KSB

Judge Nugent

09-12460 Vollen (Doc. # 41) - Document Text

SO ORDERED.
SIGNED this 19 day of March, 2010.


________________________________________
ROBERT E. NUGENT
UNITED STATES CHIEF BANKRUPTCY JUDGE
DESIGNATED FOR PUBLICATION

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


IN RE: )
)
BARBARA JEAN VOLLEN, ) Case No. 09-12460
) Chapter 13
Debtor. )

__________________________________________)

MEMORANDUM OPINION

The chapter 13 Trustee objects to the confirmation of debtor Barbara Jean Vollen’s chapter
13 plan. Specifically, the Trustee objects to the debtor’s claimed marital adjustment deductions for
her non-filing spouse on Line 13 and Line 19 of Official Form 22C, the Chapter 13 Statement of
Current Monthly Income and Calculation of Commitment Period and Disposable Income (“Form
22C” or “B22C”).1 First, the trustee objects to Ms. Vollen’s use of a marital adjustment deduction

1 Ex. A.
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on Line 13 of Form 22C. This deduction results in Ms. Vollen being a below-median income debtor
and reduces her applicable commitment period (“ACP”) to three (3) years. The trustee questions
not only the substance of the deduction, but also challenges the debtor’s right to assert a marital
deduction on Line 13 as being inconsistent with the provisions of § 1325(b)(4). Second, the Trustee
asserts that the substance of the marital adjustment deduction from Ms. Vollen’s current monthly
income (“CMI”) on Line 19 of Form 22C does not comply with § 1325(b)(1)(B), resulting in an
understatement of her disposable income.

After trial and review of the parties’ memoranda of law,2 the Court is ready to rule as
follows.3

Facts

Debtor Barbara Jean Vollen filed this case on July 31, 2009. According to her schedules,
she owns no real estate or vehicles and has no secured or priority debt.4 Ms. Vollen proposes to pay
her creditors $250 each month for 36 months, or $9,000.5 Except for the Trustee’s fees and her
attorney fees, all of the plan payments will go toward her unsecured debt of approximately $33,000,
all of which is credit card debt. Ms. Vollen works at an animal shelter and earns roughly $620 in
gross income bi-weekly. Ms. Vollen claims to be a below-median income based on her Form 22C.
The trustee challenges Ms. Vollen’s $3,829.87 marital adjustment deductions on Form 22C, Lines

2 The debtor appeared in person and by her attorney Don W. Riley. The chapter 13
trustee Laurie B. Williams appeared by her attorney Christopher T. Micale.

3

 Unless otherwise indicated, all statutory references are to Title 11, U.S.C. as amended
by the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”).
4 Ms. Vollen “holds or controls” a 2004 Honda CRV owned by her husband. See Dkt. 1,
Statement of Financial Affairs, Question 14.
5 Dkt. 3.
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13 and 19.6 Her Line 13 deduction renders Ms. Vollen a below-median debtor for the purpose of
determining her ACP under § 1325(b)(4), reducing her ACP to three years. Her deduction from
current monthly income (CMI) on Line 19 reduces Ms. Vollen’s projected disposable income to be
paid to unsecured creditors as required by § 1325(b)(1)(B) and (b)(2).

Ms. Vollen lives with her husband, Jeffrey Vollen. The Vollens’ daughter is 18 and
attending college outside the home. She remains dependent on the family for support. The Vollens
live in a home that Mr. Vollen nominally owns. They acquired the home in 1997 and have lived
together since its acquisition. Ms. Vollen admitted that if she did not live in the home, she would
have to rent a place to live. The home is encumbered by two mortgage liens, one to Wells Fargo and
a second to Central Star Credit Union. Ms. Vollen did not sign either note and is, therefore, not
obligated to either lender. The first mortgage monthly payment is $837 (inclusive of taxes and
insurance) and the second mortgage monthly payment is $305.7

Mr. Vollen owns two vehicles, a 2004 Honda CRV and a 2001 Honda Civic. His daughter
drives one at school and he drives the other in his daily pursuits. No one presented any evidence
about how Ms. Vollen gets to work.

Mr. Vollen works in the aircraft industry. He makes considerably more money than Ms.
Vollen does and, were all of his income to be added to hers without any marital adjustment on Line
13, the couple’s CMI would well exceed the median income for Kansas. The Vollens maintain
separate checking accounts. Mr. Vollen contributes some $500 a week to Ms. Vollen in order for
her to pay certain family expenses, including the first mortgage payment, utilities, groceries,

6 See Dkt. 19; Ex. A.
7 See Ex. 14.
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clothing, home maintenance, car insurance, and gas for the vehicles. In addition to taxes and 401k
contributions, Mr. Vollen’s employer deducts from his income payments for the second mortgage,
the two car loans, the signature loan, and his 401k loan.

Mr. Vollen has signed a series of notes with Central Star Credit Union. In addition to the
note secured by the second mortgage (incurred for home improvements or repairs), Mr. Vollen
signed a note secured by a 2004 Honda CRV, a note to purchase the 2001 Honda Civic and a fourth
unsecured note referred to as a “signature loan,” that appears to be unsecured. The purpose of the
signature loan is not entirely clear but a portion of the loan proceeds were for car repairs and credit
card debt.8 Mr. Vollen testified that he borrowed money against the 2004 Honda to refinance credit
card debt of his own. The monthly payment on the 2004 Honda note is $241. The monthly car
payment on the 2001 Honda utilized by their daughter is $109. The monthly payment on the
signature loan is $206.

