Rental Expenses Not Included in Ch. 13 Disposable Income Calculation

• Rent payments aren’t included on Line 9b of Official Form 122C-2
• Debtor doesn’t have mortgage or other debts secured by his home

A debtor doesn’t have to account for monthly rental expenses when calculating disposable income for Chapter 13 because it isn’t a mortgage or other debt secured by a home, the U.S. Bankruptcy Court for the Southern District of Texas held.

This conclusion in a case not previously addressed by the court flows from the plain language of Official Form 122C-2, which helps Chapter 13 debtors calculate their disposable income, Judge Eduardo V. Rodriguez wrote June 18.

Felipe Hernandez filed Chapter 13, proposing to pay three payments of $350, and 57 monthly payments of $400, for a 9.24 percent dividend to unsecured creditors. He listed a $678 rental expense on Schedule J.

The trustee recommended court approval of Hernandez’s plan, but the court questioned whether he needed to list his monthly rent on Line 9b of Form 122C-2.

Because Hernandez’s annual income exceeds the median family income for similarly sized households in his state, his expenses must be determined under the “Means Test” of Bankruptcy Code Section 707(b)(2), the court said.

Form 122C-2 calculates a debtor’s expenses under that provision, the court said.

The plain language of the Bankruptcy Code and the Means Test indicate that a debtor’s rent expense isn’t deducted from Line 9b, the court said. Rent expenses aren’t a mortgage or other debt secured by the debtor’s home, the court said.

Hernandez’s rent expense was correctly excluded from the form, and his Chapter 13 plan should be approved, the court said.

Oliva Law, McAllen, Texas, represented Hernandez; Cindy Boudloche, Corpus Christi, Texas, is Chapter 13 trustee.

In re Hernandez, 2018 BL 215427, Bankr. S.D. Tex., 17-10473 , CHAPTER 13, 6/18/18.