FOR PUBLICATION


UNITED STATES BANKRUPTCY APPELLATE PANEL

FOR THE FIRST CIRCUIT

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BAP NO. EP 08-090

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Bankruptcy Case No. 07-20955-JBH

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SCOTT W. COFFIN,

Debtor.

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SCOTT W. COFFIN,

Appellant,


v.


ECAST SETTLEMENT CORPORATION and

PETER C. FESSENDEN, Chapter 13 Trustee,

Appellees.

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Appeal from the United States Bankruptcy Court

for the District of Maine

(Hon. James B. Haines, Jr., U.S. Bankruptcy Judge)

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Before Lamoutte, Boroff, and Rosenthal, Footnote

United States Bankruptcy Appellate Panel Judges.

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 J. Scott Logan, Esq., on brief for Appellant.


William Andrew McNeal, Esq., on brief for Appellee eCast Settlement Corporation.


Peter C. Fessenden, Esq., on brief for Appellee Chapter 13 Trustee.


Ramona D. Elliott, Esq., P. Matthew Sutko, Esq., and David I. Gold, Esq., on brief for the Executive Office for United States Trustees, Department of Justice, as Amicus Curiae.

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September 15, 2010

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Lamoutte, U.S. Bankruptcy Appellate Panel Judge.

            Scott Coffin (the “Debtor”) appeals from an order, dated November 18, 2008, issued by the United States Bankruptcy Court for the District of Maine (the “Order”) Footnote denying confirmation of his chapter 13 plan because it included a deduction for an ownership expense on a vehicle which was neither leased nor encumbered. The bankruptcy court concluded that, under § 707(b)(2)(A)(ii)(I), Footnote the vehicle ownership expense deduction is not “applicable” to above-median debtors who have no loan or lease payments, and that the Debtor had therefore failed to apply all of his disposable income to make payments to unsecured creditors as required by § 1325(b)(1)(B).

            We do not say that the bankruptcy court’s well-reasoned decision failed to reach a sensible conclusion. However, the statute, as drafted, and in light of its underlying policies, mandates a different result. Accordingly, we conclude that the mandatory language of § 707(b)(2)(A)(ii)(I), read in the context of its statutory scheme, purposes, and policies, provides that above-median debtors “shall” enter the Internal Revenue Service (the “IRS”) Local Standards (rather than their actual expenses) onto their Form B22C Footnote in determining their projected net disposable income. For this reason, we REVERSE.

BACKGROUND

            The relevant facts are not in dispute.

            The Debtor has current monthly income Footnote which is above the median for the District of Maine. He owns three motor vehicles outright: a 2002 Chevrolet Camaro, a 1973 Cadillac El Dorado, and a 1987 Chevrolet plow truck. On his amended Schedule I, the Debtor disclosed total monthly gross income of $8,766.73, and total net monthly take home pay of $6,557.03. On his amended Schedule J, he disclosed monthly living expenses totaling $5,859.93. On his amended Footnote Form B22C, the Debtor calculated deductions from his income totaling $8,692.86, leaving $73.87 in projected monthly disposable income. As part of those deductions, the Debtor claimed ownership expenses of $478.00 a month for each of two vehicles, for a total of $956.00 per month, but listed no monthly debt payments on those vehicles.

            The Debtor’s Second Amended Plan, in which he proposed a 16 percent distribution to general unsecured creditors, “depend[ed] on his entitlement to the two $478 deductions.” ECast Settlement Corporation (“eCast”), an unsecured creditor in the Debtor’s bankruptcy, objected to confirmation of the Second Amended Plan on the grounds that the Debtor had understated his projected disposable income by deducting ownership expenses for two vehicles that were neither leased nor encumbered. The Debtor filed a brief in response to eCast’s objection, in which he set forth multiple arguments as to why he should be allowed to claim the vehicle ownership expense deduction. The chapter 13 trustee disagreed; in his brief, he acknowledged that there was no controlling authority in this circuit, but argued that the applicable statutory scheme does not allow the Debtor to claim the ownership expenses.

