Court Opinion

ID: 4578009
Source: CourtListenerOpinion
Date Created: 2020-10-16 21:01:57.401629+00
Date Added: 2024-06-11T13:38:36.908873
License: Public Domain

FILED
                                                                                OCT 16 2020

                          ORDERED PUBLISHED                                 SUSAN M. SPRAUL, CLERK
                                                                              U.S. BKCY. APP. PANEL
                                                                              OF THE NINTH CIRCUIT

          UNITED STATES BANKRUPTCY APPELLATE PANEL
                    OF THE NINTH CIRCUIT

In re:                                              BAP No. NC-20-1085-TaBG
PHILLIP JOHNNY RODRIGUEZ and
JENNIFER LYNN RODRIGUEZ,                            Bk. No. 19-42408
             Debtors.

PHILLIP JOHNNY RODRIGUEZ;
JENNIFER LYNN RODRIGUEZ,
             Appellants,
v.                                                  OPINION
MARTHA G. BRONITSKY, Chapter 13
Trustee,
             Appellee.

              Appeal from the United States Bankruptcy Court
                   for the Northern District of California
             Charles Novack, Chief Bankruptcy Judge, Presiding

                             APPEARANCES:
Carl R. Gustafson of Lincoln Law, LLP argued for appellants; Nima
Ghazvini argued for appellee

Before: TAYLOR, BRAND, and GAN, Bankruptcy Judges.

TAYLOR, Bankruptcy Judge:

      Chapter 131 trustee Martha G. Bronitsky objected to confirmation of a

chapter 13 plan proposed by above-median income debtors Phillip and

      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. § 101–1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
Jennifer Rodriguez because, in calculating their disposable income under

§ 1325(b), they claimed monthly vehicle operation expenses over the

amount specified in the applicable Local Standards published by the

Internal Revenue Service (“IRS”).

       Facing a tentative ruling sustaining the objection and before the

hearing on the objection, Debtors reduced this expense request and

amended their plan to increase their dedicated income accordingly. Thus,

the bankruptcy court entered two orders, one sustaining the plan objection

and one confirming the amended plan.

       Debtors appealed, contending that the bankruptcy court erred when

it prohibited them from claiming vehicle operation expenses over the

amount specified in the Local Standards. We disagree, and we AFFIRM.

                                        FACTS2

       Debtors commenced their chapter 13 bankruptcy case and

concurrently filed their bankruptcy schedules and a chapter 13 plan

(“Original Plan”). At the time, Debtors owned three vehicles and a motor

home, had a combined monthly income of $13,135.00, and alleged monthly

transportation expenses (exclusive of car payments) of $1,000.00.

       As part of their petition, Debtors completed Official Bankruptcy

       2
          We exercise our discretion to take judicial notice of documents electronically
filed in the bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),
293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).

                                             2
Forms 122C-1 and 122C-23 to calculate their current monthly income and

disposable income, respectively. These forms are collectively referred to as

the “means test” and are used to determine the amount of disposable

income that a chapter 13 debtor is able to pay to unsecured creditors.

      Form 122C-2 directed Debtors to take the IRS’s standardized

deductions for certain expenses. Debtors thus claimed $424.00 as set forth

in the IRS’s Local Standards for vehicle operation expenses in line 12. In

addition, in line 43—which allows debtors to list additional expenses if

“special circumstances” justified the expense and the debtor had “no

reasonable alternative” to incurring the expense—Debtors listed $500 in

“extraordinary commute expense (husband).”

      Based on their disposable income as calculated in their initial means

test, the Original Plan proposed to pay $300 per month to their unsecured

creditors. The Trustee objected; she asserted that they improperly reduced

disposable income by including the special circumstances vehicle operating

expense deduction. She argued that Debtors could not circumvent the

Local Standards by simply categorizing ordinary work travel as a special

circumstance. She concluded that Debtors failed to commit all of their

projected disposable income to fund their Original Plan, as required by

      3
        Because Debtors reported $188,986.08 of annualized income on their Form
122C-1, which is well above the $114,813.00 median income for their household size in
California, they were required under § 1325(b)(3) to calculate their disposable income in
Form 122C-2.

