Baud v. Carroll

Summarized by Dean Langdon , DelCotto Law Group PLLC
15 years 3 weeks ago

Citation:

Sixth Circuit Case No. 09-2164

Tag(s):

6th Circuit

Ruling:

The District Court ruling holding that an above-median income debtor with negative projected disposable income does not have to make plan payments for the applicable commitment period is affirmed in part, reversed in part and remanded to the District Court, with instructions to remand further to the Bankruptcy Court. Where a Chapter 13 plan does not propose to pay unsecured creditors in full and an objection to confirmation is filed, a debtor with positive projected disposable income must propose a plan which extends for the applicable commitment period. A debtor who might be able to satisfy the projected disposable income requirement under the plan by using non-disposable income will not be able to shorten the applicable commitment period. In other words, the temporal requirement of 11 U.S.C. Section 1325(b) controls over the monetary amount needed to satisfy the projected disposable income requirement. The calculation of projected disposable income must exclude income which is excepted from the definition of current monthly income (i.e., Social Security benefits), and must deduct expenses permitted to above-median income debtors under the definition of projected disposable income (i.e., continuing payments on secured debts). Finally, the applicable commitment period provided by 11 U.S.C. Section 1325(b) applies to Chapter 13 plans for debtors who have zero or negative projected disposable income as well as those with positive projected disposable income. Writing for the panel, Judge Cole provides an excellent review of the different approaches to these issues, as well as the practical ramifications of the decision. The opinion is based on the plain language of the statutes, pre-BAPCPA practice, legislative history and the Supreme Court rulings in Lanning and Ransom. On a larger scale, the opinion provides: "We believe it is now clear that, where each competing interpretation of a Code provision amended by BAPCPA is consistent with the plain language of the statute, we must, as the Supreme Court did in Lanning and Ransom, apply the interpretation that has the best chance of fulfilling BAPCPA'spurpose of maximizing creditor recoveries."

Procedural context:

Chapter 13 Trustee for the Eastern District of Michigan appeals from a District Court ruling which held plan length must conform to applicable commitment period for above-median income debtors, but not for debtors who have negative projected disposable income.

Facts:

The Bauds filed a Chapter 13 petition on September 26, 2008. They subsequently filed Form 22C which disclosed above-median current monthly income (CMI) of $7,086.72 and negative disposable income of $1,203.55. The negative disposable income resulted primarily from the exclusion of Social Security benefits from income and the inclusion of the Debtors' actual mortgage payments of $1699.93 as a deduction from income. The Debtors' gross monthly income on Schedule I was listed as $9,115.63, which included Social Security benefits of $1758 per month. Pursuant to Schedule J, the Debtors had monthly net income of $402.32. Accordingly, the Debtors fell into the category of above-median income debtors with negative disposable income. The Debtors' Chapter 13 plan proposed payments totaling $30,321.65 over a 36 month period. The Chapter 13 Trustee objected to confirmation, arguing that the Debtors' plan was required to be 60 months - the applicable commitment period for above-median income debtors. The bankruptcy court agreed; the Debtors amended their plan to provide for payments totaling $58,603.97 over 60 months; the amended plan was confirmed; and the Debtors appealed. The District Court reversed and remanded, holding that the 60 month applicable commitment period does not apply to debtors who have negative projected disposable income. The Trustee appealed to the Sixth Circuit.

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