            The bankruptcy court held a hearing and took the matter under advisement. The court subsequently issued the Order, accompanied by a memorandum of decision in which it concluded that the Bankruptcy Code does not permit an above-median chapter 13 debtor to deduct a vehicle ownership expense that he is not incurring. The bankruptcy court examined the legislative intent behind BAPCPA and the language of § 1325(b)(3), which governs the determination of “reasonably necessary expenses” for debtors with income above the median for their jurisdiction. The court reasoned that, while the language of § 1325(b)(3) divulged no plain meaning, “[t]he determinative standard for Chapter 13 debtors’ expenses is reasonableness and necessity,” and that a “non-expenditure” such as the Debtor sought to apply did not qualify. Additionally, the court explained that it had rejected a vehicle’s declining worth as an ownership expense because chapter 13 budgeting had traditionally taken no account of such “costs” and “BAPCPA did not alter confirmation standards so fundamentally (and so adversely to creditors’ interests) that they must now be taken into account.” Accordingly, the court concluded that because the Debtor was not incurring out-of-pocket ownership expenses, they could not fairly be “projected” into his plan. This appeal followed. Footnote

JURISDICTION

            A bankruptcy appellate panel may hear appeals from “final judgments, orders and decrees [pursuant to 28 U.S.C. § 158(a)(1)] or with leave of the court, from interlocutory orders and decrees [pursuant to 28 U.S.C. § 158(a)(3)].” Fleet Data Processing Corp. v. Branch (In re Bank of New England Corp.), 218 B.R. 643, 645 (B.A.P. 1st Cir. 1998). “A decision is final if it ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’” Id. at 646 (citations omitted).

            Here, the Panel ordered the Debtor to show cause why this appeal should not be dismissed as interlocutory because an order denying confirmation of a chapter 13 plan is not a final order (as the debtors are free to propose an alternative plan), and the Order did not appear to satisfy any of the exceptions to the final order rule. The Debtor filed a response in which he argued that the Order is a final, appealable order, or alternatively that the Order satisfies each of the three exceptions to the final order rule. The Panel determined that the Debtor had shown sufficient cause to preclude dismissal of the appeal, but did not make a final ruling on jurisdiction. We conclude that the Order is interlocutory, see Hamilton v. Wells Fargo Bank, N.A. (In re Hamilton), 401 B.R. 539 (B.A.P. 1st Cir. 2009); Watson v. Boyajian (In re Watson), 309 B.R. 652, 659 (B.A.P. 1st Cir. 2004), aff’d, 403 F.3d 1 (1st Cir. 2005); Ransom v. MBNA America Bank, N.A. (In re Ransom), 380 B.R. 799, 801 (B.A.P. 9th Cir. 2007), aff’d, 577 F.3d 1026 (9th Cir. 2009), cert. granted, 130 S. Ct. 2097 (2010), but that the Order satisfies the § 158 exception to the final order rule. Footnote See In re Bank of New England, 218 B.R. at 652-54.

STANDARD OF REVIEW

            The Panel generally reviews findings of fact for clear error and conclusions of law de novo. See TI Fed. Credit Union v. DelBonis, 72 F.3d 921, 928 (1st Cir. 1995); Western Auto Supply Co. v. Savage Arms, Inc. (In re Savage Indus., Inc.), 43 F.3d 714, 719 n.8 (1st Cir. 1994). We review questions of statutory interpretation de novo. United States v. Tobin, 552 F.3d 29, 32 (1st Cir. 2009). The issue before us is one of statutory interpretation.

DISCUSSIONI. BAPCPA and Statutory Construction

            Traditionally, questions of statutory construction begin with the plain language of the statute; courts consider the language in the context of the statutory scheme, avoiding statutory constructions which create results that are “senseless” or contrary to congressional intent. See Hamilton v. Lanning (In re Lanning), 130 S. Ct. 2464, 2468-69, 2475-76 (2010); United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989); but see Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007). Footnote “We presume that Congress intended all words and provisions contained within a statute to have meaning and effect, and we will not readily adopt any construction that renders any such words or phrases meaningless, redundant, or superfluous.” United States v. Ahlers, 305 F.3d 54, 58 (1st Cir. 2002). A court should look beyond the language of the statute for interpretive guidance only where the language of the statute is ambiguous; a statute is ambiguous if it allows for more than one reasonable interpretation. General Motors Corp. v. Darling’s Auto Mall, 444 F.3d 98, 108 (1st Cir. 2006).

