## Facts

- David and Marguerite Darrohn filed for Chapter 13 relief as above-median-income debtors in the Middle District of Tennessee.
- The Code’s “current monthly income” figure was based on a six-month look-back period that included higher prepetition earnings.
- During the look-back period, David Darrohn lost a $100,000/year job, was unemployed for about 90 days, and then obtained new employment at $83,000/year.
- The Darrohns proposed a Chapter 13 plan providing for surrender of their residence securing a mortgage loan.
- Despite the planned surrender (and cessation of payments), the Darrohns’ Form B22C means-test calculation deducted the ongoing mortgage payment as a secured-debt expense.
- The Chapter 13 trustee objected to confirmation, arguing the plan failed to commit all “projected disposable income” to unsecured creditors because it used an expense the debtors would not incur during the plan.
- The bankruptcy court overruled the objection and confirmed the plan; the trustee pursued a certified direct appeal to the Sixth Circuit.

## Issues

1. Whether “projected disposable income” under 11 U.S.C. § 1325(b)(1)(B) for above-median-income debtors is determined strictly by the Form B22C means-test figures or may be adjusted to account for known changes.
2. Whether debtors may deduct mortgage payments for collateral they will surrender when calculating projected disposable income for plan confirmation.

## Decision

- The Sixth Circuit reversed the confirmation order and remanded.
- The court held that “projected disposable income” is forward-looking and permits adjustments when a change in income or expenses is known or virtually certain to occur.
- The bankruptcy court erred by allowing the Darrohns to deduct a mortgage expense that would end upon surrender of the residence, thereby understating projected disposable income required to be paid to unsecured creditors.

## Legal Principles

- When a trustee or unsecured creditor objects, § 1325(b)(1)(B) requires a plan to apply all of the debtor’s projected disposable income received during the commitment period to payments for unsecured creditors.
- For above-median-income debtors, the means-test calculation is the starting point for determining disposable income, but “projected” requires a realistic estimate when the baseline is known or virtually certain to be inaccurate.
- A debtor may not reduce projected disposable income by claiming an expense that will not be incurred during the plan, including secured-debt payments on property the debtor will surrender.

## Conclusion

The Sixth Circuit required recalculation of projected disposable income to exclude mortgage payments that would cease upon surrender of the residence, holding that Chapter 13 confirmation cannot rest on a means-test expense deduction that is known to be inapplicable during the plan term.


Darrohn v. Hildebrand (In re Darrohn), 615 F.3d 470 (6th Cir. 2010)