ROBERT G. MAYER, United States Bankruptcy Judge.
THIS MATTER is before the court on the chapter 13 trustee's recommendation of confirmation of the debtors' chapter 13 plan filed June 5, 2001.
This is the second bankruptcy filed by the debtors. The first case was filed in this court on September 25, 2000, pursuant to chapter 7 of the United States Bankruptcy Code. The chapter 7 trustee filed a report of no distribution on November 16, 2000. The debtors were granted a discharge on January 12, 2001, and the case was closed on January 16, 2001. The debtors discharged more than $74,000.00 in unsecured debt in the chapter 7 case.
While the debtors scheduled no unsecured debts in this case, their chapter 13 plan states there is unsecured debt in the amount of $72,322.74 in Section A-2. The plan does not provide for payment of any unsecured debt.
In this case, the debtors are current on their home mortgages and car payments. The only creditors being paid are taxing authorities. The debtors are not paying all of their entire net disposable income to the trustee. Schedule I and J reflect the total net disposable income as $1,542.93. They propose a plan which pays $1,325.92 to the trustee each month for 60 months.
Some tax claims were discharged in the prior chapter 7 case.
A review of the Schedules and Statement of Financial Affairs in the two cases raises questions to which no answers are readily apparent. For example, the answer to Question 1 on the Statement of Financial Affairs in both cases is identical. The first case was filed on September 25, 2000; the second case on June 5, 2001. No wage information is reflected for the year 2001 in this case. If the answer in the second case is to be believed, neither debtor worked after filing the prior petition in 2000.
The answer to Question 3 on the Statement of Financial Affairs is incomplete. The question requests information with respect to payments made within 90 days prior to the commencement of the case. The answer in both cases is "periodic payments on installment obligations". The payments are not itemized and there is no way to determine whether this means only the mortgage payments, car payments, or other creditors as well. The answer to Question 4 in the first case states that a suit was pending against Joel S. Friedman on the date of the filing of the petition. That petition was filed within one year of the filing of the second petition. Question 4 requests information relating to all suits to which the debtors are or were within one year immediately preceding the filing of the bankruptcy case. The prior suit identified in the first case is omitted in the second. It appears that the answer to this question on the second statement of affairs is incomplete. Question 9 of the Statement of Financial Affairs may be incomplete. This requests information on payments made to attorneys, including counsel for the debtor. The answer reflects no payment. The statement required by Federal Rule of Bankruptcy Procedure 2016 filed in the second case reflects no payments made, but an agreement to pay a fee of $1,000.00. The Rule 2016 statement in the first case reflects an agreement to pay a fee of $1,400.00. There is no indication that this fee was paid. If it was paid, it should appear in answer to question 9 on the statement of financial affairs in the second case. Perhaps counsel should be listed as a creditor in this case.
More troubling are the changes in Schedules I and J between the two cases. It appears that the debtors have not changed their employment. Mr. Friedman was employed by Teligent Services, Inc., for two months at the time of the filing of the first petition. At the time of the filing of the second petition, he had been employed at the same company with the same job description for a period of eight months. Mrs. Friedman continues to list her occupation as psychotherapist, an occupation in which she has been engaged for 15 years. Despite the fact that the second petition was filed less than ten months after the first petition, the debtors, in the chapter 13 case, reflect an increase in their combined monthly income. The total combined monthly income in the chapter 7 case was $8,417.74. The total combined monthly income in the second case is $8,860.41, an increase of $442.67. Notwithstanding the increase in income, there is no increase in payroll taxes or social security taxes withheld. On both petitions, they are scheduled at $2,577.79 for the husband and $687.80 for the wife.