                                            3
§ 1325(b)(1)(B).

      Debtors initially responded by amending their means test to delete

the special circumstance deduction and to increase their vehicle operation

expense from $424 to $924. But thereafter the bankruptcy court issued a

tentative order denying confirmation of the Original Plan. It concluded that

a plain reading of §§ 707(b)(2)(A)(ii)(I) and 1325(b)(3) did not authorize

deviation from the Local Standards when calculating disposable income.

Rather, it reasoned, the means test required a mechanical application of the

National and Local Standards. The tentative ruling permitted Debtors to

file a supplemental memorandum to contest the tentative ruling and

warned that, if they failed to do so, the tentative ruling would become the

final ruling.

      Debtors filed a supplemental memorandum arguing that deviation

from a mechanical application of the means test “as justice requires” was

appropriate and that the IRS’s Financial Analysis Handbook Part 5,

Chapter 15, Section 1 (“Handbook”) of the Internal Revenue Manual

(“Manual”) makes clear than the Standards are guidelines, rather than

strict figures requiring adherence.4 But they also filed an amended means

      4
        The Manual and its Standards table exhibits are web-based and can respectively
be found at https://www.irs.gov/irm/part5/irm_05-015-001 and
https://www.irs.gov/businesses/small-businesses-self-employed/collection-financial-sta
ndards. All Internet materials referenced herein were last visited on October 13, 2020.
The National Standards establish expenses for food, housekeeping supplies, apparel
and services, personal care products and services, out-of-pocket health care costs, and
miscellaneous expenses. The Local Standards establish expenses for housing, utilities,
and transportation.

                                           4
test to decrease their requested vehicle operation expense to $424 and

amended the Original Plan (as so modified, the “Amended Plan”) to

increase their plan payments.

      At the final confirmation hearing, Debtors’ counsel continued to

argue that the Standards were nothing more than discretionary guidelines.

But the bankruptcy court disagreed and entered an order sustaining the

Trustee’s objection to the Original Plan (“Objection Order”), followed by an

order confirming the Amended Plan (“Confirmation Order”). Debtors

appealed.

                              JURISDICTION

      Subject to our jurisdictional discussion below, the bankruptcy court

had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(A), (L), and (O) and

we had jurisdiction over the appeal under 28 U.S.C. § 158.

                                   ISSUES

      1. Does the Panel have jurisdiction over the appeal?

      2. Did the bankruptcy court err as a matter of law in sustaining the

Trustee’s objection to confirmation of Debtors’ Original Plan?

                         STANDARD OF REVIEW

      We review jurisdictional issues, including questions of mootness and

standing, de novo. Hunt v. Imperial Merch. Servs., Inc., 560 F.3d 1137, 1141

(9th Cir. 2009); Aheong v. Mellon Mortg. Co. (In re Aheong), 276 B.R. 233, 238

(9th Cir. BAP 2002). We also review plan confirmation issues requiring

                                       5
only statutory interpretation de novo. Villanueva v. Dowell (In re Villanueva),

274 B.R. 836, 840 (9th Cir. BAP 2002).

                                DISCUSSION

Jurisdiction

      Before reaching the merits of Debtors’ appeal, we must determine

whether it is properly before us. The Trustee argues that we lack

jurisdiction to hear the appeal because Debtors only specifically stated in

their notice of appeal that they were appealing from the interlocutory

Objection Order. The Trustee alternatively argues that we lack jurisdiction

on standing and mootness grounds because Debtors resolved their

controversy with the Trustee by amending their means test and filing the

Amended Plan. We reject both arguments.

