RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0211p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

In re: DAVID ANDREW DARROHN;

MARGUERITE MOTTOLA DARROHN, 

Debtors.

_____________________________________

DAVID ANDREW DARROHN; MARGUERITE

MOTTOLA DARROHN,

Plaintiffs-Appellees,

v.

HENRY E. HILDEBRAND, III, Trustee,

Defendant-Appellant.

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No. 09-5499

Appeal from the United States Bankruptcy Court

for the Middle District of Tennessee at Nashville.

No. 08-09075—George C. Paine, II, Bankruptcy Judge.

Argued: April 27, 2010

Decided and Filed: July 22, 2010 

Before: SUHRHEINRICH, McKEAGUE, and GRIFFIN, Circuit Judges.

_________________

COUNSEL

ARGUED: Henry E. Hildebrand, III, OFFICE OF THE CHAPTER 13 TRUSTEE,

Nashville, Tennessee, for Appellant. Mary Elizabeth Ausbrooks, ROTHSCHILD &

AUSBROOKS, PLLC, Nashville, Tennessee, for Appellees. John P. Sheahan, UNITED

STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus Curiae.

ON BRIEF: Henry E. Hildebrand, III, OFFICE OF THE CHAPTER 13 TRUSTEE,

Nashville, Tennessee, for Appellant. Mary Elizabeth Ausbrooks, ROTHSCHILD &

AUSBROOKS, PLLC, Nashville, Tennessee, Thomas F. Bloom, LAW OFFICE, Nashville,

Tennessee, for Appellees. John P. Sheahan, UNITED STATES DEPARTMENT OF

JUSTICE, Washington, D.C., for Amicus Curiae. 

1
No. 09-5499 In re Darrohn, et al. Page 2

_________________

OPINION

_________________

McKEAGUE, Circuit Judge. In this direct appeal from the bankruptcy court, we are

called upon to interpret a provision of Chapter 13 of the Bankruptcy Code that requires

debtors to commit their “projected disposable income” to the repayment of unsecured claims.

The Bankruptcy Code defines projected disposable income by requiring calculation of a

debtor’s current monthly income less certain reasonably necessary expenses. Henry

Hildebrand, III, trustee in bankruptcy (“Trustee”), brings this appeal and claims error in the

bankruptcy court’s approval of David and Marguerite Darrohn’s bankruptcy plan due to

alleged miscalculations in the Darrohns’ income and expenses under the projected disposable

income formulation. With guidance from the Supreme Court’s recent decision in Hamilton

v. Lanning, -- S.Ct. ----, 78 U.S.L.W. 4518, 2010 WL 2243704 (No. 08-998 June 7, 2010),

we REVERSE the bankruptcy court’s approval of the Darrohns’ plan and REMAND for a

recalculation of their projected disposable income.

I.

David and Marguerite Darrohn filed a Voluntary Petition for Bankruptcy under

Chapter 13 of the Bankruptcy Code on October 3, 2008. The Darrohns included within their

petition a set of statutorily required schedules, which detail financial information as it existed

at the time the petition was filed. Specifically, Schedule D listed the Darrohns’ creditors

holding secured claims and included the property securing the claim along with the

outstanding debt. In Schedule D, the Darrohns listed Countrywide Home Loans and Regions

Bank as secured creditors holding mortgages secured by two pieces of real property. The

Countrywide Home Loans mortgage was secured by property located at 410 Richards Way

Drive, Cordova, Tennessee, which served as the Darrohns’ primary residence in the period

before filing the bankruptcy petition. The Regions Bank mortgage was secured by property

located at 916 North Mcleansboro, Benton, Illinois, which served as the residence of David

Darrohn’s father. It is undisputed that the Darrohns intended to surrender both of these

properties as part of their bankruptcy plan and, therefore, would no longer be required to pay

the mortgages. 
No. 09-5499 In re Darrohn, et al. Page 3

Further, the Darrohns filed Schedule I, which listed their monthly income at the time

the bankruptcy petition was filed. Schedule I listed David Darrohn’s monthly income as

$6,916, Marguerite Darrohn’s monthly income as $1,820, and a monthly commission income

of $1,510. The Darrohns’ monthly income on Schedule I totaled $7,461.01 after payroll

deductions. Finally, the Darrohns filed Schedule J, listing their current monthly

expenditures. Schedule J calculated the Darrohns’ average monthly expenditures as $6,505.

Based on calculations in Schedules I and J, the Darrohns had a monthly net income totaling

$956.

