In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 17‐2809
MARILYN O. MARSHALL,
Trustee‐Appellant,
v.
DENISE L. BLAKE,
Debtor‐Appellee.
____________________
Appeal from the United States Bankruptcy Court for the
Northern District of Illinois, Eastern Division.
No. 16‐22368 — Deborah L. Thorne, Judge.
____________________
ARGUED FEBRUARY 15, 2018 — DECIDED MARCH 22, 2018
____________________
Before BAUER, FLAUM, and MANION, Circuit Judges.
FLAUM, Circuit Judge. Appellee Denise L. Blake is a below‐
median income debtor who filed for Chapter 13 bankruptcy.
In her proposed bankruptcy plan, Blake sought to retain her
annual earned income tax credit and a portion of her tax over‐
withholdings. Trustee Marilyn O. Marshall objected to confir‐
mation of Blake’s plan, arguing that Blake is required to turn
over her entire tax refund for use as additional plan pay‐
2 No. 17‐2809
ments. The bankruptcy court confirmed the plan over Mar‐
shall’s objection. In doing so, it agreed with Marshall that tax
credits are income under the Bankruptcy Code that must be
taken into account when calculating the debtor’s projected
disposable income for plan payments. However, the bank‐
ruptcy court held that Blake could retain her tax refund if she
prorated it as monthly income and offset it with reasonably
necessary expenses to be incurred throughout the year. The
bankruptcy court certified the case for direct appeal to this
court. For the reasons below, we affirm.
I. Background
A. Blake’s Income, Expenses, and Bankruptcy Plan
Blake is a single mother who lives in subsidized housing
with her three dependent children. She has worked as a secu‐
rity officer for more than six years. As a low‐income wage
earner, Blake consistently qualifies to receive the earned in‐
come tax credit.
On July 12, 2016, Blake filed for bankruptcy under Chapter
13. According to her Form 122C‐1, Blake’s current monthly in‐
come (“CMI”) is $2,512, or $30,144 annually.1 This falls well
below the median income in Illinois for a household of four,
which is $86,921 annually. When calculating her monthly in‐
come on her Schedule I,2 Blake included a pro‐rata share of
1 CMI is the debtor’s average monthly income during the six‐month
“look‐back” period before they filed their bankruptcy petition. The Form
122‐C is used to determine whether a debtor’s income is above‐median or
below‐median and which commitment period is required.
2 Schedule I requires the debtor to report gross monthly income from
all sources. The income listed on Schedule I is not the same as a debtor’s
No. 17‐2809 3
her anticipated earned income tax credit for the following
year in the amount of $168.50. Blake also filed a Schedule J3
listing her ongoing monthly expenses. After subtracting pay‐
roll deductions and expenses from her monthly income, Blake
was left with $119.91 of disposable income each month to
make plan payments to her creditors.
On July 26, 2016, Blake filed her original Chapter 13 plan,
which proposed monthly plan payments of $119 for thirty‐six
months, for a total of $4,284. Her plan also included the fol‐
lowing provision:
For each year that the case is pending, Debtor
will submit a copy of her federal income tax re‐
turn to the Trustee by April 30 of each year.
Debtor shall tender to the trustee the amount of
any federal tax refund within 14 calendar days
of receipt, except that Debtor shall be permitted
to keep the amount of any earned income tax
credit. For tax year 2016, Debtor shall tender to
the trustee (1/2) of any federal tax refund within
14 days, excluding the earned income tax credit.
On September 8, 2016, the trustee filed a motion to dismiss
Blake’s case for failing to correctly list her income and ex‐
penses and failing to confirm her plan in a timely manner. A
CMI because (1) it includes income from sources like social security bene‐
fits, which are expressly excluded from CMI, and (2) it does not reflect an
average of the debtor’s gross income during the six months before the pe‐
tition date. See In re Morales, 563 B.R. 867, 870, n.2 (Bankr. N.D. Ill. 2017).
3 Schedule J requires debtors to estimate their monthly expenses for
themselves and their dependents as of the date they file for bankruptcy.
4 No. 17‐2809
week later, Blake filed an amended Schedule I to reflect a de‐
crease in her income due to fewer overtime hours. She also
filed an amended Schedule J. After these amendments, Blake’s
monthly disposable income for plan payments was $74.75.
She proposed a new plan under which she would pay the
trustee $119 for two months and then $74 for forty‐eight
months, for a total of $3,790.
B. Trustee’s Objection and Bankruptcy Court’s Memo‐
randum Order
On January 20, 2017, the trustee objected to confirmation
of Blake’s plan. Specifically, the trustee argued that Blake was
not committing all of her projected disposable income to the
plan because she was retaining her tax refund. The trustee ar‐
gued that the entire tax refund should be turned over to the
trustee to be used for additional plan payments. In response,
Blake asserted that she should be allowed to keep the earned
income tax credit because it does not count as income under
the Bankruptcy Code. The bankruptcy court consolidated
Blake’s case with two other cases to consider the issue of
whether a debtor may retain some or all of a tax refund that
includes tax credits.
On March 16, 2017, the bankruptcy court issued a memo‐
randum order overruling the trustee’s objection. The court ex‐
plained that the portion of a tax refund attributable to over‐
withholdings is automatically included in the debtor’s income
because it is calculated using a debtor’s gross income prior to
tax withholding. In addition, the court held that tax credits
are also considered income under the Bankruptcy Code.
Thus, the court required Blake to include a prorated version
of her annual tax credit as monthly income on her Schedule I
(i.e., the annual tax credit divided by twelve months). At the
No. 17‐2809 5
same time, however, the court allowed Blake to offset that ad‐
ditional income by adding monthly prorated versions of rea‐
sonably necessary expenses to be incurred throughout the
year on her Schedule J. In effect, this allowed Blake to retain
some, or even all, of her tax credit. The court stated that as
long as the offsetting expenses were reasonably necessary, it
would confirm Blake’s plan without requiring payment of ex‐
pected tax credits.
C. Blake’s Amended Schedules and Bankruptcy Plan
Pursuant to the bankruptcy court’s order, Blake filed
amended schedules on April 4, 2017. In her amended Sched‐
ule I, Blake increased her prorated earned income tax credit
from $168.50 per month to $311 per month. In addition, Blake
added prorated monthly tax over‐withholdings of $100.4 In
her amended Schedule J, Blake added the following monthly
prorated expenses: $132 for medical and dental expenses; $40
for shoes and clothing for her two sons (down from $85); $104
for new beds and furniture for her sons; and $43 for gradua‐
tion expenses for her sons (including a school trip and prom).
Once these expenses were deducted from her income, Blake
had $102 in disposable income each month to make plan pay‐
ments.
Blake then filed an amended bankruptcy plan. Her new
plan proposed making payments to the trustee of $119 for two
4 Blake estimated these amounts based on her 2015 tax refund, in
which she received an earned income tax credit of $4,050 and tax over‐
withholdings of $2,661. However, she noted that she expected her earned
income tax credit to be reduced in coming years due to the age and student
status of her qualifying dependents.
