in part on other grounds by, New York City Employees’ Ret. Sys. v. Sapir (In re Taylor), 243 F.3d 124 (2d Cir. 2001).

 

97  See In re Guild, 269 B.R. 470, 474 (Bankr. D. Mass. 2001) (Following the reasoning in New York City Employees Retirement System v. Sapir (In re Taylor), 243 F.3d 124 (2d Cir. 2001), and rejecting Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995), “[t]here is an inherent unfairness in adopting a per se rule that says retirement loan repayments are never reasonably necessary for the maintenance and support of a debtor and thus should always be considered disposable income. . . . [T]he facts surrounding each individual case must be analyzed in order to make a fair determination as to whether the money being utilized for loan repayment is ‘reasonably necessary’ for the maintenance and support of a debtor.”); In re Bell, 264 B.R. 512, 516–17 (Bankr. S.D. Ill. 2001) (Case-by-case analysis based on many factors determines whether repayment of 401K loan is reasonably necessary for § 1325(b) purposes. “[T]he ‘mandatory/voluntary’ distinction used to determine whether a debtor’s 401K loan payments constitute ‘disposable income’ is inherently ambiguous and arbitrary . . . . Section 1325(b)(2) imposes a duty on the bankruptcy court to decide what expenses are ‘reasonably necessary’ . . . . This necessarily requires a case-by-case analysis of the overall circumstances confronting the debtor and consideration of any factors properly before the court . . . . Among the relevant factors are: (a) the age of the debtor and the amount of time until expected retirement, (b) the amount deducted monthly for the loan repayment and the total amount the debtor will have to pay back if the monthly payments are discontinued, (c) the likelihood that this pay-back amount will jeopardize the debtor’s fresh start, (d) the number and nature of the debtor’s dependents, (e) the likelihood the debtor will suffer adverse employment conditions if the loan payments are discontinued, (f) the debtor’s yearly income and overall budget, and (g) any other constraints on the debtor that make it likely the pension loan repayment is a reasonably necessary expense for that debtor. . . . Other factors this Court would consider include, inter alia: (a) the purpose of the loan, (b) what the proceeds were used for, (c) when the loan was taken out, i.e., how long before bankruptcy, (d) whether any proceeds of the loan are left, (e) how much of the repayment period remains, and (f) the effect of the debtor's proposed repayment of the loan on creditors in his Chapter 13 case. Administrative inconvenience in altering the loan repayment procedure, however, is not a factor bearing on whether pension loan payments should be continued in Chapter 13 . . . nor is the possibility that the debtor may suffer adverse tax consequences for failure to repay the 401K loan.”); In re Esquivel, 239 B.R. 146, 149–54 (Bankr. E.D. Mich. 1999) (Purporting to apply Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775 (6th Cir. 1995), loan repayment to ERISA-qualified retirement account is not a debt for bankruptcy purposes and even if it is, repayment through a Chapter 13 plan that only pays 8% to unsecured creditors is not reasonably necessary. “Harshbarger’s inclusion of such words as ‘in these circumstances’ and ‘debtors in the present case’ to qualify its holding make it clear that the court was not establishing a per se rule. Thus, we are not precluded from considering the Debtor’s own particular circumstances or his attempt to distinguish them from the facts in Harshbarger. . . . The Sixth Circuit in Mullen v. United States (In re Mullen), 696 F.2d 470 (6th Cir. 1983), agreed with the analysis in [New York City Employees’ Retirement System v. Villarie (In re Villarie), 648 F.2d 810 (2d Cir. 1981)]. . . . The court stated that no ‘debt’ or ‘claim’ can arise where the debtor is not liable for repayment, and the only remedy available for nonpayment is setoff against future payments that will become due. . . . [E]ven assuming the pension-account loan could be characterized as a secured ‘debt,’ this fact would not eliminate the need to perform the ‘reasonably necessary’ analysis required by § 1325(b). . . . The Debtor has failed to show any extraordinary facts or circumstances that would make the application of the Harshbarger rule to his case inequitable, or that somehow this $6,000 contribution is otherwise ‘reasonably necessary to be expended for . . . [his] maintenance or support.’”).

 

98  In re Colon Vazquez, 111 B.R. 19 (Bankr. D.P.R. 1990) (A compulsory 3% wage deduction required of school teachers by Puerto Rican law to maintain membership in the Asociacion de Empleados del E.L.A. is excluded from projected disposable income.).

 

99  In re Presley, 201 B.R. 570, 575 (Bankr. N.D. Fla. 1996). Accord In re Bottelberghe, 253 B.R. 256, 263–64 (Bankr. D. Minn. 2000) (Life insurance payment of $136 a month is not “remotely questionable” as an expense for a family of six.); In re Rothman, 206 B.R. 99, 108 (Bankr. E.D. Pa. 1997) (A $100 monthly expenditure for life insurance is “not luxurious nor excessive, particularly since the Debtor has a wife and four young children.”).

 

100  In re Smith, 207 B.R. 888, 890 (B.A.P. 9th Cir. 1996). Accord In re Williamson, 296 B.R. 760, 765–66 (Bankr. N.D. Ill. 2003) (“The non-Debtor spouse’s whole life insurance policy in this case is an investment vehicle as the policy builds cash value . . . . [A] term life insurance policy without cash value . . . is an arguably necessary expense to protect a surviving spouse. . . . [T]he whole life insurance policy . . . is not ‘reasonably necessary’ and the amount of the monthly policy premium for that policy should be included in the Debtor’s disposable income.”); In re Rothman, 204 B.R. 143, 159 (Bankr. E.D. Pa. 1996) (“$350 monthly for the life insurance premiums, or $4,200 per year, indicates an inordinate and unnecessary amount . . . . [W]e do not object to a debtor’s expending a reasonable amount on life insurance. We are not certain that there is not a savings component to the Debtor’s insurance policies, but we find the amount paid to be excessive irrespective of the presence of any savings component. The amount of the insurance payments compares most unfavorably with the Plan’s provision of only $1,800 per year towards payments to be allocated to the Debtor’s unsecured creditors.”).

