Debtor filed for Chapter 13 relief without her husband. Debtor's husband had previously filed a bankruptcy case of his own without the Debtor. Despite the separate filings, the Debtor and her husband maintained a joint financial household: they had a joint bank account, filed joint tax returns, and were jointly and severally liable on a lease agreement for their residence.
Together, the Debtor and her husband's unadjusted monthly income was above median income for the household size. However, in her case the Debtor took a marital adjustment on line 13 of Form 22C for one-half of the rent expense, which rendered her below median income for purposes of applicable commitment period under §1325(b)(4) of the Bankruptcy Code. As a result, Debtor proposed a 36-month plan rather than a longer, more costly 60-month plan. The Trustee filed an objection to the Debtor's claim of the marital adjustment.
The Court noted that the analysis for applicable commitment period under §1325(a)(4) is the same as that for calculating disposable income under §1325(b)(2). Therefore, a marital adjustment is not proper if an item constitutes "a household expense of the debtor or the debtor's dependents" under §101(10A)(B).
The Court adopted Judge Romero's definition of a "household expense" in the Toxvard opinion to find that the Debtor's rental expense fell within the ambit of §101(10A)(B) because the Debtor, her husband, and their child lived together as a family in the leased property. However, the Court distinguished the facts of this case from those in Toxvard. Specifically, the Court found that here, the Debtor and her husband's lives were financially intertwined in a manner that allowing a 50/50 split of their monthly rent expense would create a judicial fiction and artificially reduce her monthly income so she would slip below the median income standard. The Court denied confirmation of the Debtor's plan.