672 B.R. 905
Bankr. W.D. Tex.2024Background
- Packet Construction, LLC, a debtor in a Subchapter V Chapter 11 bankruptcy, filed a reorganization plan requiring payment of projected disposable income to creditors over five years.
- The Subchapter V trustee objected, arguing the plan should include a "true up" provision requiring payment of additional sums if actual disposable income exceeded projections.
- The plan as proposed and eventually confirmed did not contain any true-up provision.
- The legal question concerns whether Subchapter V of the Bankruptcy Code requires or permits a court to impose a true-up, particularly in nonconsensual (cramdown) plans confirmed over creditor objection.
- The court considered both relevant statutory text and analogous treatment in Chapters 12 and 13, as well as existing case law, before overruling the trustee's objection.
- No allegations or evidence of special circumstances (like fraud or grossly misleading projections) were presented that might justify a departure from the standard statutory rule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Subchapter V requires a true up for actual vs. projected disposable income | Trustee: Plan must require debtor to pay additional sums if actual disposable income exceeds projections | Debtor: Only projected disposable income is required under the Code | Court: No general requirement for true up exists in Subchapter V |
| Whether courts have discretion to impose true ups on nonconsensual plans | Trustee: Cites In re Staples and section 105/aiding fairness | Debtor: No statutory authority; only projections matter | Court: No general authority; Staples not persuasive as a general rule |
| Persuasiveness of Rowley v. Yarnall approach (actual income required) | Trustee: Argues for following Rowley to prevent abuse | Debtor: Cites contrary case law and legislative changes | Court: Rowley unconvincing, not followed; prospective standard preferred |
| Whether special circumstances could ever require a true up | Not specifically raised | No special circumstances present | Court: True up might be warranted in rare special circumstances; not here |
Key Cases Cited
- Anderson v. Satterlee (In re Anderson), 21 F.3d 355 (9th Cir. 1994) (holds debtors need pay only projected, not actual, disposable income under Chapter 13)
- Nowlin v. Peake (In re Nowlin), 576 F.3d 258 (5th Cir. 2009) (adopts a forward-looking interpretation of "projected disposable income" in Chapter 13)
- Killough v. United States (In re Killough), 900 F.2d 61 (5th Cir. 1990) (prospective interpretation of income projections for plan confirmation)
- Rowley v. Yarnall, 22 F.3d 190 (8th Cir. 1994) (imposed actual disposable income payment in Chapter 12, but criticized as inconsistent with statutory text)