6 No. 17‐2809
months, $74 for seven months, and $102 for fifty‐one months,
for a total of $5,958.5
D. The Bankruptcy Court’s Confirmation Order
On May 3, 2017, the bankruptcy court held a hearing on
the confirmation of Blake’s plan. During the hearing, Blake’s
counsel explained that the monthly prorated furniture ex‐
pense was necessary because Blake’s two nineteen‐year‐old
sons had previously been sleeping on air mattresses, their bed
frames and mattresses are in “incredibly poor condition,” and
they do not have any dressers. The court noted that “[i]t’s a
pretty skinny budget overall.” The trustee again objected to
confirmation. The court overruled the trustee’s objection, stat‐
ing:
I think the kids are entitled to sleep on beds that
aren’t falling apart. And I think that overall the
budget as proposed is pretty skimpy and thin.
So I think prorating these will be in the best in‐
terest of the estate, the best interest of the debtor
in terms of hopefully having a plan that actually
5 On April 27, 2017, Blake filed another amended plan solely to add
the following language regarding future income tax returns:
On or before April 20th of the year following the filing of
the case and each year thereafter, Debtor shall submit a
copy of the prior year’s filed federal tax return to the
Chapter 13 trustee. Debtor shall be permitted to retain
any tax refund (including EITC) up to $4,942. Debtor shall
tender to the Trustee the amount of any tax refund in ex‐
cess of $4,942. Payment of any tax refund (as applicable)
to the Trustee shall be treated as additional payment into
the plan and must be submitted with 7 (seven) days of
receipt of such refund by the Debtor.
No. 17‐2809 7
at the end of the day she can get a discharge.
And, meanwhile, creditors will be getting a lit‐
tle.
On the same day, the bankruptcy court entered an order con‐
firming Blake’s plan.
E. Motion for Certification For Direct Appeal
On May 16, 2017, the trustee filed a notice appealing the
bankruptcy court’s confirmation order. At the same time, the
trustee filed a motion to certify the order for direct appeal to
this Court. On June 15, 2017, Blake filed her objection to the
certification motion.
On July 5, 2017, the bankruptcy court denied the certifica‐
tion motion without prejudice. The bankruptcy court held
that that, because more than thirty days had passed since the
notice of appeal was filed, the matter was no longer “pend‐
ing” in the bankruptcy court, but rather in the district court.
As a result, the bankruptcy court concluded that, under Fed‐
eral Rule of Bankruptcy Procedure 8006(b), it lacked power to
certify the order for direct appeal. However, the bankruptcy
court noted that if the district court remanded the case, it was
prepared to enter an order certifying the case for direct ap‐
peal. On July 27, 2017, the district court remanded the case to
the bankruptcy court for further proceedings.
On August 28, 2017, the bankruptcy court entered an or‐
der certifying the case for direct appeal to this Court. The
court determined that certification was appropriate because
there is no controlling decision from the Supreme Court or the
Seventh Circuit as to whether tax credits are disposable in‐
come under the Bankruptcy Code. We subsequently author‐
ized a direct appeal.
8 No. 17‐2809
II. Discussion
We review questions of our jurisdiction de novo. Muratoski
v. Holder, 622 F.3d 824, 829 (7th Cir. 2010). “We review the
bankruptcy court’s conclusions of law de novo and its factual
findings for clear error.” Stamat v. Neary, 635 F.3d 974, 979 (7th
Cir. 2011).
A. Jurisdiction
As a threshold issue, Blake argues we lack jurisdiction to
hear this direct appeal because: (1) this case does not actually
involve the legal question certified for direct appeal; (2) the
trustee failed to file a petition for permission to appeal as re‐
quired by Federal Rule of Appellate Procedure 5; and (3) the
bankruptcy court lacked authority to certify the direct appeal
because it did not do so within the time limit in Federal Rule
of Bankruptcy Procedure 8006(f). These arguments fail.
1. This Case Involves the Legal Question Certified for Di‐
rect Appeal
We have jurisdiction to hear direct appeals “if the bank‐
ruptcy court … certif[ies] that … the judgment, order, or de‐
cree involves a question of law as to which there is no control‐
ling decision of the court of appeals for the circuit or of the
Supreme Court of the United States … and if the court of ap‐
peals authorizes the direct appeal.” 28 U.S.C.
§ 158(d)(2)(A)(i); see also, e.g., In re Pajian, 785 F.3d 1161, 1162
(7th Cir. 2015). Here, the bankruptcy court certified the con‐
firmation order for direct appeal under that provision and we
subsequently authorized the direct appeal.
Nevertheless, Blake maintains that we lack jurisdiction to
review the confirmation order. Blake initially argued that her
No. 17‐2809 9
earned income tax credit was not income under the Bank‐
ruptcy Code, but the bankruptcy court rejected that argument
in its March 2017 memorandum order. As a result, Blake in‐
cluded her earned income tax credit as income in her
amended Chapter 13 plan. Therefore, Blake argues that, by
the time her plan was confirmed in May 2017, this case no
longer “involved” the legal question that the bankruptcy
court certified for direct appeal.
Blake’s argument fails for two reasons. First, our jurisdic‐
tion under § 158(d)(2)(A) turns on whether the bankruptcy
court certified that the order involves a question of law that
warrants a direct appeal. In other words, under
§ 158(d)(2)(A), the bankruptcy court gets to determine which
legal questions are implicated by its own orders and whether
those legal questions warrant certification. Given the bank‐
ruptcy court’s familiarity with its own orders, it is in the best
position to make this determination. Here, by granting certi‐
fication, the bankruptcy court implicitly determined that its
confirmation order involved the legal question of whether
Blake’s earned income tax credit was income under the Bank‐
ruptcy Code.
Second, to the extent we get to weigh in on whether certi‐
fication was appropriate by “authoriz[ing] the direct appeal,”
we agree that the bankruptcy court’s order confirming Blake’s
plan “involves” the legal question certified. 28 U.S.C.
§ 158(d)(2)(A). Indeed, this legal question was the basis for the
trustee’s objection to confirmation. The court resolved that
question in the trustee’s favor and required Blake to file an
amended plan that treated her tax credit as income. Once she
did so, the court confirmed her plan in accordance with its
previous memorandum order. Thus, the order confirming
10 No. 17‐2809
Blake’s Chapter 13 plan inherently involved the legal question
of whether her earned income tax credit is income under the
Bankruptcy Code.6
2. The Trustee’s Failure to File a Petition for Permission to
Appeal Was Harmless
Federal Rule of Appellate Procedure 57 requires a party to
file a petition for permission to appeal in the circuit court that
includes the legal question presented, the relief sought, the
reasons why the appeal should be allowed, a copy of the order
appealed, and a copy of the district court’s order granting per‐
mission to appeal. Fed. R. App. P. 5. We have generally said
that the requirements for perfecting an appeal, including
those imposed by court rule, “are important and should be
complied with.” In re Turner, 574 F.3d 349, 354 (7th Cir. 2009).
However, we have excused the failure to file a Rule 5 pe‐
tition if the party filed a timely notice of appeal and “no one
is harmed by the failure.” Id. For example, in Turner we found
that the trustee’s failure to file a petition for leave to appeal
was harmless because the appellant‐trustee filed a timely no‐
tice of appeal and the bankruptcy court clerk transmitted the
6 Although the bankruptcy court certified the confirmation order
based on the income classification issue, it acknowledged that this Court
“has jurisdiction over the entire certified order.” This is evident from the
text of § 158, which gives us jurisdiction over “final judgments, orders, and
decrees,” not just the narrow legal issue certified. 28 U.S.C. § 158(d)(2)(A),
(a)(1). In addition, 28 U.S.C. § 1292(b), which is the equivalent of § 158(d)
in non‐bankruptcy cases, similarly “allows interlocutory appeal of or‐
ders—not interlocutory appeal of issues.” N.Y.C. Health & Hosps. Corp. v.
