§ 95.24 — Elderly, Ill or Disabled

Revised: March 28, 2006

Rev:  Mar. 28, 2006

[1]

For Chapter 13 debtors with current monthly income (CMI)1 greater than applicable median family income,2 “amounts reasonably necessary to be expended—”3 are determined in accordance with § 707(b)(2)(A) and (B).4 Among the 10 classes of expenditures5 included in a debtor’s monthly expenses by § 707(b)(2)(A)(ii) is this allowance for care and support of the elderly, ill or disabled:

In addition, the debtor’s monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor’s immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.6
[2]

This allowance is “in addition” to the nine other classes of expenses that § 707(b)(2)(A)(ii) includes in monthly expenses.7 There are many possibly important words and phrases in this long sentence. “If applicable” signals that this additional expense allowance won’t apply in every case. “The continuation of actual expenses paid by the debtor” indicates that this is not an allowance like the amounts specified under the National Standards and Local Standards which can be deducted by a debtor without regard to whether the debtor has “actual” expenses of that kind.8 The requirement that these be “actual expenses paid by the debtor” arguably renders the phrase “if applicable” redundant. Only the continuation of actual expenses paid by the debtor that are “reasonable and necessary” are allowable. The actual expenses must be for “care and support”—a fairly broad description. The care and support must relate to “an elderly, chronically ill, or disabled” individual. These words are not further defined and if given ordinary meanings will encompass a large population.

[3]

The individual involved must be a “household member” or a “member of the debtor’s immediate family.” As discussed elsewhere,9 “household”—at least for census purposes—is broadly defined as all the people who occupy a housing unit as their usual place of residence. Family, on the other hand, is a group of individuals who reside together and are related by birth, marriage or adoption. It is not obvious that the census definitions will prevail for purposes of this expense deduction for care and support.

[4]

For example, nothing in the section suggests that this deduction relates only to individuals who reside together. Rather, the use of both household member and member of the debtor’s immediate family seems broadly inclusive. This interpretation is supported by the parenthetical that follows the phrase “immediate family”: “(including parents, grandparents, siblings, children and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent).” The actual expenses paid by the debtor for care and support that are included in this monthly expense extend broadly to the debtor’s siblings, grandchildren, parents and grandparents—individuals that will not always reside with the debtor.

[5]

The treatment of the “spouse of the debtor” in the parenthetical is odd.10 According to the parenthetical, the spouse of the debtor is a member of the debtor’s immediate family “in a joint case” when the spouse is “not a dependent.” Giving words ordinary meaning, a debtor’s “immediate family” would include the debtor’s spouse without regard to whether the debtor is a joint debtor or a dependent. In other words, even in a Chapter 13 case for a married debtor that is not a joint case, the debtor’s nonfiling spouse would be an immediate family member whose care and support if elderly, chronically ill or disabled would be captured when § 707(b)(2)(A)(ii)(I) is applicable. This conclusion is still possible given that the parenthetical begins with the word “including.”11 Perhaps the specific mention of the spouse of the debtor in a joint case who is not a dependent allows for the continuation of actual expenses that are reasonable and necessary for the “care” of a spouse in a joint case when the spouse does not require “support.”

[6]

The final condition on this additional expense is that the household member or member of the debtor’s immediate family must be “unable to pay for such reasonable and necessary expenses.” It is not clear what this test means. It could be a simple test whether the elderly, ill or disabled individual has sufficient income to pay the care and support expense actually paid by the debtor or the test could require a more intensive inquiry into such things as assets, the availability of social services, etc.

