PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

In Re: SUSAN QUIGLEY, 

Debtor.

HELEN M. MORRIS,

Trustee-Appellant,

v.

SUSAN QUIGLEY,  No. 09-2102

Debtor-Appellee.

UNITED STATES OF AMERICA; ECAST

SETTLEMENT CORPORATION, assignee

of FIA Card Services a/k/a Bank

of America,

Amici Supporting Appellant. 

Appeal from the United States District Court

for the Northern District of West Virginia, at Wheeling.

Frederick P. Stamp, Jr., Senior District Judge.

(5:08-cv-00126-FPS)

Argued: January 26, 2012

Decided: March 7, 2012

Before TRAXLER, Chief Judge, and MOTZ and SHEDD,

Circuit Judges.
Reversed and remanded by published opinion. Chief Judge

Traxler wrote the opinion, in which Judge Motz and Judge

Shedd joined.

COUNSEL

ARGUED: Susan Kaye Cannon-Ryan, OFFICE OF THE

CHAPTER 13 TRUSTEE, South Charleston, West Virginia,

for Appellant. Wendy Cox, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; William Andrew

McNeal, BECKET & LEE, LLP, Malvern, Pennsylvania, for

Amici Supporting Appellant. Kelly Gene Kotur, DAVIS

LAW OFFICES, Bridgeport, Ohio, for Appellee. ON

BRIEF: D. William Davis, DAVIS LAW OFFICES, Bridgeport, Ohio, for Appellee. W. Clarkson McDow, Jr., United

States Trustee, Region 4, Douglas A. Kilmer, UNITED

STATES DEPARTMENT OF JUSTICE, Charleston, West

Virginia; Ramona D. Elliott, General Counsel, P. Matthew

Sutko, Associate General Counsel, Catherine B. Sevcenko,

UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for the United States, Amicus Supporting Appellant. Gilbert B. Weisman, BECKET & LEE, LLP, Malvern,

Pennsylvania, for eCast Settlement Corporation, Amicus Supporting Appellant. 

OPINION

TRAXLER, Chief Judge:

Helen M. Morris ("the Trustee"), the bankruptcy trustee in

the Chapter 13 bankruptcy of Susan Quigley ("the Debtor"),

appeals a district court order affirming a bankruptcy court ruling that in calculating projected disposable income, the

Debtor could deduct the monthly payments that she would not

in fact be required to make. We reverse and remand.

2 IN RE: QUIGLEY
I.

The Debtor filed a Chapter 13 bankruptcy petition on January 11, 2008. On her Schedule B, which lists personal property, she listed two all-terrain vehicles ("ATVs"). She stated

on her Schedule D, listing secured debts, that both ATVs were

collateral for promissory notes that she executed. In her proposed repayment plan, however, she represented that she

would be surrendering both vehicles to the secured creditors.

Thus, she would no longer be required to make the payments

on the ATVs.

On her Schedule B, the Debtor also listed a 2004 Ford truck

as her personal property, although the same schedule notes

that the truck belongs to her ex-boyfriend. The vehicle’s title

does list the Debtor as a legal owner, but her former boyfriend

was making payments on the truck, was a co-debtor on the

note, and was in possession of the vehicle.

On her statement of current monthly income, calculation of

commitment period, and calculation of disposable income

(Form B22C), the Debtor listed the payments owed on the

two ATVs and the truck as expense deductions. She noted on

that form that during the 60 months encompassed by her

repayment plan, she was obligated to make monthly payments

of $40.87 on one ATV, $122.46 on the other, and $307.83 on

the truck. According to her calculations, she had no disposable income to pay to unsecured creditors.1

 Her plan nevertheless proposed that she pay $15,960 to the Trustee over the 60-

month life of the plan, in bi-weekly installments of $122.77.

The Debtor estimated that $7,992 of that total would be payable to unsecured creditors, which would amount to approximately 26% of their filed claims.

1

In fact, her calculations showed her monthly disposable income as negative $48.08. 

IN RE: QUIGLEY 3
The Trustee objected to the proposed plan on the basis that

it did not allot all of the Debtor’s projected disposable income

during the repayment period to payments to her unsecured

creditors. More specifically, the Trustee contended that the

Debtor had understated her projected disposable income by

deducting the amount of the payments for the three vehicles

as expenses, when the Debtor would not actually be making

any of those payments once the plan was implemented.