Blum, 678 F.2d 392, 396–97 (2d Cir. 1982).
7
Rule 5 applies to direct appeals of bankruptcy orders under
§ 158(d)(2). See Fed. R. App. P. 6(c)(1).
No. 17‐2809 11
certification order to this Court. See id. at 351–52. We ex‐
plained:
The material that the bankruptcy court trans‐
mitted to this court contained everything that
the petition for review would have con‐
tained …. It contained information concerning
the identity of the parties and the order being
appealed that the petition would have con‐
tained, plus the reasons why this court should
grant leave to appeal–for they were the same
reasons that the trustee, in the request for certi‐
fication that he had filed with the bankruptcy
court, had presented to that court when it asked
that court to certify the case for direct appeal to
this court.
Id. at 352. In addition, we noted that the appellee‐debtor did
not oppose the request for certification below in the bank‐
ruptcy court, and thus did not “miss[] a chance to oppose a
formal petition for review.” Id. at 354.
Here, as in Turner, the trustee’s failure to file a separate pe‐
tition for permission to appeal was harmless. The bankruptcy
court clerk transmitted the necessary materials to this Court
just ten days after the bankruptcy court issued the certifica‐
tion order, well before the deadline to file a notice of appeal
had elapsed. As in Turner, these materials contained all the
information that a petition for review would have contained.8
Moreover, although Blake objected to the certification request
8 Specifically, the bankruptcy court clerk transmitted the order being
appealed, the notice of appeal, the certification order, and a copy of the
entire bankruptcy court docket.
12 No. 17‐2809
in this case, she filed a brief opposing that request below in
the bankruptcy court. Thus, like the appellant in Turner, she
had an opportunity to challenge our jurisdiction.
3. The Bankruptcy Court Had Authority to Certify The Di‐
rect Appeal
Rule 8006(f) provides that a request to certify for direct ap‐
peal under § 158(d)(2)(A) “must be filed with the clerk of the
court where the matter is pending within 60 days after the en‐
try of the judgment, order, or decree.” Fed. R. Bankr. P.
8006(f)(1). “[A] matter remains pending in the bankruptcy
court for 30 days after the effective date … of the first notice
of appeal from the judgment, order, or decree for which direct
review is sought.” Id. 8006(b). After that, the matter is pending
in the district court. Id. “Only the court where the matter is
pending … may certify a direct review on request of parties
or on its own motion.” Id. 8006(d).
Here, the trustee filed her notice of appeal and certification
request in the bankruptcy court on May 16, 2017. However,
the bankruptcy court did not issue a ruling on the request un‐
til July 6, 2017. At that point, more than thirty days had
elapsed since the notice of appeal was filed. As a result, the
matter was no longer “pending” in the bankruptcy court un‐
der Rule 8006(b). Accordingly, the bankruptcy court denied
the certification request without prejudice. However, the
bankruptcy court indicated its intention to grant the certifica‐
tion motion if the district court remanded for that purpose.
The district court subsequently remanded the matter back to
the bankruptcy court, which then entered the certification or‐
der on August 28, 2017. Blake argues that this was an im‐
proper end‐run around Rule 8006’s “crystal‐clear” thirty‐day
deadline.
No. 17‐2809 13
Blake’s argument is unpersuasive. Rule 8008 explicitly
states that, “[i]f a party files a timely motion in the bankruptcy
court for relief that the court lacks authority to grant because
of an appeal that has been docketed and is pending, the bank‐
ruptcy court may … state that the court would grant the mo‐
tion if the court where the appeal is pending remands for that
purpose.” Fed. R. Bankr. P. 8008(a)(3). If the bankruptcy court
so indicates, “the district court … may remand for further
proceedings.” Id. 8008(c). That is exactly what happened here.
This result promotes the purpose of Rule 8006, which is to
“give the bankruptcy judge, who will be familiar with the
matter being appealed, an opportunity to decide whether cer‐
tification for direct review is appropriate.” Fed. R. Bankr. P.
8006 advisory committee’s note to 2014 amendments.
For all these reasons, we have jurisdiction to hear the di‐
rect appeal.
B. Tax Credits Are Income Under the Bankruptcy Code
If the trustee objects to confirmation of the bankruptcy
plan, the court may not approve the plan unless the debtor
pays all of their “projected disposable income” into the plan
during the applicable commitment period.9 11 U.S.C.
§ 1325(b)(1). The Code defines “disposable income” as:
current monthly income received by the debtor
(other than child support payments, foster care
payments, or disability payments for a depend‐
ent child made in accordance with applicable
9 Because Blake is a below‐median income debtor, her applicable com‐
mitment period is three years. 11 U.S.C. § 1325(b)(4)(A). However, under
Blake’s plan, she will pay all of her projected disposable income into the
plan for five years—a longer commitment period than required.
14 No. 17‐2809
nonbankruptcy law to the extent reasonably
necessary to be expended for such child) less
amounts reasonably necessary to be ex‐
pended … for the maintenance or support of the
debtor or a dependent of the debtor ….
Id. § 1325(b)(2).
In turn, the Code defines “current monthly income” as
“the average monthly income from all sources that the debtor
receives … without regard to whether such income is taxable
income” in the six‐month period before the bankruptcy peti‐
tion was filed. Id. § 101(10A)(A). CMI “includes any amount
paid by any entity other than the debtor … on a regular basis
for the household expenses of the debtor or the debtor’s de‐
pendents.” Id.
Bankruptcy courts in this Circuit agree that tax credits are
income under the Bankruptcy Code. See In re Morales, 563 B.R.
867, 872 (Bankr. N.D. Ill. 2017); In re Forbish, 414 B.R. 400, 403
(Bankr. N.D. Ill. 2009); In re Royal, 397 B.R. 88, 94 (Bankr. N.D.
Ill. 2008). These courts have reasoned that the statutory defi‐
nition of CMI, which has only a few enumerated exceptions,
is broad enough to encompass tax credits. Moreover, the stat‐
ute specifically excludes other sources of revenue—for exam‐
ple, social security benefits and payments to victims of war
crimes—but not tax credits. See 11 U.S.C. § 101(10A)(B). This
suggests that Congress intended for tax credits to be included
in the income calculation. See Smith v. Zachary, 255 F.3d 446,
451 (7th Cir. 2001) (“The general rule of statutory construction
is that the enumeration of specific exclusions from the opera‐
tion of a statute is an indication that the statute should apply
to all cases not specifically excluded.” (quoting 2A Sutherland
Statutory Construction § 47.23)); Royal, 397 B.R. at 94 (“Earned
No. 17‐2809 15
income tax credits were not specifically excluded, which is an
indication that they are meant to be included.”).
