Opinion
Case No. 99-21372, Chapter 13
March 7, 2000
ORDER DENYING CONFIRMATION OF CHAPTER 13 PLAN
On February 29, 2000, the debtors' chapter 13 plan dated January 13, 2000 came before the court for hearing on objection by the chapter 13 standing trustee. The court has considered the testimony and other evidence, heard the arguments of the parties and concludes the plan cannot be confirmed.
The trustee objects that the debtors are not committing all of their disposable income into the plan as required by 11 U.S.C. § 1325(b)(1). Under that section, a debtor not paying all unsecured claims in full must commit all disposable income to the plan for the first three years of the plan. Disposable income is defined as "income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of a debtor[.]"
The debtors' plan proposes payments of $955 per month for at least 55 months. The plan will pay a priority claim to the Internal Revenue Service in full, in the amount of $28,800. The unsecured general claimants, scheduled at over $133,000, will receive less than a 1% distribution from the plan from $1,600. The remainder of the payments will be paid to attorney fees, the standing trustee's fee, and to pay off the secured claims for a 1989 Toyota, a 1995 Pontiac, and a Wreidt boat and 220 HP motor.
The trustee contends a boat and motor are "luxury" items which are not reasonably necessary to the support and maintenance of the debtors. He argues that the portion of the plan payment ($73 per month) necessary to pay on the claim secured by the boat and motor during the first 36 months of the plan (totaling $2,615), should be committed to pay other claims under the plan, and the debtors should surrender the collateral.
The debtors' argument is threefold: under the standards of § 1325(b)(1), a debtor is permitted to include a reasonable amount for recreation and boating is their only form of recreation; the debtors' expenses are $300 less than the expenditures permitted pursuant to the Internal Revenue Service's Collection Financial Standards; and even if the boat is surrendered, the net effect will be to decrease the term of the plan, paying the claims in the same amounts stated.
The debtors' latter two arguments can be disposed of quickly. With regard to the effect a surrender of the boat has on the plan, the issue becomes one of good faith relevant to any future proposed plan. If a debtor has an increase in disposable income, the court will look closely at amended schedules which consume all newly found income, in lieu of committing that income to plan payments. And even if an increase in plan payments only shortens the term, retiring the claims sooner is beneficial to the creditors and the debtors.
With regard to the IRS collection guidelines, the debtors apply them to show their expenses are reasonable. They calculated the monthly expenses under the guidelines as though they were supporting a family of four. Actually, the debtors have one child at home and one who is a college student, not always at home. Thus, the calculations are not accurate.
The only issue in this case is whether a boat and motor are reasonably necessary to the maintenance of this family under the standards of § 1325, not whether the debtors are spending more or less than entitled under federal tax collection guidelines. As such, the IRS collection expenditure standards are not particularly relevant.
The court agrees with the trustee. A boat and motor are not a reasonable recreational expense for a chapter 13 debtor. It cannot be seriously argued that waterskiing as a summer pastime is a necessary living expense. The cost of the boat, and the undisclosed maintenance and insurance expenses are not reasonable and effectively reduce the debtors' disposable income. Nor is a boat the type of recreation contemplated and allowed under the state or the case law cited by the debtors. In re Anderson, 143 B.R. 719, 721 (Bankr.D.Neb. 1992) (health club and country club memberships held excessive); In re Gonzales, 157 B.R. 604 (Bankr.E.D.Mich. 1993) (maintaining accustomed life style while paying general unsecured creditors nominal amount is criticized).
Under their proposed plan, the debtors would emerge from the chapter 13 case with equity in the boat and motor, a sport's vehicle. Retaining luxury items and expensive recreational equipment at the expense of the creditors is in opposition to the real goal of chapter 13, that is, to grant the debtors a fresh start in return for payments in accordance with a plan proposed in good faith.
Other factors are important in this case also. All of the apparent benefit of this plan favors the debtors. The payments will satisfy a nondischargeable tax obligation and pay off secured debt on collateral the debtors wish to retain. The boat and motor are an indulgence which is not indicative of good faith and not a permissible basic living expense. In re Hedges, 68 B.R. 18 (Bankr.E.D.Va. 1986); In re Kasun, 186 B.R. 62 (Bankr.E.D.Va. 1995) (different judge).
IT IS, THEREFORE, ORDERED that confirmation of the Chapter 13 Plan Dated January 13, 2000 is DENIED.