The bankruptcy court sustained the Trustee’s objection in

part and overruled it in part. Regarding the truck, the court

ruled that because the Debtor’s ex-boyfriend was already

making her payments, the Debtor’s then-current income

should have been increased to account for that. Accordingly,

the court required her to amend her forms to include those

amounts as monthly income (which resulted in a new disposable monthly income of $248.75). However, the court overruled the Trustee’s objection regarding the ATVs. The court

reasoned the Bankruptcy Code requires that projected disposable income be based only on expenses and income from the

six-month period preceding a bankruptcy filing and that the

court was statutorily precluded from considering even known

changes in the Debtor’s future expenses.

The Trustee then appealed to the district court, which

affirmed the bankruptcy court’s ruling. This appeal followed.

II.

The Trustee argues that the district court erred in affirming

the bankruptcy court decision. We agree.

When reviewing a district court order on appeal from the

bankruptcy court, we review the district court decision de

novo, "effectively standing in its shoes to consider directly the

findings of fact and conclusions of law by the bankruptcy

court." Cypher Chiropractic Ctr. v. Runski (In re Runski), 102

F.3d 744, 745 (4th Cir. 1996). "[W]e review legal conclusions

4 IN RE: QUIGLEY
by the bankruptcy court de novo and may overturn its factual

determinations only upon a showing of clear error." Id.

We begin by discussing the Bankruptcy Code provisions

that are relevant to this appeal. 

Attempting to address some perceived abuses in the bankruptcy system, as part of the Bankruptcy Abuse Prevention

and Consumer Protection Act of 2005 ("BAPCPA"), Congress revised the Bankruptcy Code by requiring debtors with

above-median income, such as the Debtor, to file for bankruptcy under Chapter 13’s reorganization provisions rather

than the liquidation provisions of Chapter 7. Under Chapter

13, a debtor proposes a plan under which a portion of the

debtor’s future income will be paid to the bankruptcy trustee.

See 11 U.S.C.A. §§ 1321, 1322 (West 2004 & Supp. 2011).

The bankruptcy court then must confirm the plan if it complies with the applicable requirements, see 11 U.S.C.A.

§ 1325 (West 2004 & Supp. 2011), which include the following:

(b)(1) If the trustee or the holder of an allowed

unsecured claim objects to the confirmation of the

plan, then the court may not approve the plan unless,

as of the effective date of the plan—

(A) [the plan provides for the full payment of all unsecured claims]; or

(B) 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.

(2) For purposes of this subsection, the term "disposable income" means current monthly income

IN RE: QUIGLEY 5
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

. . .

. . .

(3) Amounts reasonably necessary to be expended

under paragraph (2) . . . shall be determined in accordance with subparagraphs (A) and (B) of section

707(b)(2), if the debtor has current monthly income,

when multiplied by 12, greater than—

. . .

(B) 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

. . . .

11 U.S.C.A. § 1325(b) (emphasis added). 

In the present case, it is undisputed that the Debtor’s

revised plan will not provide for full payment to the unsecured creditors. Thus, to be confirmable, the plan must allot

all of the Debtor’s projected disposable income during the

plan period to payments to unsecured creditors. The question

before us now is whether the bankruptcy court erred in concluding that the Debtor’s projected disposable income should

not take into account her intention to surrender her two ATVs

to her secured creditors.

The Bankruptcy Code does not define "projected disposable income," but it does define "disposable income" as "current monthly income . . . less amounts reasonably necessary

6 IN RE: QUIGLEY
to be expended." 11 U.S.C.A. § 1325(b)(2). "Current monthly

income" is generally defined to mean the debtor’s average

monthly income for the six-month period preceding the debtor’s bankruptcy filing. See 11 U.S.C.A. § 101(10A)(A) (West

Supp. 2011). For debtors with above-median incomes,

"amounts reasonably necessary to be expended" are determined by reference to the Chapter 7 "Means Test." See 11

U.S.C.A. §§ 707(b)(2), 1325(b)(3) (West Supp. 2011). This

test lists certain types of expenses that a debtor may deduct

from his current monthly income. See 11 U.S.C.A.

§ 707(b)(2)(A)(i), (ii). As is particularly relevant here, a

debtor may deduct "average monthly payments on account of

secured debts." 11 U.S.C.A. § 707(b)(2)(A)(iii).

What we must decide in this case is whether a debtor’s

"projected disposable income" must be equal to the debtor’s

"disposable income" for purposes of satisfying

§ 1325(b)(1)(B), or whether the projected disposable income

should reflect changes that have occurred or that will occur

and that are known as of the date of plan confirmation. We

conclude that the answer to this question lies in the reasoning

of Hamilton v. Lanning, 130 S. Ct. 2464 (2010), which was

decided after both the bankruptcy court’s and the district

court’s decisions in the present case. In Lanning, the debtor

had received a one-time buyout from her employer that had

the effect of artificially inflating her monthly income for the

six months prior to her bankruptcy filing. See id. at 2470.