 

101  In re MacDonald, 222 B.R. 69, 77 (Bankr. E.D. Pa. 1998) (“[S]ending one’s child to parochial school is not, in certain circumstances, an unreasonable expense . . . . [S]ending a child to a private school can, in some circumstances, certainly be found to be a luxury expense because ‘a debtor does not have the right to force his creditors to donate to his children’s education.’ . . .  Debtors are not only sending their son to parochial school, but to a parochial school many miles from their home. . . . [T]estimony . . . failed to help us understand his desire to not only send his son to a private Catholic school, but to one located in New York City, rather than a school proximate to rural Quakertown, where the Debtors live. In fact, a desire to send a child from an area which promises uncrowded public schools to a city school is, we suspect, the reverse of that which would be expressed by most parents. The only explanation presented on the record . . . was that the Husband wanted his son to attend Catholic school because he himself is Catholic. This is a logical but insufficient basis to justify this expense. The Husband did not adequately explain or submit any documentation to the record supporting his choice to not send his son to either a public school or possibly a less expensive parochial school in his neighborhood. . . . Debtors’ parochial-school situation is less like merely sending a child to a religious school and more like sending the child to a private boarding school, which normally would be considered a luxury expense.”).

 

102  In re Burgos, 248 B.R. 446, 450–51 (Bankr. M.D. Fla. 2000) ($590 per month for private religious school tuition is reasonably necessary in the context of a 60-month plan paying 70% of unsecured debt. Debtor was a physician earning $8,803.88 per month. The purpose of the Chapter 13 case was to save the debtors’ house, valued at $275,000. Unsecured claims totaled $92,909.91. The debtors’ 60-month plan would cure mortgage arrearages of $21,210 and pay approximately 70% to unsecured creditors. “A split of authority exists as to whether payment of school tuition is a reasonably necessary expense for a Chapter 13 debtor. . . . [T]he amount paid for the private education of their two minor children is less than the amount to be distributed to the unsecured creditors. Debtors retain no real property other than their home. . . . Debtors note strong religious beliefs carried out by their feeling that their children should receive education in a Christian school and that these children have always attended private Christian school. . . . [T]his tuition expense is an expense that creditors could have reasonably anticipated to be incurred by Debtors at the time credit was extended. . . . Debtors’ primary motivation is to save their home and still be able to provide a good life for their children . . . . [T]he Trustee is not without future remedy in this case. The Trustee can, and maybe should in this case . . . monitor the Debtors’ financial activities over the course of the plan and solicit information from Debtors on a regular basis to determine whether additional disposable income exists to increase payment to unsecured creditors.”).

 

103  Lynch v. Tate (In re Lynch), 299 B.R. 776, 779–80 (W.D.N.C. 2003) (“The primary reason given by the Appellants for the necessity of private school tuition is one of religious conviction, including their objection to the teaching of evolution. . . . Appellants have not argued that the public schools in their area are unsafe, remote from their home or educationally unsound. . . . Nor have the Appellants offered to modify other aspects of their standard of living in order to accommodate the tuition costs . . . . Neither child suffers from a disability or mental or emotional impairment. . . . [T]his is not a case in which the tuition for the school is a ‘bargain.’”).

 

104  In re Bottelberghe, 253 B.R. 256, 264 (Bankr. D. Minn. 2000).

 

105  In re Jones, 55 B.R. 462 (Bankr. D. Minn. 1985). Accord In re Stephens, 265 B.R. 335, 338 (Bankr. M.D. Fla. 2001) (“[T]he $500.00 used by Debtor Wife to attend school is not reasonably necessary for her maintenance or support.”).

 

106  In re Riegodedios, 146 B.R. 691 (Bankr. E.D. Va. 1992).

 

107  In re Gonzales, 157 B.R. 604, 609 (Bankr. E.D. Mich. 1993).

 

108  In re Zaleski, 216 B.R. 425, 432 (Bankr. D.N.D. 1997).

 

109  Univest-Coppell Village Ltd. v. Nelson (In re Nelson), 204 B.R. 497, 498, 500 (E.D. Tex. 1996) ($395-per-month tuition to the Liberty Christian private school for 15-year-old daughter is not reasonably necessary in the context of a gross monthly income of $8,081.46. “[T]his court is not persuaded the tuition expenses for a private high school are reasonably necessary. . . . [A] private school education is not a basic need. The debtor’s daughter can attend Ryan [Public] High School, where her older sister attended. Furthermore, in his deposition, her father, Mr. Nelson, stated he did not have any particular problems with the education offered at the public school.” Court was not persuaded by testimony that the 15-year old daughter was “the first (high school) freshman to have ‘made the cheerleading squad’” nor the testimony that the daughter was “in honors courses at Liberty Christian School, which she is not certain are offered at the public school.”).

 

110  In re Weiss, 251 B.R. 453, 462 (Bankr. E.D. Pa. 2000) (“Debtor has failed to meet his burden of [proving] that private school tuitions for his three children are a necessary expense rather than a luxury item. In some circumstances, sending one’s child to a private school is not an unreasonable expense, and it does not necessarily have to be sacrificed in order to pay more money to unsecured creditors. . . . In many circumstances, however, private school tuition is a luxury expense that amounts to a debtor requiring his or her creditors to donate toward his children’s education. . . . The Debtor offered no persuasive testimony that would justify spending $760.00 per month to send his children to private schools. The Debtor’s five-year old son and eight-year old son would clearly appear capable of attending public school in the safe, suburban setting of the Debtor’s home as an alternative to private schooling.’).