[7]

Summarizing, there appear to be at least eight conditions on this additional expense allowance:

 

  
The continuation of;
 

 

 

 

  
Actual expenses;
 

 

 

 

  
Paid by the debtor;
 

 

 

 

  
That are reasonable and necessary;
 

 

 

 

  
For care and support;
 

 

 

 

  
Of an elderly, chronically ill or disabled;
 

 

 

 

  
Household member or member of the debtor’s immediate family;
 

 

 

 

  
Who is unable to pay for such reasonable and necessary expenses.12
 

 

 

[8]

Actual expenses that are reasonable and necessary for care and support could include many things. Hospital and doctor bills are an obvious example. Groceries or rent or a mortgage payment might be included. Payments to a long-term care facility or for home nursing come to mind. “Support” is a broad concept that doesn’t require the recipient to be ill or disabled—“elderly” is a sufficient basis for claiming actual expenses for the continuation of reasonable and necessary support.

[9]

Section 707(b)(2)(A)(ii)(II) does not reveal how the continuation of actual expenses paid by the debtor will be calculated. The section could be narrowly interpreted to include only actual expenses paid on a regular or recurring basis. But the phrase “reasonable and necessary for care and support” conveys a broader theme that should permit debtors to budget for the continuing care and support of an elderly, chronically ill or disabled household or family member based on past experience of reasonable expenses and a likelihood that continued care and support will be necessary.

[10]

This additional expense allowance is likely to overlap several other classes and categories of expenses that are allowed by § 707(b)(2)(A) as “amounts reasonably necessary to be expended—” for a Chapter 13 debtor with CMI greater than applicable median family income. For example, the National Standards and Local Standards allowed by § 707(b)(2)(A)(ii)(I)13 include allowances for food, clothing, housing, utilities and transportation for the debtor, dependents of the debtor and the spouse of the debtor in a joint case that are likely to overlap some reasonable and necessary expenses paid by the debtor for the care and support of an elderly, chronically ill or disabled household member or member of the debtor’s immediate family. There is a category of Other Necessary Expenses specified by the IRS for “dependent care (for the care of the elderly, invalid, or handicapped)” that will almost certainly duplicate some actual expenses separately allowed by § 707(b)(2)(A)(ii)(II).14 Clause (iii) of § 707(b)(2)(A) allows average monthly payments on account of secured debts that will overlap the continuation of actual expenses paid by the debtor that are secured debts for the care and support of an elderly, chronically ill or disabled household member or member of the debtor’s immediate family.

[11]

In contrast to other clauses, subclauses and sentences within § 707(b)(2)(A),15 subclause (II) does not require the debtor to demonstrate that the continuation of actual expenses for the reasonable and necessary care and support of an elderly, chronically ill or disabled household member or member of the debtor’s immediate family must not already be included or accounted for somewhere else in § 707(b)(2)(A) or (B).16 It can be anticipated that Chapter 13 trustees and perhaps other parties in interest will object to the debtor claiming any actual expense for care and support under subclause (ii) that is also included or allowed by another clause, subclause or sentence of § 707(b)(2)(A).

[12]

But to net or subtract the overlapping amounts will require an invasive rewriting of § 707(b)(2)(A) and (B). For example, what portion of a housing or utility expense under the Local Standards is duplicative of housing or utility expenses for an elderly parent paid by the debtor? The dependent care category of Other Necessary Expenses specified by the IRS does not have the same predicates or conditions as the additional expense allowed by subclause (II) of clause (ii) of § 707(b)(2)(A)—there is plenty of room for both to operate in a Chapter 13 case.

[13]

Without statutory support, Official Form B22C takes the position that Chapter 13 debtors should eliminate the overlapping expense deductions with respect to care and support. For example, Line 34 of Official Form B22C allows a monthly expense for the “education” category included by the IRS in the Other Necessary Expenses. As described by the IRS in its Manual, this category includes education “required for a physically or mentally challenged child” when no appropriate public education is available.17 Actual expenses for the education of a physically or mentally challenged dependent child would be entered at Line 34.

[14]

At Line 40, Official Form B22C allows the actual monthly expenses that the debtor continues to pay for the reasonable and necessary care and support of a disabled member of the debtor’s immediate family and the instructions at Line 40 state “do not include payments listed in Line 34.” It is likely that these two categories overlap. The statute does not require netting or eliminating the potential overlap of these two expense allowances.

