REPORT AND RECOMMENDATION
BETH P. GESNER, Magistrate Judge.
Before the court is the United States' Motion for Installment Payment Order ("Motion") pursuant to the Federal Debt Collection Procedures Act of 1990, 28 U.S.C. § 3204. (ECF No. 45.) Currently pending are the United States' Motion (ECF No. 45) and Memorandum in Support of Motion for Installment Payment Order ("Memorandum") (ECF No. 46), plaintiff's Opposition to the United States' Motion to Impose Installment Payment Order ("Opposition") (ECF No. 62), and the United States' Reply Memorandum in Support of Motion for Installment Payment Order ("Reply"). (ECF No. 63.) The United States seeks an order compelling the judgment debtor in this action, Ford T. Johnson, Jr. ("plaintiff"), to make monthly installment payments in the amount of $400 to the United States until the total judgment debt of $1,498.004.01, plus the accrued post judgment interest and the 10 percent surcharge imposed by 28 U.S.C. 3011(a),
Judge Quarles referred this case to the undersigned pursuant to 28 U.S.C. § 636 and Local Rules 301 and 302 to hold a hearing and to make recommendations regarding the United States' Motion. (ECF No. 49.) Accordingly, a hearing was held in open court before the undersigned on February 7, 2012, at which plaintiff testified and counsel were heard. For the reasons discussed herein, I respectfully recommend that the United States' Motion for Installment Payment Order (ECF No. 45) be GRANTED and that plaintiff be ordered to make monthly installment payments to the United States in the amount of $400 until the total judgment debt of $1,498.004.01, plus the accrued post judgment interest and costs, has been satisfied.
Plaintiff commenced this action on September 4, 1998 to recover $15,435.50 that the Internal Revenue Service ("IRS") had withheld from his 1995 personal tax return.
On April 12, 2011, the United States moved to reopen the case to permit consideration of its Motion for Installment Payment Order. (ECF No. 42.) Plaintiff opposed the Motion to Reopen Case. (ECF No. 52.) On April 20, 2011, Judge Quarles referred the case to the undersigned to hold a hearing and make recommendations regarding the United States' Motion and Memorandum. (ECF No. 49.) On May 18, 2011, the undersigned suspended review of the instant motion until resolution of the United States' Motion to Reopen Case. (ECF No. 54.)
On October 7, 2011, the court granted the United States' Motion to Reopen Case "to permit consideration of the motion for an installment payment order." (ECF Nos. 59, 60.) Accordingly, the undersigned resumed review of the instant motion on October 11, 2011. (ECF No. 61.) On October 28, 2011, plaintiff filed his Opposition (ECF No. 62), and on November 14, 2011, the United States filed its Reply. (ECF No. 63.) On February 7, 2012, in accordance with 28 U.S.C. § 3204(a), a hearing was held in open court. Present at the hearing were plaintiff and plaintiff's counsel, Alexei M. Silverman, Esq. Gerald A Role, Esq., and Melissa Dickey, Esq. appeared on behalf of the United States. At the hearing, counsel were heard and plaintiff testified and introduced his 2011 Form 1099 and attached schedule into evidence. (ECF No. 67.)
The United States seeks an order pursuant to 28 U.S.C. § 3204 compelling plaintiff to remit $400 monthly installment payments to the United States until the total judgment debt, plus accrued interest and costs, has been satisfied. (ECF Nos. 45, 46.) The central dispute is whether ordering plaintiff to make monthly installment payments to the United States is appropriate, and, if so, what amount is reasonable. The United States maintains that an installment payment order is appropriate pursuant to § 3204 because the post-judgment interrogatories it propounded to plaintiff show plaintiff "is believed to receive substantial non-exempt disposable earnings from self-employment that are not readily subject to garnishment," and that plaintiff "is not subject to any present writ of garnishment with regards to his judgment liability in the present case." (ECF No. 46 at 2.) The United States asserts that "[m]onthly payments of $400 are reasonable considering the substantial income believed to be earned by [plaintiff], his reasonable living expenses, and the size of the judgment" and "there is nothing about [plaintiff's] financial situation that indicates that monthly payments of $400 would impose an undue financial hardship on him." (
Plaintiff's primary contention is that no installment payment is appropriate because it "would impose an undue hardship on [plaintiff], and by extension, his wife and children," without meaningfully reducing the outstanding judgment. (ECF No. 62 at 2.) At the hearing held in this case, plaintiff also maintained that the amount of the monthly installment payment that the United States seeks, $400, is unreasonable.