            It is generally accepted that many provisions of BAPCPA are unclear, making it difficult for courts to discern the congressional intent. See, e.g., Jean Braucher, A Guide to Interpretation of the 2005 Bankruptcy Law, 16 Am. Bankr. Inst. L. Rev. 349, 349 (Winter 2008); Hon. Thomas F. Waldron and Neil M. Berman, Principled Principles of Statutory Interpretation: A Judicial Perspective After Two Years of BAPCPA, 81 Am. Bankr. L.J. 195, 197 (Summer 2007). Further complicating matters, different portions of BAPCPA are driven by different congressional goals, namely the sometimes competing goals of “Bankruptcy Abuse Prevention” and “Consumer Protection.” As such, the canons of statutory interpretation “do not necessarily compel consistent conclusions” with respect to different sections of BAPCPA. Footnote Waldron & Berman, supra, at 199.

            Thus, a provision of BAPCPA may be unclear even if it does not appear on its face to be ambiguous. See id.; Braucher, supra, at 349; see also General Motors Corp. v. Darling’s Auto Mall, 444 F.3d at 108 (explaining that a determination of statutory ambiguity is not limited to the four corners of a statute, but includes instances where the statute in question allows for more than one reasonable interpretation). Therefore, when interpreting BAPCPA, courts should review a range of statutory principles before settling on a final interpretation, see Waldron & Berman, supra, at 228, and “check” the apparent plain meaning against congressional purpose and the policy effects on the bankruptcy system. Braucher, supra, at 357. In particular, courts should examine the language, purposes, and policies of BAPCPA, and attempt to reconcile all three, “making sense of the law to the extent possible.” Id. at 351.

            The provision of BAPCPA at issue in this appeal is no exception; it has generated much conflicting case law as well as discussion of differing theories of statutory construction. Footnote See, e.g., id.; In re Young, 392 B.R. 6, 22 (Bankr. D. Mass. 2008) (explaining that it was “loathe to characterize [] § 707(b)(2)(A)(ii)(I) as clear or unambiguous in light of the vast amount of conflicting authority”); In re Mati, 390 B.R. 11, 21 (Bankr. D. Mass. 2008) (noting that courts are about evenly split as to whether a vehicle ownership deduction is permissible where the debtor has no car payment); In re Swan, 368 B.R. 12, 17 (Bankr. N.D. Cal. 2007) (noting that the issue has been thoroughly discussed but no discernable majority view has emerged).

            In our view, § 1325(b) is an example of a provision that is caught between the tension of BAPCPA’s two goals: bankruptcy abuse prevention and consumer protection. Thus, under different facts that implicated a different subsection of § 1325(b), this Panel concluded that the term “projected disposable income” is forward looking and that courts should adjust a below-median debtor’s “current monthly income” (with further adjustments not relevant here) when not consistent with the debtor’s actual circumstances. Kibbe v. Sumski (In re Kibbe), 361 B.R. 302, 312 (B.A.P. 1st Cir. 2007). In the context of the instant appeal, however, we conclude for the reasons discussed below that the statutory structure requires that the vehicle ownership expense be determined strictly based on the National Standards (rather than on the Debtor’s actual expense). This difference in approach is dictated by the statute itself, namely that § 1325(b)(3) mandates how expenses are to be calculated for above-median income debtors but not for below-median income debtors.

II. The Statute: Sections 1325(b) and 707(b)

            The issue before us hinges on how to calculate the amounts that an above-median income chapter 13 debtor must pay unsecured creditors under BAPCPA. The calculation has two basic components: income and expenses. In the real world, one would intuitively subtract expenses from income to obtain that number. However, in bankruptcy after BAPCPA, the expense calculation for above-median income debtors is subject, with exceptions not here relevant, to a variety of nondiscretionary limitations.