      We have jurisdiction under 28 U.S.C. § 158(a) and (b) to hear appeals

from final orders and, with our leave, interlocutory orders of the

bankruptcy court. Whereas an order granting confirmation of a chapter 13

plan is considered a final order, an order denying confirmation is not.

Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1692 (2015). However, the finality

defect of an interlocutory order can be “cured” when another order is

entered that fully and finally disposes of the matter. Parks v. Drummond (In

re Parks), 475 B.R. 703, 706 (9th Cir. BAP 2012). Such is the case here. The

interlocutory Objection Order became final given the subsequently entered

Confirmation Order.

                                         6
      But the Trustee points to further potential problems; Debtors’ notice

of appeal only explicitly referenced the Objection Order as the subject of

appeal. Nevertheless, it “is well settled that a mistake in designating the

judgment appealed from should not result in loss of the appeal as long as

the intent to appeal from a specific judgment can be fairly inferred from the

notice and the appellee is not misled by the mistake.” Munoz v. Small Bus.

Admin., 644 F.2d 1361, 1364 (9th Cir. 1981).

      Here, all of Debtors’ submissions in this appeal made it clear that

they are also challenging the Confirmation Order. Specifically, their notice

of appeal attached both orders, their statement of issues asserted error in

the bankruptcy court’s confirmation of the Amended Plan, and their

opening brief stated that entry of the Confirmation Order rendered the

Objection Order final and appealable. Further, Debtors’ asserted scrivener’s

error in failing to explicitly appeal from the Confirmation Order did not

prevent the Trustee from fully briefing the propriety of both the

bankruptcy court’s denial of confirmation of the Original Plan and its

confirmation of the Amended Plan. Because we interpret notices of appeal

liberally and because the Trustee has not been prejudiced or misled by the

contents of Debtors’ notice of appeal, we will construe the notice of appeal

as covering both orders. See Drummond v. Luedtke (In re Luedtke), 508 B.R.
408, 412 n.3 (9th Cir. BAP 2014).

      The Trustee argues, however, that even if we consider the appeal as

                                      7
pertaining to both orders, Debtors mooted the issue on appeal by

amending their means test and filing the Amended Plan. We disagree.

      Constitutional mootness is derived from Article III of the

Constitution, which provides that the exercise of judicial power depends

on the existence of a live case or controversy. DeFunis v. Odegaard, 416 U.S.
312, 316 (1974). The mootness doctrine applies when events occur that

make it impossible for the appellate court to affect the rights of the

litigants. Id. Thus, if effective relief is impossible, we must dismiss for lack

of jurisdiction. United States v. Arkison (In re Cascade Rds., Inc.), 34 F.3d 756,

759 (9th Cir. 1994). This doctrine “subsists through all stages of federal

judicial proceedings, trial and appellate.” Lewis v. Cont’l Bank Corp.,

494 U.S. 472, 477 (1990). And, to have standing to appeal a bankruptcy

court order, an appellant must be a “person aggrieved” who was “directly

and adversely affected pecuniarily by an order of the bankruptcy court.”

Fondiller v. Robertson (In re Fondiller), 707 F.2d 441, 442-43 (9th Cir. 1983).

      Here, the controversy surrounding Debtors’ asserted entitlement to

the augmented vehicle operation expense in their disposable income

calculation continues, and Debtors are aggrieved by it. They did not waive

this claim by amending their means test or the Original Plan. Rather, they

were forced, over their expressed objection in their supplemental

memorandum, to propose the Amended Plan with provisions that they

disputed in order to obtain appellate review of the bankruptcy court’s

                                         8
impending adverse ruling. Their chosen path to expeditious appellate

review, proposing an undesirable plan, has been endorsed by the Ninth

Circuit and this Panel. See, e.g., In re Sisk, 962 F.3d 1133, 1141 (9th Cir. 2020);

Giesbrecht v. Fitzgerald (In re Giesbrecht), 429 B.R. 682, 687-88 (9th Cir. BAP

2010).

