Opinion ID: 1358766
Heading Depth: 1
Heading Rank: 7

Heading: Disposable Income and Projected Disposable Income

Text: Our court issued Frederickson after the parties submitted their briefs in the present case, and the appellants subsequently identified Frederickson as supplemental authority. eCAST asserts Frederickson as controlling precedent requiring reversal because Frederickson recognized the existence of judicial discretion in determining projected disposable income, 545 F.3d at 659, and because judicial discretion appears inconsistent with Ross-Tousey and Tate. While eCAST is correct in its characterization of Frederickson as recognizing discretion in determining projected disposable income, the question in Frederickson was different than the question at hand. There, we recognized a distinction between disposable income and projected disposable income. Id. We found the latter to be a forward-looking term rather than merely a mechanically derived and strictly defined term like disposable income. We ultimately recognized the existence of some judicial discretion to look beyond disposable income calculations in determining projected disposable income. Id. In doing so, we stated: Thus, a distinction can be drawn between a debtor's disposable income, which is calculated solely on the basis of historical numbers and regional averages, and a debtor's projected disposable income, which necessarily contemplates a forward-looking number. Under this interpretation, bankruptcy courts will continue to have some discretion over the calculations of each individual debtor's financial situation, with the result that the debtor's projected disposable income will end up more closely aligning with reality. This interpretation also comports with the congressional intent that above-median debtors pay the maximum they can afford.... Accordingly, we adopt the view shared by many bankruptcy courts that a debtor's disposable income calculation ... is a starting point for determining the debtor's projected disposable income, but that the final calculation can take into consideration changes that have occurred in the debtor's financial circumstances as well as the debtor's actual income and expenses.... Id. (emphasis added). Subsequently, the Seventh, Fifth, and Tenth Circuits have agreed with our conclusion. See In re Turner, 574 F.3d 349, 355-56 (7th Cir. 2009); In re Nowlin, 576 F.3d 258, 265-66 (5th Cir.2009); In re Lanning, 545 F.3d 1269, 1282 (10th Cir.2008). But see In re Kagenveama, 541 F.3d 868, 872-75 (9th Cir.2008) (adopting a mechanical or non-discretionary approach to defining projected disposable income). Neither our opinion in Frederickson nor the other circuits' opinions regarding projected disposable income characterize the discretion under § 1325(b)(1)(B) as unfettered, and none discuss discretion in the context of applying § 707(b)(2)(A)(ii)(I) to calculate disposable income. In Frederickson, we faced no question regarding how to interpret the Chapter Seven provisions expressly incorporated into Chapter Thirteen. Rather, we called the determination of disposable income a process based on historical numbers and regional averages and disposable income itself a starting point for determining projected disposable income. Frederickson, 545 F.3d at 659. In a more recent Rule 28(j) letter citing Nowlin, the appellants urge us to apply Nowlin and other circuit-level cases that agree with Frederickson as separate and independent bases for reversing the bankruptcy court in the present case. The appellants appear to argue that, even if our application of the Chapter Seven means test results in allowance of the $471 categorical expense, we should direct the bankruptcy court to depart from the disposable income starting point and disregard this expense when determining projected disposable income. We are not inclined to do so in the present case for several reasons. First, there is no indication that the parties made any such arguments to the bankruptcy court, and despite the fact that Frederickson is a later-decided case, we believe the appellants needed to make some argument to the bankruptcy court attempting to distinguish projected disposable income from disposable income to now receive relief based on this theory. Further, we are not inclined to appropriate for ourselves in the first instance the fact-intensive analysis required to apply Frederickson and assess the propriety of any such distinction in the present case. Finally, to the extent it is appropriate to employ a less-mechanistic method for calculating projected disposable income when compared to disposable income, it is by no means clear that attempted prediction of future vehicle-ownership expense could serve as a sufficiently certain basis for departing from the disposable income definition in the present case. We stated in Frederickson that the discretion held by bankruptcy courts was to permit projected disposable income to more closely align[ ] with reality. Id. at 659. We did not, however, suggest that it would be appropriate to engage in speculation. In Nowlin, the Fifth Circuit went farther, stating that disposable income is presumptively the debtor's `projected disposable income' under § 1325(b)(1)(B), but that any party may rebut this presumption by presenting evidence of present or reasonably certain future events that substantially change the debtor's financial situation. Nowlin, 2009 WL 2105356, at . We recently applied the standard from Nowlin. See In re Lasowski, 575 F.3d 815, 819 (8th Cir.2009) ([T]he bankruptcy court's calculation of a debtor's projected disposable income can take into account changes in the debtor's financial circumstances that are reasonably certain to occur during the term of the debtor's proposed plan.). Similarly, in Turner, the Seventh Circuit cautioned against speculative departures from the disposable income calculations, stating, bankruptcy judges must not engage in speculation about the future income or expenses of the Chapter 13 debtor. That would unsettle and delay the Chapter 13 process as well as exaggerate how accurately a person's economic situation in five years can be predicted. Turner, 574 F.3d 349, 2009 WL 2136867, at . Here, the appellants neither preserved the issue addressed in Frederickson for review nor developed a record sufficient to enable anything more than a speculative assessment of whether projected disposable income should, on the present facts, differ from disposable income. Unlike the facts of Lasowski, where it was reasonably certain that the debtor would fully pay off a loan from her 401(k) retirement account during the period of plan administration, it is by no means clear that the present debtor's future vehicle payments can be deemed reasonably certain. [5] We note that our current holding, coupled with Frederickson, comports with the Seventh Circuit's holdings in both Turner and Ross-Tousey: determination of a vehicle-ownership expense for the purpose of determining disposable income is categorical under § 707(b)(2)(A)(ii)(I), but some discretion exists for bankruptcy courts to consider the debtor's actual financial situation in determining projected disposable income for the purpose of § 1325(b)(1)(B). Lasowski recognized that this discretion must be based on reasonably certain future events, and we leave for another day the question of whether the requisite certainty is present when addressing questions of vehicle expenses. For the foregoing reasons, we affirm the judgment of the bankruptcy court.