 

111  In re Nicola, 244 B.R. 795, 797–99 (Bankr. N.D. Ill. 2000) ($260 per month for private Catholic school tuition is reasonably necessary in the context of a Chapter 13 plan paying 10% to unsecured creditors over 40 months when the monthly payment to the trustee is $686. “There is a split of authority on the issue of whether payment of school tuition is a reasonably necessary expense for a debtor in a Chapter 13 case. . . . Here, the debtors are spending $260 per month to send the child to Catholic school. This is not an excessive amount . . . . [D]ebtors here do not send the child away to boarding school; she attends a local Catholic school . . . . [T]he debtors have alleged that the local public school is inadequate and have provided a ‘School Report Card’ indicating that, in fact, average standardized test scores at the public school are below those of the state as a whole. . . . [T]he child has attended Catholic school her entire life . . . . [T]here would likely be significant emotional cost to the child to change placement in her final year of elementary school. . . . [The debtor] and the child’s father are practicing Catholics and desire their daughter to attend Catholic school . . . . [T]aken as a whole, the facts in this case indicate that the debtors’ monthly payment of $260 for Catholic school tuition is reasonably necessary.”).

 

112  In re Ehret, 238 B.R. 85, 88 (Bankr. D.N.J. 1999) (“The debtor presented no evidence as to the existence or nature of his son’s disability. . . . The debtor offers no explanation as to why his son’s educational needs are not being satisfied under [Individuals With Disabilities Education Act] at no cost to the Ehrets. The debtor has therefore failed to meet his burden to proving that his son’s private school tuition is a reasonable, necessary expense under Code section 1325(b)(2)(A).”).

 

113  In re Webb, 262 B.R. 685, 691–93 (Bankr. E.D. Tex. 2001) (Proposed plan paid a 1% dividend. Budget showed monthly private school tuition of $550. Uncontradicted testimony from physician showed that debtor’s 12-year-old suffered from Attention Deficit Hyperactive Disorder and a Generalized Anxiety Disorder. Bankruptcy court refused trustee’s invitation to require the debtors to prove that special educational needs could be met by local school district under Individuals with Disabilities Education Act: “While this statute properly insures that a local school district cannot ignore the special educational needs of children located within its boundaries, this Court is not convinced that the existence of this statute imposes any burden upon a chapter 13 debtor with educational expenses for a special needs child to explain either why a local school district may not be meeting its statutory obligations under the IDEA or why a lawsuit to compel compliance by the district has not been initiated.”).

 

114  Cancel v. City of Schenectady (In re Cancel), 82 B.R. 674 (Bankr. N.D.N.Y.), rev’d, 85 B.R. 677 (N.D.N.Y. 1988).

 

115  Kohr v. Magisterial Dist. 52-1-01 (In re Kohr), 82 B.R. 706 (Bankr. M.D. Pa. 1988).

 

116  See §§ 151.1 [ Priority Claims ] § 87.4  Priority Claims and 154.1 [ Restitution, Fines and Other Criminal Problems ] § 88.7  Restitution, Fines and Other Criminal Problems.

 

117  In re Greer, 60 B.R. 547 (Bankr. C.D. Cal. 1986).

 

118  In re Otero, 48 B.R. 704 (Bankr. E.D. Va. 1985).

 

119  In re Crompton, 73 B.R. 800 (Bankr. E.D. Pa. 1987).

 

120  In re Fries, 68 B.R. 676 (Bankr. E.D. Pa. 1986). Accord In re Bottelberghe, 253 B.R. 256, 263 (Bankr. D. Minn. 2000) (“[R]easonable reserve or contingency funds to meet unexpected or extraordinary expenses are also permissible family expenses.”). See also In re Rothman, 206 B.R. 99 (Bankr. E.D. Pa. 1997) ($82.40 per month is not an excessive contingency fund for a Chapter 13 debtor who has four children and will contribute $39,438.48 over 36 months to satisfy § 1325(b).).

 

121  In re Kitson, 65 B.R. 615 (Bankr. E.D.N.C. 1986).

 

122  In re Marshall, 111 B.R. 325 (Bankr. D. Mont. 1990). Accord In re Smith, 222 B.R. 846 (Bankr. N.D. Ind. 1998) (Cushion of $183.57 in the context of a monthly family income of $4,338.90 and expenses of $2,422 is excessive and is reduced to $75 per month.); In re Clements, 185 B.R. 903 (Bankr. M.D. Fla. 1995) (Surplus of $364.74 from gross monthly income of $4,588.74 is not permitted.); In re Gonzales, 157 B.R. 604 (Bankr. E.D. Mich. 1993) (Cushion of $330 per month is excessive where debtors have take-home pay of almost $4,300 per month and propose to pay $1,300 per month for three years into the plan. Cushion was calculated in part by recharacterizing an expense for a master’s degree program as disposable income. The $330-per-month cushion would produce approximately $11,880 for additional payment to creditors during the 36-month life of the plan. The debtors’ plan proposed to distribute only $7,300 to unsecured creditors.).

 

123  See, e.g., In re Rybicki, 138 B.R. 225 (Bankr. S.D. Ill. 1992) (Although bankruptcy courts do sometimes allow a cushion in the budget for disposable income purposes, there is no specific rule that automatically allows a cushion. Debtors cannot modify their budget to create a cushion so they can pay for a camper that the court has determined is not a reasonable and necessary expense.).

 

124  See, e.g., In re Alicea, 199 B.R. 862, 865 (Bankr. D.N.J. 1996) (Rejects argument that “good faith requires that all postpetition refunds, credits and rebates must be turned over to the trustee . . . . This argument is based upon a faulty assumption, . . . since refunds, credits and rebates will often be for items which must then be repurchased for the maintenance and support of the debtors and their dependents under Code section 1325(b)(2)(A). Moreover, such a requirement would be excessive in light of the tightness of these debtors’ budget, which as it is has very little room for unexpected expenses.”).