Moreover, the earned income tax credit statute provides
that the credit “shall not be treated as income” for the pur‐
poses of several other federal statutes that provide public as‐
sistance benefits. 26 U.S.C. § 32(l). However, when Congress
passed the Bankruptcy Abuse Prevention and Consumer Pro‐
tection Act (“BAPCPA”) in 2005, it “fail[ed] to amend the
earned income tax credit statute to exclude the credit from the
definition of current monthly income.” Royal, 397 B.R. at 94.
“The implication is that … Congress intended for [the earned
income tax credit] to be included in the calculation of income.”
Id. For all these reasons, tax credits must be included in CMI
when calculating disposable income.10
C. Below‐Median Income Debtors May Prorate Their
Annual Income Tax Refund And Associated Ex‐
penses
Just because tax credits are included in CMI, however,
does not mean the debtor must pay the entire tax credit to the
trustee as disposable income. After all, disposable income
10 The bankruptcy court correctly noted that, unlike tax credits, tax
over‐withholdings do not represent additional income that must be used
for plan payments. This is because CMI is calculated from a debtor’s gross
income prior to tax withholdings. Forbish, 414 B.R. at 403 (“CMI is in es‐
sence pre‐tax gross income.”). As a result, CMI “already includes a
debtor’s wages withheld for taxes, and if a debtor has used his CMI (as he
must) in coming up with his plan payments, there should be no need to
require him to add in his tax refunds.” Id.; see also Morales, 563 B.R. at 872
(“If debtors account for their expected income and tax expense correctly
at the time of confirmation, tax refunds need not be paid as additional plan
payments.”).
16 No. 17‐2809
equals CMI minus the “amounts reasonably necessary to be
expended … for the maintenance or support of the debtor or
a dependent of the debtor.” 11 U.S.C. § 1325(b)(2). That brings
us to the real issue in this case: how debtors should account
for their annual tax refund when calculating their projected
disposable income.
The trustee argues that income tax refunds should be
turned over to the trustee to make additional plan payments.
To the extent a debtor wants to retain some or all of the tax
refund for reasonably necessary expenses, the debtor must
move to modify the plan under 11 U.S.C. § 1329.
However, several bankruptcy courts in this Circuit have
adopted a different practice. See, e.g., Morales, 563 B.R. at 872–
73; In re Gibson, 564 B.R. 608, 610–11 (Bankr. N.D. Ill. 2017). In
these cases, bankruptcy courts have allowed below‐median
income debtors like Blake to account for their annual tax re‐
fund before their plan is confirmed. Under this approach, the
debtor prorates her annual tax refund (i.e., divides the annual
tax refund by twelve) and adds the resulting amount to her
CMI. Then, the debtor prorates future expenses that the re‐
fund will be spent on over that twelve‐month period, thus po‐
tentially offsetting the tax refund income as long as her addi‐
tional expenses are reasonably necessary.11
11 Although the bankruptcy court gave below‐median income debtors
the option to prorate the income and expenses related to their tax return,
it did not require them to do so. The court made clear in its certification
order that it “would not force debtors to prorate their tax‐refund related
income and expenses if the trustee did not object to another form of treat‐
ment in the plan and the parties were in agreement.”
No. 17‐2809 17
The bankruptcy court here adopted this practice for a cou‐
ple reasons. First, the court wanted to alleviate the burdens
that the motion‐to‐modify process imposes on trustees, debt‐
ors’ counsel, and the court.12 Second, the court sought to pro‐
mote consistency across trustees who often have different
practices as to whether a debtor may retain a portion of their
tax refund.13
The trustee argues that this approach is inconsistent with
§ 1325(b) of the Bankruptcy Code and the Supreme Court’s in‐
terpretation of “projected disposable income” in Hamilton v.
Lanning, 560 U.S. 505 (2010). The trustee also argues that this
practice results in plans that are not feasible, accurate, or pro‐
posed in good faith as required by § 1325(a). Finally, the trus‐
tee contends that this procedure frustrates the legislative pur‐
poses of Chapter 13. We disagree.
12 The court explained that below‐median income debtors often pro‐
pose plans with “extremely tight” budgets that do not consider all ex‐
penses to be incurred during the commitment period. As a result, when
these debtors receive their tax refunds, they move to modify their plans so
they can use that money for necessary expenses. In fact, the court noted
that, of the 554 motions to modify it received between January 1, 2016 and
February 14, 2017, approximately 24% requested retention of tax refunds.
Not surprisingly, then, the number of motions to modify increases signif‐
icantly around tax season. According to the bankruptcy court, the top
three reasons for debtors wishing to keep their refunds were car repairs,
household expenses, and medical/dental expenses, and the court granted
the vast majority of those motions (only 2% were denied).
13 For example, the trustee in this case requires that debtors turn over
the entire tax refund, but two other trustees in the Northern District of
Illinois allow debtors to keep $2,000 of their tax refunds and do not try to
recover tax credits from low‐income debtors.
18 No. 17‐2809
1. The Bankruptcy Court’s Holding Is Consistent With
§ 1325(b) and the Supreme Court’s Interpretation Of
“Projected Disposable Income”
Because the trustee objected to the confirmation of Blake’s
plan, the court could only confirm the plan if it “provide[d]
that all of the debtor’s projected disposable income to be received
in the applicable commitment period … will be applied to
make payments to unsecured creditors under the plan.” 11
U.S.C. § 1325(b)(1)(B) (emphasis added). As explained supra,
“disposable income” equals CMI minus reasonably necessary
expenses. Id. § 1325(b)(2). However, the Code does not tell us
how to calculate projected disposable income.
In Lanning, the Supreme Court adopted a “forward‐look‐
ing approach” to the question. 506 U.S. at 509. There, the
debtor had received a one‐time buyout from her former em‐
ployer during the six month‐period before she filed for bank‐
ruptcy, which greatly inflated her CMI calculation. Id. at 511.
The debtor’s plan proposed monthly payments that were
more in line with her actual income and ability to pay going
forward. Id. The trustee objected, arguing that the proper way
to calculate projected disposable income was to simply mul‐
tiply the debtor’s past average monthly income by the num‐
ber of months in the commitment period. Id. at 511–13. The
Court acknowledged that this “mechanical approach” is ap‐
propriate “in most cases.” Id. at 513. However, it agreed with
the debtor that, “in exceptional cases, where significant
changes in a debtor’s financial circumstances are known or
virtually certain, a bankruptcy court has discretion to make
an appropriate adjustment.” Id.
The Lanning Court provided several reasons for this flexi‐
ble approach. First, the Court relied on “the ordinary meaning
No. 17‐2809 19
of the term ‘projected.’” Id. at 513. The Court explained that,
“[w]hile a projection takes past events into account, adjust‐
ments are often made based on other factors that may affect
the final outcome.” Id. at 514. Second, the Court examined
how the term “projected” is used in other federal statutes, and
found that “Congress rarely has used it to mean simple mul‐
tiplication.” Id. Third, the Court reasoned that, if Congress
wanted “to mandate simple multiplication,” it could have just
used the word “multiplied” as it did elsewhere in the Bank‐
ruptcy Code. Id. at 514–15 (citing 11 U.S.C. §§ 704(b)(2),
707(b)(2), 707(b)(6), (7)(A), 1325(b)(3)). Finally, the Court
noted that, prior to BAPCPA, courts multiplied a debtor’s
CMI by the number of months in the commitment period “as
the first step,” but “also had discretion to account for known
or virtually certain changes in the debtor’s income.” Id. at 515,
517 (“[P]re‐BAPCPA bankruptcy practice reflected a widely
acknowledged and well‐documented view that courts may
take into account known or virtually certain changes to debt‐
ors’ income or expenses when projecting disposable in‐
come.”). The Court found this pre‐BAPCPA bankruptcy prac‐
tice “telling” because courts “will not read the Bankruptcy
Code to erode past bankruptcy practice absent a clear indica‐
tion that Congress intended such a departure.” Id. at 517
(quoting Travelers Cas. & Sur. Co. of America v. Pac. Gas & Elec.