      Because Debtors filed the Amended Plan under protest, the required

increase in plan payments in the Amended Plan is material and prejudicial

to them, making them aggrieved parties with standing to pursue this

appeal. See In re Sisk, 962 F.3d at 1143 n.5. And we can provide them with

effective relief “because if we were to reverse on the merits, debtors could

file a motion to modify their plan under § 1329 or seek to obtain relief

under Rule 9024. With these possible avenues of relief still available, the

appeal is not moot.” In re Parks, 475 B.R. at 706.

Merits

      Under § 1325(b)(1), if a trustee objects to confirmation of a plan, then

the bankruptcy court may not approve the plan unless it pays unsecured

creditors in full or pays all of the debtor’s “projected disposable income” to

unsecured creditors during the life of the plan. Here, the Trustee objected

to the Original Plan which did not pay creditors in full; she argued that

Debtors erroneously calculated and, thus, understated their “disposable

income”—a term defined in § 1325(b)(2) as a debtor’s current monthly

income (with exceptions not relevant here) less reasonably necessary

                                         9
expenses.

      Above-median-income debtors must use the IRS’s Standards to

calculate expenses.

      Before the enactment of the Bankruptcy Abuse Prevention and

Consumer Protection Act of 2005, Pub.L. 109–8, April 20, 2005, 119 Stat. 23

(“BAPCPA”), the Bankruptcy Code gave bankruptcy courts substantial

discretion to consider a debtor’s particular circumstances in determining

their reasonably necessary expenses. See Drummond v. Welsh (In re Welsh),

711 F.3d 1120, 1130 (9th Cir. 2013). But BAPCPA replaced this discretion

with a statutory formula, the “means test,” for assessing an above-median-

income debtor’s ability to pay. Id.

      The means test is set forth in § 707(b)(2)(A)(ii) and is made applicable

by § 1325(b)(3). It provides in relevant part that:

      [t]he debtor’s monthly expenses shall be the debtor’s applicable
      monthly expense amounts specified under the National
      Standards and Local Standards, and the debtor’s actual
      monthly expenses for the categories specified as Other
      Necessary Expenses issued by the Internal Revenue Service for
      the area in which the debtor resides, as in effect on the date of
      the order for relief . . . .

§ 707(b)(2)(A)(ii)(I) (emphasis added). Thus, the means test mandates that

an above-median-income debtor’s expenses in certain categories be

calculated by the “expense amounts specified under the National

Standards and Local Standards” in lieu of actual living expenses.

                                       10
      The capitalized terms “National Standards” and “Local Standards” in

§ 707(b)(2)(A)(ii)(I) refer to the “tables that the IRS prepares listing

standardized expense amounts for basic necessities.”5 In re Luedtke, 508 B.R.

at 413 (emphasis added) (quoting Ransom v. FIA Card Servs., N.A., 562 U.S.
61, 66 (2011)). Contextually, the tables are exhibits to the Manual and are

published to assist IRS agents in calculating a taxpayer’s ability to pay

delinquent taxes. Ransom, 562 U.S. at 66. And we acknowledge that the

Manual itself merely provides guidelines to IRS agents and lacks the force

of law. See 26 U.S.C. § 7122(d)(1) (the enabling statute); Fargo v. Comm’r, 447
F.3d 706, 713 (9th Cir. 2006) (citing Marks v. Comm’r, 947 F.2d 983, 986, n.1

(D.C. Cir. 1991)), which held “the provisions of the manual are directory

rather than mandatory, are not codified regulations, and clearly do not

have the force and effect of law.”). But once Congress expressly

incorporated the Standards into § 707(b)(2)(A)(ii)(I), this portion of the

Manual was elevated and made authoritative in the chapter 13 context; the

Standards largely dictate which expenses are reasonably necessary for

above-median-income debtors and, hence, may be subtracted from their

current monthly income to calculate their disposable income. See In re

Luedtke, 508 B.R. at 413.