 

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

 

126  See §§ 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1  Alimony, Maintenance and Support in Cases Filed before October 22, 1994.

 

127  See also § 152.2 [ Alimony, Maintenance and Support ] § 88.4  Alimony, Maintenance and Support.

 

128  In re Curry, 77 B.R. 969 (Bankr. S.D. Fla. 1987). Accord In re Dick, 222 B.R. 189, 190 n.1, 191 (Bankr. D. Mass. 1998) (Although one of the debtors “works for the church and a tithe, although not required, is expected of the employees,” tithing “cannot be considered a reasonable and necessary expense of a Chapter 13 debtor.”).

 

129  In re Zaleski, 216 B.R. 425, 432 (Bankr. D.N.D. 1997) (In the context of Chapter 13 debtor with gross family income of $7,145, “[c]haritable contributions of $65 per month are unnecessary and cannot be said to be essential to the family’s maintenance or support.”).

 

130  In re Sturgeon, 51 B.R. 82 (Bankr. S.D. Ind. 1985).

 

131  Waguespack v. Rodriguez (In re Waguespack), 220 B.R. 31 (W.D. La. 1998) (Tithe of $267.58 per month is unreasonable in the context of a plan that calls for payments of $213 per month for 36 months and dividend of 12.4% to unsecured creditors.).

 

132  In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987).

 

133  In re Saunders, 214 B.R. 524 (Bankr. D. Mass.) (Monthly expense of $400 for charitable contributions is not reasonable in the context of a plan that pays 10% to unsecured creditors over 48 months in installments of $215 per month.), on reconsideration, 215 B.R. 800, 803–06 (Bankr. D. Mass. 1997).

 

134  In re Andrade, 213 B.R. 765 (Bankr. E.D. Cal. 1997) (Tithe of $470 per month in context of plan that pays creditors $492 per month is not reasonable.).

 

135  In re McDaniel, 126 B.R. 782 (Bankr. D. Minn. 1991).

 

136  In re Wood, 92 B.R. 264 (Bankr. S.D. Ohio 1988).

 

137  In re McDaniel, 126 B.R. 782 (Bankr. D. Minn. 1991); In re Green, 73 B.R. 893 (Bankr. W.D. Mich. 1987).

 

138  See In re McDonald, 232 B.R. 818, 820–21 (Bankr. S.D. Fla. 1999) (“This Court agrees with the reasoning set forth in [In re Andrade, 213 B.R. 765 (Bankr. E.D. Cal. 1997)], and concludes that the requirements of 11 U.S.C. 1325(b) mandating the Debtors allocate all disposable income to the Chapter 13 plan is [sic] a facially neutral law of general application on Debtors’ religious beliefs and does not violate the First Amendment.”); In re Andrade, 213 B.R. 765, 769 (Bankr. E.D. Cal. 1997) (“[Section] 1325(b)’s requirement that debtors allocate all disposable income to the Chapter 13 plan is a facially neutral law of general application . . . any incidental interference by its application on Debtors’ religious beliefs does not violate the Free Exercise Clause.”). Accord In re Reynolds, 83 B.R. 684 (Bankr. W.D. Mo. 1988); In re Navarro, 83 B.R. 348 (Bankr. E.D. Pa. 1988).

 

139  In re Bien, 95 B.R. 281, 282–83 (Bankr. D. Conn. 1988) (10% Mormon Church contribution “is an integral part of the religion rather than a discretionary donation,” and “the amount of such expense is not a proper subject for court scrutiny.” Payment of the tithe is “reasonably necessary for the debtor’s maintenance and support” because the proposed expense “fulfills a bonafide personal commitment intended to serve or promote some religious or spiritual purpose.”).

 

