In Re Frederickson
- Reporters:
- , ,
- Before:
- Taylor
MEMORANDUM OPINION AND ORDER
RICHARD D. TAYLOR, Bankruptcy Judge.Before the Court is the trustee’s Objection to Confirmation of Initial Plan filed on January 19, 2007. The debtor, Craig M. Frederickson, filed his chapter 13 voluntary petition and proposed plan on December 13, 2006. In his plan, the debtor proposed to pay $600.00 per month for a period of 48 months, with the unsecured creditors receiving a pro rata distribution. Because the debtor’s income is above the median family income for the state of Arkansas, the trustee objected to the 48 month period, arguing instead that the plan must provide for payments over a 60 month time period. The Court heard the trustee’s objection on February 21, 2007, and took the matter under advisement to allow the parties additional time to brief the issues. For the reasons stated below, the Court overrules the trustee’s objection.
Jurisdiction
The Court has jurisdiction over this matter under
Background
The facts in this case are undisputed and have been stipulated by both parties:
1. This case was filed on December 13, 2006. The plan, schedules and Statement of Current Monthly Income and Disposable Income (Form 22C) were timely filed on that date.
*826 2. Pursuant to the calculations reflected on the Form 22C, the debtor is an “above-median” debtor whose disposable income is determined pursuant to11 U.S.C. § 1325(b)(3) . The disposable income calculation reflected on Form 22C, line 58 is a negative amount, $-95.49.
3. The plan provides that the debtor will pay $600. per month for a period of 48 months, with unsecured creditors to receive a pro rata dividend. As of the date of the first meeting of creditors, it was anticipated that the unsecured creditors would receive a dividend of $3,672.82, or 61% of the scheduled claims. As of Tuesday, February 20, 2007, based upon the claims in the case, the trustee calculates that the unsecured creditors will receive $5,455.11. If the debtors are required to maintain their case for 60 months, it is estimated that the unsecured creditors’ dividend would near, if not equal, 100% on their claims.
Additionally, the parties stipulated to the following exhibits:
A. Narrative Statement of Plan, filed December 13, 2006.
B. Official Form 22C, Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income, filed December 13, 2006.
C. Schedules I, J, filed December 13, 2006.
D. Trustee’s “payees” print-out reflecting scheduled and filed claims.
The trustee’s principle objection is that because the debtor is above the median family income for the state of Arkansas, he must provide for payments over a 60 month period of time in accordance with
Findings of Fact and Conclusions of Law
According to the bankruptcy code, the court shall confirm a plan if the requirements of
Projected Disposable Income
The debtor’s “disposable income,” an expressly defined term, 2 is determined by taking his “current monthly income,” also a defined term, 3 and subtracting amounts *828 reasonably necessary for the debtor’s maintenance and support. According to the debtor’s Schedules I and J, the debtor in reality has approximately $600.00 of disposable income each month. However, for an above median family income debtor, the amounts reasonably necessary to be expended for his maintenance and support are to be determined in accordance with the means test set forth in § 707(b)(2), using Form 22C. Form 22C determines expenses in accordance with IRS national and local standards. The parties stipulated that the debtor’s disposable income according to Form 22C is a negative amount. Even though the debtor has proposed a plan that will allow the unsecured creditors to receive a substantial distribution in this case, according to Form 22C the debtor is not required to make any payments to the unsecured creditors under the plan. 4 The trustee concedes this point in his brief. 5
Although the discrepancy between the disposable income on Schedules I and J and Form 22C appears problematic, the code is clear.
Applicable Commitment Period
Temporal Requirement or Monetary Requirement
After determining the monthly amount of disposable income the debtor must commit to the plan, the debtor must satisfy the requirement that his projected disposable income will be applied for the benefit of unsecured creditors during the applicable commitment period.
Much has been written about whether the applicable commitment period is a temporal requirement or a monetary requirement.
See generally In re Luton,
363 B.R. 96 (Bankr.W.D.Ark.2007) (listing in detail courts that find both positions). Courts holding that the period is a temporal requirement focus primarily on the statutory language, which states that the applicable commitment period for an above median income debtor “shall be not less than 5 years.”
Courts finding that the requirement is a monetary requirement generally agree that the applicable commitment period is part of a formula to determine the amount to be paid to unsecured creditors. Courts should focus “on the amount a debtor will return to creditors rather than the length of time it might take the debtor to perform.”
Luton,
363 B.R. at 100 (citing
In re Fuger,
347 B.R. 94 (Bankr.D.Utah 2006)). The
Fuger
court found that the requirement was both a temporal and a monetary requirement.
