THOMAS L. PERKINS, Bankruptcy Judge.
Before the Court is the confirmation of the amended Chapter 13 plan filed by the Debtor, Stephanie Brooks (DEBTOR), and the objection by Michael D. Clark, Chapter 13 Trustee (TRUSTEE). At issue is how child support payments should be treated on Form 22C for purposes of calculating disposable income.
The DEBTOR, who is divorced with two young children, filed a Chapter 13 petition on October 4, 2012. Because the DEBTOR'S annualized current monthly income exceeds the applicable median family income for a household of three persons residing in the state of Illinois, she is an "above median" debtor, her applicable commitment period is 60 months and the Bankruptcy Code requires her to use the "means test" to calculate the "amounts reasonably necessary to be expended" for her family's maintenance or support.
Official Form 22C, the Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income, as subsequently amended by the DEBTOR, discloses current monthly income of $6,614.50, of which $6,214.50 is attributable to her employment as a nurse manager. In addition to her wages, the DEBTOR receives child support of $400 per month for her two children. The DEBTOR takes a deduction on Line 54 of Form 22C, for the full amount of child support which she receives, as reasonably necessary to be expended for her children's care. According to Line 59, the DEBTOR'S monthly disposable income is $111.46. However, the DEBTOR separately deducts an expense of $141 for day care, as an additional expense claim on Line 60, which directs the debtor to list and describe other expenses required for the health and welfare of the debtor and the debtor's family. Taking that final deduction into account, the DEBTOR is left with a negative disposable income.
On Schedule I, the DEBTOR reported her average monthly income as $4,340, including child support. Her monthly expenses, including $150 for day care, were reported on Schedule J as $4,252. According to those schedules, her monthly net income was $88. The amended Chapter 13 plan filed by the DEBTOR proposes to pay $100 per month for 60 months, for a total of $6,000. From that amount, the amended plan would pay off a mortgage arrearage to Busey Bank of $2,000.
The TRUSTEE objected to confirmation of the amended plan, contending that the amended plan failed to apply all of the DEBTOR'S projected disposable income to the payment of unsecured creditors, as required by section 1325(b)(1)(B). The primary basis of the TRUSTEE'S objection is that by excluding the full amount of the child support that she receives, the DEBTOR is availing herself of double deductions, as most of those expenses are factored into the standard deductions for living expenses allowed elsewhere on Form 22 C. At the DEBTOR'S request, an evidentiary hearing was held on July 23,
Section 1325(b)(1)(B) provides that if a trustee or unsecured creditor objects to confirmation of a chapter 13 plan, the court may not approve the plan unless, as of its effective date, 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." 11 U.S.C. § 1325(b)(1)(B). Section 1325(b)(2) defines "disposable income" in two parts. The first step focuses upon the income side of the equation and applies to all chapter 13 debtors.
The second part of the "disposable income" determination, addressing the expense component of the equation, provides for the deduction of amounts "reasonably necessary to be expended ... for the maintenance or support of the debtor or a dependent of the debtor...." 11 U.S.C. § 1325(b)(2)(A). While the expenses of a below median debtor are determined by the same standard which was employed prior to BAPCPA, the deduction of expenses for an above median debtor is to be determined by application of the chapter 7 formulaic "means test."
The issue before the Court is the interpretation and application of the parenthetical exclusion from disposable income of "child support payments ... for a dependent child made in accordance with applicable nonbankruptcy law to the extent reasonably necessary to be expended for such child" in section 1325(b)(2). The interpretation
Section 1325(b)(2)'s parenthetical excludes three types of payments: child support, foster care payments and disability payments for a dependent child. The exclusion is subject to two conditions: (1) the payments are made in accordance with applicable nonbankruptcy law; and (2) the payments are excludable only to the extent reasonably necessary to be expended for such child. Keeping in mind that the exclusion is made in the context of the "income side" of the calculation, the Court will briefly examine the nature and character of child support, the category of payments at issue here, before addressing the contentions of the parties.