      5
          Debtors argue that the Standards are much more than just the tables, but they
fail to cite any supporting authority.

                                           11
      The Court cannot rely on the Manual if it is at odds with the Code.

      Notwithstanding the mandatory language of § 707(b)(2)(A)(ii)(I),

which requires use of the expense amounts specified under the Standards,

Debtors base their entitlement to an enhanced vehicle operation expense

deduction on two manual provisions designed to guide IRS agents in their

highly discretionary collection process. The first provides that “[i]f it is

determined a standard amount [in the tables] is inadequate to provide for a

specific taxpayer’s basic living expenses, allow a deviation.” Manual

§ 5.15.1.8(6).6 The second provides that “[i]f a taxpayer claims higher

amounts of operating costs because he commutes long distances to reach

his place of employment, he may be allowed greater than the standard. . .

[as it] would generally meet the production of income test.” Id.

§ 5.15.1.10(1)b.7

      While we agree with Debtors that the Supreme Court in Ransom

determined that it was appropriate to consult the Manual guidelines in

interpreting the Standards, we note that it also cautioned that the

guidelines could not control the means test outcome to the extent they were

at odds with the language of the Bankruptcy Code:

      Although the statute does not incorporate the IRS’s guidelines,
      courts may consult this material in interpreting the National

      6
          https://www.irs.gov/irm/part5/irm_05-015-001#idm140164197759840.
      7
          https://www.irs.gov/irm/part5/irm_05-015-001#idm140164197698064.

                                          12
      and Local Standards; after all, the IRS uses those tables for a
      similar purpose–to determine how much money a delinquent
      taxpayer can afford to pay the Government. The guidelines of
      course cannot control if they are at odds with the statutory
      language. But here, the Collection Financial Standards’
      treatment of the car-ownership deduction reinforces our
      conclusion that, under the statute, a debtor seeking to claim this
      deduction must make some loan or lease payments.
562 U.S. at 72-73; see also Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469,

476 (1992) (“[A] reviewing court should not defer to an agency position

which is contrary to an intent of Congress expressed in unambiguous

terms.”); In re Luedtke, 508 B.R. at 411, 415. And, when the language of a

statute is plain, courts must enforce the statute according to its terms unless

doing so would produce absurd results. Lamie v. U.S. Tr., 540 U.S. 526, 534

(2004). In this case, as discussed below, we find that § 707(b)(2)(A)(ii)(I) is

plain and that enforcement of the statute by its terms would not produce

absurd results. Thus, there is no need to refer to the Manual to determine

how much Debtors may claim as a vehicle operation expense.

      Under a plain reading of § 707(b)(2)(A)(ii), Debtors may only claim

the vehicle operation expense amount listed in the Local Standards

tables.

      Section 707(b)(2)(A)(ii) utilizes both the term “applicable monthly

expense amounts specified under the National Standards and Local

Standards” and the term “actual expenses.” A predominant maxim of

                                        13
statutory construction is “that ‘[w]here Congress includes particular

language in one section of a statute but omits it in another section of the

same Act, it is generally presumed that Congress acts intentionally and

purposely in the disparate inclusion or exclusion.’” Duncan v. Walker,

533 U.S. 167, 173 (2001) (quoting Bates v. United States, 522 U.S. 23, 29-30

(1997)); see also In re Sisk, 962 F.3d at 1148. Under this maxim, a term that is

intended to mean one thing should, upon reoccurrence elsewhere, mean

the same thing in the same act or statute.

      Debtors’ view—in which a bankruptcy court must disregard the

Standards if they fail to adequately equate to actual expenses—may be

consistent with the Manual’s instructions for the collection process, but it

ignores the language of the statute and this rule of statutory interpretation.