[15]

It is also likely that the actual expenses allowed by § 707(b)(2)(A)(ii)(II) will collide with the prohibition that “the monthly expenses of the debtor shall not include any payments for debts.”18 For example, suppose the debtor is paying a prepetition hospital bill for an elderly parent who is unable to pay the bill. That hospital bill would be a “debt.” Arguably, payment of that debt is excluded from the continuing care and support expense allowed by § 707(b)(2)(A)(ii)(II). Fights are likely with respect to the meaning of “debts” in this context. If the debtor is paying an obligation of a parent that is not also the personal obligation of the debtor, then the debtor is not paying a “debt” in the bankruptcy sense. On the other hand, to provide care and support to that parent, the debtor reasonably and necessarily will continue to make that debt payment for purposes of § 707(b)(2)(A)(ii)(II). Ironically, the prohibition on the inclusion of “payments for debts” in the monthly expenses of the debtor for § 707(b)(2)(A)(ii) purposes could apply only to claims against the debtor and not to actual expenses of the debtor for the care and support of household or family members.

[16]

What about the continuation of actual expenses paid by the debtor’s spouse for the care and support of an elderly, chronically ill or disabled household member or member of the spouse’s family? Section 707(b)(2)(A)(ii)(II) is worded in terms of the debtor’s actual expenses and the debtor’s immediate family. In a joint case in which all of the spouse’s income is included in CMI,19 will § 707(b)(2)(A)(ii)(II) be interpreted to permit a monthly expense for care and support of an elderly, chronically ill or disabled member of the spouse’s immediate family who is not also a dependent or member of the debtor’s household or immediate family? Some distortion of the actual language of the section would be necessary to reach this conclusion but certainly no more distortion than Official Form B22C embraces to eliminate the overlap of expense deductions.


 

1  See 11 U.S.C. § 101(10A), discussed in §§ 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.

 

2  See § 469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3).

 

3  See 11 U.S.C. § 1325(b)(2) and (3), discussed in § 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors.

 

4  11 U.S.C. § 1325(b)(3), discussed in § 471.1 [ Big Picture: Too Many Issues ] § 94.1  Big Picture: Too Many Issues.

 

5  The full list is in § 471.1 [ Big Picture: Too Many Issues ] § 94.1  Big Picture: Too Many Issues.

 

6  11 U.S.C. § 707(b)(2)(A)(ii)(II).

 

7  See discussion beginning at § 95.1  In General.

 

8  Amounts specified under the National Standards and Local Standards that are allowed as monthly expenses by 11 U.S.C. § 707(b)(2)(A)(ii)(I) are discussed in §§ 475.1 [ National Standards ] § 95.2  National Standards and 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

9  See § 469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3).

 

10  Further discussion of the treatment of spouses is in § 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses.

 

11  See 11 U.S.C. § 102(3) (“‘[I]ncludes’ and ‘including’ are not limiting.”).

 

12  11 U.S.C. § 707(b)(2)(A)(ii)(II).

 

13  See §§ 475.1 [ National Standards ] § 95.2  National Standards and 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

14  The Other Necessary Expenses categories are discussed in § 477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

15  See, e.g., 11 U.S.C. § 707(b)(2)(A)(ii)(IV).

 

16  See § 472.1 [ Netting Issues, Including Exclusion of Payments for Debts ] § 94.2  Netting Issues, Including Exclusion of Payments for Debts for further discussion of the netting issue.

 

17  I.R.M. 5.15.1.10 (May 1, 2004).

 

18  See 11 U.S.C. § 707(b)(2)(A)(ii)(I), discussed in § 472.1 [ Netting Issues, Including Exclusion of Payments for Debts ] § 94.2  Netting Issues, Including Exclusion of Payments for Debts.

 

19  See 11 U.S.C. § 101(10A), discussed in §§ 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.