Under section 505(a) of the Illinois Marriage and Dissolution of Marriage Act, the trial court may order either or both of the parents to pay child support in an amount that is "reasonable and necessary." 750 ILCS 5/505(a). The Act provides guidelines for determining the minimum amount of child support. 750 ILCS 5/505(a)(1). A deviation from the guidelines may be made upon a determination that it would be appropriate after considering the best interest of the child in light of the evidence, including, but not limited to, the financial resources and needs of the child and both parents, the standard of living the child would have enjoyed had the marriage not been dissolved, and the physical, mental, emotional, and educational needs of the child. 750 ILCS 5/505(a)(2). The trial court is justified in making a downward departure from the guideline amount where the incomes of the parents are more than sufficient to provide for the reasonable needs of the children of the marriage. In re Marriage of Hubbs, 363 Ill.App.3d 696, 707, 300 Ill.Dec. 220, 843 N.E.2d 478 (Ill.App. 5 Dist.2006). An award of child support is not meant to be a windfall to the custodial parent. In re Keon C., 344 Ill.App.3d 1137, 1142, 279 Ill.Dec. 674, 800 N.E.2d 1257 (Ill.App. 4 Dist.2003). It is equally true that a child is not required to subsist at a minimal level of comfort while the noncustodial parent is living a life of luxury. In re Marriage of Bussey, 108 Ill.2d 286, 297, 91 Ill.Dec. 594, 483 N.E.2d 1229 (1985). Support is for the benefit of the child, not the parent or stepparent of the child, nor the step-siblings of the child. In re Marriage of Edwards, 369 Ill.App.3d 1035, 1039, 308 Ill.Dec. 455, 861 N.E.2d 1020 (Ill.App. 5 Dist.2006).
Although it is only the exclusion for child support at issue here, the other exclusions provided by the statute, for foster care payments and disability payments, are similar in their purpose and are regarded as subject to the same restriction that the payments be expended for the child. In Bryant v. Bryant, 218 S.W.3d 565 (Mo.App. E.D.2007), the court summarized the nature of foster care payments, stating:
218 S.W.3d at 569. Similarly, social security disability payments to children replace wages that a parent would have earned but for the disability, substituting for support. Graby v. Graby, 87 N.Y.2d 605, 664 N.Y.S.2d 577, 664 N.E.2d 488 (1996). Like the first two exclusions, those disability payments belong to the child.
The TRUSTEE contends that the DEBTOR, as an above median debtor, is not entitled to exclude any portion of the child support she receives, as being "reasonably necessary to be expended" for expenses incurred on behalf of the children which are otherwise included in the standardized expense component of the means test computation. The TRUSTEE believes that the parenthetical exclusion calls for an independent calculation to be made, on a case-by-case basis, with the Line 54 exclusion limited to additional, extraordinary expenses of the children which are reasonably necessary and have not otherwise been deducted on Form 22C. The TRUSTEE believes a case-by-case analysis is necessitated by the statute's "reasonably necessary" standard set forth in the parenthetical. According to the TRUSTEE, because the DEBTOR has included her two children in her claim of a household size of three, most, if not all, of the cost of the children's care and support cannot be separately considered in determining how much of the child support she receives is reasonably necessary for their care, because those amounts are separately accounted for under the National Standard for allowable living expenses, which includes food, apparel and services, personal care products and services and miscellaneous expenses.
The DEBTOR contends that the child support she receives of $200 for each child falls well below any threshold amount which might be questioned as reasonably necessary to meet the needs of a child. The DEBTOR maintains that it is appropriate for the Court to make this determination as a matter of law. According to the DEBTOR, that determination ends the inquiry. If the child support is reasonably necessary to be expended for the child's care, it is not included in disposable income. Alternatively, the DEBTOR suggests that the Court should revert to Schedules I and J, with their detailed itemization of actual expenses, engaging in a painstaking analysis on a case-by-case basis.