             Under § 1325(b)(1)(B), Footnote if the trustee or an unsecured creditor objects to confirmation of the plan, the bankruptcy court may not confirm the plan unless the plan “provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.” Footnote 11 U.S.C. § 1325(b)(1). The Code does not define “projected disposable income;” Footnote however, “disposable income” means the debtor’s current monthly income minus “amounts reasonably necessary to be expended . . . for the maintenance or support of the debtor or a dependent of the debtor” in addition to other items that do not apply in this instance. 11 U.S.C. § 1325(b)(2).

            Section 707(b)(2)(A) and (B), the so-called “means test,” significantly restricts court discretion as to those expenses which are “amounts reasonably necessary” and accordingly can be deducted in calculating disposable income. 11 U.S.C. § 1325(b)(3); 11 U.S.C. § 707(b)(2); In re Haley, 354 B.R. 340, 342 (Bankr. D.N.H. 2006). Pursuant to § 707(b)(2)(A)(ii)(I), Footnote the above-median income debtor’s monthly expenses are fixed as “the debtor’s applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor’s actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides.” 11 U.S.C. § 707(b)(2)(A)(ii)(I) (emphasis supplied).

            The National and Local Standards are “the Collection of Financial Standards used by the Internal Revenue Service to determine a taxpayer’s ability to pay a delinquent tax liability.” In re Fowler, 349 B.R. 414, 416-17 (Bankr. D. Del. 2006). The National Standards include five expense categories: (1) food; (2) housekeeping supplies; (3) apparel and services; (4) personal care products and services; and (5) miscellaneous. Id. The National Standards are based on the taxpayer’s gross income and family size. Id.

            The Local Standards provide fixed allowable expenses for (1) housing and utilities, and (2) transportation. Id.; In re Haley, 354 B.R. at 342. There are two components to the transportation expense: (1) ownership costs, which are based on the number of cars owned by the taxpayer; and (2) operating costs and public transportation costs, which are based on the number of cars owned by the taxpayer and on the taxpayer’s location. In re Fowler, 349 B.R. at 416-17. The Local Standards allow ownership expenses of $471.00 for the first car and $332.00 for the second car. In re Haley, 354 B.R. at 342.

            The fact that Congress specified that debtors are entitled to “actual” monthly expenses with respect to Other Necessary Expenses and “applicable” monthly expense amounts with respect to the National and Local Standards indicates that Congress intended “applicable” to mean something other than “actual.” In re Mati, 390 B.R. at 23; In re Swan, 368 B.R. at 18; In re Fowler, 349 B.R. at 418. “‘Applicable’ in this context simply means that debtors shall select the appropriate values from the Local Standards table, taking the debtor’s locality into account.” In re Young, 392 B.R. at 22; see also In re Lanning, 130 S. Ct. at 2469 (examining context of statutory language).

            Legislative history indicates that Congress intended for the Local Standards to function as fixed deduction amounts. In re Fowler, 349 B.R. at 418. Congress added § 707(b)(2) to the Bankruptcy Code in 2005 as part of BAPCPA. In re Burbank, 401 B.R. 67, 70 (Bankr. D.R.I. 2009). In an earlier version of BAPCPA that did not pass, Congress had defined “projected monthly net income” for the means test to require the following calculation of expenses:

(A) the expense allowances under the applicable National Standards, Local Standards, and Other Necessary Expenses allowance (excluding payments for debts) for the debtor . . . in the area in which the debtor resides as determined under the Internal Revenue Service financial analysis for expenses in effect as of the date of the order for relief.

 

