Ana Flores v. Rod Danielson
735 F.3d 855
9th Cir.2013Background
- Debtors Cesar and Ana Flores (above-median income) filed Chapter 13 and proposed a 3-year plan paying unsecured creditors $122/month; Trustee objected seeking a 5-year plan.
- Bankruptcy court sustained the Trustee’s objection, confirmed a 5-year plan with $148/month.
- A Ninth Circuit panel (following In re Kagenveama) reversed, holding §1325(b)(1)(B) does not impose a minimum duration when projected disposable income is zero; the case was reheard en banc.
- Central statutory provision: 11 U.S.C. §1325(b)(1)(B) requires a plan to apply a debtor’s "projected disposable income" during the "applicable commitment period"; §1325(b)(4) sets that period at 3 or 5 years (with a limited exception).
- The en banc court overruled Kagenveama and held that the applicable commitment period is a temporal minimum for plan duration and applies even when projected disposable income is zero.
Issues
| Issue | Flores' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Does §1325(b)(1)(B)’s “applicable commitment period” impose a temporal minimum plan length or only a monetary multiplier? | It does not impose a temporal minimum; only the dollar amount matters (monetary view). | It is a temporal requirement that sets a minimum plan duration. | Temporal: the applicable commitment period sets a minimum duration for confirmable plans. |
| If temporal, does that minimum apply when projected disposable income ≤ $0? | Kagenveama: no — if projected disposable income is zero, there is no applicable commitment period, so no minimum duration. | Yes — the temporal minimum applies regardless of projected disposable income; the statute’s text, structure, history, and purpose support this. | Applies regardless of projected disposable income; plans must be at least the applicable commitment period unless the §1325(b)(4)(B) exception applies. |
| Is §1325(b)(1)(B) redundant with §1322(d) (maximum durations)? | The minimum conflicts with Chapter 13’s fresh-start purpose and need not duplicate §1322(d). | The two sections serve different functions: §1322(d) caps maximum length; §1325(b) sets minimum when objection is raised. | Not redundant: §1325(b) sets a minimum; §1322(d) a maximum; both can coexist. |
| Does legislative history and policy support a temporal minimum to preserve creditors’ modification rights? | Fresh-start purpose and statutory text counsel against imposing a mandatory multi-year plan for debtors who will pay $0 initially. | Yes — Congress intended fixed commitment periods to allow §1329 modifications and creditor recourse if debtors’ incomes later increase. | Legislative history and policy support a temporal minimum to preserve the modification mechanism for creditors. |
Key Cases Cited
- In re Kagenveama, 541 F.3d 868 (9th Cir. 2008) (earlier Ninth Circuit panel holding that no projected disposable income negates the applicable commitment period)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (Supreme Court endorsing a forward-looking calculation of projected disposable income)
- Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011) (holding the applicable commitment period is a temporal minimum regardless of zero projected disposable income)
- In re Frederickson, 545 F.3d 652 (8th Cir. 2008) (rejecting monetary-only view of the applicable commitment period)
- Whaley v. Tennyson, 611 F.3d 873 (11th Cir. 2010) (same: applicable commitment period is temporal and applies despite zero projected disposable income)
- In re Fridley, 380 B.R. 538 (B.A.P. 9th Cir. 2007) (discussing plan “completion” and §1329 modification rights)