ORDER
This matter comes before the Court on Objection to Confirmation of Chapter 13
FINDINGS OF FACT
• Debtors’ chapter 13 plan provides “Debt- or(s) shall pay to the Trustee the sum of $457.00 for the applicable commitment period of: a minimum of 36 months. § 1325(b)(4).” (See Dckt. # 7.)
• Debtors’ Schedule I lists an average monthly income of $4,095.61, and Schedule J reflects average monthly expenses of $3,638.64, resulting in a monthly net income of $456.97. (See Dckt. # 1.)
• Debtors’ B22C Means Test Form (“B22C”) reflects Debtors are “above-median” debtors. (See Dckt. ## 1 and 28.)
• Debtors’ original B22C shows an applicable commitment period of 5 years and lists monthly disposable income as negative $99.79. (See Dckt. # 1.)
• Debtors’ amended B22C reflects a monthly disposable income of negative $570.83 and changed the “applicable commitment period” from 5 years to 3 years. (See Dckt. # 28.)
• Debtors’ plan proposes to pay a 0% dividend to their unsecured creditors. (See Dckt. # 1,12(i).) 1
• The Trustee objects to confirmation of Debtors’ chapter 13 plan. (See Dckt. ## 20, 22 and 23.) Because Debtors are above-median debtors, the Trustee argues § 1325(b)(4) requires a plan duration of 60 months, not 3 years.
CONCLUSIONS OF LAW
The issue is whether the term “applicable commitment period” as used in 11 U.S.C. § 1325(b)(1)(B) and (b)(4) is “temporal” requiring a specific plan duration or a “multiplier” used to determine an amount of money to be distributed to unsecured creditors under the plan. Debtors are above median-income debtors with negative B22C disposable income. Debtors argue “applicable commitment period” does not establish a minimum plan length, but rather it is a multiplier determining the amount of money Debtors must pay to unsecured creditors. “As a result [of a negative B22C monthly disposable income result, Debtors] are not required to return anything to their general unsecured creditors .... ” (See Dckt. # 24, p. 2.) According to Debtors when the B22C reflects a negative disposable income, then applicable commitment period is irrelevant. Conversely, the Trustee argues the “applicable commitment period” language of § 1325(b)(4)(B) is temporal in nature and allows for a shorter “applicable commitment period” only if the plan provides for payment in full of all allowed unsecured claims over the shorter period.
Applicable Commitment Period.
Upon objection of the Trustee or the holder of an allowed unsecured claim, Debtors’ plan may not be confirmed unless all unsecured creditors are paid in full, or “all of the debtor’s projected disposable income to be received in the applicable commitment period ... be applied to make payments to unsecured creditors under the plan.” 11 U.S.C. § 1325(b)(1)(B).
2
“Appli
Several eases have required the applicable commitment period be treated as a period of time for plan duration.
See In re Musselman,
Section § 1325(b)(4) which defines “applicable commitment period” uses words with temporal meanings — “period” 4 and “years.” Section 1325(b)(4)(B) goes on to provide that the applicable commitment period “may be less than 3 or 5 years, whichever is applicable under sub-paragraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.” 11 U.S.C. § 1325(b)(4)(B). Allowing plans of above-median debtors to be confirmed that propose a shorter period of time would render this section meaningless and superfluous and, in theory, allow one week plans or even lump-sum payment plans, which the Court finds to be at odds with the plain meaning of § 1325(b)(4)(B) and the Bankruptcy Code in general. As one court has said;
It is irrelevant whether the projected disposable income is zero or $1,000 or some other amount. If unsecured claims are not to be paid in full, the plan must have a length of three (3) years forbelow-median income debtors and not less than five (5) years for above-median income debtors.
In re Casey,
As other courts have noted, Congress uses the word “multiply” when it wants a mathematical result.
In re Davis,
BAPCPA’s legislative history supports a finding that “applicable commitment period” sets the required plan length. House Report 109-31 provides in pertinent part:
Sec. 318. Chapter IS Plans to Have a Five-Year Duration in Certain Cases “... a chapter 13 plan may not provide for payments over a period that is not less than five years if the current monthly income of the debtor and the debtor’s spouse combined exceeds certain monetary thresholds. If the current monthly income of the debtor and the debtor’s spouse fall below these thresholds, then the duration of the plan may not be longer than three years, unless the court, for cause, approves a longer period up to five years. The applicable commitment period may be less if the plan provides for payment in full of all allowed unsecured claims over a shorter period. ”
H.R.Rep. No. 31(1), 109th Cong., 1st Sess. at 79 (2005), reprinted in 2005 U.S.C.C.A.N. at 143(emphasis added). “Applicable commitment period” as contemplated by the House Report is temporal in nature and refers to plan duration. Furthermore, the title of the House Report comment is temporal — “Chapter 13 plans to have a five-year duration in certain cases.”
Some courts like
Frederickson
and
Alexander, supra,
have tied “projected disposable income” to “applicable commitment period” and stated when there is negative disposable income then applicable commitment period is not relevant.