Aside from the above-listed schedules, the Darrohns filed a Chapter 13 Statement

of Current Monthly and Disposable Income, also known as Form B22C. This form instructs

petitioners to calculate their income by averaging the income for the “six calendar months

prior to filing the bankruptcy case, ending the last day of the month before the filing.” At

the bankruptcy hearing, David Darrohn testified that during this six-month look-back period,

he lost his job, which carried an annual salary of $100,000. After a 90-day period of

unemployment, David Darrohn secured another job, which carried an annual salary of

$83,000. Thus, based on Form B22C’s instructions, David Darrohn’s monthly income

calculated to $4,300.50, and Marguerite Darrohn’s monthly income amounted to $2,052.25.

The Darrohns’ combined monthly income on Form B22C totaled $6,352.75, which was

significantly less than the amount listed on Schedule I. Form B22C also instructs petitioners

to list debt payments secured by their home, which are then deducted from petitioners’ total

monthly income. Under this section, the Darrohns listed payments for the mortgages held

by Countrywide Home Loans and Regions Bank, though the couple intended to surrender

these properties. After subtracting all of the allowable deductions from their monthly

income, the Darrohns’ disposable monthly income under Form B22C totaled -$2,267.08.

Chapter 13 also requires petitioners to file a proposed repayment plan, under which

debtors repay unsecured creditors over time based on how much the debtors can afford on

a monthly basis. These monthly payments are derived from the debtors’ disposable monthly

income calculated in Form B22C. Though the Darrohns’ Form B22C disposable income

totaled a large negative number, they nevertheless proposed to pay creditors $550 bi-weekly

for a period of 60 months. This repayment schedule would have left unsecured creditors

receiving substantially less than the full amount owed to them. The Trustee therefore
No. 09-5499 In re Darrohn, et al. Page 4

objected to the Darrohns’ proposed plan. The Trustee proposed that the mortgage payments

to Countrywide Home Loans and Regions Bank be omitted from the Darrohns’ Form B22C

income deductions because the Darrohns would no longer be making payments on these

mortgages. In addition, the Trustee proposed that the Darrohns’ monthly income listed in

Schedule I be used to calculate their disposable monthly income because the formulation

used in Form B22C artificially deflated their income by including a 90-day period of

unemployment for David Darrohn. The Trustee specifically argued that the bankruptcy court

should have considered the Darrohns’ changed circumstances in confirming the plan.

In deciding whether to confirm the Darrohns’ proposed plan, the bankruptcy court

noted that the “case presents the conundrum that every Bankruptcy Court in America

practically has written an opinion on, and that’s how you calculate disposable income when

the numbers come out differently using Schedules I and J versus B-22(c).” Tr. of

Bankruptcy Proceedings at 45:21–25, In re: Darrohn, 3:08-bk-09075 (Bankr. M.D. Tenn.

Dec. 15, 2008). After recounting the various methods courts have employed to resolve this

problem, the bankruptcy court rejected the Trustee’s proposals. The bankruptcy court

determined that the Darrohns’ monthly income calculated in accordance with Form B22C

should serve as the starting point for the Darrohns’ disposable income, rather than the larger

amount reflected in Schedule I. The court also determined that the Darrohns could deduct

mortgage payments for the surrendered properties. Both of these determinations were

predicated on the bankruptcy court’s interpretation of Chapter 13 and the court’s belief that

it could not account for the Darrohns’ changed circumstances. The bankruptcy court then

confirmed the Darrohns’ proposed plan of $550 bi-weekly for repayment to unsecured

creditors. The Trustee now appeals the plan confirmation. Specifically, the Trustee alleges

that the bankruptcy court erred in using the Darrohns’ income calculated under Form B22C,

rather than the income listed in Schedule I, and in allowing the Darrohns to deduct mortgage

payments even though they intended to surrender the properties.

II.

In this case, we must review the bankruptcy court’s interpretation of two sections in

Chapter 13. We review the bankruptcy court’s legal determinations de novo. Shaw v.

Aurgroup Fin. Credit Union, 552 F.3d 447, 449 (6th Cir. 2009). 
No. 09-5499 In re Darrohn, et al. Page 5

A.

