In-kind income is not included in the calculation of a chapter 13 debtor’s current monthly income, according to a June 3 opinion by Chief Bankruptcy Judge Susan V. Kelley of Milwaukee, who disagreed with judges who have reached the opposite conclusion.
An auto saleswoman’s employer gave her a car for personal use. In tax reporting, the employer increased her taxable gross income to account for the value of the use of the car.
If the in-kind value of the car were included in the calculation of her current monthly income, the debtor’s income would exceed the median, requiring her to fund a 60-month plan with income that she did not physically receive.
The issue turned on Section 101(10A), which defines “current monthly income” to mean average monthly income “from all sources that the debtor receives ... without regard to whether such income is taxable income.” However, the Bankruptcy Code does not define “income,” the pivotal term.
Judge Kelley declined to employ a dictionary definition of “income” because different dictionaries give the term different meanings, “even in the business context.” The meaning of the word in the Internal Revenue Code is likewise not controlling, she said, because Section 101(10A) shows that Congress did not intend for tax concepts of income to control the outcome in bankruptcy.
Instead, Judge Kelley followed the Collier bankruptcy treatise, which says “it makes sense to look to census definitions of income” since current monthly income is compared to census figures for median income.
“Notably,” the judge said, the Census Bureau definition “explicitly excludes in-kind income.” She conceded, however, that Census Bureau and Bankruptcy Code definitions “are not coextensive.”
Distinguishing and disagreeing with courts that have reached a different conclusion, Judge Kelley ended her opinion on a practical note by saying that the debtor could not “use the value of her personal use of the demo vehicle to pay creditors.”