The Vollens’ consistent testimony is that Mr. Vollen owns the major assets that the family
uses and pays the debts that those assets secure, either by paying those debts directly or providing
funds to Ms. Vollen to pay them. Mr. Vollen solely contributes to funding their daughter’s college
education. In addition, Mr. Vollen has other debts of his own that include a debt to Dell Credit and
a 401k loan.9 Finally, Mr. Vollen pays withholding taxes and withholds additional money from his
paycheck for his 401k contributions. Ms. Vollen has no separate retirement account.

Mr. Vollen spends a small amount each month for personal recreation. His recreational

8 See Ex. 10.

9 Mr. Vollen testified that he took out a 401k loan in the amount of $5,000 to pay
expenses for his daughter’s senior year of high school, including graduation and prom. The
401k loan repayment is $107.50 a month. See Ex. 14.

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activities include golf, fishing, attending concerts, and occasional travel out-of-state to visit family.10

Ms. Vollen claims the following amounts as marital adjustment deductions from the income
that is attributed to her under § 101(10A). These figures were provided as an attachment to Form
22C.11 At trial, Ms. Vollen offered an itemized list of payments, some of which differed from those
listed in the B22C’s detail sheet. Those amounts are set out below in brackets.

401K Contributions $ 333.10
401K Loan Repayment 33.3512 [$107.50]
Payroll Taxes 1,265.42
Loan Repayments 744.00 [$511.00]
Recreation 20.00
Daughter’s College Expense 266.0013 [$704.08]
Central Star CU – Vehicle Loan 109.00
Husband’s credit card payments 262.00 [$241.00]
Mortgage 837.00
[Dell Financial Services] [$ 49.00]
TOTAL $3,829.87

10 Ex. 11.

11 See Ex. A.

12 According to the attachment to Form 22C, Mr. Vollen’s 401k loan repayments were
$33.35 per month. However, on debtor’s itemization of the marital deductions, the 401k loan
repayments were shown as $107.50. No explanation was given for this discrepancy and debtor’s
supporting documentation for the 401k loan repayments supports the $33.35 figure. See Ex. 4.
The Court will apply this rate of repayment for the marital deduction.

13 At trial, Mr. Vollen testified that their daughter’s college expenses were much greater
than the $266 claimed on the attachment to Form 22C. Ex. 14 shows these expenditures to be
$704.08 a month. It is unclear how Mr. Vollen arrived at this number. The supporting detail for
college expenses shows periodic deposits to the daughter’s checking account. It does not reflect
the amounts incurred for tuition and housing, but does show some amounts spent for food,
books, and entertainment. Mr. Vollen indicated that his daughter had taken out student loans for
tuition. While the Court suspects that housing costs and living expenses alone more closely
approach the $704.08 monthly figure claimed, there is no support in the record for either this
amount or the $266.

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At trial, the Vollens expounded upon and clarified these deductions.14 The “Loan Repayments” of
$744 were originally for the Central Star Credit Union signature loan, 2004 Honda CRV loan, and
the second mortgage. The loan repayments are now comprised of the signature loan and second
mortgage and total $511, rather than $744. The husband’s credit card payments were rolled over into
a loan secured by the 2004 Honda and those payments are now $241, rather than $262. The Central
Star vehicle loan is for the 2001 Honda loan. Finally, debtor’s summary of marital deductions, Ex.
14, included a monthly installment payment of $49 to Dell Financial Services for a loan obtained
by Mr. Vollen to purchase a home computer. This item was not included in the marital deduction
detail attached to Form 22C.15

Analysis

This case requires the Court to interpret and apply principally two subsections of § 1325 of
the Bankruptcy Code: § 1352(b)(2) and § 1325(b)(4). The debtor’s marital adjustment deduction
on Line 13 of Form 22C is linked to § 1325(b)(4) for determining the applicable commitment period.
It is an issue of first impression for this Court. The debtor’s marital adjustment deduction on Line
19 of Form 22C is linked to § 1325(b)(2) for the calculation of debtor’s disposable income and
compliance with the requirement in § 1325(b)(1)(B) that all of the debtor’s projected disposable
income to be received in the applicable commitment period be paid to unsecured creditors. The
Court has previously alluded to Line 19 in its 2007 decision, In re Shahan.16

A.
Line 13 Marital Adjustment Deduction, Applicable Commitment Period and §
1325(b)(4)
14 See Ex. 14 (marital adjustment itemized deductions prepared by debtor).

15 Cf. Ex. A and Ex. 14.

16 367 B.R. 732 (Bankr. D. Kan. 2007).

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The trustee relies on the comparative language of § 1325(b)(2) and § 1325(b)(4) to contend
that a married debtor filing an individual case should not be permitted a marital adjustment
deduction in determining the applicable commitment period under § 1325(b)(4). She argues that
because § 1325(b)(4) refers to the combined current monthly income of the debtor and the debtor’s
spouse, no deduction should apply. Section 1325(b)(2) only considers the debtor’s current monthly
income in determining the amount of disposable income that the debtor must pay. While she
questions whether the debtor may adjust her income for applicable commitment purposes, the trustee
concedes that the substance of the marital adjustment deduction, or the types of expenses that may
be deducted from CMI, can be determined in the same fashion under both § 1325(b)(2) and (b)(4).