140  See, e.g., In re Andrade, 213 B.R. 765, 769–72 (Bankr. E.D. Cal. 1997) (Tithe of $470 per month in context of plan that pays creditors $492 per month is not reasonable. “While some discretionary spending is permitted, the amount claimed must be subject to a reasonableness determination. . . . This court thus refuses to adopt a blanket rule that all religious tithes are per se reasonably necessary. . . . We adopt the position that some reasonable contribution, whether to a secular or sectarian cause, is permitted from the ‘reasonably necessary’ discretionary spending occasionally permitted a debtor. . . . When a court does approve some discretionary spending as a reasonably necessary expense, debtors are free to spend that amount of income on recreation, vacation, charity or anything else they choose. . . . [D]ebtors have no right to ‘more discretionary income than other debtors merely because they wish to use some of it to make charitable [or religious] donations.’ . . . Debtors’ proposed $470.00 monthly charitable distribution does not constitute a reasonably necessary living expense. . . . [T]he amount of the contribution is simply too high. . . . [It is] nearly equal to the $492.00 allocated to the plan payments. . . . Debtors have not undertaken enough sacrifice. . . . Debtors have allocated $570.00 ($470.00 for charity and $100.00 for entertainment) towards discretionary spending. . . . This is more than the $492.00 allotted for creditors. This $570.00 also represents 20% of the $2,848.00 monthly expenses; this is simply too much discretionary spending.”); In re Lees, 192 B.R. 756, 758–59 (Bankr. D. Mont. 1994) (Tithing of $200 per month in a Chapter 13 case that pays $150 a month to creditors is not permitted by the disposable income test. “Their $200 monthly tithe is a long-standing religious belief personal to the Debtors. . . . There is no suggestion that the Lees family began tithing in contemplation of bankruptcy. . . . The record does not show, however, that the Shepherd of the Valley Church requires a tithe of ten percent from its members. . . . [In re Navarro, 83 B.R. 348 (Bankr. E.D. Pa. 1988)] has no remaining leg to stand on in light of Smith [Employment Div., Dep’t of Human Resources of Or. v. Smith, 494 U.S. 872, 110 S. Ct. 1595, 108 L. Ed. 2d 876 (1990)] . . . . I adopt the majority position that tithing should not be considered a reasonable living expense. . . . I follow [In re] Packham’s [126 B.R. 603 (Bankr. D. Utah 1991),] reasoning and decline to set a percentage which can be deemed a ‘reasonable charitable contribution.’”); In re Cavanaugh, 175 B.R. 369, 374 (Bankr. D. Idaho 1994) ($55 per month for “charitable contributions” may or may not be reasonable, depending on the total of discretionary expenses. “[A]s long as section 1325(b) is applied neutrally to church and charitable donations it does not violate the First Amendment. However, in determining whether an item is reasonably necessary for the support and maintenance of the debtor, most courts including this Court permit a Chapter 13 debtor some recreational spending. . . . Because the courts allow discretionary spending for some items which are not absolute necessities of life such as modest dinners out, newspapers and other recreational items, the debtors should not be denied to make donations purely because of the discretionary nature of the items. Instead, it is concluded the debtors have the right to spend their discretionary funds in any manner they choose including the making of charitable donations. However, by the same token the debtors have no right to more discretionary income than other debtors merely because they wish to use some of it to make charitable donations. Therefore, the debtors’ expenses for charitable donations will be considered with their other discretionary funds when determining the reasonableness of charitable contributions.”); In re Anderson, 143 B.R. 719, 721 (Bankr. D. Neb. 1992) (Some discretionary spending is reasonable and necessary in a Chapter 13 case and can be allocated by the debtor to charity or other activities. However, the total amount of discretionary expenses should be limited. Chapter 13 debtors “are not required to live at a poverty level.” Discretionary expenses must be evaluated in light of income and plan payments on a case-by- case basis. Monthly discretionary expenses of $215 for recreation and charity are excessive when the debtors’ gross monthly income is $3,144 and the plan calls for payments of $475. Debtors are required to increase plan payments by $120 per month.); In re McDaniel, 126 B.R. 782, 783–85 (Bankr. D. Minn. 1991) (Proposed monthly tithe of $540 is excessive and not reasonably necessary when tithing nearly equals the amount of the proposed monthly payment and the plan proposes only 30% payment of unsecured debt. Debtors had tithed for several years and expressed a strong moral obligation to continue to do so, but conceded that they would not be denied full participation in church if they did not tithe. “Expenses that are not absolutely essential to the maintenance and support of debtors can nonetheless be ‘reasonably necessary.’ . . . Courts must balance the interests of creditors against debtors’ entitlement to determine the manner in which they should maintain and support themselves and their dependents. . . . Debtors in Chapter 13 cases are not entitled to maintain their former lifestyles and statuses in society at the expense of their creditors. . . . Tithing is a non-luxury expense, since a debtor ‘obtains no tangible benefit or increased standard of living because of the money expended.’ . . . It would be contrary to the ‘free exercise’ clause of the First Amendment to the United States Constitution to hold that tithing is not a reasonable, necessary expense per se, even if such a rule were applied only in cases where the debtors could discontinue tithing without being denied full participation in their churches. . . . A bankruptcy court must permit a debtor with sincere religious beliefs to engage in some level of tithing. . . . A bankruptcy court, however, would not violate the First Amendment by concluding that a proposed level of tithing in a particular case is excessive, and thus not reasonably necessary. . . . Such a conclusion constitutes a permissible application of neutral principles established by Congress.”); In re Packham, 126 B.R. 603, 608–10 (Bankr. D. Utah 1991) (10% tithe is not reasonably necessary for the maintenance and support of debtor or debtor’s dependents. “The only alleged loss that the debtors might suffer as a consequence of their failure to pay tithing is the denial of a temple recommend. Denial of a recommend, however, was based on the debtors’ speculation. The debtors did not present evidence that the church would in fact deny them a temple recommend if they failed to make tithing payments. . . . Even if the debtors had presented competent evidence on the issue of the temple recommend, the court would probably follow the majority line of cases that hold that ‘while church donations may be a source of inner-strength and comfort to those who feel compelled to make them, they are not necessary for the ‘maintenance or support of the debtor or dependent of the debtor.’ . . . [B]y making decisions as to the propriety of including contributions to charitable and/or religious organizations in a debtor’s budget, the court, in effect, would be forced to pass on the legitimacy of that organization. Or, . . . the court would be forced to decide whether an individual has ‘a bona fide personal commitment’ . . . to the religious organization to which it desires to contribute. Such decisions are not for courts to make. . . . [T]he court will not follow the totality of the circumstances approach stated in [In re Reynolds, 83 B.R. 348 (Bankr. E.D. Pa. 1988)]. Moreover the court will not set a percentage that it deems to be a reasonable charitable contribution.” Official Bankruptcy Form 10 contains a budget item for “religious and other charitable contributions,” but this is not indicative of congressional intent because the official forms do not require approval either by the Supreme Court or by Congress.); In re Miles, 96 B.R. 348, 350 (Bankr. N.D. Fla. 1989) (Adopting the holdings in In re Reynolds, 83 B.R. 348 (Bankr. E.D. Pa. 1988), and In re Sturgeon, 51 B.R. 82 (Bankr. S.D. Ind. 1985), and rejecting In re Green, 73 B.R. 893 (Bankr. W. D. Mich. 1987), church donations “may be a source of inner-strength and comfort . . . [but] they are not necessary for the ‘maintenance or support of the debtor or a dependent of the debtor.’”); In re Wood, 92 B.R. 264 (Bankr. S.D. Ohio 1988) (Monthly tithe of $43 is “not so inappropriate.”); In re Reynolds, 83 B.R. 684, 685 (Bankr. W.D. Mo. 1988) (In re Sturgeon correctly focuses on the question of whether the contribution is a necessary living expense. “This court chooses to establish no hard and fast rule as to what amount or percentage of charitable contribution it will construe as ‘reasonably necessary.’ That will depend on the circumstances of each case. Certainly some nominal amount will be permissible, but that amount will need to be below 3% of gross income unless very unusual circumstances are present.”); In re Navarro, 83 B.R. 348, 356–57 (Bankr. E.D. Pa. 1988) (Tithing and religious education are not per se unreasonable choices for the maintenance and support of a Chapter 13 debtor’s family. “[R]eligious contributions and parochial school education are not expenses for luxury goods or services. . . . [S]ome level of religious or charitable contribution and some expenditure on religious education may be consistent with expenditures reasonably necessary for maintenance and support. . . . $100 monthly on religious education . . . is not excessive . . . . [I]n the context of a sincerely held religious belief in a denomination which mandates a tithe, I cannot hold that contribution of a tithe is excessive. . . . [M]y resolution of this contested matter might be different if there were evidence that these debtors were making religious contributions or sending their son to parochial school as part of a conscious choice to presently favor their religious beliefs over unsecured creditors.”).