The TRUSTEE also argues that if Congress had intended to exclude the entire amount of child support income, it could have done so explicitly in section 101(10A)(B). Because the exclusion is set forth in chapter 13 of the Code, not in chapter 1, it is clear that the exclusion was intended to operate only in chapter 13 cases. It is also clear by its placement in section 1325(b)(2), not (b)(2)(A), that the parenthetical exclusion is intended to be applied as an exclusion from income rather than an expense adjustment as the TRUSTEE would apply it. In this Court's view, the flaw in the TRUSTEE'S interpretation results from regarding the parenthetical exclusion as creating an additional, separate computation, prematurely calling into play the expense side of the disposable income equation. Nothing in the language of the statute calls for such a calculation. Construing the parenthetical exclusion in conjunction with section 1325(b)(2) in its entirety, it becomes apparent that the TRUSTEE'S interpretation disrupts the formulaic approach prescribed by the statute. The means test was intended to establish a uniform, easily administrable, mechanical formula. Disposable income was intended to be determined as a "simple and straightforward matter of arithmetic." In re Farrar-Johnson, 353 B.R. 224, 232 (Bankr.N.D.Ill.2006). This is especially true on the income side of the equation. As a practical matter, the TRUSTEE makes no suggestion as to how a child's fractional share of the standard deduction for allowable living expenses would be determined. The allocation would be no less problematic for below median debtors who are recipients of child support, because the exclusionary paragraph applies equally to them. The TRUSTEE'S interpretation would present difficult evidentiary issues.
The plain meaning of the parenthetical exclusion is better reflected by the DEBTOR'S interpretation, and is adopted by the Court. Under Illinois law, as set forth above, the benchmark for determination of child support is the reasonable and necessary needs of the child.
Moreover, if the custodial parent's finances improve such that the entire amount of the child support award is no longer reasonably needed by the child, the ex-spouse payor has the right to seek reduction of the award. The custodial parent's creditors have no valid claim to the excess funds. This result is in harmony with the long-standing principle that domestic relations matters should properly be reserved to the state courts. Simms v. Simms, 175 U.S. 162, 20 S.Ct. 58, 44 L.Ed. 115 (1899). Federal courts, in deference to the states' traditional authority over and particular expertise in domestic relations, are loath to intrude in matters of family law. In re Taub, 438 B.R. 39 (Bankr. E.D.N.Y.2010).
Noting that a primary objective of the means test was to make "can-pay" debtors pay more, the TRUSTEE maintains that allowing debtors to fully exclude child support would result in a windfall to them, a result clearly not intended by the drafters of BAPCPA. That general policy, however, must defer to the specific exclusions from disposable income for child support, foster care and disability payments for a dependent child. Congress carved out an exclusion for payments received by debtors which must be dedicated for the support of the child for whom those payments are received. In crafting these narrowly targeted exclusions from a debtor's income, Congress intended to protect those funds for their dedicated purpose by removing them from the disposable income equation. To the extent that the income exclusions might enable some debtors to live a better lifestyle in chapter 13 than creditors might prefer, Congress likely weighed this as a lesser evil than depriving dependent children of the benefit of funds intended solely for their care, which is the risk that would be entailed by including the funds in the debtor's income or requiring the debtor to prove exactly how the child support funds are spent each month.
In this Court's view, the condition that the income exclusions are subject to a standard of reasonable necessity, is best interpreted as a hedge against the risk of abuse. There may be some few cases where the custodial parent is so well off that child support payments amount to unneeded surplus funds. In that event, the reasonable necessity standard provides a basis for including the payments in the debtor's income. That occurrence is likely to be rare. This case, where each child is receiving $200 per month from their father, is a far cry from being an abusive situation where a debtor is unfairly taking advantage of the income exclusion for child support payments to the detriment of creditors.
For the reasons stated in an Opinion entered this day, IT IS HEREBY ODERED that the Trustee's objection to the exclusion from income of $400 per month for child support payments received by the Debtor is DENIED.
