Can payments on an expensive home and BMWs be used to determine the disposable income of an above-median debtor in chapter 13?
Yes, in the case of George Pryor Faison, II, 416 B.R. 227 (Bkr. E.D.Va., 2008), in the Eastern District of Virginia, Richmond Division, the bankruptcy judge held that the disposable income of an above-median-income debtor can be determined using the monthly income resulting from Official Form B22C, the means testing form, minus the expenses allowed by 11 U.S.C. 707(b)(2)(A)(iii) , including payments on a luxury goods, like BMWs, and an expensive, $700K home, even if such payments were at the expense of the unsecured creditors, who were only receiving a 3% dividend. Bankruptcy attorney James H. Wilson, Jr., successfully defended the unsecured creditor’s objections to confirmation of the chapter 13 plan based on failure to meet the liquidation test and the good faith test. Although the bankruptcy judge sustained the objection to confirmation based on underfunding, this objection could be overcome by increasing the funding, which was done in a modified plan.
Although this case does not directly concern a divorce, the same issue may be applicable to separated or divorcing spouses.