Business Law

In re Clifford, No. 22-00129-NGH, 2022 WL 16727279, at *1 (Bankr. D. Idaho Nov. 4, 2022)

Dear constituency list members of the Insolvency Law Committee, the following is a case update by Summer Shaw analyzing a recent case of interest:


A bankruptcy court in the District of Idaho held that a Chapter 13 Debtor’s employer-paid medical and dental benefits shall be considered income for purposes of calculating “currently monthly income” (“CMI”) for Means Test purposes.  In re Clifford, No. 22-00129-NGH, 2022 WL 16727279, at *1 (Bankr. D. Idaho Nov. 4, 2022).

To read the full decision, click here.


Chapter 13 debtor, Michelle Clifford (“Debtor”), was an employee of the City of Nampa, Idaho. Part of the benefits her employer chose to pay for her were $35.50 for dental insurance, $597.00 for medical insurance, and $417.24 for a mandatory retirement contribution. Debtor’s Means Test listed her CMI as $4,132.47 with yearly income of $49,589.64 which qualified her as a “below-median debtor” with an applicable commitment period requiring only a 36-month plan, rather than the longer 60-month plan. The Chapter 13 Trustee objected to the Debtor’s classification “as a below-median debtor” because she did not properly include the “employer-paid benefits on Form 122C” (“the Means Test”). The Debtor asserted the benefits paid by the employer “should not be considered ‘income’ because ‘Debtor (had) no control over these benefits nor (were) these benefits ever paid directly to her for household expenses.’”


The Court opens its analysis with the Code’s definition of CMI which specifically states that it is “the average monthly income from all sources that the debtor receives . . . without regard to whether such income is taxable income . . . and includes any amounts paid by an entity other than the debtor on a regular basis for the household expenses of the debtor.” Further, the Court explains that the determination of CMI is not dependent upon it being “taxable” and everything should be included “unless . . . specifically excluded . . . .” The Court goes on to quote another Idaho bankruptcy court opinion in which the court “noted that some payments made on behalf of the debtor by a third party are ‘possibly never received directly by the debtor’ but ‘are considered income for purposes of calculating CMI . . . .’” in furtherance of the “congressional goal” that debtors should pay their creditors and such payments “increase the amount of a debtor’s income available to pay creditors.”

Next, the Court analyzes the two types of “Employer-Paid Benefits” the Debtor’s employer paid and why the Court found they should be treated as income for purposes of the Means Test and CMI.

First, the Court analyzes why medical and dental benefits should be considered “income.” Here, with little analysis, the Court disposes of Debtor’s arguments that they are not “income” within the meaning of CMI because the Debtor “does not ‘receive’ such funds” nor can the benefits be used “to pay creditors and including such payments would not comport with the purpose of BAPCPA.” The Court instead concludes the benefits are part of the CMI calculation/income “because regular payments made by an employer towards a debtor’s household expenses increase the debtor’s available income” and because another bankruptcy court characterized that “health insurance (voluntarily) paid by a non-filing spouse on behalf of the debtor as ‘undoubtedly a household expense of the [d]ebtor.’” Further, the Court states that because another Idaho court listed “health care when giving examples of household expenses, and because Debtor does not have to provide her own insurance coverage, Debtor’s health care expenses are reduced, thus increasing ‘the amount of a debtor’s income available to pay creditors.’”

Second, because the Trustee did not “present sufficient evidence or argument regarding (the Retirement contributions) . . .” the Court concludes that the retirement contributions should not be considered income for CMI calculations under the Means Test.

When the Court added back in the benefits voluntarily paid by the Debtor’s employer, the medical and dental insurance, the Debtor’s CMI was increased to an amount that placed the Debtor above the “median family income for a family of one for Idaho…” and required her to pay whatever her disposable monthly income was for 60 months, rather than 36 months.   


The opinion is troublesome for several reasons. First, the benefits paid by the employer under this scenario appear to be voluntary benefitspaid on the debtor’s behalf, whether they want them or not, or whether they are “necessary” or not. As Debtor’s counsel points out here, the benefits are not exchangeable for monies that could pay their creditors and involve no choice by the Debtor to receive them; there is no evidence that the Debtor could somehow give them up and receive more compensation that could be used to pay creditors. Second, missing from the opinion in this case, when determining “household expenses” is an analysis of what the Code enumerates as “expense” under 11 U.S.C. § 1325(b), which clearly states that expenses under the Means Test must have a “reasonably necessary” component to them. Having been a consumer bankruptcy paralegal and then attorney for over two decades, one thing I have observed about most debtors, sadly, is that families are often making choices about giving up/cutting back on various “household expenses” like food, personal car and utilities; healthcare expenses is not typically a “necessary” household expense that ever makes the list of expenses for the support of a family and is one of those discretionary expenses that is eliminated from the family’s budget far before they ever even contemplate filing a bankruptcy case. To include these expenses as “income” in calculations for Means Test purposes overinflates a debtor’s income, substantially, based on no choice or election of the debtor. Third, and most importantly, the holding in this case will unfairly discriminate against those debtors whose employers list the monetary value of benefits that many other debtors receive, but which do not even appear on the debtor’s paystub. Even worse, typically this will likely affect all civil servants in the Court’s district employed by federal, state and local government employers (like the employer of the Debtor here). Lastly, the application of the standard/holding in this case seems unrealistic. Will every debtor that files a case before this Court and those that adopt the holding in this case be required to obtain a value of any and all benefits the debtor receives from their employer, whether listed on their paystub or not, and place that value on the Means Test, as well as Schedule I?

These materials were written by Summer Shaw of Shaw & Hanover, PC in Palm Desert, California (  Editorial contributions were provided by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.). 

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