Aware that the debtor could not afford to make payments that

were based on the amount of her income over the six-month

period, the bankruptcy court took into account the one-time

nature of the buyout in determining her projected disposable

income. See id. at 2471. The Tenth Circuit Bankruptcy Appellate Panel and the Court of Appeals for the Tenth Circuit both

affirmed on appeal. See id.

The Supreme Court granted certiorari and also affirmed. In

so doing, the Court noted that the word "projected" should be

given its ordinary meaning, see id., and stated that "[w]hile a

IN RE: QUIGLEY 7
projection takes past events into account, adjustments are

often made based on other factors that may affect the final

outcome," id. at 2472. The Court also recognized that prior to

BAPCPA, bankruptcy courts "had discretion to account for

known or virtually certain changes in the debtor’s income,"

id., and the Court stated that the amendments did not purport

to make any change in that regard, see id. at 2473-74. The

Court rejected the notion that the text of the amendments precluded consideration of changed circumstances. See id. at

2475. Indeed, the Court reasoned that ignoring such circumstances would contravene the language of § 1325 and produce

"senseless results" in which a debtor whose income has been

artificially inflated will be "den[ied] the protection of Chapter

13" and creditors whose debtors’ income has been artificially

depressed will be denied "payments that the debtor could easily make." Id. at 2475-76. For these reasons, the Court held

"that when a bankruptcy court calculates a debtor’s projected

disposable income, the court may account for changes in the

debtor’s income or expenses that are known or virtually certain at the time of confirmation."2

Id. at 2478. 

The Debtor maintains that Lanning is distinguishable from

her case because Lanning concerned a change in income

whereas the present case concerns a change in expenses. But

the Court’s reasoning applies just the same. The Lanning

Court based its holding on the term "projected disposable

income," which is determined based on current monthly

income and reasonably necessary expenses. Indeed, the Court

plainly stated that its holding applied to "changes in the debtor’s income or expenses." Id. For these same reasons, the

Sixth Circuit, in a case after Lanning addressing facts materially identical to ours, reached the same conclusion we reach

2The Supreme Court reached a similar decision in Ransom v. FIA Card

Services, N.A., 131 S. Ct. 716 (2011). In Ransom, the Court decided that,

under the formula for calculating monthly expenses, see 11 U.S.C.A.

§ 1325(b)(3)(A) (West Supp. 2011), a debtor who owns a car outright cannot claim an allowance for car ownership costs, where that allowance was

for car-loan or car-lease payments. See Ransom, 131 S. Ct. at 721. 

8 IN RE: QUIGLEY
today. See Darrohn v. Hildebrand (In re Darrohn), 615 F.3d

470, 477 (6th Cir. 2010); see also In re Turner, 574 F.3d 349,

356 (7th Cir. 2009) (reaching similar result prior to Lanning).

The Debtor maintains that even though it was known that

she would not have to make the ATV payments during the

plan period, her case did not present "exceptional" circumstances, such that the bankruptcy court would have discretion

to take them into account. Lanning, 130 S. Ct. at 2471 ("[I]n

exceptional cases, where significant changes in a debtor’s

financial circumstances are known or virtually certain, a

bankruptcy court has discretion to make an appropriate adjustment."). Specifically, she maintains that the relatively small

amount of the ATV payments were not sufficient to warrant

the bankruptcy court’s consideration of them. She alternatively argues that the bankruptcy court was not required to

consider that she would not actually be making the ATV payments. We disagree with both arguments.

The amount of money at issue here is hardly inconsequential. In fact, it is quite significant in the context of this bankruptcy: the total amount that the Debtor sought to shield over

the life of her Chapter 13 plan by deducting the ATV payments was $9,799.80, and removing that deduction would

increase the Debtor’s projected disposable income by almost

two-thirds. Certainly under these circumstances, failing to

account for such changes and thereby denying the unsecured

creditors payments that the Debtor clearly could make would

be just the sort of "senseless result[ ]" that the Lanning Court

rejected. Id. at 2475. We therefore conclude that the bankruptcy court erred in ruling that the determination of the Debtor’s projected disposable income would not take into account

the Debtor’s intention to surrender the ATVs.

III.

In sum, we reverse the district court order affirming the

bankruptcy court and remand for further proceedings consistent with this order.

REVERSED AND REMANDED

IN RE: QUIGLEY 9