In Debtors’ view, “applicable monthly expense amounts specified under

the National Standards and Local Standards”sometimes means actual

expenses. But if Congress meant “actual expenses” in this context, it could

have and should have simply used those words instead of importing the

amounts specified in the Standards. It demonstrated an ability to do so in

the latter part of the same statute. See § 707(b)(2)(A)(ii)(I), (II), (III), (IV),

and (V). We cannot assume that the statute’s clear language is an example

of mere Congressional caprice.

      When unpacking the words at issue in the term “applicable monthly

expense amounts specified under the [Standards]”, the Supreme Court in

                                          14
Ransom held that “applicable” does not mean “actual.” Further, no one

disputes that the type of expense Debtors seek to deduct qualifies as

vehicle operation expenses. And the word “specify” in the statute means

“to name or state explicitly or in detail,” Webster’s New Collegiate

Dictionary 2187 (2002), and it modifies the term “amounts.” As the

bankruptcy court noted, the only relevant explicit amounts found in the

Manual are in the tables comprising the Standards themselves.

Section 707(b)(2)(A)(ii)(I) thus requires debtors to use the exact numerical

values contained in the Local Standards for their vehicle operation

expense—no more and no less.

      Our plain meaning interpretation of the statute is supported by Form

122C-2.8 When the Advisory Committee on Bankruptcy Rules promulgated

the form, it recognized that § 707(b)(2)(A)(ii)(I) requires debtors to calculate

their reasonably necessary expenses according to the numerical values in

the Standards even if the values conflict with the amounts of their actual

expenses. As relevant to this appeal, the form instructs debtors to “[d]educt

the expense amounts set out in lines 6-15 regardless of your actual expense.

      8
         Form 122C-2 was approved by the Judicial Conference of the United States (a
national policy-making body of judges chaired by the Chief Justice of the United States,
as enacted and subsequently amended after the passage of BAPCPA. See 28 U.S.C. § 331
and Rule 9009(a). The form was drafted to assist practitioners in calculating disposable
income. The Official Bankruptcy Forms, together with the Rules, govern procedures in
cases under the Bankruptcy Code and are presumptively valid. See Rules 1001 and 9009.
In this regard, Form 122C-2 is akin to an advisory opinion as to how § 707(b)(2)(A)(ii)(I)
should be interpreted.

                                           15
In later parts of the form, you will use some of your actual expenses if they

are higher than the standards.” Then line 12 for vehicles operation

expenses instructs debtors to, “[u]sing the IRS Local Standards and the

number of vehicles for which [they] claim the operating expenses, fill in the

Operating Costs that apply for [their] Census region or metropolitan

statistical area.” Section 707(b)(2)(A)(ii)(I) should be interpreted in a way

that harmonizes and gives meaning to all of its sub-parts. We believe our

interpretation of the statute accomplishes this and that Form 122C-2

supports this view.

      Our statutory interpretation does not lead to absurd results.

      Yet Debtors urge against interpreting the statute as we do; they argue

that strict adherence to the numerical values in the Standards tables would

lead to absurd results. We disagree.

      True, the Supreme Court in Ransom recognized that using a

standardized approach to calculate disposable income “[is] by [its] nature

over- and under-inclusive.” Ransom, 562 U.S. at 78. It also noted, however,

that: “[i]n eliminating the pre-BAPCPA case-by-case adjudication of

above-median-income debtors’ expenses, on the ground that it leant itself

to abuse, Congress chose to tolerate the occasional peculiarity that a

brighter-line test produces.” Id. While we acknowledge that the means test

may lead to over- or under-inclusive results with respect to particular

expenses, it does not necessarily yield absurdly over- or under-inclusive

                                       16
assessments of a debtor’s overall expenses. In the Debtors’ case, the means

test arguably leads to an under-inclusive assessment of their vehicle

operation expenses. But to the extent Debtors take advantage of expense

amounts in the Standards that exceed their other actual expenses, the

means test calculation may, on balance, either reflect or exceed their actual

expenses overall. By incorporating the IRS’s detailed series of average

national and local living expenses, the means test is designed to produce

relatively reliable estimates of a debtor’s overall reasonably necessary

expenses.