To better understand how the Darrohns’ case fits within the statutory framework of

Chapter 13, we begin by addressing the requirements of this chapter. The Bankruptcy Abuse

Prevention and Consumer Protection Act of 2005 revised the Bankruptcy Code in part by

requiring above-median income debtors to file for bankruptcy under the reorganization

provisions in Chapter 13. Schultz v. United States, 529 F.3d 343, 347 (6th Cir. 2008). This

revision meant that above-median income debtors would be required to make more payments

to unsecured creditors under their bankruptcy plans. Id. In this case, the Darrohns’ income

fell above the median income for a family of four in Tennessee; they were therefore required

to file under the reorganization provisions of Chapter 13. 

A debtor filing for bankruptcy under Chapter 13 must propose a plan that provides

for the submission of a portion of future income to the trustee. 11 U.S.C. §§ 1321, 1322.

The bankruptcy court then must confirm the debtor’s plan in accordance with the provisions

of Chapter 13. Id. § 1325. Section 1325 of Chapter 13 specifically requires 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 --

. . .

(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 the purposes of this subsection, the term “disposable income” means

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 . . . ;

. . .

(3) Amounts reasonably necessary to be expended under paragraph (2) . . .

shall be determined in accordance with subparagraph (A) and (B) of section

707(b)(2), if the debtor has a 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 income of the applicable State for a family of the same

number . . . .
No. 09-5499 In re Darrohn, et al. Page 6

1

The Means Test determines whether the debtor is an above-median income debtor, such that

he can afford to file under the reorganization provisions of Chapter 13. Schultz, 529 F.3d at 347.

Id. § 1325(b). This section therefore specifies that the bankruptcy court may not confirm a

plan unless the plan provides that all of a debtor’s “projected disposable income” be

submitted to unsecured creditors and that this amount be calculated by taking the debtor’s

“disposable income” less “amounts reasonably necessary” for maintenance and support.

To determine a debtor’s “disposable income,” the Code directs us to the term

“current monthly income,” which is generally defined as the average monthly income that

the debtor receives in the six-month period prior to filing the bankruptcy petition. Id.

§101(10A)(A). In addition, if the debtor is an above-median income debtor, the Code directs

us to the Chapter 7 Means Test for a determination of the “amounts reasonably necessary”

to be expended for maintenance and support. Id. §§ 707(b)(2), 1325(b)(3). The Chapter 7

Means Test lists certain allowable expenses that a debtor may deduct from his current

monthly income.1

 Id. § 707(b)(2)(A)(i). Specifically, this section allows a debtor to

deduct “average monthly payments on account of secured debts . . . .”

Id.§ 707(b)(2)(A)(iii). The majority of courts applying the Means Test to Chapter 7

petitioners have held that these petitioners may deduct secured debt payments even if the

petitioner intends to surrender the property in bankruptcy. See Morse v. Rudler, 576

F.3d 37, 45 (1st Cir. 2009) (recounting court decisions applying the Means Test to

Chapter 7 petitioners). 

Applying this statutory framework to this case, we must determine whether the

bankruptcy court should have calculated the Darrohns’ “disposable income” using the

income from David Darrohn’s newly secured job, rather than basing the calculation

solely on the six-month look-back period as defined by “current monthly income.” In

addition, we must determine whether the bankruptcy court properly allowed the

Darrohns to deduct the mortgage payments on surrendered property as an “amount[]

reasonably necessary” for maintenance and support, rather than considering the

Darrohns’ intent to surrender these properties.
No. 09-5499 In re Darrohn, et al. Page 7

B.

Since this case was submitted, the Supreme Court released its opinion in

Hamilton v. Lanning, --- S.Ct.----, 78 U.S.L.W. 4518, No. 08-998, 2010 WL 2243704

(June 7, 2010). In Lanning, the Supreme Court decided “how a bankruptcy court should

calculate a debtor’s ‘projected disposable income’” if the debtor’s circumstances change

in the period leading up to the bankruptcy filing. Id. at *4. The debtor in Lanning had

received a one-time buyout from her employer during the period leading up to

bankruptcy. Id. at *5. The buyout in turn caused her current monthly income on Form

B22C, calculated using the six-month look-back formula, to greatly exceed her thenexisting monthly income reported on Schedule I. Id. Under the disposable income

calculations in Form B22C, the debtor would have been required to make monthly

payments to unsecured creditors far in excess of what she could actually afford. Id. 

