Chief Bankruptcy Judge Melvin S. Hoffman of Boston explained why reimbursements that may not be taxable income are nonetheless included the calculation of current monthly income in deciding whether a consumer is eligible for chapter 7 relief.
Hoping to qualify for chapter 7, the debtor did not include four items in his Form 122A-1, line 2: a meal allowance, a travel allowance, an “attendance lump sum payment,” and a corporate profit share. The debtor conceded there would be a presumption of abuse under Section 707(b)(2)(A) if the items were included in the calculation of “current monthly income,” or CMI, as defined in Section 101(10A).
The debtor primarily made two arguments for excluding the four items from CMI. Judge Hoffman rejected both in his May 16 opinion.
First, the debtor argued that the four items do not fall within the description in the form on line 2 of “gross wages, salary, tips, bonuses, overtime and commissions (before all payroll deductions).”
The U.S. Trustee contended that the items nevertheless should be included in view of the Section 101(10A) definition of CMI, which includes “average monthly income from all sources . . . without regard to whether such income is taxable income . . . .”
Judge Hoffman said that the debtor’s argument “lacks merit” because it “is axiomatic” that “the Bankruptcy Code controls” when “an official form and the Bankruptcy Code are in conflict.”
Next, the debtor contended that the four items were not “sufficiently stable and regular” and therefore did not fall within the definition of “individual with regular income” in Section 101(30).
Judge Hoffman said Section 101(30) only applies in chapter 13 cases, and the issue before him arose in a chapter 7 case. Moreover, he said that the debtor’s attempt “to impose a ‘stable and regular’ gloss on the definition of CMI in Section 101(10A) is unsupportable.”
Judge Hoffman held that meal and travel allowances are included in calculating CMI, citing “plain language” bankruptcy court decisions around the country holding that employer-paid reimbursements are income to be included in the calculation.
Although he could find no case dealing with profit sharing or an “attendance lump sum payment,” Judge Hoffman said that they should be part of the calculation because “the plain language of Section 101(10A)(A) is sufficiently broad to require their inclusion.” To support his conclusion, he cited Blausey v. United States Trustee, 552 F.3d 1124, 1132 (9th Cir. 2009), where the Ninth Circuit said that “unless a source of income is specifically excluded from the CMI calculation, Congress meant for it to be included.”