Co., 549 U.S. 443, 454 (2008)). “Congress did not amend the
term ‘projected disposable income’ when it passed BAPCPA
in 2005,” and thus did not clearly indicate a departure from
this historical practice. Id.
The Lanning Court also found that the trustee’s mechanical
approach “clashe[d] repeatedly with the terms of 11 U.S.C.
§ 1325.” Id. For instance, § 1325(b)(1)(B) states that a bank‐
20 No. 17‐2809
ruptcy court may overrule a trustee’s objection to confirma‐
tion of a plan if “the plan provides that all of the debtor’s pro‐
jected disposable income to be received in the applicable commit‐
ment period” will be used to make payments to unsecured
creditors. 11 U.S.C. § 1325(b)(1)(B) (emphasis added). This ad‐
ditional language “strongly favors the forward looking ap‐
proach.” Lanning, 560 U.S. at 517. In addition, “§ 1325(b)(1) di‐
rects courts to determine projected disposable income ‘as of
the effective date of the plan,’ which is the date on which the
plan is confirmed.” Id. at 518 (quoting 11 U.S.C. § 1325(b)(1)).
The Court explained: “Had Congress intended for projected
disposable income to be nothing more than a multiple of dis‐
posable income in all cases, we see no reason why Congress
would not have required courts to determine that value as of
the filing date of the plan.” Id. Therefore, this language is also
“more consistent with the view that Congress expected courts
to consider postfiling information about the debtor’s financial
circumstances.” Id.
As a practical matter, the Lanning Court noted that the
trustee’s approach “would produce senseless results” in cases
where “a debtor’s disposable income during the 6‐month
look‐back period is either substantially lower or higher than
the debtor’s disposable income during the plan period.” Id. at
520. If a debtor’s income is unusually high during the look‐
back period, the debtor will not be able to make plan pay‐
ments and thus will be denied Chapter 13 protection. Id. at
520–21. Conversely, if the debtor’s income is unusually low
during the look‐back period, “the mechanical approach
would deny creditors payments that the debtor could easily
make.” Id. at 520. For all these reasons, the Court ultimately
held that, “when a bankruptcy court calculates a debtor’s pro‐
jected disposable income, the court may account for changes
No. 17‐2809 21
in the debtor’s income or expenses that are known or virtually
certain at the time of confirmation.” Id. at 524.
The trustee points out that Blake is a below‐median in‐
come debtor, whereas the debtor in Lanning was an above‐
median income debtor. Although the Bankruptcy Code treats
these two kinds of debtors differently in at least one respect,14
the trustee fails to explain why Lanning’s holding would not
apply equally to below‐median income debtors. As the trus‐
tee herself acknowledges, this case is similar to Lanning in that
Blake’s CMI during the six‐month look‐back period did not
accurately represent her post‐confirmation income. Thus, the
Lanning Court’s reasoning applies with equal force to below‐
median income debtors.
Here, the bankruptcy court properly followed Lanning to
calculate Blake’s projected disposable income. Although
Blake did not receive a tax refund during her six‐month look‐
back period, it is virtually certain that she will be entitled to
an earned income tax credit each year during her commitment
period. The earned income tax credit statute provides a re‐
fundable credit as a percentage of every dollar earned, and
the percentage received depends on the number of qualifying
14 “[T]he disposable income calculation under § 1325(b)(2) for below‐
median debtors differs slightly from the calculation for above‐median
debtors.” In re Brooks, 784 F.3d 380, 384 n.3 (7th Cir. 2015). BAPCPA
adopted the standardized means test for above‐median debtors. Id. at 385.
Under that test, many of an above‐median income debtor’s major ex‐
penses, such as housing, utilities, food, and transportation are based upon
IRS standards. See Ransom v. FIA Card Servs., N.A., 562 U.S. 61, 66 & n.2
(2011). In contrast, below‐median income debtors “must prove on a case‐
by‐case basis that each claimed expense is reasonably necessary.” Id. at 71
n.5.
22 No. 17‐2809
children. See 26 U.S.C. § 32. Due to her income level, Blake is
virtually certain to receive the earned income tax credit each
year. As a result, her CMI during the look‐back period under‐
stated her actual disposable income during the plan period.
Accordingly, the bankruptcy court had discretion to consider
the tax credit when calculating Blake’s projected disposable
income. Other bankruptcy courts in this Circuit have reached
the same conclusion. See, e.g., Morales, 563 B.R. at 871 (holding
that debtor’s future receipt of earned income credit, child tax
credit, and educational credit should be included when calcu‐
lating projected disposable income); In re Gibson, 564 B.R. at
611–12 (same). Indeed, this is exactly the kind of forward‐
looking approach that the Supreme Court endorsed in Lan‐
ning.
The trustee argues that this calculation of Blake’s projected
disposable income is “illusory” and “divorced from reality.”
Of course, it is possible that Blake’s tax refund income might
vary during the commitment period. For example, Blake
might have another qualifying child, which would increase
her earned income tax credit. Alternatively, her earned in‐
come tax credit might decrease due to the age and student
status of her dependents. However, § 1325(b) does not require
a debtor to pay all possible or actual future disposable income
to the trustee. See In re Gibson, 564 B.R. at 612. Rather, it re‐
quires the debtor to commit all “projected disposable income.”
11 U.S.C. § 1325(b)(1)(B) (emphasis added). Given the for‐
ward‐looking nature of this analysis, there is always a risk
that the debtor’s projected disposable income will not match
up perfectly with the debtor’s actual disposable income. To
arrive at a reasonably accurate estimate, Lanning instructs
courts to look to historical practice and then make adjust‐
No. 17‐2809 23
ments based on known or virtually certain information re‐
garding the debtor’s income or expenses. Here, the bank‐
ruptcy court followed that guidance. This projected income is
no more “illusory” or “divorced from reality” than Blake’s
earned income from her regular employment, which could
also change during the commitment period. Moreover, in the
event Blake’s earned income tax credit increases in future
years, her plan requires her to turn over to the trustee any
portion of her tax refund that exceeds the amount already in‐
cluded in her projected disposable income.
Next, the trustee argues that, “because the funds are re‐
ceived annually and not on a monthly basis,” prorating the
annual tax refund in this way artificially inflates the debtor’s
income. However, the Code’s definition of “current monthly
income” is not limited to income that is received on a monthly
basis.15 Rather, the Code defines CMI as “the average monthly
income from all sources that the debtor receives” during the
six‐month look‐back period.16 11 U.S.C. § 101(10A) (emphasis
added). This language requires debtors to average (i.e., pro‐
rate) all of their income—regardless of how regularly it is re‐
ceived. See Gibson, 564 B.R. at 610 (“CMI includes all in‐
come …, whether received weekly, monthly, annually, or on
15 Indeed, if it were, an annual tax refund would not even be included
in CMI. Accordingly, this argument is in tension with the trustee’s argu‐
ment that an annual tax refund must be included in CMI.
