§ 99.3     Child Support, Foster Care and Disability Payments
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 99.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

For all Chapter 13 debtors, § 1325(b)(2) makes the following deduction from current monthly income (CMI) on the way to disposable income:

[T]he term “disposable income” means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child).1
[2]

CMI under § 101(10A) is an average of monthly income from all sources that the debtor receives or, in a joint case, the debtor and the debtor’s spouse receive.2 CMI under § 101(10A) includes child support, foster care payments or disability payments to the extent those payments are income received by the debtor.

[3]

CMI also includes any “amount paid” by any entity other than the debtor (or in a joint case, the debtor and the debtor’s spouse) on a regular basis for the household expenses of the debtor or a dependent of the debtor under § 101(10A)(B).3 CMI thus contains amounts that are not necessarily income “received” by the debtor that are paid by others for the household expenses of the debtor or a dependent of the debtor. Some child support payments, foster care payments or disability payments might fall in this category of CMI as well.

[4]

Section 1325(b)(2) instructs that some child support, foster care and disability payments are backed out of CMI to determine disposable income in a Chapter 13 case. To be excluded from CMI, child support, foster care and disability payments must be “made in accordance with applicable nonbankruptcy law.”4 It is not immediately obvious what payments would fail this condition. What does a support, foster care or disability payment look like that is not made in accordance with applicable nonbankruptcy law? Would “voluntary” support payments be excluded if not contained in an agreement or court order, or is “applicable nonbankruptcy law” broader than that?

[5]

As a matter of statutory construction, it is debatable whether the phrase “for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child” refers to just disability payments or also to support payments and foster care payments. Rules of construction can be found to limit the clause to the last antecedent; other rules would apply the phrase to all three kinds of payments in the parenthetical sentence fragment. It is possible that the chosen interpretation would change application of the parenthetical exclusion in an odd case. For the most part, support payments, foster care payments and disability payments are all for a dependent child, are made in accordance with some applicable nonbankruptcy law and are reasonably necessary to be expended for the child involved. It will be an unusual case in which child support, foster care or disability payments are challenged as an exclusion from CMI to determine disposable income under § 1325(b)(2).

[6]

The adjustment of CMI for child support, foster care and disability payments is not managed well in Official Form B22C. At Line 54, debtors are instructed to “enter the monthly average of any child support payments, foster care payments, or disability payments for a dependent child, included in Line 7, that you received in accordance with applicable nonbankruptcy law, to the extent reasonably necessary to be expended for such child.”5 Line 7 of Official Form B22C inaccurately instructs debtors to record “regular contributions” to the household expenses of the debtor or dependent of the debtor “including child or spousal support.”6 Line 7 is a confusing combination of subparts (A) and (B) of § 101(10A) that will not accurately distinguish between income “received” by a debtor from a former spouse and amounts paid by others on a regular basis for the household expenses of the debtor or a dependent of the debtor whether received by the debtor or not.

[7]

Child support, foster care and disability payments received by the debtor, whether “included in Line 7” or included elsewhere in Part I of Official Form B22C, should be deducted from CMI at Line 54 to determine disposable income under § 1325(b)(2). Amounts paid by others on a regular basis for the household expenses of the debtor or a dependent of the debtor that were not “received” by the debtor but that were included in CMI by § 101(10A)(B) must also be deducted somewhere in Official Form B22C to determine disposable income.7 Mixing child or spousal support with those “other payments” at Lines 7 and 54 is very confusing.


 

1  11 U.S.C. § 1325(b)(2).

 

2  See §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

3  11 U.S.C. § 101(10A)(B) is discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

4  11 U.S.C. § 1325(b)(2).

 

5  Line 54 of Official Form B22C, discussed in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income and 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

6  See § 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income.

 

7  See § 489.1 [ Amounts Paid by Others under § 101(10A)(B) ] § 99.2  Amounts Paid by Others under § 101(10A)(B).