Section 1325(b)(2)(b)(1)(B) requires that if a chapter 13 debtor’s plan does not pay all of the
unsecured creditors in full, the debtor must pay all of her projected disposable income received in
the “applicable commitment period” for their benefit. Section 1325(b)(4) governs the length of the
“applicable commitment period [ACP].” It provides, in pertinent part:

For purposes of this subsection [§ 1325(b)], the “applicable commitment period” –

(A) subject to subparagraph (B), shall be – (I) 3 years; or (ii) not less than 5 years,
if the current monthly income of the debtor and the debtor’s spouse combined, when
multiplied by 12 is not less than – . . . (II) in the case of a debtor in a household of
2, 3, or 4 individuals, the highest median family income of the applicable State for
a family of the same number . . .17
Thus, in general, if the debtor has below median income, the ACP is three years.18 If the debtor has

above median income, the ACP is five years.19

17 Section 1325(b)(4)(A) [Emphasis added.]. Subparagraph (B) is not applicable in this
case.
18 Section 1325(b)(4)(A)(I).
19 Section 1325(b)(4)(A)(ii).
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On its face, § 1325(b)(4)(A)(ii) appears to require consideration of a married debtor’s
spouse’s income to determine the applicable commitment period, regardless of whether the spouse
is joining in the chapter 13 filing. The statute refers to the “current monthly income of the debtor
[or “CMI”] and the debtor’s spouse combined.” But the presence of the phrase “current monthly
income” is significant. CMI is specifically defined in § 101(10A) and is peppered throughout the
Code.20 Section 1325(b)(4)(A)(ii) cannot be interpreted without considering the Code’s definition
of CMI in the contemporaneously enacted § 101(10A). CMI is defined as the income the “debtor”
receives (and in a joint case, the income the “debtor and the debtor’s spouse” receive). A married
debtor’s non-filing spouse is not a debtor. Because only debtors or joint debtors have CMI, the
Court concludes that non-debtor spouses do not have CMI.21 They merely have “income.”

One of the components of CMI is any amount paid by a non-debtor entity for the household
expenses of the debtor or the debtor’s dependents.22 Thus, as a practical matter, any funding the
non-debtor spouse provides the debtor for that purpose becomes part of the debtor’s CMI.
Therefore, if the ACP calculation requires that the non-debtor’s notional CMI be “combined,” those
funds he contributes to the household would be counted twice, once in her CMI and again in his
hypothetical CMI. Section 101(10A) makes clear that (i) both incomes of joint debtors are part of
CMI; and (ii) that a non-debtor’s contributions to debtor’s household support must also be included
as CMI. By omission, § 101(10A) excludes from CMI that part of the non-debtor spouse’s income

20 See e.g., § 1325(b)(2) (disposable income); § 707(b)(2)(A)(I) (presumption of abuse);
§ 707(b)(2)(C) (required filing by debtor of a statement of current monthly income); § 1322(d)
(chapter 13 plan contents).

21 In re Clemons, 2009 WL 1733867 at *2 (Bankr. C.D. Ill. 2009).

22 §101(10A)(B).

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that is not contributed to the debtor’s household support. This is the so-called “marital adjustment.”

The Court concludes that the “CMI of the debtor and the debtor’s spouse combined”
language in § 1325(b)(4), when applied in the case of a married debtor with a non-filing spouse,
must refer to the debtor’s CMI which, by definition, contains not only what her income may be, but
also the contributions the non-debtor spouse makes to the household. As the non-debtor spouse
cannot, by definition, have CMI, this is the most natural reading of these two statutes.

Much has been written about how these statutes have been given effect by Official Form
B22C.23 The ACP is calculated on Part II of Form 22C, Lines 12-17. Line 12 is the combined
monthly income of debtor and debtor’s spouse and is carried over from Part I, Line 11 of Form 22C.
Part I of Form 22C contains the calculation of CMI, but provides only two options for reporting of
income.24 If the debtor is married, both the debtor’s and the debtor’s spouse’s income are combined
to create the result on Line 11 that is carried into Line 12, whether or not the debtor’s spouse is a
non-filer. The instructions to Line 13 provide for a marital adjustment to the combined income of
debtor and the debtor’s non-filing (or separately filing) spouse. The manner in which Part I of Form
22C reports “CMI” for a married debtor includes the non-filing spouse’s income, without regard
to whether that income was contributed to household expenses. No adjustment has been made to
the Line 11 number for those amounts of the non-filing spouse’s income that are not devoted to

23 See generally, Keith M. Lundin & William H. Brown, Chapter 13 Bankruptcy, 4th
Edition, § 379.2, at ¶ 1, et seq., Sec. Rev. July 12, 2007, www.Ch13online.com (hereafter
“Chapter13 Bankruptcy”).

24 If single, only the debtor’s CMI is listed in Column A. If married, both the debtor’s
CMI in Column A and the spouse’s “CMI” in Column B are provided, without regard to whether
the spouse is filing. Even though a married debtor’s spouse may not be filing, the spouse’s
notional CMI is calculated in Part I. As noted previously, a non-debtor spouse has no CMI by
definition.