      Further, if a debtor is, for example, a long-haul trucker or Uber

driver, § 707(b)(2)(B) may allow additional expenses based on “special

circumstances.” Those costs of vehicle operation are business expenses –

not commuting costs.

      In any event, it is no longer within the bankruptcy courts’ discretion

to delve into every debtor’s finances to ensure that they paint a complete

and accurate picture of all their expenses in calculating their disposable

income. The bankruptcy courts are not tasked with policing compliance

with the means test unless and until a chapter 13 trustee or unsecured

creditor objects to a plan. § 1325(b); see also In re Sisk, 962 F.3d at 1146

(holding a § 1325(b) plan requirement only applied if a trustee or

unsecured creditor objected to plan confirmation). As unsecured creditors

often lack the resources and incentive to do so, trustees are frequently de

                                        17
facto gatekeepers to the bankruptcy court’s adjudication of means test

issues. And in this way, § 1325(b) does not so much eliminate discretion as

it redirects discretion from bankruptcy courts to chapter 13 trustees.

      We believe this shift in discretion does not generate absurd results.

Chapter 13 trustees are uniquely suited for this undertaking. On the one

hand, their primary duty is to serve the interests of creditors. Andrews v.

Loheit (In re Andrews), 49 F.3d 1404, 1407 (9th Cir. 1995). On the other hand,

they have a statutory duty to advise and assist debtors in plan

performance, short of giving legal advice. § 1302(b)(4). These roles

converge when trustees endeavor both to ensure that debtors dedicate all

available funds to plan payments while also providing debtors with

financial advice on budgeting issues to end cycles of poor financial

judgment. See In re Brown, 170 B.R. 362, 366 (Bankr. S.D. Ohio 1994); Keith

M. Lundin, Lundin on Chapter 13, § 53.5, at 3, LundinOnChapter13.com

(last visited October 15, 2020). In doing so, trustees can view a debtor’s

financial picture in a holistic fashion. They can recommend budgetary

adjustments enhancing repayment of creditors. When their

recommendations are rebuffed, § 1325(b) provides them with a tool to

attain bankruptcy court intervention on a means test line-item basis. But

trustees can also be pragmatic, overlooking excess in one area where it is

balanced by belt-tightening in another or where other real world concerns

establish that creditors benefit from a lack of objection. Put bluntly, a

                                       18
chapter 13 trustee need not be a sumpsimus.9

       Our statutory interpretation is consistent with binding precedent.

       Not only does our plain language interpretation of

§ 707(b)(2)(A)(ii)(I) not lead to absurd results, it is consistent with binding

authority. While the Supreme Court in Ransom consulted the Manual when

interpreting the Standards, it did so to “reinforce” its conclusion, based on

sound principles of statutory construction, that taking the deduction at

issue would be improper in the first instance. Ransom, 562 U.S. at 72-73. It

did not use the Manual to interpret a straightforward numerical value in

the tables. As explained above, Ransom forbids following the Manual

guidelines where, as here, they depart from the clear language of the

Bankruptcy Code. Id. at 72.

       We also believe our reading of § 707(b)(2)(A)(ii)(I) is in accord with

the following dicta in Ransom:

       Although the expense amounts in the Standards apply only if
       the debtor incurs the relevant expense, the debtor’s
       out-of-pocket cost may well not control the amount of the
       deduction. If a debtor’s actual expenses exceed the amounts
       listed in the tables, for example, the debtor may claim an

       9
         To truly assess whether deviation from the means test is appropriate in one
area, the bankruptcy court cannot limit its inquiry to the specific category in dispute. It
often would need an evidentiary hearing and evaluative process that would allow it to
fully understand all the economics of the debtor’s household. Arguably, the questioning
of the household’s choices should be extensive enough to duplicate the insight gained
by the trustee through the 341(a) process and related document review.

