634 F.3d 327
6th Cir.2011Background
- Bankruptcy Court considered whether 11 U.S.C. §1325(b) requires a plan to last for the applicable commitment period when there is a creditor objection to a plan paying less than full unsecured claims.
- Appellees filed a Chapter 13 plan with negative scheduled disposable income but significant Social Security benefits and mortgage payments; Appellant objected.
- Form 22C showed above-median income and negative disposable income, while Schedule I and J suggested positive net income.
- Court analyzed prior practice and the impact of BAPCPA’s definitions of current monthly income (exclude Social Security) and disposable income (adjusted for means test).
- Bankruptcy court initially confirmed a 60-month plan; district court reversed for zero/negative disposable income scenarios and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1325(b) impose a temporal commitment-period requirement for plans with objections? | Appellant argues a minimum 60-month term for above-median debtors. | Appellees contend §1325(b) sets a monetary floor, not a fixed duration, and may allow shorter plans. | Temporal requirement applies to plans with objections when there is positive projected disposable income. |
| How does §1325(b)(2) define disposable income post-BAPCPA for projection calculations? | Appellant argues Social Security benefits should be included; mortgage payments may be treated variably. | Appellees contend Social Security benefits are excluded; mortgage payments deducted per §707(b)(2)(A)(iii). | Disposable income excludes Social Security benefits; mortgage payments may be deducted under §707(b)(2)(A)(iii) for above-median debtors. |
| Is there an exception to the temporal commitment-period for zero/negative projected disposable income? | Some circuits allow no temporal requirement if disposable income is zero/negative. | Other circuits and policy considerations favor applying the commitment period regardless of current income. | No exception; applicable commitment period applies even when projected disposable income is zero or negative. |
| Should the plan duration be tied to the applicable commitment period or to the amount of disposable income paid? | Monetary approach supports payment amount over any duration. | Temporal approach requires payments over the applicable period. | Court adopts temporal approach; duration tied to §1325(b) commitment period. |
| How should Lanning and Ransom guide the interpretation here? | Lanning favors forward-looking, but may allow deviations in unusual facts. | Ransom emphasizes maximizing creditor recoveries within text and purpose; avoid senseless results. | Adopt temporal interpretation aligned with Lanning and Ransom to maximize creditor recoveries. |
Key Cases Cited
- Lanning v. U.S. Trustee, 130 S. Ct. 2464 (Supreme Court, 2010) (forward-looking disposable income, known or virtually certain changes allowed; rejects mechanical calculation)
- Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716 (Supreme Court, 2011) (means test purpose to require debtors repay creditors to the extent possible)
- Tennyson v. Bank of America (In re Tennyson), 611 F.3d 873 (11th Cir., 2010) (applies applicable commitment period to debtors with zero/negative income when objected)
- Kagenveama v. FIA Card Servs., 541 F.3d 868 (9th Cir., 2008) (debtor with above-median income; debate on applicability with zero/negative income)
- Musselman v. eCast Settlement Corp., 394 B.R. 801 (Bankr. E.D.N.C., 2008) (above-median income, mortgage payments deduction under §707(b)(2)(A)(iii))