Opinion ID: 3054394
Heading Depth: 3
Heading Rank: 2

Heading: “Current Monthly Income”

Text: We review the bankruptcy court’s interpretation of the Bankruptcy Code de novo and its factual findings for clear error. In re Salazar, 430 F.3d 992, 994 (9th Cir. 2005) (citing In re Bunyan, 354 F.3d 1149, 1150 (9th Cir. 2004)). [6] CMI is defined as “the average monthly income from all sources that the debtor receives . . . without regard to whether such income is taxable income”, including “any amount paid by any entity other than the debtor . . . on a regular basis for the household expenses of the debtor or the debt- 5 See, e.g., In re Wiegand, 386 B.R. 238, 242 (B.A.P. 9th Cir. 2008) (holding that the phrase “without regard to whether such income is taxable income” in 11 U.S.C. § 101(10A)(A) reflects a “clear congressional intent that Tax Code concepts for determining taxable income are inapplicable to a determination of current monthly income”); In re Zahn, 391 B.R. 840, 845-46 (B.A.P. 8th Cir. 2008) (holding that distributions from IRAs should be excluded from income because the money deposited into an IRA is received for use prior to the distribution from the IRA, and finding it “irrelevant to our decision that funds in an IRA are excluded from federal income tax”); In re Royal, No. 07 B 15826, 2008 WL 4900527, at  (Bankr. N.D. Ill. Nov. 7, 2008) (CMI is not based on gross income and includes earned income tax credits). 810 BLAUSEY v. U.S. TRUSTEE or’s dependents.” 11 U.S.C. § 101(10A)(A), (B). The statute excludes three types of payments from CMI: “benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism . . . or domestic terrorism . . . on account of their status as victims of such terrorism.” 11 U.S.C. § 101(10A)(B). The Bankruptcy Code does not define “income.” See 11 U.S.C. § 101. [7] CMI is a component of a statutory means test that bankruptcy courts use to determine whether a debtor’s bankruptcy petition is to be presumed an abuse of Chapter 7. See 11 U.S.C. § 707(b)(2). The means test is applied only if the debtor’s CMI is above the safe harbor amount set forth in 11 U.S.C. § 707(b)(7). If the debtor’s CMI minus certain expenses specified in the Internal Revenue Service’s collection standards multiplied by 60 is either (1) greater than or equal to $6,575 or 25 percent of the debtor’s nonpriority secured debts, whichever is greater, or (2) greater than or equal to $10,950, then the case is presumed to be an abuse and the bankruptcy court may either dismiss it under § 707(b) or, with the debtor’s consent, convert it to Chapter 13. See id. §§ 707(b)(2)(A), (b)(1). The Blauseys’ chief argument is that “income” in the definition of CMI should be interpreted as consistent with “gross income” as defined in the Internal Revenue Code. “Gross income means all income from whatever source derived . . . .” 26 U.S.C. § 61(a). “Gross income,” however, expressly does not include “amounts received through accident or health insurance . . . for personal injuries or sickness (other than amounts received by an employee, to the extent that such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer.)” 26 U.S.C. § 104(a)(3). The Blauseys argue that Mrs. Blausey’s private disability insurance benefits, which were not attributable to BLAUSEY v. U.S. TRUSTEE 811 contributions by her employer, are not “gross income” under the Internal Revenue Code. The Blauseys reason that if the benefits are not included in gross income under the Internal Revenue Code, they likewise should not be included in income when calculating CMI. [8] The plain language of the Bankruptcy Code, however, does not support this interpretation. See Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004) (“It is well established that when the statute’s language is plain, the sole function of the courts —at least where the disposition required by the text is not absurd—is to enforce it according to its terms.” (internal quotation marks omitted)). The phrase “without regard to whether such income is taxable income” in 11 U.S.C. § 101(10A)(A) reflects Congress’ judgment that the Internal Revenue Code’s method of determining taxable income does not apply to the Bankruptcy Code’s calculation of CMI. Moreover, where Congress wishes to define a term in the Bankruptcy code by reference to the Internal Revenue Code, it clearly knows how to do so. For example, Congress imported the Internal Revenue Service’s Local and National Standards for expenses into the means test calculation. See 11 U.S.C. § 707(b)(2)(A)(ii)(I). [9] In addition, the statute specifically excludes certain payments, such as Social Security payments and payments to victims of war crimes and terrorism, from CMI. 11 U.S.C. § 101(10A)(B). The general rule of statutory construction is that the enumeration of specific exclusions from the operation of a statute is an indication that the statute should apply to all cases not specifically excluded. See 2A Sutherland Statutory Construction § 47:23 (discussing the rule of expressio unius est exclusio alterius). Here, the statute makes several specific exclusions from CMI but does not specifically exclude private disability insurance benefits. This indicates that Congress meant for the benefits to be included in CMI. The Blauseys argue that even if CMI is not defined by reference to the Internal Revenue Code, standard definitions of 812 BLAUSEY v. U.S. TRUSTEE “income” support excluding Mrs. Blausey’s benefits. Webster’s Third New International Dictionary, for example, defines “income” as: a gain or recurrent benefit that is usu[ally] measured in money and for a given period of time, derives from capital, labor, or a combination of both, includes gains from transactions in capital assets, but excludes unrealized advances in value . . . the value of goods and services received by an individual in a given period of time. Webster’s Third New International Dictionary 1143 (1993). Black’s Law Dictionary, meanwhile, defines “income” as: the money or other form of payment that one receives, usu[ally] periodically, from employment, investments, royalties, gifts, and the like. Black’s Law Dictionary, 8th ed. 778 (2004). [10] The Blauseys ask us to find that the disability insurance benefit payments are not “income” under these definitions because the benefits are not derived from labor but, instead, serve as compensation for the loss of her ability to work as a court reporter. This argument is unavailing. By the terms of her insurance policy, Mrs. Blausey’s disability insurance benefits were triggered when her lost earnings exceeded twenty percent of her original monthly earnings. The monthly benefits payment under the policy is based on the amount of income lost. If Mrs. Blausey were to find a job that paid as much as her court reporter job would pay, she would no longer receive insurance benefits because she would no longer have lost income. It is thus clear that the purpose of the disability insurance plan is to replace the income that Mrs. Blausey lost due to her disability. [11] Finally, the history of BAPCPA indicates that excluding Mrs. Blausey’s disability insurance benefits from CMI BLAUSEY v. U.S. TRUSTEE 813 would contravene the purpose of the means test. According to the House Report on BAPCPA, “[t]he heart of the bill’s consumer bankruptcy reforms consists of the implementation of an income/expense screening mechanism (‘needs-based bankruptcy relief’ or ‘means testing’), which is intended to ensure that debtors repay creditors the maximum they can afford.” H.R. Rep. 109-31(I) at 1, reprinted in 2005 U.S.C.C.A.N. 88, 89 (April 8, 2005). The purpose of the means test is to “help the courts determine who can and who cannot repay their debts and, perhaps most importantly, how much they can afford to pay.” 151 Cong. Rec. S1726-01, S1786 (daily ed. Feb. 28, 2005) (statement of Sen. Hatch). Excluding the $4,000 per month in replacement income from CMI would result in a figure that does not accurately reflect the Blauseys’ ability to repay their debts. Congress’s determination that a certain type of income should not be taxed does not reflect a determination that the income is not available to repay debts. [12] For these reasons, we hold that Mrs. Blausey’s private disability insurance benefits are income under the Bankruptcy Code and should have been included in the Blauseys’ calculation of CMI.6