16 Again, although Blake did not receive her tax refund within the six‐
month look‐back period, the Supreme Court made clear in Lanning that
courts may consider changes in the debtor’s income and expenses that are
known or virtually certain to occur during the applicable commitment pe‐
riod, even if they differ from income or expenses during the look‐back pe‐
riod.
24 No. 17‐2809
an irregular basis.”). The bankruptcy forms and instruction
manual similarly tell debtors to prorate any income that is not
received on a monthly basis. See Morales, 563 B.R. at 873 (citing
Official Form 106I and Instructions: Bankruptcy Forms for In‐
dividuals 26 (Rev. Apr. 2016)).17 In addition, CMI is defined to
“include[] any amount paid by any entity other than the
debtor … on a regular basis for the household expenses of the
debtor or the debtor’s dependents.” 11 U.S.C. § 101(10A)(B)
(emphasis added). As the trustee acknowledges, tax refunds
from the IRS meet this definition because they are paid on a
regular basis (annually) for household expenses. For all these
reasons, Blake’s income tax refund qualifies as income that
must be included in CMI even though it is not received in
monthly installments, but rather as an annual lump sum.
Thus, the court correctly allowed Blake to include a prorated
version of her annual tax refund in her CMI when calculating
her projected disposable income.
The trustee’s real complaint is not that the court allowed
Blake to prorate her annual tax refund as monthly income. Af‐
ter all, the trustee wants to use that additional income for plan
payments. Rather, the trustee objects to the court’s approach
because it allows Blake to deduct reasonable expenses, thus
potentially negating the amount that could otherwise be used
to make plan payments.
But the statutory language and the Lanning decision sup‐
port the bankruptcy court’s approach on the other side of the
ledger as well. To calculate disposable income, “Chapter 13
17 The trustee argues that, “[w]here the language of the Code is at odds
with the form,” the statute prevails. However, in this case, the statutory
text and the official forms do not conflict. To the contrary, both require
proration. Thus, we need not choose between them.
No. 17‐2809 25
utilizes a multi‐part equation, containing both an income
component and an expense component.” In re Brooks, 784 F.3d
380, 383 (7th Cir. 2015). Specifically, a debtor must subtract
from her CMI “amounts reasonably necessary to be expended
… for the maintenance or support of the debtor or a depend‐
ent of the debtor.” 11 U.S.C. § 1325(b)(2). Thus, the bank‐
ruptcy court properly allowed Blake to deduct reasonably
necessary expenses from her income tax refund. Indeed, as
another bankruptcy court in this Circuit noted, “the trustee’s
approach eliminates entirely the ‘expenses’ component from
the statutory formula for plan payments … when the income
is received annually.” Morales, 563 B.R. at 873. If Blake ex‐
pected to receive this additional income in the form of bi‐
weekly wages, rather than an annual tax refund, no one
would question her ability to deduct reasonably necessary ex‐
penses from it when calculating her projected disposable in‐
come. See id. at 874. The trustee provides no persuasive reason
to treat the income differently simply because she receives it
in the form of a tax refund once a year.
Moreover, because we are dealing with projected disposa‐
ble income, Lanning gives bankruptcy courts discretion “in
unusual cases” to “go further and take into account other
known or virtually certain information about the debtor’s fu‐
ture income or expenses.” 560 U.S. at 519 (emphasis added).
The bankruptcy court in this case noted that below‐median
income debtors like Blake have “extremely tight” budgets
that “do not consider all the commonly incurred expenses
during the applicable commitment period.” As a result, these
debtors often rely on their annual tax refund as “a poor per‐
son’s savings account.” In other words, the court determined
that Blake’s expenses during the look‐back period did not ac‐
26 No. 17‐2809
curately reflect all of the expenses that she would actually in‐
cur during the commitment period. Thus, the court properly
exercised its discretion to allow Blake to prorate reasonably
necessary expenses that would be incurred throughout the
year.18
The trustee does not argue that Blake’s prorated expenses
were not reasonably necessary. Instead, she argues that they
“do not actually exist at the time the schedules are filed,” and
debtors “cannot demonstrate that they will actually spend the
refunds on that expense.” She asserts that Blake must provide
evidence “demonstrating a historical practice of spending her
refund on these exact same expenses every year.”
These arguments fail for two reasons. First, § 1325(b)(2)
says nothing of “actual” expenses; it merely describes
“amounts reasonably necessary to be expended … for the
maintenance or support of the debtor or a dependent of the
debtor.” 11 U.S.C. § 1325(b)(2) (emphasis added). Notably,
several other provisions of the Bankruptcy Code use the word
“actual” when describing expenses. See, e.g., 11 U.S.C. §§
330(a)(1)(B) (allowing a court to award the trustee “reim‐
bursement for actual, necessary expenses”), 1329(a)(4) (allow‐
ing for modification of the plan after confirmation to reduce
payments “by the actual amount expended by the debtor to
purchase health insurance”). Accordingly, we must presume
18 Other bankruptcy courts in this Circuit have done the same. For ex‐
ample, in Royal, the court noted that the debtor had an “extremely tight”
budget and “strongly suspect[ed] that [the debtor] defer[red] certain ex‐
penses, those that [could] wait until she receive[d] her yearly earned in‐
come tax credit.” 397 B.R. at 100. Preferring “to make decisions that [were]
grounded in reality,” that court allowed the debtor to file an amended ex‐
pense schedule to offset the additional income in her tax refund. Id.
No. 17‐2809 27
Congress acted intentionally by omitting the word “actual”
when describing the kinds of expenses that debtors may de‐
duct from their CMI when calculating projected disposable
income. See BFP v. Resolution Tr. Corp., 511 U.S. 531, 537 (1994)
(“[I]t is generally presumed that Congress acts intentionally
and purposely when it includes particular language in one
section of a statute but omits it in another.”) (alteration in
original) (quoting Chicago v. Envtl. Def. Fund, 511 U.S. 328, 338
(1994))).
Second, the trustee’s argument is just another version of
the rigid mechanical approach the Supreme Court rejected in
Lanning. Historical practice is not dispositive in every case.
Thus, the word “projected” implies more than merely multi‐
plying past expenses by the amount of time in the commit‐
ment period. See Lanning, 560 U.S. at 514 (“While a projection
takes past events into account, adjustments are often made
based on other factors that may affect the final outcome.”); In
re Kibbe, 361 B.R. 302, 312 n.9 (B.A.P. 1st Cir. 2007) (“The word
‘multiplied’ is quite different from the word ‘projected.’ The
former requires only mathematical acumen; the latter, math‐
ematic acumen adjusted by deliberation and discretion.”).
Here, consistent with Lanning and the text of § 1325(b)(2), the
court made adjustments to Blake’s projected disposable in‐
come based on known or virtually certain future expenses
(e.g., her sons’ high school graduation expenses) that were
reasonably necessary.