 

141  See Employment Div., Dep’t of Human Resources of Or. v. Smith, 494 U.S. 872, 110 S. Ct. 1595, 108 L. Ed. 2d 876 (1990).

 

142  42 U.S.C. § 2000bb.

 

143  See 42 U.S.C. § 2000bb-1(b)(1); (2).

 

144  Christians v. Crystal Evangelical Free Church (In re Young), 82 F.3d 1407 (8th Cir.) (Although prepetition contributions to a church were fraudulent transfers for purposes of § 548, the Chapter 7 trustee could not recover those transfers because of the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb.), reh’g denied, 89 F.3d 494 (8th Cir. 1996).

 

145  City of Boerne v. Flores, 521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997).

 

146  Christians v. Crystal Evangelical Free Church, 521 U.S. 1114, 117 S. Ct. 2502, 138 L. Ed. 2d 1007 (1997).

 

147  Christians v. Crystal Evangelical Free Church (In re Young), 82 F.3d 1407 (8th Cir. 1996), on remand, 141 F.3d 854, 856–61 (8th Cir. 1998) (“Upon reconsideration, we conclude that, under the Bankruptcy Clause and the Necessary and Proper Clause of Article I of the Constitution, RFRA is constitutional as applied to federal law. Accordingly, we reinstate our previous decision . . . . In concluding that Congress could not rely on § 5 of the Fourteenth Amendment to impose RFRA on state governments, the Flores Court [City of Boerne v. Flores, 521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997),] did not address whether Congress could, pursuant to its Article I authority, constitutionally impose RFRA on federal law. . . . We conclude that RFRA is an appropriate means by Congress to modify the United States bankruptcy laws. In attempting to avoid the Youngs’ tithes to the church, the Trustee relied on an affirmative act of Congress defining which transactions of debtors in bankruptcy may be avoided. See 11 U.S.C. § 548(a)(2)(A). RFRA, however, has effectively amended the Bankruptcy Code, and has engrafted the additional clause to § 548(a)(2)(A) that a recovery that places a substantial burden on a debtor’s exercise of religion will not be allowed unless it is the least restrictive means to satisfy a compelling governmental interest.”).

 