                                            19
      allowance only for the specified sum, rather than for his real
      expenditures. For the Other Necessary Expense categories, by
      contrast, the debtor may deduct his actual expenses, no matter
      how high they are.
Id. at 75-76 (emphasis added). We treat such dicta with great deference.

United States v. Baird, 85 F.3d 450, 453 (9th Cir. 1996). It strengthens our

convictions that Debtors misread Ransom and that the bankruptcy court

properly applied the means test.

      We also disagree with Debtors’ reading of our decision in Luedtke,

508 B.R. 408. In Luedtke, we reversed a bankruptcy court that allowed

above-median-income debtors to augment their vehicle operation expense

with the IRS’s $200 “older vehicle operating expense.” Id. at 416. We

determined that the expense was inapplicable because it is not found in the

Local Standards table or the Handbook, which “identif[ies] and interpret[s]

those standards.” Id. at 414. Rather, it is only mentioned in the Manual at

Part 5, Chapter 8, which is not incorporated in either the Standards or the

Handbook. Id. But nothing in our decision departs from Ransom’s clear

instruction that bankruptcy courts may use the Handbook as relevant and

persuasive authority only to the extent it does not conflict with the

language of the Bankruptcy Code. See id. at 415. Here, conflict arises.

      Likewise, we disagree with Debtors that the Supreme Court’s

decision in Hamilton v. Lanning, 560 U.S. 505 (2010), required the

bankruptcy court to deviate from its mechanical application of the means

                                       20
test. The issue before the Supreme Court in Lanning was whether projected

disposable income should always be a strict calculation based on the

debtor’s current monthly income and expenses during the six-month

period before bankruptcy (i.e., the “mechanical” approach) or whether a

bankruptcy court may take into account the particular circumstances of the

debtor’s finances for which the mechanical approach would not account

(i.e., the “forward-looking” approach). In adopting the forward-looking

approach, the Supreme Court stated that bankruptcy courts “may account

for changes in the debtor’s income or expenses that are known or virtually

certain at the time of confirmation.” Id. at 524. In so holding, the Supreme

Court noted that bankruptcy courts must nevertheless “begin by

calculating disposable income and that in most cases nothing more is

required. It is only in the unusual cases that a court may go further and

take into account other known or virtually certain information about the

debtor’s future income or expenses.” Id. at 519.

      Thus, under Lanning, a bankruptcy court has the discretion to adjust

the projected disposable income calculation in Form 122C only when there

has been changes in a debtor’s financial situation. Absent a change, Lanning

has no bearing. If it did, Lanning would in effect require that courts add to

the end of § 707(b)(2)(A)(ii)(I) the words “or the actual expenses, if higher.”

The Supreme Court, in actual effect, recognized that Congress chose not to

include such language in the statute. We therefore read Lanning as only

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applying when it is known or virtually certain that changes in the debtor’s

income or expenses will occur after the otherwise required period for

calculating disposable income. Here, Debtors presented no evidence of

such changes in their financial situations. Accordingly, Lanning is not

germane to the analysis.10

                                    CONCLUSION

       Based on the foregoing, we see no error in the bankruptcy court’s

conclusion that Debtors’ vehicle operation expense was limited to the

numerical value specified in the Local Standards table. We AFFIRM.

       10
          Nor do we agree with Debtors that there is any significance in the fact that the
bankruptcy court’s ruling departed from its prior memorandum decision in another
case, In re De Lara, No. 19-41231, slip op. (Bankr. N.D. Cal. Oct. 7, 2019). While as a
general matter “it is wise judicial policy to adhere to rules announced in earlier cases,”
“[w]hen the prior court is the same as the subsequent court, the general rule is that
precedent is not binding, even though a court may give great weight to its own prior
decisions.” 18 Moore’s Federal Practice § 134.02[1][a] (Matthew Bender 3d ed. 2020).

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