2. The Bankruptcy Court’s Holding Is Consistent With
The Good Faith Requirement Under § 1325(a)(3)
Next, the trustee argues that, if debtors are allowed to pro‐
rate in this manner to comply with § 1325(b), their schedules
28 No. 17‐2809
and plans will not comply with the good faith requirement in
§ 1325(a).
Before the court may confirm a bankruptcy plan, the
debtor must also show the requirements in § 1325(a) have
been met. Section 1325(a)(3) requires that the plan be “pro‐
posed in good faith.” 11 U.S.C. § 1325(a)(3). “In considering
whether a plan is filed in good faith, the court asks of the
debtor: ‘Is he really trying to pay the creditors to the reasona‐
ble limit of his ability or is he trying to thwart them?’” In re
Smith, 286 F.3d 461, 466 (7th Cir. 2002) (quoting In re Schaitz,
913 F.2d 452, 453 (7th Cir. 1990)). “At base, this inquiry often
comes down to a question of whether the filing is fundamen‐
tally unfair.” Id. (quoting In re Love, 957 F.2d 1350, 1357 (7th
Cir. 1992)). “Whether a plan or petition is filed in good faith
is a question of fact based on the totality of the circumstances
surrounding the proposed plan.” Id. Because “[a] bankruptcy
court’s determination that a plan was filed in good faith is a
factual finding,” we will only reverse “if the court’s finding
was clearly erroneous.” Id. at 465.
The trustee argues that when courts prorate the annual tax
refund and associated expenses on a monthly basis, the
debtor’s expense schedule is “subject to manipulation” in vi‐
olation of the good faith requirement. The trustee questions
the accuracy of Blake’s projected expenses in this case, espe‐
cially because she filed an amended expense schedule four
times.
By confirming Blake’s plan, the bankruptcy court implic‐
itly found, based on the totality of the circumstances, that her
plan was proposed in good faith. Moreover, the trustee never
objected to confirmation of Blake’s plan in the bankruptcy
court on the ground that it was proposed in bad faith, and
No. 17‐2809 29
does not point to anything in the record on appeal to suggest
that Blake was trying to thwart her creditors.
True, Blake amended her expense schedule multiple
times. However, Bankruptcy Rule 1009 allows a debtor to
amend her schedules “as a matter of course at any time before
the case is closed.” Fed. R. Bankr. P. 1009(a). This “precludes
an inquiry into the Debtor’s good faith” based solely on the
filing of amended schedules. In re Padula, 542 B.R. 753, 760
(Bankr. E.D. Va. 2015), aff’d, 651 F. App’x 228 (4th Cir. 2016).
Moreover, the “nature and timing” of Blake’s amend‐
ments do not suggest bad faith. Cf. In re Powers, 554 B.R. 41,
57 (Bankr. N.D.N.Y. 2016). When Blake first amended her
Schedule J in September 2016, she reduced the amount of her
monthly expense for shoes and clothing from $200 to $85.
When Blake next amended her Schedule J in December 2016,
she reduced her monthly expense for food and housekeeping
from $500 to $400 and her monthly expense for personal care
from $40 to $35. By making these reductions in her budget,
Blake completely offset the increase in her monthly rent. As a
result, the amount of disposable monthly income available to
make plan payments to her creditors remained exactly the
same. In April 2017, Blake amended her Schedule J again be‐
cause the bankruptcy court told her to do so in its March 2017
order. In that amendment, Blake added monthly expenses for
furniture, medical and dental, as well as graduation expenses.
However, she reduced the amount to be spent on clothing and
shoes. Similarly, when Blake amended her expense schedule
again in May 2017 to add an expense for car repairs, she pro‐
portionately reduced her monthly furniture expense. These
amendments do not suggest that Blake was trying to “thwart”
her creditors. Smith, 286 F.3d at 466. To the contrary, Blake
30 No. 17‐2809
repeatedly reduced her own spending so that her creditors
would not take a hit. If anything, these amendments evince a
good faith attempt to pay her creditors to the reasonable limit
of her ability. Furthermore, the nature of Blake’s expenses dis‐
tinguish this case from the other cases that the trustee relies
on. See, e.g, In re McNichols, 254 B.R. 422, 431 (Bankr. N.D. Ill.
2000) (concluding that debtor’s plan did not meet the good
faith requirement because she testified that her spouse still
spent $720 for manicures and $1,680 for a housekeeper, which
showed that “the Debtor continues to live an opulent lifestyle
while paying a relatively small dividend to her unsecured
creditors”).
The trustee argues that Blake’s prior bankruptcy case also
demonstrates a lack of good faith. Blake filed a previous bank‐
ruptcy case that was dismissed within one year of the filing of
this matter due to Blake’s failure to make plan payments. As
a result, this case was presumed to have been filed in bad
faith. 11 U.S.C. § 362(c)(3)(C). To rebut this presumption and
extend the automatic bankruptcy stay at the outset of this
case, Blake had to provide “clear and convincing evidence”
that this case was filed in good faith. Id. To that end, Blake
submitted a declaration stating that she had suffered a loss in
income because one of her children was no longer receiving
social security benefits. Blake also agreed to go on “payroll
control”—i.e., her monthly payments to the trustee would
come directly from her employer—to facilitate making her
plan payments. There were no objections to Blake’s motion to
extend the automatic stay, and the bankruptcy court granted
it. Thus, the bankruptcy court implicitly found that the instant
case was not filed in bad faith.
No. 17‐2809 31
Finally, the trustee argues that the bankruptcy court was
required to hold an evidentiary hearing so the trustee could
cross‐examine Blake about the accuracy of her expenses.
However, “[n]othing in the statutes or case law requires a
hearing every time the issue of good faith is raised in a Chap‐
ter 13 proceeding. The bankruptcy court, exercising its sound
discretion, is in the best position to determine when an evi‐
dentiary hearing on the issue of good faith is necessary.”
Noreen v. Slattengren, 974 F.2d 75, 76 (8th Cir. 1992). We ac‐
cordingly defer to the bankruptcy court’s judgment that an
evidentiary hearing was not necessary.
3. The Bankruptcy Court’s Holding Is Consistent With
The Feasibility Requirement in § 1325(a)(6)
In addition to satisfying the good faith requirement, the
debtor’s plan must be feasible. See 11 U.S.C. § 1325(a)(6) (re‐
quiring that the debtor “be able to make all payments under
the plan and to comply with the plan”). “To be feasible, the
plan must have a reasonable likelihood of success as deter‐
mined by the particular circumstances of the plan and the
case.” In re Olson, 553 B.R. 343, 348 (Bankr. N.D. Ill. 2016).
“While the feasibility requirement is not rigorous, the plan
proponent must, at minimum, demonstrate that the Debtor’s
income exceeds expenses by an amount sufficient to make the
payments proposed by the plan.” Id. (quoting In re Ber‐
nardes, 267 B.R. 690, 695 (Bankr. D.N.J. 2001)). “Because the is‐
sue of feasibility is one of fact, the determination by the bank‐
ruptcy court will not be disturbed unless the decision is
clearly erroneous.” 6 Norton Bankr. L. & Prac. 3d § 112:28.