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household expenses.

In order to capture only the contributions to household expenses by the non-filing spouse that
count as part of the debtor’s CMI and to prevent counting these contributions twice (once as the
non-filing spouse’s income that funds them and again as the debtor’s income), the non-filing
spouse’s income that is not regularly contributed to household expenses should be backed out of the
combined income number on Line 11 to calculate the applicable commitment period under §
1325(b)(4)(A). Note that Line 7 of Form 22C includes in CMI amounts paid by another person for
the household expenses of the debtor or debtor’s dependents, except for amounts paid by the
debtor’s spouse. If two spouses file jointly, these amounts are already included in each debtor’s
CMI. But if a married debtor files without her spouse, the Line 11 total should be adjusted for the
non-filing spouse’s income that is not regularly contributed for household expenses. Line 13
provides that opportunity. If the debtors are married and filing jointly, both debtors’ CMI is
represented on Line 11 and there is no ”marital adjustment” to be made on Line 13 because each
joint debtor’s contributions to household expense is already captured in each debtor’s income
received from all sources.25

Because the applicable commitment period is directly connected to the debtor’s projected
disposable income to be paid under the plan under § 1325(b)(1)(B), the Court concludes that
allowing a marital adjustment deduction on Line 13 is most consistent with the definition and
calculation of disposable income in § 1325(b)(2). The Court therefore sides with the overwhelming
majority of courts that allow a marital adjustment on Line 13 for the non-filing spouse’s income

25 See § 101(10A)(A).
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under these circumstances.26 In its own way, the form follows the logic of § § 101(10A) and

1325(b)(4). As Judges Lundin and Brown state in their treatise:

The path of least resistance is to accept the marital adjustment if you are a married
debtor not filing jointly and subtract at Line 13 all of the spouse’s income included
in Part I except for amounts paid on a regular basis for the household expenses of the
debtor or the debtor’s dependents.27

In general, it makes little sense to exclude that part of Jeffery Vollen’s income that is not

regularly contributed to the household expenses of the debtor or debtor’s dependents in the

calculation of Ms. Vollen’s disposable income while including it in the ACP calculation to extend

Barbara Vollen’s plan for two additional years. That part of Jeffrey’s income that is not contributed

to household expense would not figure in the disposable income calculation, nor would it be

contributed to free up debtor’s income to make the plan payment over the extended period. In that

regard, Judge Karlin’s reasoning in In re Dugan is both compelling and correct:

The Court can think of no reason why Congress would require the Court to treat a
married debtor, who elects not to file jointly with his spouse, as if the case was filed
jointly solely for the purpose of calculating the applicable commitment period, but
provide different treatment [of a married debtor filing individually] for all other
aspects of the means test. There is no readily apparent basis for requiring a debtor
to account for all of his [non-filing] spouse’s income when determining whether a
Chapter 13 case must run for 36 or 60 months, but then allowing at least a portion
of the spouse’s income to be totally disregarded when deciding all other issues, such
as what the debtor’s projected disposable income will be . . .

26 Clemons, 2009 WL 1733867 at *2 (citing six bankruptcy cases adopting the view that

a marital adjustment is allowed: In re Stansell, 395 B.R. 457 (Bankr. D. Idaho 2008); In re

Borders, 2008 WL 1925190 (Bankr. S.D. Ala. 2008); In re Dugan, 2008 WL 3558217 (Bankr.

D. Kan. 2008); In re Grubbs, 2007 WL 4418146 (Bankr. E.D. Va. 2007); In re Hall, 2007 WL
445517 (Bankr. C.D. Ill. 2007); In re Quarterman, 342 B.R. 647 (Bankr. M.D.Fla. 2006) and
one case disallowing the marital adjustment on Line 13: In re Ariyaserbsiri, 2008 WL 5191200
(Bankr. E.D. Tex. 2008)).
27 See Chapter 13 Bankruptcy, supra at § 379.2, ¶ 11.

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Instead, the Court finds the more reasonable interpretation of § 1325(b)(4) is that
Congress inadvertently failed to include the qualifier that the spouse’s current
monthly income must only be “combined” with the filing debtor in a joint case by
putting those words in parenthesis . . . as it did in the definition of current monthly
income.28

As do many other courts, this Court concludes that Barbara Vollen is entitled to a marital
adjustment on Line 13 for the income that Jeffrey Vollen does not regularly contribute to her or their
daughter’s household expenses. Accordingly, the Trustee’s legal objection to the debtor’s marital
adjustment deduction on Line 13 is OVERRULED. The Court addresses the substance of the
adjustments below.

B.
In re Shahan, Line 19 Marital Adjustment Deduction and Net Disposable
Income, § 101(10A) and § 1325(b)(2)(A)(I)
To confirm the plan over the trustee’s objection, § 1325(b)(1)(B) requires the debtor to show
that all of her disposable income to be received in the applicable commitment period will be paid
to unsecured creditors. For below median income debtors, disposable income is defined in §
1325(b)(2) as:

current monthly income received by the debtor . . . less amounts reasonably
necessary to be expended – (A)(I) for the maintenance or support of the debtor or a
dependent of the debtor . . .29

As noted above, § 101(10A) defines CMI in a single debtor case as the average monthly income
received by the debtor from any source for six months before the petition date. It includes “any
amount paid by any entity other than the debtor . . . on a regular basis for the household expenses

28 2008 WL 3558217 at *3 (Bankr. D. Kan. 2008).