Alexander,
While some courts look to § 1322 as stating the length of the plan, § 1322 sets the maximum length of a plan and § 1325(b)(1) states the required length of the plan depending on whether debtor is a below or above-median income debtor. See Alane A. Becket & Thomas A. Lee III, Applicable Commitment Period: Time or Money?, Am. Bankr.Inst. J. 16 (March 2006).
Section 1322
5
also provides that plans
Finally, this temporal construction also gives meaning to 11 U.S.C. §§ 521(a)(l)(B)(vi) and 521(f), which respectively require debtors to file post-petition financial information and annual income tax returns which allow the Trustee or a party in interest to request a modification under 11 U.S.C. § 1329. If above-median debtors with negative disposable income could just propose a plan of one month or less such requirements would have no meaning.
For these reasons, I conclude “applicable commitment period” is a temporal concept requiring debtors with above median income to pay all unsecured creditors in full, or propose a plan length of 5 years.
Good faith.
The Trustee also opposes confirmation on good faith grounds. Under 11 U.S.C. § 1325(a)(3) a plan must be “proposed in good faith and not by any means forbidden by law.” 11 U.S.C. § 1325(a)(3). Pre-BAPCPA, the Court applied the
Kitchens
“totality of the circumstances” test.
See Kitchens v. Ga. RR Bank & Trust Co. (In re Kitchens),
1. the amount of the debtor’s income from all sources;
2. the living expenses of the debtor and his dependents;
3. the amount of attorney’s fees;
4. the probable or expected duration of the debtor’s Chapter 13 plan
5. the motivations of the debtor and his sincerity in seeking relief under the provisions of Chapter 13;
6. the debtor’s degree of effort;
7. the debtor’s ability to earn and the likelihood of fluctuation in his earnings;
8. special circumstances such as inordinate medical expenses;
9. the frequency with which the debtor has sought relief under the Bankruptcy Code;
10. the circumstances under which the debtor has contracted his debts and his demonstrated bona fides, or lack of the same, in dealing with his creditors;
11. the burden which the plan’s administration would place upon the trustee;
12. the substantiality of repayment; and
13. the potential nondischargeability of debt in a chapter 7 proceeding.
Kitchens,
Debtors argue cases following the “multiplier” analysis have delivered “[a]n-other grievous wound to the already moribund
Kitchens
test.... Is this not the
In this particular case, the Trustee objects to Debtors’ retention of four vehicles, all which are in need of repair. 6 Debtors are allowed to take deductions for two vehicles/household on their B22C. {See lines 27-29 of B22C form, Dckt. # 28.) In this case, Debtors have limited their B22C deductions to two vehicles. Interestingly, Debtors have taken the deductions for the two vehicles with debk-1987 Buick and the 1995 Honda. In another case this may factor into a question of manipulation of the B22C form; however, in the current case it is immaterial because the parties agree even without these deductions, Debtors’ B22C result remains negative. The Trustee does not object to Debtors’ Schedule J expenses for these vehicles. Overall, while retaining four vehicles may not be financially prudent, this alone does not rise to the level a “bad faith” under Kitchens totality of the circumstances test.
For these reasons, the Court finds the required plan length of these above-median income debtors is 5 years. Therefore confirmation of Debtors’ plan must be DENIED and Debtors’ counsel is ordered to file a modified plan or conversion within fifteen (15) days of the date of this order.
Notes
. Debtors argue their proposed "pot plan” may actually result in an approximate 27% ($8,000.00) dividend to unsecured creditors. (See Dckt. ## 38 and 39, p. 2.)
. Section 1325(b)(1) provides:
(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—
(A) the value of the property to be distributed under the plan on account of such claimis not less than the amount of such claim; or
(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.
. Section 1325(b)(4) provides in pertinent part:
(4) For purposes of this subsection, the 'applicable commitment period'—
(A) subject to subparagraph (B), shall be—
(i) 3 years; or
(ii) not less than 5 years, if the current monthly/income of the debtor and the debt- or's spouse combined, when multiplied by 12, is not less than—
•
•
(II) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individ-' uals;
(B) may be less than 3 or 5 years, whichever is applicable under subparagraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.
. The word "period” means "a division of time in which something is completed.” Webster’s Third New International Dictionary 1680 (2002).
. Section § 1322 provides in pertinent part:
(a) The [contents of the] plan shall—
•
(4) notwithstanding any other provision of this section, a plan may provide for less than full payment ... only if the plan provides that all of the debtor’s projected disposable income for a 5-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.
•
•
(d) (1) If the current monthly income of the debtor and the debtor’s spouse combined, when multiplied by 12, is not less than—
•
•
•
(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or
•
•
the plan may not provide for payments over a period that is longer than 5 years.
. 1987 Buick 140,000 $10,055
Vehicle Miles Approx. Debt 1994 Honda 234,000 $1,228
1984 Ford F150 170,000 $0 1994 Mercury 134,000 $0