The trustee argues that, because debtors only receive their
tax refund once a year as a lump sum, and not in monthly
installments, debtors will not have sufficient cash flow to
32 No. 17‐2809
make their monthly plan payments. As a result, the trustee
claims that prorating the debtor’s annual tax refund and as‐
sociated expenses in this way will necessary result in plans
that are not feasible.
This argument fails for two reasons. First, feasibility turns
on the “particular circumstances of the plan and the case.” Ol‐
son, 553 B.R. at 348. As a result, per se rules are not appropri‐
ate in this context. See Blackshear, 531 B.R. at 719 (“The deter‐
mination of feasibility must be done on a case by case basis
and is not subject to per se rules.” (quoting 8 Collier on Bank‐
ruptcy ¶ 1325.07[1] p. 1325–49)). Here, by confirming Blake’s
plan, the bankruptcy court implicitly found that Blake would
be able to make her payments under the plan, and the trustee
points to no reason to think otherwise. See id. (holding that
bankruptcy court’s “implicit conclusion that the plan is feasi‐
ble” would not be disturbed on appeal to district court).
Second, even if per se rules were appropriate, bankruptcy
courts have rejected the trustee’s argument that prorating an
annual tax refund and associated expenses will automatically
render plans unfeasible. See, e.g., Morales, 563 B.R. at 874; Gib‐
son, 564 B.R. at 612. “If the debtor has reasonable expenses that
offset the tax credits, her plan payment will not increase.” Mo‐
rales, 563 B.R. at 874. And if expenses do not offset the tax
credits, such that the plan payment does increase, “[t]he
debtor is free to adjust the timing of payment for expenses so
that he can make … plan payments on time.” Gibson, 564 B.R.
at 612. The debtor can accomplish this “either by saving the
amounts received from the tax credits and using them to pay
expenses during the year, or by delaying paying bills and de‐
ferring purchases until she received the tax credits.” Morales,
563 B.R. at 874.
No. 17‐2809 33
Thus, the bankruptcy court’s approach does not make
debtor’s plans less feasible. If anything, this approach makes
the debtor’s plan more feasible because it gives the debtor
more flexibility in their budget to account for additional ex‐
penses throughout the year. See id. at 875 (“Rooted in all of
these approaches is the sensible recognition that, to succeed
in a chapter 13 case, a debtor must have some flexibility in his
budget.”).
4. The Bankruptcy Court’s Holding Promotes The Pur‐
poses of Chapter 13
In light of the analysis supra, we need not delve into the
purposes behind Chapter 13 or public policy arguments. In
this context, we have said that “[r]ights depend … on what
the Code provides rather than on notions of equity.” Sunbeam
Prod., Inc. v. Chi. Am. Mfg., LLC, 686 F.3d 372, 376 (7th Cir.
2012) (“[A]rguments based on views about the purposes be‐
hind the Code, and wise public policy, cannot be used to su‐
persede the Code’s provisions.”) (citing RadLAX Gateway Ho‐
tel, LLC v. Amalgamated Bank, 566 U.S. 639, 649 (2012)).
Nevertheless, the bankruptcy court’s holding also pro‐
motes the underlying purposes of Chapter 13, “which are to
allow the debtor a fresh start where it is possible to do so with‐
out liquidating the debtor’s assets …, while at the same time
ensuring that the debtor devotes all of her disposable income
during the life of the plan to repaying creditors.” Germeraad v.
Powers, 826 F.3d 962, 971 (7th Cir. 2016). The purpose of
providing the earned income tax credit to the working poor is
to “help them meet the basic costs of life.” In re Brockhouse, 220
B.R. 623, 625 (Bankr. C.D. Ill. 1998); see also Sorenson v. Secʹy of
Treasury of U.S., 475 U.S. 851, 864 (1986). By allowing debtors
34 No. 17‐2809
to retain the portion of their tax credit that is used for reason‐
ably necessary living expenses, the bankruptcy court’s ap‐
proach ensures that debtors will actually be able to make their
plan payments and get the fresh start envisioned by Chapter
13.
III. Conclusion
For the foregoing reasons, we AFFIRM the judgment of the
district court.
No. 17‐2809 35
MANION, Circuit Judge, concurring in part and concurring
in the judgment. I join the vast majority of the court’s well‐
written opinion, but write separately out of concern that this
case should not have been here on direct appeal. Particularly,
there are two things that future panels should watch for when
a case comes here on direct appeal from a bankruptcy court.
First, it’s important that we not grant direct appeal in the ab‐
sence of a petition filed in accordance with Federal Rule of
Appellate Procedure 5. And second, we should not grant such
a petition if there is no dispute between the parties on the is‐
sue that prompted the bankruptcy court to certify the case in
the first place.
This court has jurisdiction over a direct appeal from bank‐
ruptcy court if (1) the bankruptcy court certifies that the judg‐
ment involves a question of law that we have not yet decided;
and (2) we authorize the direct appeal. 28 U.S.C. § 158(d)(2);
see In re Turner, 574 F.3d 349, 357 (7th Cir. 2009) (Sykes, J., dis‐
senting). Thus, we have discretion to deny direct review even
if the bankruptcy court certifies the case. That makes it very
important for us to adhere to the rules and require the party
seeking to invoke our jurisdiction to file a petition pursuant
to Rule 5. As Judge Sykes wrote in Turner, a petition is not
perfunctory, but “a substantive adversarial pleading intended
to persuade the appellate court to accept the case.” 574 F.3d at
359. It also triggers the opposing party’s opportunity to re‐
spond with reasons why we should not accept jurisdiction. Id.
Without a petition, we cannot properly exercise our discretion
to accept or reject a direct appeal and so we end up deferring
to the bankruptcy court’s certification decision. The bank‐
ruptcy court’s decision to certify a particular case may be cor‐
rect, but we have an obligation to determine for ourselves
whether the case truly merits direct review.
36 No. 17‐2809
This is the type of case that probably should have gone
through the normal process of appeal to the district court first.
There was simply no compelling reason to grant direct review
here. If we had required the trustee to file a petition, we would
have seen that the parties were in agreement on the only issue
the bankruptcy court deemed certifiable: whether the earned
income tax credit counts as income under the Bankruptcy
Code. The lack of adversarial briefing on this question makes
the present case a poor vehicle for its resolution. See City &
Cty. of San Francisco v. Sheehan, 135 S. Ct. 1765, 1773 (2015)
(“San Francisco, the United States as amicus curiae, and
Sheehan all argue (or at least accept) that § 12132 applies to
arrests. No one argues the contrary view. As a result, we do
not think that it would be prudent to decide the question in
this case.”). Like the Supreme Court when it denies certiorari,
we should as a prudential matter decline to hear direct ap‐
peals in cases where the only issue deemed certifiable is not
disputed.
All that being said, what’s done is done. We have agreed
to hear this case and there is no reason to send it back at this
point. I join all but Parts II‐A and II‐B of the court’s well‐rea‐
soned opinion because it correctly holds that the bankruptcy
court did not abuse its discretion in overruling the trustee’s
objections to the debtor’s Chapter 13 plan. Because we have
no adverse briefing on the issue and its resolution would not
affect the outcome, I would express no opinion on whether
the earned income tax credit qualifies as income under the
Bankruptcy Code. Since we have already agreed to take juris‐
diction, I concur in the judgment to affirm the decision below.