29 For above-median income debtors, the “amounts reasonably necessary to be
expended” in calculating disposable income are determined by the standard deductions under §
707(b)(2). See § 1325(b)(3).

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of the debtor or the debtor’s dependents . . .”30 Thus, what a non-filing spouse regularly pays for
household expenses of the debtor or debtor’s dependents is included in the debtor’s CMI. What the
non-debtor spouse does not pay toward household expenses of the debtor or debtor’s dependents is
“deducted” from the debtor’s CMI as a marital adjustment on Line 19 of Form 22C.

This Court has previously considered the impact on CMI of non-debtor spouses making
mortgage payments in In re Shahan.31 In Shahan, an above-median income debtor sought to deduct
the secured debt payments his non-filing spouse made on a vehicle and a home (in which debtor
lived) from disposable income on Line 47 of Form 22C. The Court disallowed the Line 47 secured
debt payment deductions because the non-debtor spouse was solely liable for the secured debt
payments, but not the debtor. Section 1325(b)(3) provides that an above-median debtor’s disposable
income is measured using the means testing calculus set out in § 707(b)(2)(A)(ii)(I). That
subsection only allows a deduction for the “debtor’s applicable monthly expense amounts...for the
debtor...and the spouse of the debtor in a joint case . . . .” The Court concluded that the non-debtor
spouse’s payments could not be deducted as payments of the debtor because it was not a joint case
and the debtor did not make the payments. Instead, the Court concluded that payments made by a
non-filing spouse on assets solely owned by the non-filing spouse could not be amounts paid on a
regular basis for household expenses under § 101(10A) and therefore could not be included in CMI.
Because they could be deducted from CMI, the Line 47 deduction was improper. As the Court
suggested in Shahan, while the payments were inappropriate Line 47 deductions, they could be
deducted from the non-filing spouse’s income on Line 19:

30 Section 101(10A)(B).
31 367 B.R. 732 (Bankr. D. Kan. 2007).
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To reach another conclusion would dictate that a spouse who does not file with her
husband is actually worse off than a spouse who does. Under the Trustee's theory,
Debra would be required to contribute less of her income had she filed a joint case
with Robert, even though she appears to have no need for bankruptcy relief and
Robert is solely liable on the debts listed in this case. If the aim of BAPCPA was to
reduce bankruptcy filings, this can hardly be what the Congress had in mind.32

Shahan also addressed dependent expenses and recreation expenses of the non-filing spouse and
concluded that these expenses could also be deducted on Line 19 as a marital adjustment.33

Because Shahan involved an above-median income debtor the Court was required to address
the § 707(b)(2) deductions as taken on part IV of Form 22C (where Line 47 is located) for
determining disposable income in accordance with § 1325(b)(3). In the present case, Ms. Vollen
is a below-median income debtor to whom the § 707(b)(2) standardized deductions are not available.

 Part IV, Line 47 does not come into play.34 But the Line 19 marital adjustment, found in Part III
of the form, is available to above-and below-median debtors.35 The facts of Shahan are different
from this case in two key ways. First, the non-filing spouse in Shahan had acquired the home and

32 Id. at 738.

33 These expenses could not, however, be deducted as “other necessary expenses” on
Line 59 of Form 22C, as contemplated by § 707(b)(2)(A)(ii)(I). 367 B.R. at 739-40.

34 While the calculation of the “amounts reasonably necessary to be expended” for the
maintenance or support of the debtor or debtor’s dependent in determining the disposable
income of an above-median income debtor are determined by the means test standardized
deductions in § 707(b)(2) [See § 1325(b)(3)], the same calculation for a below-median income
debtor is determined by Schedule J expenses [See § 1325(b)(2)]. See In re Lanning, 545 F.3d
1269, 1275 (10th Cir. 2008), cert. granted Hamilton v. Lanning, 130 S. Ct. 487 (Nov. 2, 2009); In
re Kibbe, 361 B.R. 302, 306 n.3 (1st Cir. BAP 2007); In re Daniel, 359 B.R. 320 (Bankr. D. Kan.
2006).

35 See In re Charles, 375 B.R. 338, 342 (Bankr. E.D. Tex. 2007) (Noting that the
contribution of a non-filing spouse is clearly defined by BAPCPA in § 101(10A) and limits the
extent to which a court may consider income of non-filing spouse in determining projected
disposable income; this limit applies regardless of whether debtor is an above-median or below-
median income debtor.).

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vehicle prior to her marriage to the debtor and brought these assets to the marriage as her separate
property. Here, Mr. Vollen acquired the marital home and the vehicles while married to Ms. Vollen
but titled the property solely in his name. In both instances, the home and vehicle were not property
of the bankruptcy estate. Second, the dependent expenses in Shahan were the non-filing spouse’s
support of a daughter from a previous marriage and the daughter was not a dependent of the debtor.
The daughter in Shahan was not counted in the household size for purposes of Form 22C. Here, the
Vollens acknowledge that their daughter is dependent upon both of them and she is included in the
household size (3) on Form 22C.

