614 B.R. 80
Bankr. D. Alaska2020Background
- Debtor Carol A. Johnson filed Chapter 13 on Jan 31, 2019 and proposed a 60‑month "pot plan" committing $500/month plus estimated annual Alaska Permanent Fund Dividend (PFD) payments of $1,000/year (total $35,000).
- The Plan included a nonstandard clause treating any PFD proceeds received in excess of $1,000/year and tax refunds as pre‑payments of monthly plan payments.
- Trustee objected, citing AK LBR 3015‑1(b) and AK LBF 5, and § 1306(a), arguing all post‑petition PFDs received during the plan term are estate property and must be applied to plan distributions.
- Debtor argued the Bankruptcy Code does not require committing excess PFDs beyond projected monthly payments and contended the local rule/form improperly modifies substantive Code rights.
- The court found the Alaska local rule and form valid, held future PFDs are "projected disposable income" under § 1325(b)(1)(B) and property of the chapter 13 estate under § 1306(a), and denied confirmation with leave to amend.
Issues
| Issue | Johnson's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Validity of AK LBR 3015‑1(b) and AK LBF 5 | Local rule/form impermissibly alters Code; plan complies with § 1325(b) so local restrictions are invalid | Local rule/form valid procedural rules to ensure debtors commit PFDs to plans and prevent understatement of disposable income | Local rule and form are validly adopted and consistent with bankruptcy rules and BAPCPA policy; they inform plan treatment of PFDs |
| Are post‑petition PFDs "projected disposable income" under § 1325(b)? | PFDs are not wages and Code does not mandate committing windfalls; debtor may allocate excess to prepay plan payments | PFDs are virtually certain for Alaskans and thus must be projected and applied to creditor distributions under § 1325(b)(1)(B) | PFDs are "projected disposable income" (known or virtually certain) and must be applied to make plan payments to unsecured creditors |
| May debtor vest excess PFDs (> $1,000) in herself at confirmation as prepayments? | Debtor may elect to apply excess PFDs as pre‑payments to reduce future monthly payments; § 1327(b) allows vesting unless plan says otherwise | Committing excess PFDs to debtor at confirmation defeats § 1306(a) and § 1325(b) protections; future assets must remain estate property so Trustee/creditors can seek modifications under § 1329 | Debtor may not cap estate interest at $1,000 or preclude application of future PFDs; plan provision vesting excess amounts in debtor impermissible; confirmation denied (leave to amend) |
Key Cases Cited
- Hamilton v. Lanning, 560 U.S. 505 (2010) (courts may account for "known or virtually certain" income changes when projecting disposable income)
- Carroll v. Logan, 735 F.3d 147 (4th Cir. 2013) (post‑confirmation inheritance is part of chapter 13 estate)
- Dale v. Maney (In re Dale), 505 B.R. 8 (B.A.P. 9th Cir. 2014) (post‑petition inheritance included in chapter 13 estate under § 1306)
- Midkiff v. Stewart, 342 F.3d 1194 (10th Cir. 2003) (tax refunds can be included in projected disposable income)
- In re Shay, 553 B.R. 412 (Bankr. W.D. Wash. 2016) (plan provisions cannot short‑circuit trustee/creditor rights to seek plan modification for post‑petition property)