148  Waguespack v. Rodriguez (In re Waguespack), 220 B.R. 31, 34–37 (W.D. La. 1998) (Tithe of $267.58 per month is unreasonable in the context of a plan that calls for payments of $213 per month for 36 months and dividend of 12.4% to unsecured creditors. “Debtors are sincere about the religious beliefs they express.” “God’s portion” or the first 10% of the debtors’ gross income was income for purposes of the disposable income test notwithstanding that “Judeo-Christian tradition . . . and the Bible” might counsel otherwise. “While tithing may be reasonably necessary for maintenance of the debtor’s spiritual welfare, it is arguably neither indispensable to or necessary for the maintenance of his or her physical well-being. . . . Appellants cannot have their cake and eat it too: they cannot, in good faith, on the one hand voluntarily seek the financial safety and protection afforded by the bulwark of federal bankruptcy law and on the other, decry its religiously neutral requirements. . . . [T]his case is controlled by Employment Div., Dept. of Human Resources of Oregon v. Smith, 494 U.S. 872 [110 S. Ct. 1595, 108 L. Ed. 2d 876 (1990).] . . . . [A] valid and neutral law of general applicability that only incidentally burdens religion does not offend the First Amendment’s guarantee of free exercise. . . . This Court cannot, on the facts presented, find that this section of federal bankruptcy law intends to target or regulate religious beliefs . . . . [T]he Religious Freedom Restoration Act (R.F.R.A.) was declared unconstitutional in its totality and for all purposes by the U.S. Supreme Court in City of Boerne v. Flores, [521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997).] . . . . [W]hile the Flores Court’s Fourteenth Amendment analysis played a prominent role in that opinion, the Court was clear it was also invalidating R.F.R.A. because it violated the principle of separation of powers . . . . Because R.F.R.A. has been declared unconstitutional, that statute and the compelling interest standard which it embodies have no application in this case.”); In re Saunders, 214 B.R. 524, 527 (Bankr. D. Mass.), on reconsideration, 215 B.R. 800, 803–06 (Bankr. D. Mass. 1997) (Notwithstanding that the Supreme Court’s analysis of RFRA in City of Boerne v. Flores, 521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997), applies only to the states, both as a matter of statutory construction and constitutional law tithing is not permitted under the disposable income test in a Chapter 13 case. “I stand by my prior ruling that, considered without regard to RFRA, tithing is not a reasonably necessary expense of a Chapter 13 debtor. . . . RFRA, as applied to tithing in Chapter 13, favors religion in general over non-religion. To that extent it violates the Free Exercise Clause and is unconstitutional. . . . RFRA, if it authorizes tithing in the context of a Chapter 13 plan, has the primary effect of advancing religion, not as one type of non-profit institution . . . but solely because it is religion. That effect is impermissible under the Establishment Clause. . . . The application of RFRA to Chapter 13 plans with the effect of permitting tithing imposes a necessity for ‘continuing surveillance leading to an impermissible degree of entanglement’ into the mind and soul of a debtor. . . . [I]f RFRA directs me to permit tithing in a Chapter 13 plan, it most excessively entangles me with religion and is unconstitutional.”); In re Andrade, 213 B.R. 765, 772 (Bankr. E.D. Cal. 1997) (“Lastly, Debtors contend that the Religious Freedom Restoration Act precludes this court from interfering with Debtors’ tithing. However, the Act was recently declared unconstitutional by the Supreme Court in City of Boerne v. Flores, [521 U.S. 507, 117 S. Ct. 2157, 138 L. Ed. 2d 624 (1997)].”); In re Tessier, 190 B.R. 396, 403–07 (Bankr. D. Mont. 1995) (RFRA is unconstitutional when applied to tithing in a Chapter 13 case. Contribution of $100 per month to a church in a plan that pays nothing to unsecured claim holders cannot be confirmed. “Under 11 U.S.C. § 1325(b) charitable contributions, both secular and sectarian, are not a reasonable living expense for the purposes of confirmation of a Chapter 13 plan, so they therefore do come within the definition of disposable income. In re Lees [192 B.R. 756 (Bankr. D. Mont. 1994)] . . . . [U]nder RFRA, a worshiper’s subjective belief that a statute places a substantial burden upon acts regarded as central to the exercise of the worshiper’s religious faith serves to satisfy the first two elements of the Act. . . . The Court must therefore conclude, despite the Tessiers’ individual beliefs’ apparent contradiction with their church’s official doctrine, not allowing them to tithe in Chapter 13 would substantially burden the Tessiers’ exercise of their religion. . . . While the government clearly has interests in the bankruptcy system . . . such interests do not implicate the security of the United States or physical safety of its people. These interests therefore, while rational, and even important, are not sufficiently grave to deserve the ‘compelling’ label when balanced against a parishioner’s free exercise of religion. . . . Since not allowing the Tessiers to tithe in their Chapter 13 Plan imposes upon their exercise of religion a substantial burden in which the Trustee has failed to show the government has a compelling interest, RFRA effectively invalidates this Court’s holding in Lees . . . . Unlike a specific statutory amendment designed to accomplish a free exercise end (such as a provision in the Bankruptcy Code specifically excluding reasonable charitable contributions from the definition of disposable income), through RFRA, Congress purports to force the Judicial Branch to apply a statutory standard that it has specifically rejected as judicially unworkable in the constitutional context. . . . [T]his Court has concluded under the holding of [Employment Div., Dept. of Human Resources of Oregon v. Smith, 494 U.S. 872, 110 S. Ct. 1595, 108 L. Ed. 2d 876 (1990),] that it lacks the constitutional authority to seriously inquire whether the Tessiers’ religious practice requires them to give to their church and must therefore accept their allegations as true even if their church disagrees. . . . To apply RFRA, the Bankruptcy Court has to fly directly in the face of the Supreme Court’s admonition that it cannot adequately evaluate and compare the competing interests implicated by the facts . . . . [I]n attempting to deny the Supreme Court’s determination of its own capacity to adjudicate, the Congress invades a province properly left to a coordinate Branch, and in so doing, impermissibly exceeds its legislative authority. Baker v. Carr, 369 U.S. 186, [82 S. Ct. 691, 7 L. Ed. 2d 663 (1962),] . . . . The Judicial Branch set its institutional limits regarding free exercise in Smith, and invited Congress to address the judiciary’s bounds with instructional legislation. . . . Rather than take this political responsibility, the Congress impermissibly ordered the courts to ignore Smith and apply a judicially unmanageable test. . . . The doctrine of separation of powers precludes such a result.” Having determined that RFRA is unconstitutional in this context, Lees requires denial of confirmation.).

 

149  Pub. L. No. 105-183, 112 Stat. 517 (June 19, 1998).

 

150  11 U.S.C. § 1325(b)(2)(A) (emphasis added), as amended by Religious Liberty and Charitable Donation Protection Act of 1998, Pub. L. No. 105-183, 112 Stat. 517 (June 19, 1998).

 

151  See § 5, Pub. L. No. 105-183, 112 Stat. at 518–19.

 

152  11 U.S.C. § 548(d)(3); (d)(4) read as follows:

(3) In this section, the term “charitable contribution” means a charitable contribution, as that term is defined in section 170(c) of the Internal Revenue Code of 1986, if that contribution—
(A) is made by a natural person; and
(B) consists of—
(i) a financial instrument (as that term is defined in section 731(c)(2)(C) of the Internal Revenue Code of 1986); or
(ii) cash.
(4) In this section, the term “qualified religious or charitable entity or organization” means—
(A) an entity described in section 170(c)(1) of the Internal Revenue Code of 1986; or
(B) an entity or organization described in section 170(c)(2) of the Internal Revenue Code of 1986.