The key inquiry for determining the propriety of a marital adjustment on Line 19 is the extent
to which a non-filing spouse’s income is not regularly contributed or dedicated to the household
expenses.36 The statutory predicate for this marital adjustment is found in the definition of CMI,
which includes “any amount paid by any entity other than the debtor . . . on a regular basis for the
household expenses of the debtor or the debtor’s dependents”37 If the non-filing spouse’s income
is not regularly contributed for household expenses, it should not be included in calculating a
debtor’s disposable income and should be “deducted” from CMI as a marital adjustment. Therefore,
the Court applies this analysis to the various items claimed as Line 19 marital adjustments by Ms.
Vollen.

1. Mortgage Payments on Home Solely Owned by Non-filing Spouse
The debtor argues that, like the debtor in Shahan, she has no legal interest in the residential
real estate and should therefore be allowed to deduct from CMI the amounts Mr. Vollen pays on the

36 367 B.R. at 736-37.

37 § 101(10A)(B).

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two liens ($837 and $305) that encumber it.38 The Trustee objects to the adjustment and asks the
Court to revisit its prior conclusions in Shahan.

As noted above, the debtor in Shahan did not own the real property. His non-debtor wife
owned the property prior to their marriage and was solely obligated on the mortgages that
encumbered it. Under Kansas law, property owned by a person prior to his or her marriage remains
such person’s sole and separate property, notwithstanding the marriage.39 A married person’s
separate property is not liable for the spouse’s debts.40 A married person’s separate property
becomes marital property upon the commencement of an action for divorce.41 Common ownership
in the marital property vests in each spouse at the moment a divorce action is commenced and the
marital property is thereafter subject to division between the spouses in accord with KAN.STAT.
ANN. § 60-1610(b)(1) (2008 Supp.).42

Thus, in Shahan the house acquired and owned by the non-filing spouse prior to her marriage

38 At least one case cited by the debtor (Dkt. 36) actually supports the trustee’s position
on the marital adjustment for the non-filing spouse’s mortgage payments. See e.g., In re
Baldino, 369 B.R. 858 (Bankr. M.D. Pa. 2007) (mortgage payment on house owned by non-
filing spouse contributed to household expenses and was therefore included in debtor’s income
under § 101(10A)).

39 KAN.STAT.ANN. § 23-201(a) (2007).

40 Id.

41 KAN.STAT.ANN. § 23-201(b) (2007).

42 See Cady v. Cady, 224 Kan. 339, 344, 581 P.2d 358 (1978). However, in making a
division of the property, the domestic court shall consider “the property owned by the parties,”
“the time, source and manner of acquisition of property,” and “such other factors as the court
considers necessary to make a just and reasonable division of property.” KAN.STAT.ANN. § 601610(
b)(1) (2008 Supp.). See also, In re Marriage of Hair, 40 Kan. App. 2d 475, 193 P.3d 504
(2008) (District court did not abuse its discretion in awarding accounts to husband that were
traceable to inheritance received by the husband).

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to the debtor, was the non-filing spouse’s separate property. The debtor had no interest in the
separate property absent a divorce petition.43 If the house payments on this separate property were
included as part of the filing spouse’s CMI in the bankruptcy, as “amount[s] paid by any entity other
than the debtor . . . on a regular basis for the household expenses of the debtor or the debtor’s
dependents” and in the calculation of disposable income under § 1325(b)(2),44 the separate property
would effectively be subjected to the filing spouse’s debts. In the Court’s view, a marital adjustment
for payments on separate property is appropriate under these very narrow factual circumstances.
This case is different.

While it is clear that Mr. Vollen is the only person obligated on the debts secured by the
mortgages on the home, the record is conflicting whether Mr. Vollen is the sole owner of the real
property. The home was originally deeded to Mr. and Mrs. Vollen as joint tenants. Their original
warranty deed was executed by the grantors on August 12, 1997 and recorded on August 18, 1997
at Film 1715, Page 0776. Several months after that deed was recorded, the Vollens “RE-filed to
correct Buyer name” a “correction deed” that struck Mrs. Vollen’s name as a grantee and struck the
survivorship language in the granting clause. The grantors did not re-execute the “correction deed”
which appears to the Court to be a copy of the first deed because it contains the same date of
execution and acknowledgment. It also contains the original warranty deed recording information
and was “re-recorded” on February 2, 1998 at Film 1755, Page 2147. But for the effect of a curative
statute, the “correction deed” would be defective because, apart from the lack of present execution

43 See In re Oetinger, 49 B.R. 41, 43 (Bankr. D. Kan. 1985).
44 Section 101(10A)(B).
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of the correction deed,45 the grantors no longer had any interest in the property to convey solely to

Mr. Vollen.46

Kansas law provides that defective instruments may be cured by the passage of time and

given effect. KAN.STAT.ANN. § 58-2237 (2005) provides:

When any instrument of writing shall have been on record in the office of the office
of the register of deeds in the proper county for the period of ten (10) years, and there
is a defect in such instrument because . . . of any defect in the execution,
acknowledgment, recording or certificate of recording the same, such instrument
shall, from and after the expiration of ten (10) years from the filing thereof for
record, be valid as though such instrument had, in the first instance, been in all
respects duly executed, acknowledged, and certified . . ., after the expiration of ten

