487 B.R. 682
Bankr. E.D.N.C.2013Background
- Debtors filed Chapter 13 petition Aug 10, 2012; Trustee objected to confirmation and moved to dismiss for lack of plan in good faith and insufficient payment during commitment period.
- Debtors’ B22C showed negative disposable income (-$291.20) with household income above NC median; plan proposed 15 months at $1,784 and 40 months at $1,547, total $88,640 including $3,335 in attorney fees.
- Plan contains an ‘early termination’ provision aiming to discharge after paying administrative, secured, priority, and certain other claims, with zero/low unsecured payout expected.
- Court treated Form B22C disposable income as a starting point but adopted a forward-looking approach to projected disposable income per Musselman/major Supreme Court guidance, considering known or virtually certain future changes.
- The court rejected early termination as incompatible with §1325(b)(4)’s applicable commitment period and directed Trustee to seek confirmation of a plan at $1,784/month for 60 months with no early termination.
- Hearing held Dec 10, 2012; decision from Jan 15, 2013 addressed issues of projected disposable income, applicable commitment period, good faith, and possible direct appeal certification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How to compute projected disposable income under 1325(b)(1)(B)? | Trustee argues forward-looking changes may be included. | Pliler contends a statutory disposable income basis suffices (mechanical). | Forward-looking approach adopted; account for known/virtually certain changes. |
| Is the applicable commitment period a temporal requirement for all debtors? | Trustee supports temporal 3/5-year period regardless of initial disposable income. | Pliler/Ballew contend zero/negative income negates commitment period. | Applicable commitment period is temporal for all debtors; 36 months below median, 60 months above median unless full unsecured claims paid earlier. |
| Is an early termination provision consistent with 1325(b)(4) and good faith? | Trustee concerns: early termination undermines payments to unsecured creditors. | Debtors rely on 1325(a)(3)/(a)(7) and plan terms; some courts permit early termination. | Early termination language void; plan must run through applicable commitment period to maximize unsecured creditor payout. |
| Should the case be certified for direct appeal to the Fourth Circuit? | N/A | Debtors seek appellate review of certification issues; Trustee seeks direction to 60-month plan without early termination. | Not explicitly resolved here; the court grants certification on issues related to projected disposable income, applicable commitment period, and good faith for direct appeal. |
Key Cases Cited
- Morris v. Quigley, 673 F.3d 269 (4th Cir. 2012) (forward-looking calculation permitted for projected disposable income)
- Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011) (advances temporal reading of applicable commitment period)
- Musselman v. eCast Settlement Corp., 394 B.R. 801 (E.D.N.C. 2008) (pre-Lanning debate; held no applicable commitment period with no projected disposable income)
- In re Alexander, 344 B.R. 742 (E.D.N.C. 2006) (projected disposable income calculated by §1325(b)(2) method)
- In re Ballew, 487 B.R. 657 (E.D.N.C. 2013) (conflicts with other Eastern District decisions on early termination)
- Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716 (2011) (means test disallows deductions for expenses not incurred during plan)