In re Fowler, 349 B.R. at 418 (quoting H.R. 3150, 105th Congress (1998) (emphasis added by Fowler court)). In the enacted version of BAPCPA, Congress replaced the reference to the IRS financial analysis with the “applicable monthly expense amounts specified under the National and Local Standards” language. Id. This language change demonstrates that Congress’ purpose in referring to the Local Standards was to establish a fixed deduction rather than to make IRS financial analysis binding on bankruptcy courts. Id. Footnote Indeed, in this respect, the legislative history could not have been clearer: “‘The bill also makes substantial changes to chapter 13 by substituting the IRS expense standards to calculate disposable income. . . . The formula remains inflexible and divorced from the debtor’s actual circumstances.’” In re Swan, 368 B.R. at 20 (quoting Report of the Committee on the Judiciary, House of Representatives, to Accompany S. 256, H.R. Rep. No. 109-31, pt. 1 at 553 (2005)). The purpose behind the means test in general also supports the conclusion that debtors who have no car loan or lease payment should be allowed to take the vehicle ownership deduction. Hildebrand v. Kimbro (In re Kimbro), 389 B.R. 518, 531 (B.A.P. 6th Cir. 2008); In re Fowler, 349 B.R. at 420. In creating the means test, Congress intended that there be an easily applied formula for determining when bankruptcy courts should presume that a debtor’s filing of a chapter 7 petition is abusive, and presumptions are typically created to avoid litigation. In re Fowler, 349 B.R. at 420. Thus, Congress intended for the National and Local Standards to serve as a list of standard expenses for all debtors that could be “easily and uniformly applied.” Id. at 420-21. There is no question but that Congress intended to limit the bankruptcy court’s discretion in inquiring into the particulars of a debtor’s lifestyle and disposable income. In re Swan, 368 B.R. at 20; see also In re Phillips, 382 B.R. 153, 172 (Bankr. D. Mass. 2008) (reaching, after a thorough analysis, the same conclusion with regards to claiming the standard housing deduction for which the debtor qualified based on the area where she lived and the size of her household).

            While the congressional wisdom of fixing the vehicle ownership expense deductions without regard to loan or lease is certainly subject to debate, there are sound reasons for that choice. Ownership expenses encompass costs associated with owning a vehicle beyond loan or lease payments; thus, even if the debtor does not need to replace the vehicle, owning a vehicle “always involves an expense.” In re Kimbro, 389 B.R. at 531; see also In re Burbank, 401 B.R. at 72 (explaining that car ownership expenses necessarily and typically include depreciation, licensing, taxes, and insurance); but see In re Young, 392 B.R. at 22 (clarifying that only operating vehicles incur some costs). Allowing debtors who do not have a car payment to take the vehicle ownership deduction “‘avoids arbitrary distinctions between debtors who have only a few car payments left at the time of their bankruptcy filing and those who finished making their car payments just before filing.’” Wedoff, supra, at 257; see also In re Burbank, 401 B.R. at 72; In re Fowler, 349 B.R. at 418. Allowing debtors to take the vehicle ownership deduction where they have no lease or loan payments rewards “honest but unfortunate” debtors who “[hung] on to old cars to economize and get on a better financial footing.” See Braucher, supra, at 386 n.204. On the other hand, disallowing the vehicle ownership expense where the debtor has no lease or loan payment would penalize these debtors, and indeed would create “a perverse incentive to splurge on a vehicle” prior to filing a bankruptcy petition. In re Baughman, No. 07-63208, 2008 WL 4487879, *4 (Bankr. N.D. Ohio Sept. 30, 2008); see also In re Lanning, 130 S. Ct. at 2476-78 (rejecting appellant’s suggestion that debtors could engage in certain “maneuvers” to avoid problems of mechanical approach); Braucher, supra, at 386 n.204. Rewarding debtors who “enter bankruptcy owning expensive, shiny new cars with huge monthly payments, which can be taken in full under means testing,” see Braucher, supra, at 386 n.204, would thus frustrate the Bankruptcy Code’s most basic principle: equity. See In re Marrama, 549 U.S. at 367.

CONCLUSION

            Although Lanning can be read as an endorsement of judicial discretion, see, e.g., In re Collier, No. 09-33187, 2010 WL 2643542 (Bankr. M.D. Ala. June 29, 2010); Footnote 8 Bankruptcy Service Current Awareness Alert 4, Hon. Nancy C. Dreher (Aug. 2010), Footnote we cannot conclude that the Supreme Court intended to endorse an unfettered grant of discretion which would permit bankruptcy courts to apply BAPCPA in a manner directly at odds with its express terms. The Debtor owns and operates a vehicle and, therefore, incurs expenses related to it. The fact that those expenses may be less than the amount Congress fixed for inclusion in the means test analysis does not mean that courts have the discretion to disallow the expense in that analysis.

            For the reasons discussed above, we REVERSE the Order and REMAND for proceedings consistent with this opinion.