## Facts

- Kevin Paul Cleary filed a Chapter 13 case; his non-filing spouse and six children lived in the household.
- The family’s combined gross annual income was about $86,283.60, below South Carolina’s median income for a family of eight.
- Mrs. Cleary worked at a parochial elementary school to help pay tuition; the family viewed parochial education as required by their religious beliefs.
- Five children attended private parochial schools; one attended public school but wished to return to private school.
- The family paid about $1,513 per month in private-school tuition and reduced spending on food, clothing, recreation, and transportation to afford it.
- The proposed plan paid unsecured creditors a 1% dividend while continuing full tuition payments.
- The Chapter 13 trustee objected to confirmation, arguing the tuition was not a reasonably necessary expense and that the plan failed to commit all projected disposable income to unsecured creditors under 11 U.S.C. § 1325(b)(1)(B).

## Issues

1. Whether a below-median Chapter 13 debtor’s $1,513 monthly private religious school tuition is a reasonably necessary expense excluded from projected disposable income under 11 U.S.C. § 1325(b)(1)(B).
2. Whether a plan proposing only a 1% distribution to unsecured creditors can be confirmed when it preserves substantial tuition payments without evidence of special educational need.

## Decision

- The court sustained the trustee’s objection and denied confirmation of the plan as proposed.
- The court held the tuition payments were not reasonably necessary for the support of the debtor’s dependents on this record.
- Because the tuition was not reasonably necessary, the debtor failed to commit all projected disposable income to unsecured creditors as required by § 1325(b)(1)(B).
- The debtor was required to modify the plan (including by reallocating funds from tuition to creditor payments) to obtain confirmation.

## Legal Principles

- When the trustee (or an unsecured creditor) objects, confirmation requires that all projected disposable income be applied to payments to unsecured creditors. 11 U.S.C. § 1325(b)(1)(B).
- For below-median income debtors, projected disposable income is determined through Schedules I and J and a fact-specific inquiry into whether expenses are “reasonably necessary,” rather than strict application of the § 707(b)(2) means-test standards.
- The debtor bears the burden to show that contested expenses are reasonably necessary for the support of the debtor and dependents.
- Private school tuition, including religious tuition, is not treated as automatically necessary; absent evidence such as special educational or medical need, substantial tuition may be viewed as a discretionary family choice that cannot be maintained at the expense of meaningful payment to unsecured creditors.
- Religious motivation may be considered but does not override the statutory requirement to devote disposable income to the plan when an objection is made.

## Conclusion

The court denied confirmation because the debtor’s substantial private religious school tuition was not shown to be reasonably necessary support for dependents, and retaining it while paying unsecured creditors only 1% violated § 1325(b)(1)(B)’s projected disposable income requirement.


In re Cleary, 357 B.R. 369 (Bankr. D.S.C. 2006)