The expenses reflected on the two Schedule J's have decreased from $8,178.39 to $7,317.48, a decrease of $860.91. There is no explanation for this decrease. The mortgage payment remains the same on both Schedule J's at $2,300.00. The schedule reflects that real estate taxes and insurance are not included in the mortgage payment. However, there is no expense for real estate taxes and insurance elsewhere on Schedule J. CSMI REMIC 1993-14 is the holder of the note secured by the mortgage on the debtors' properties. The proof of claim filed by it reflects the original loan made on April 10, 1998, in the principal amount of $225,000.00. Pursuant to a modification agreement dated July 22, 1993, the interest rate was reduced and the monthly payment of principal and interest was reduced to $1,627.22. The real estate tax rate in Fairfax County is 1.23%. The debtors estimated the value of the property at $235,000.00 which would suggest a tax escrow of $240.87 per month. Insurance can be estimated at about $50.00 a month, leaving a total payment on the first trust of about $1,918.09. There is a second trust on the property in favor of Chevy Chase Home Equity which had a balance of $8,592.83 on the date of the filing of both petitions according to Schedule D in each case. The payment on a small credit line is likely to be in the range of $100.00 to $200.00 a month. If this is the case, it appears that the estimate for the mortgage payment on Schedule J in both cases is too high by $100.00 to $200.00 a month, or the tax assessed value of the property is higher than the value suggested by the debtors, an uncommon circumstance in the current real estate market. The latter possibility is given credence by the fact that the proof of claim filed by the mortgage company reflects a new loan made April 10, 1989 in the original principal amount of $225,000.00. The deed of trust attached to the proof of claim reflects that this is a re-finance of an existing mortgage. Properties are not usually re-financed at 100% of their fair market value. The amount of the re-finance would suggest a value of the property on April 10, 1989, of at least $250,000.00 and possibly more. Properties in Fairfax County appreciated significantly from 1987 to 1990 and again from 1998 to the present. It is questionable whether a property worth at least $250,000.00 on April 10, 1989, is today worth $235,000.00 as scheduled by the debtors. The debtors on Schedule A in both cases state that the house is about 40 years old and that it needs substantial work in order to obtain a "price commensurate with the market". Notwithstanding by the derogatory comments made by the debtors relating to the value of their property, they scheduled no expense for home maintenance in the chapter 7 Schedule J and only $50.00 a month on Schedule J in the Chapter 13 case. If the house is indeed in such a dire condition, this may be a gross underestimate of the amount necessary to maintain the home. This affects the feasibility of the plan.
Another item of concern is the charitable contributions reflected on Schedule J. In both cases, they are estimated at $130.00 per month. The answer to question 7 on the Statement of Financial Affairs in the chapter 7 case reflects contributions to a religious organization for 1999 in the amount of $200.00. The answer to question 7 in the chapter 13 case reflects no gifts to any religious or charitable organizations in the year preceding the petition.
The debtors reflect two car payments totaling $553.00. The proofs of claim reflect that the payments are $551.95. While the amount on the schedule is accurate, the proofs of claim reflects that these loans will be paid off during the course of the plan. The plan does not address this issue and does not provide for any increase in payments to the trustee when the car loans are paid off.
Schedule J reflects regular expenses from the operation of Mrs. Friedman's business in the amount of $1,132.08 on the first Schedule J and $782.08 on the second Schedule J. No itemization of the business expenses is provided and no explanation for the decrease is given.
Other expenses require explanation. The first Schedule J reflects an expense for cable television of $75.00 a month. The second reflects a payment of $95.00 a month for cable television and internet access. The cable television at $75.00 a month includes premium and luxury service. The telephone bill is $100.00 a month. The food expense is $1,053.33 on the first Schedule J and $1,100.00 on the second Schedule J. There is no explanation for the increase. The first reflects an annotation that the amount includes "kid's meals at school". However, it appears that the older child is away at college. Without explanation, the food expenditure appears high. There are also numerous changes in other items most of which, with the exceptions noted and auto and life insurance, are reduced from the first case to the second. All these reductions are without explanation. It is, therefore,
ORDERED that a confirmation hearing shall be held on September 12, 2001 at 9:30 a.m. The debtors are reminded that the burden of proof of confirmation remains on them and that they must comply with all provisions of § 1325 of the United States Bankruptcy Code. Particular attention should be paid to the value of the real property, the feasibility of the plan and § 1325(a)(3).