(10) years from the filing of the same for record, impart to subsequent purchasers,
encumbrancers and all other persons whomsoever, notice of such instrument of
writing so far as and to the same extent that the same may then be recorded, copied
or noted in such books of record, notwithstanding such defect.
Here, the “corrected deed” was recorded on February 2, 1998. The ten year period passed in
February 2008 and the corrected deed became valid and effective from and after that date. The
effective date of the corrected deed precedes the date of the bankruptcy filing. Accordingly, the
Court concludes that on the date of the petition, Mr. Vollen was the sole owner of the home.47 If this
Court applies the Shahan rule to this case, what Mr. Vollen pays on this real estate would be

45 See KAN.STAT.ANN. §§ 58-2203, 58-2209, 58-2211 (2005).

46 See Kirkpatrick v. Ault, 177 Kan. 552, 557, 280 P.2d 637 (1955) (Court held that
correction deed was ineffective and judgment creditor’s lien attached to husband’s interest in the
real property.)

47 Mrs. Vollen testified that she believed she was on the deed to the home, until the
corrected deed was shown to her to refresh her recollection. See Ex. E. She was initially
unhappy about having her name removed from the deed but reconciled herself to that when a
lender representative explained to her that the loan was based only on Mr. Vollen’s credit. The
lender would not discuss the loan with her because she was not on the note and when the lender
realized she was on the deed, caused the deed to be corrected to remove Mrs. Vollen’s name
from the warranty deed.

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deductible on Line 19 as amounts not contributed to household expense.

Since Shahan, a few courts have held to the contrary. Most recently, in In re Trimarchi, the
court expressly disallowed a marital adjustment deduction of mortgage payments on Line 19
“because the mortgage is an expense that is paid on a regular basis for the household expenses of
the Debtor and her son, as well as the non-debtor spouse.”48 In Trimarchi, the court stated that
allowing the marital deduction of this expense simply because the debtor is not liable on the
underlying obligation “ignores the reality that the debtor benefits from the payment of the mortgage
expense.”49 The Trimarchi court discounted this Court’s previously expressed view that attributing
the non-debtor spouse’s income expended in payment of those debts to CMI would place the spouse
in worse financial condition than if he had actually sought bankruptcy relief. Instead, that court
considered that the plain language of Form 22C required the inclusion of the non-debtor payments
in CMI. In so holding, the Trimarchi court denied the Line 19 deduction, but allowed the debtor the
standard housing deduction on Line 25B even though she incurred no actual housing expense.
Trimarchi is the factual mirror opposite of Shahan.

As this Court noted in Shahan, it is difficult to square allowing the marital deduction of
payments made on the family home as something other than regular household expenses. The Court
reached the conclusion it did in Shahan because of the non-debtor’s exclusive legal ownership of
the real estate acquired prior to the marriage. Here, the Vollens acquired an initial interest in the real
estate during their marriage and it is their family home. The Court continues to believe that its
allowance of a marital adjustment on Line 19 of Form 22C was proper in Shahan on its facts. At

48 421 B.R. 914, 920 (Bankr. N.D. Ill. 2010).
49 Id. at 922.
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the same time, the Court believes the factual distinction between Shahan and the case at bar warrants
a different result here, where the property was acquired (and even owned briefly by the debtor)
during the marital relationship for the purpose of housing Ms. Vollen and the couple’s dependent
daughter. In these circumstances, the Court concludes that debtor is not entitled to a marital
adjustment for the mortgage payments made by the non-filing spouse on the marital home because
such mortgage payments are for the household expenses of the debtor and the debtor’s dependent
daughter and are therefore to be counted as part of Ms. Vollen’s CMI under § 101(10A), not
deducted on Line 19. Accordingly, the marital adjustment for the mortgage payments is disallowed.

2. College Expenses and Car Payment for Dependent Daughter
With respect to the college expenses ($266-$744) and car payments on the 2001 Honda
($109) that Mr. Vollen pays for the Vollens’ daughter, the daughter is a dependent of the debtor and
is included in the debtor’s household on Form 22C. The daughter drives the 2001 Honda while at
college. A dependent’s college expense, even when incurred by a person of majority, is a household
expense. A dependent is one who is sustained by another or relies on another for support. The
Vollens’ daughter clearly falls into that category and the family’s expenses incurred subsidizing her
higher education and providing her with a means of transportation while she is a dependent amount
to support. Therefore, the Court concludes that the funds Mr. Vollen expends for their daughter’s
college expenses and the 2001 Honda payment are household expenses of the dependent daughter
that may not be deducted as a marital adjustment on Line 19.50

50 Although this conclusion differs from the result reached in Shahan with respect to
support payments and college expenses paid to an adult daughter by the non-filing spouse, the
difference is explained by the fact that the daughter in Shahan was not a dependent of the debtor
and was not included in debtor’s household size on Form 22C. See 367 B.R. at 740.