The Federal Debt Collection Procedures Act ("FDCPA"), 28 U.S.C. § 3001
28 U.S.C. § 3204(a). Under the procedure set forth by § 3204(a), a hearing must be held to determine the appropriateness of the relief requested. 28 U.S.C. § 3204(a). In addition, an installment payment order may only be issued with respect to "nonexempt disposable earnings" of the debtor and may not be issued "against a judgment debtor with respect to whom there is in effect a writ of garnishment of earnings issued under [the FDCPA] and based on the same debt." 28 U.S.C. § 3204(c).
The parties do not dispute that plaintiff is a self-employed debtor within the meaning of § 3204(a)(1) or that plaintiff is not presently subject to a writ of garnishment with regard to his judgment liability in the present case. (ECF Nos. 46, 62, 63.) The parties also agree that plaintiff's earnings consist solely of his 1099 Miscellaneous Income ("1099 income"), as shown by plaintiff's 2011 Form 1099, which plaintiff introduced into evidence at the hearing. Plaintiff's 2011 Form 1099
The parties dispute whether an installment payment order is appropriate and whether the amount that the United States requests is reasonable. Plaintiff maintains that an installment payment order is not appropriate, in part because it would impose an undue hardship on him and his dependents. (ECF No. 62 at 2.) Plaintiff testified that he financially supports his 24-year-old adult son who has Asperger's Syndrome. Plaintiff advised that, if a $400 monthly installment payment was taken out of his 1099 income, he would not be able to pay the rent due on his home. He further noted that, if his family was forced to relocate as a result, it would have a destabilizing effect on his son. Plaintiff also testified that, in his position as president, he makes the final decisions regarding the salaries of all Koba employees. Plaintiff advised that he and his wife reached a "mutual decision" that his compensation would be paid solely in the form of rental payments for the family home in the total amount of $63,787.00, but that his wife would be paid a salary of approximately $130,000.00-140,000.00. He testified that their primary consideration in making these decisions was maintaining the stability of their family, and that they decided the "best way" to do that was for plaintiff not to receive a salary.
The United States argues that an installment payment order as to plaintiff's earnings is a "fair, efficient, and statutorily authorized means to ensure that [plaintiff] begins to meet his legal obligation to the United States with respect to the [outstanding judgment]." (ECF No. 46 at 2-3.) The United States notes the large amount of plaintiff's debt, $2,474,531.50 as of December 1, 2010, and observes that plaintiff has not made a single payment on the debt.
Based upon a review of the record and the testimony and evidence offered at the hearing, the undersigned finds that the United States has shown that plaintiff has "substantial nonexempt disposable earnings from self employment" under § 3204(a)(1), $63,787.00 in 1099 income, and those earnings are "not subject to garnishment" within the meaning of § 3204(c).
The United States requests that the court order plaintiff to make a $400 monthly installment payment. (ECF Nos. 45, 46, 63.) At the hearing, plaintiff contended that the amount the United States seeks is unreasonable, but did not offer an alternative amount.
28 U.S.C. § 3204(a). Although the § 3204(a) factors focus the court on the "requirements of the judgment debtor and the judgment debtor's dependents," the evidence in this case clearly establishes that plaintiff and his wife share the family's financial obligations. The undersigned notes that plaintiff's son is not plaintiff's dependent alone and that, as he testified, plaintiff is not supporting any dependent beyond paying rent on the family home. It is also worth noting that plaintiff's testimony revealed that his wife's annual salary, which is used for all household expenses with the exception of rent, is approximately double that of plaintiff's, even though she works substantially fewer hours than plaintiff.
At the hearing, plaintiff argued that he will be unable to pay rent if a portion of his 1099 earnings are diverted toward a $400 monthly installment payment. The undersigned is not persuaded by this argument, especially in view of the fact that plaintiff, who testified that he has complete control over the allocation of salaries of Koba employees, has selected this method and manner of compensation. The fact that plaintiff chose to have the full amount of his earnings applied toward the rental obligations of his family's residence does not have a significant bearing on the question of whether sufficient funds exist to meet installment payment obligations. The undersigned concludes that the intent of § 3204 cannot be circumvented by plaintiff's decision to structure his compensation as he has. Accordingly, the undersigned finds that plaintiff has not shown that monthly payments of $400 would impose an undue financial hardship on him or that the monthly installment amount that the United States requests is unreasonable.
Based upon a review of the record, the testimony and evidence elicited at the hearing, and a consideration of the factors set forth by § 3204(a), the undersigned concludes that an installment payment order as to plaintiff's earnings is appropriate and that the $400 monthly installment amount requested by the United States is not unreasonable.
Any objections to this Report and Recommendation must be served and filed within fourteen (14) days, pursuant to Fed. R. Civ. P. 72(b) and Local Rule 301.5.b.