 

153  See In re Buxton, 228 B.R. 606, 610–11 (Bankr. W.D. La. 1999) (After Religious Liberty and Charitable Donation Protection Act of 1998, the reasonably necessary test in § 1325(b)(2)(A) still applies to charitable contributions. “The definition of ‘disposable income’ still contains the ‘reasonably necessary’ restriction. . . . The 1998 Act now makes it clear that such living expenses may include charitable contributions, thus overturning that line of cases which totally prohibited any charitable contribution by a chapter 13 debtor. . . . Those expenses, however, must still be determined by the court to be reasonable. . . . ‘The courts should thus confirm tithing as a necessary expense, but only by virtue of the debtors’ willingness to pay for it with their discretionary funds—not by virtue of its charitable or religious nature.’ . . . Had Congress intended the result suggested by the Debtors, it surely knew how to do so. Look at what they did to section 707(b). In determining whether a case constitutes a ‘substantial abuse’ of the provisions of chapter 7, ‘the court may not take into consideration whether a debtor has made, or continues to make, charitable contributions’ . . . . Had Congress wanted this same result in chapter 13 cases, they surely would have stated so with the same force in which they restricted application of section 707(b). . . . [T]he Debtors seek to make charitable contributions of $280.00 per month, they will pay into the Plan only the sum of $322.00—$330.00 per month, and the unsecured creditors will receive only approximately $225.00 over the course of the entire plan. The court finds this level of charitable contribution unreasonable under the circumstances. . . . [T]he Debtors did make charitable contributions pre-petition, but at a significantly lower level . . . . While the court believes that some discretionary spending in a chapter 13 budget is permissible, the level in this case is so high when compared to the pre-petition contributions as to suggest a lack of good faith on the part of the Debtors.”).

 

154  250 B.R. 107 (B.A.P. 9th Cir. 2000).

 

155  250 B.R. at 114. Accord In re Kirschner, 259 B.R. 416, 422–26 (Bankr. M.D. Fla. 2001) (Embracing Drummond v. Cavanagh (In re Cavanagh), 250 B.R. 107 (B.A.P. 9th Cir. 2000), the Religious Liberty and Charitable Donation Act of 1998 created a sort of “exemption” from the disposable income test for 15% of the Chapter 13 debtors’ gross income when contributed to a qualified charity; the good-faith test still applies, and monitoring of debtors’ charitable contributions is appropriate after confirmation. Debtors proposed charitable contribution expense of $674 from a gross monthly income of $7,147.19. No evidence was presented with regard to the sincerity of the debtors’ religious beliefs or the debtors’ history of charitable giving. “Unfortunately Congress did not place the RLCDA [sic] charitable contribution ‘exemption’ in a stand-alone subsection. The ‘exemption’ was placed in subsection (b)(2)(A), which remains qualified by the phrase ‘reasonably necessary to be expended.’ . . . The Court finds the reasoning of the Cavanagh decision more persuasive, . . . a § 548(d)-qualified charitable contribution, whether ‘reasonably necessary’ or not, may not be treated as unapplied disposable income if the contribution amounts to less than fifteen percent of a debtor’s gross income. . . . Congress explicitly limited the religious giving ‘exemption’ to fifteen percent of a debtor’s gross income. The Court also thinks it appropriate to limit potential abuse by providing for monitoring of contributions in order to insure that the stated charitable donations are actually made to a qualified religious entity . . . . [A]ny attempt by a debtor to claim an amount as ‘exempt’ from treatment as disposable income under the RLCDA [sic] must pass the good faith test found in § 1325(a)(3). . . . [T]he Court finds that, although Debtors’ charitable contributions do not constitute unapplied disposable income and do not indicate lack of good faith so as to prevent confirmation, Debtors should be obliged to provide documentation to Trustee that the amount allocated to charitable expenses is actually given to the § 548(d)-qualified charitable entity.”).

 

156  But see In re McDonald, 232 B.R. 818, 820–21 (Bankr. S.D. Fla. 1999) (“Tithing does not constitute a reasonably necessary living expense. The effect of such a deduction would permit the Debtors to require that their creditors contribute to their chosen charity. . . . To permit a Chapter 13 debtor to siphon off a portion of his disposable income is not fair and equitable and probably denies equal protection under the law to creditors of the tithing debtor.”).

 

157  See, e.g., In re Watson, 299 B.R. 56, 58–59 (Bankr. D.R.I. 2003) (Parochial school tuition is not a charitable contribution for purposes of § 1325(b)(2)(A). “Regarding the reasonably necessary issue, it has been held that ‘in the absence of some compelling circumstance . . . a private school education is not reasonably necessary.’ . . . These Debtors have given no reason why their children need to attend parochial school, i.e., they have not shown that the public schools in their area . . . are not adequate, and neither have they suggested any other special need to do so. The only reason advanced by them is preferential . . . . Allowing these Debtors to pay parochial school tuition which over the life of the Plan will exceed the amount distributed to creditors, is to require general creditors to fund the private education of the Debtors’ kids. . . . If Congress intended parochial school tuition to be included within the scope of [§ 1325(b)(2)(A)], it could, should, and would have said so . . . . Debtors propose to purchase, under the guise of a so-called religious donation, a substantial asset—the private education of their children. . . . [P]arochial school tuition payments are not ‘charitable donations’ within the meaning of [§ 1325(b)(2)(A)].”).

 

158  See 112 Stat. at 519 (§ 6).

 

159  See § 196.1 [ Income, Expenses, Lifestyle and Luxuries ] § 108.4  Income, Expenses, Lifestyle and Luxuries.

 

160  296 B.R. 402 (Bankr. E.D. Va. 2002).

 

161  296 B.R. at 408.

 

162  See § 4.4 [ 11 U.S.C. § 707(b) Problems Are Likely ] § 8.6  11 U.S.C. § 707(b) Problems Are Likely.

 

163  11 U.S.C. § 707(b) (emphasis added).

 

164  See § 196.1 [ Income, Expenses, Lifestyle and Luxuries ] § 108.4  Income, Expenses, Lifestyle and Luxuries.

 

165  Legendary Bankruptcy Judge Ralph Kelley, E.D. Tenn., would be mortified to learn that he was overheard commenting on cars and the disposable income test. After all, Judge Kelley drives a Buick, and it’s 10 years old, not six.