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3.
Loan Repayments on Non-Filing Spouse’s Signature Loan and 2004
Honda CRV Loan
The Court next considers payments on the other loans for which only Mr. Vollen is liable.
Mr. Vollen refinanced his credit card debt by borrowing against the family’s 2004 Honda CRV,
resulting in a monthly payment obligation of $241. The Court has carefully reviewed the various
charges on the credit card statements and concludes that nearly all of these expenses were incurred
for food, apparel, and other personal incidental expenses. These are typical household expenses.
Mr. Vollen testified that he eats out frequently, both for lunch during the work day and in the
evening when the family is pressed for time. This is no different than Mr. Vollen packing a lunch
or cooking dinner at home, only more costly. Either would generate household expense. Similarly,
credit card charges for clothing for his daughter are part of household expense. Therefore,
repayment of the 2004 Honda CRV loan amounts to repayment of household expenses incurred on
credit and may not be deducted from CMI on Line 19. Mr. Vollen’s signature loan appears to have
been taken out for car repairs and an additional refinancing of credit card debt. The Court similarly
concludes that the signature loan repayment ($206) is an amount regularly contributed to household
expenses and may not be claimed as a marital adjustment on Line 19.

4. Non-Filing Spouse’s Paycheck Withholdings and Deductions
Mr. Vollen’s tax withholdings ($1,265.42) do not enter the household income stream and
should therefore be deducted from CMI as a marital adjustment. Because they are withheld by the
taxing authorities, they are not regularly devoted to household expense.51 For similar reasons, Mr.
Vollen’s 401k contributions ($333.10), as well as his 401k loan repayments ($33.35), deducted from

51 See Shahan, supra at 737.
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his paycheck are appropriate marital adjustments from CMI. None of these dollars enters the
household income stream. In addition, by contributing to his 401k plan and repaying money he has
“borrowed” from that account, Mr. Vollen adds to an account that is, as a matter of Kansas law,
solely his property. The Court recognizes that Ms. Vollen may be a beneficiary of this account at
some future point, but, as of the petition date, these funds are Mr. Vollen’s separate property. No
“marital estate” arises in Kansas until a dissolution of marriage petition is filed by a spouse.52 These
paycheck amounts may be deducted as marital adjustments on Line 19.

5. Non-Filing Spouse’s Recreation Expenses
Consistent with Shahan, the Court concludes that Mr. Vollen’s personal recreation expenses
($20) are not payments contributed to household expenses.53 He effectively is spending his income
on his own expenses. This amount may be deducted on Line 19 as a marital adjustment.

6. Non-Filing Spouse’s Payments to Dell Computer
At trial, debtor sought to add to the marital adjustment the monthly $49 payment made by
Mr. Vollen for a computer he purchased on credit. The record is largely silent on the purpose and
usage of the computer other than that Mr. Vollen purchased a “home computer” from Dell. On this
limited record, the Court concludes that the home computer is a household expense and therefore,
the Dell computer payment may not be deducted as a marital adjustment on Line 19.

C. Conclusion
Based upon the foregoing analysis, the Court concludes that the following amounts paid by
Mr. Vollen, as the non-filing spouse, are regularly contributed to the household expenses of debtor

52 See KAN.STAT.ANN. § 23-201.
53 367 B.R. at 740.
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and the Vollens’ dependent daughter and may not be properly deducted as marital adjustments on
either Lines 13 or 19 of Form 22C: first and second mortgage payments on the home owned by Mr.
Vollen ($837 + $305 = $1,142); payments made for the Vollens’ daughter’s college expenses ($266
or $704.80); payments on the 2001 Honda note ($109); payments on the 2004 Honda note ($241);
and payments on the signature loan ($206). Marital adjustment deductions are appropriate for the
following entries: Mr. Vollen’s recreation expense ($20); Mr. Vollen’s payroll taxes ($1,265.42);
Mr. Vollen’s 401k contributions ($333.10); and Mr. Vollen’s 401k loan repayments ($33.35). Ms.
Vollen may therefore deduct the sum of $1,651.87 as a marital adjustment on Lines 13 and 19 of
Form 22C.

According to the Court’s calculations, the forgoing results in the debtor’s annualized CMI
being $64,490.52, which exceeds the then-applicable median income of $63,245.54 This has the
effect of extending the debtor’s ACP to five years under § 1325(b)(4) and rendering the debtor
”above-median” for disposable income purposes under § 1325(b)(3). This in turn implicates the
calculation of deductions from the debtor’s income provided for in § 1325(b)(3) and § 707(b)(2) on
Part IV of Form 22C. Because the present form does not contain that information, and because the
debtor’s plan proposes an ACP that is too short, her plan cannot be confirmed. While the Court has
OVERRULED the Trustee’s legal objection to debtor’s Line 13 marital adjustment for the purpose
of determining the ACP, the Court SUSTAINS the Trustee’s objection to debtor’s proposed ACP
as being shorter than the appropriate marital adjustment warrants. In addition, the Court SUSTAINS
the Trustee’s disposable income objection relative to the amount of the Line 19 marital adjustment.

54 $7,026.08 (Line 11 income) - $1,651.87 (Line 13 and Line 19 marital adjustment) =
$5,374.21 CMI, or $64,490.52 annualized CMI.

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The debtor is granted 21 days from the entry of this order to (1) amend her Form 22C and her plan
in accordance with this Opinion, or (2) convert this case to Chapter 7.

# # #

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