In deciding whether the bankruptcy court could consider the debtor’s changed

circumstances, the Court focused on the term “projected disposable income” as used in

Section 1325. Id. at *6. The Court noted that the ordinary meaning of “projected,”

which is not defined in the Bankruptcy Code, accounts for future events that might

affect the ultimate outcome. Id. The Court also noted that prior to the 2005 amendments

to the Bankruptcy Code, bankruptcy courts “had discretion to account for known or

virtually certain changes in the debtor’s income,” and nothing in the amendments

indicated that this authority had changed. Id. at *7. Based on textual interpretation as

well as past precedents, the Court concluded 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.” Id. at *12. Finally, the Court rejected textual arguments that Section

1325 required a mechanical application of the projected disposable income formula,

without accounting for debtors’ changed circumstances. Id. at *9. According to the

Court, a mechanical application would clash with the terms of Section 1325 and would

lead to “senseless results.” Id. at *8, *10. Thus, the bankruptcy court in Lanning

properly considered the debtor’s buyout payment, and the fact that her income was
No. 09-5499 In re Darrohn, et al. Page 8

substantially less than that calculated under Form B22C, in deciding to confirm the plan.

Id. at *12.

C.

Applying Lanning to the Darrohns’ case, the bankruptcy court erred in

confirming the Darrohns’ proposed plan. The facts in the Darrohns’ case differ from

those in Lanning because in this case, the income calculated using the six-month lookback period resulted in a smaller amount than the debtors’ actual monthly income. In

addition, this case involves changes in the debtors’ anticipated monthly expenses, which

was not directly at issue in Lanning. Yet even with these factual differences, the issues

in this case both fall squarely within the Court’s decision in Lanning.

Beginning with the issue of the Darrohns’ current monthly income, the

bankruptcy court erred when it determined that it was required to use the income

calculated on Form B22C, which was derived from the six-month look-back formula.

In confirming the Darrohns’ plan, the bankruptcy court stated that “the correct

calculation of projected disposable income . . . is current monthly income determined in

accordance with Section 101-10(a).” Tr. of Bankruptcy Proceedings at 46:22–25. The

court then rejected the Trustee’s arguments that the figures in Schedule I should have

been the starting point for the Darrohns’ monthly income. Yet because David Darrohn

was unemployed for 90 days during the six-month look-back period, the figure used by

the bankruptcy court was substantially less than the Darrohns’ actual income at the time

of confirmation. David Darrohn’s new job—carrying an annual salary of $83,000—was

a “known or virtually certain” event at the time of confirmation. Therefore, the

bankruptcy court had the authority to account for this change in calculating the

Darrohns’ projected disposable income. See Lanning, 2010 WL 2243704 at *12. And

by using amounts derived solely from the Darrohns’ past income, rather than their

projected income, the bankruptcy court’s decision clashed with the mandates of Section

1325. See id. at *10.

Moving to the issue of the Darrohns’ reasonably necessary monthly expenses,

the bankruptcy court also erred in failing to account for the Darrohns’ intent to
No. 09-5499 In re Darrohn, et al. Page 9

surrender properties securing the mortgages. In calculating their projected disposable

income, the Darrohns’ deducted over $2,700 in mortgage payments from their current

monthly income, though they were no longer responsible for these payments.

Responding to the Trustee’s objection to these deductions, the bankruptcy court stated

that “you have to determine these things at the petition” and “[a]t the petition three

mortgages were contractually scheduled as due by this Debtor.” Tr. of Bankruptcy

Proceeding at 51:23–25, 52:1. The court then confirmed the Darrohns’ plan, which was

premised on a projected disposable income that included deductions for the mortgage

payments. This calculation also clashed with the language of Section 1325. See

Lanning, 2010 WL 2243704 at *8.

While much of the Court’s analysis in Lanning focused on the income side of the

projected disposable income formulation, the holding clearly applied to “changes in the

debtor’s income or expenses . . . .” Id. at *12 (emphasis added). Further, the Court

rested its holding on the meaning of the term “projected disposable income,” which is

calculated using a debtor’s current monthly income and his reasonably necessary

expenses. Thus, Lanning also governs the bankruptcy court’s determination on the

deduction for mortgage payments. Because it is undisputed that the Darrohns intended

to surrender these properties, this represents a change in the Darrohns’ “expenses that

[was] known or virtually certain at the time of confirmation.” Id. The bankruptcy court

therefore should have accounted for this changed circumstance, and its failure to do so

violated the requirements of Section 1325. See id. at *8.

III.

For the foregoing reasons, we REVERSE the bankruptcy court’s confirmation

of the Darrohns’ bankruptcy plan. We REMAND for a determination of the Darrohns’

projected disposable income in light of Lanning and this decision.