Fuger,
347 B.R. at 99. It was temporal in that the debtors had to project their proposed income over a specific period of time and the statute provided a time limit for performing under a plan. Conversely, it was monetary in the sense that it required the debtor to commit to pay unsecured creditors a specific amount.
Id.
The three year period referenced in
However, this is a BAPCPA case. The applicable commitment period refers to a specific period of time in the statute-three years or five years-and the Court finds that when the commitment period applies,
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it is a temporal requirement, not a monetary requirement as suggested by the debtor. If a debtor has income below the median family income for his state, he must commit his projected disposable income for the benefit of his unsecured creditors for a period of three years. If a debtor has income above the median family income for his state, he must commit his projected disposable income for the benefit of unsecured creditors for not less than five years. This is what is required by
No Projected Disposable Income
However, a different situation arises when an above median family income debt- or has no projected disposable income according to Form 22C, as in the present case. In this situation, the “applicable commitment period” phrase may not be relevant.
See, e.g., In re Lawson,
361 B.R. 215, 219 (Bankr.D.Utah 2007);
Alexander,
344 B.R. at 751. The applicable commitment period is the length of time during which the debtor’s projected disposable income will be applied to make payments to unsecured creditors under the plan.
Subsection (b) addresses what a plan must include in order for a court to confirm a plan over the objection of the trustee or an unsecured creditor. The requirement is that the debtor provide that all of his projected disposable income received during the applicable commitment period be applied to make payments to the unsecured creditors. The debtor’s disposable income is his current monthly income less expenditures as determined by Form 22C.
Two bases support, and limit, this conclusion. First is the introductory clause to
Second, the term “disposable income” is statutorily defined in the context of a “current monthly income” analysis. Current monthly income is determined historically. Specifically, the debtor is required to determine a figure based on the average of his monthly income from all sources for the six month period prior to his or her filing. Thus, the disposable income figure, although a projection, is a finite figure based upon set and definite historical data. Accordingly, and definitionally, the “disposable income” figure does not appear to contemplate increases based on raises, windfalls, or the prospective effect of § 1306.
8
Hence, there appears to be no Congressional purpose designed or served in the circumstance where an above median family income debtor has a negative income and the trustee concedes that the debtor has no obligation to make payments into his plan for the benefit of his unsecured creditors. Additionally, it is apparent from a close reading of
Conclusion
In this case, the debtor has proposed a 48 month plan that pays a substantial amount to his unsecured creditors, and the trustee objected. Because the debtor is an above median family income debtor, the
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Court finds that his projected disposable income is determined by Form 22C. The trustee did not object to the debtor’s calculations on Form 22C, and the parties have stipulated that the debtor’s projected disposable income is a negative number. Additionally, and perhaps appropriately, the trustee did not object to the feasability of the debtor’s plan or argue that the plan was not proposed in good faith. According to
IT IS SO ORDERED.
Notes
. (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 claim is 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.
(2) For purposes of this subsection, the term “disposable income” means current monthly *827 income received by the debtor ... less amounts reasonably necessary to be expended—
(A) (i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and
(ii) for charitable contributions ... in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and
(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.
(3) Amounts reasonably necessary to be expended under paragraph (2), other than sub-paragraph (A)(ii) of paragraph (2), shall be determined in accordance with subpara-graphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income, when multiplied by 12, greater than—
(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
(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
(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.
(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 debtor’s spouse combined, when multiplied by 12, is not less than—
(I) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
(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 individuals; or
(III) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4; and
(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.
. “Disposable income” is defined, in relevant part, as current monthly income received by the debtor ... less amounts reasonably necessary to be expended (i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and (ii) for charitable contributions ... in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made....
. “Current monthly income” is defined, in relevant part, as “the average monthly income from all sources that the debtor receives ... without regard to whether such income is taxable income, derived during the 6-month period ending on ... the last day of the calendar month immediately preceding the date of
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the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii)...
.
. The trustee states: “Thus, there is no minimal amount which must be paid to the general unsecured creditors by virtue of the disposable income plan confirmation requirements.”
. In fact, the only other reference to the applicable commitment period in the code appears in § 1329(c), but, again, only in relation to
(c) A plan modified under this section may not provide for payments over a period that expires after the applicable commitment period undersection 1325(b)(1)(B) after the time that the first payment under the original confirmed plan was due....
. The Court is aware that its finding may actually allow an above median family income debtor to propose a confirmable chapter 13 plan that lasts less than three years. The Court can find no other requirement under the BAPCPA code that requires a minimum plan period of even three years if the debtor has no projected disposable income as determined by Form 22C.
. “For purposes of this subsection, the term ‘disposable income’ means current monthly income received by the debtor....”