Maney v. Kagenveama

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: LAURA F. KAGENVEAMA, 
Debtor.
No. 06-17083
EDWARD J. MANEY, CHAPTER 13 Bankruptcy Ct. No.
TRUSTEE,  05-28079-PHX-
Trustee-Appellant, CGC
v. OPINION*
LAURA F. KAGENVEAMA,
Debtor-Appellee.

Appeal from the United States Bankruptcy Court
for the District of Arizona
Charles G. Case II, Bankruptcy Judge, Presiding
Argued and Submitted
August 17, 2007—San Francisco, California
Filed June 5, 2008
Before: Harry Pregerson, Eugene E. Siler, Jr.,** and
Carlos T. Bea, Circuit Judges.
Opinion by Judge Siler;
Partial Concurrence and Partial Dissent by Judge Bea
*This disposition is published pursuant to Ninth Circuit Rule 36-2(g),
at the request of the panel.
**The Honorable Eugene E. Siler, Jr., Senior United States Circuit
Judge for the Sixth Circuit, sitting by designation.
6363
6366 IN RE: KAGENVEAMA
COUNSEL
Ronald L. Hoffbauer, Phoenix, Arizona, for the appellant.
Andrew S. Nemeth, Phillips & Associates, Phoenix, Arizona,
for the appellee.
Edward Himmelfarb, Department of Justice, Washington, DC,
amicus in support of the appellant.
M. Jonathon Hayes, Woodland Hills, California, and Tara
Twomey, National Association of Consumer Bankruptcy
Attorneys, Washington, DC, amicus in support of the appel-
lee.
IN RE: KAGENVEAMA 6367
OPINION
SILER, Circuit Judge:
Edward Maney, as Chapter 13 Trustee, appeals the bank-
ruptcy court’s order confirming the plan of the debtor, Laura
Kagenveama. He argues that the bankruptcy court erred by (1)
calculating Kagenveama’s “projected disposable income” by
multiplying her “disposable income” over the “applicable
commitment period” and (2) finding the five-year “applicable
commitment period” inapplicable because Kagenveama’s
resulting “projected disposable income” was a negative num-
ber. We affirm.
I. Background
In 2005, Kagenveama filed a petition for Chapter 13 pro-
tection in the bankruptcy court. In her filing she included the
required Schedules A through J, a Statement of Financial
Affairs, a Master Mailing List, and a Form B22C Statement
of Current Monthly Income and Calculation of Commitment
Period and Disposable Income. Schedules I and J listed
Kagenveama’s projected monthly income and expenses. Her
Schedule I listed a monthly gross income of $6,168.21, with
a monthly net income of $4,096.26. Her Schedule J listed
monthly expenses of $2,572.37. Subtracting total monthly
expenses from total monthly net income left Kagenveama
with $1,523.89 in monthly income available to pay creditors.
Kagenveama filed an amended Form B22C listing an aver-
age monthly gross income of $6,168.21 for the six months
prior to her bankruptcy petition, yielding an annual income of
$74,018.52. Because she was an above-median income
debtor, § 1325(b)(3) required her to recalculate her expenses
pursuant to § 707(b)(2). This recalculation produced a revised
Form B22C listing her “disposable income” as a negative
number: -$4.04.
6368 IN RE: KAGENVEAMA
Kagenveama determined that her “projected disposable
income” was a negative number because her “disposable
income” was a negative number. Because her “projected dis-
posable income” was a negative number, she would not be
subject to the “applicable commitment period.” However, she
voluntarily proposed a plan in which she would pay $1,000
per month with a commitment period of three years. This plan
yielded an estimated dividend of $9,444.38 to her unsecured
creditors. The Trustee objected because the plan extended
only three years, not the five-year “applicable commitment
period” under § 1325(b)(4)(A)(ii). The bankruptcy court held
that because Kagenveama had no “projected disposable
income,” she was not required to propose a plan with an “ap-
plicable commitment period” of five years. The Trustee
appealed, and the bankruptcy court entered an order certifying
this case for direct appeal to this court.
II. Analysis
The parties dispute the meaning of two phrases contained
in § 1325 of the Bankruptcy Code, as amended by the Bank-
ruptcy Abuse Prevention and Consumer Protection Act of
2005 (“BAPCPA”), Pub. L. No. 109-8, 119 Stat. 23: “pro-
jected disposable income” and “applicable commitment peri-
od.” This case raises solely questions of law, which we review
de novo. In re Alsberg, 68 F.3d 312, 314 (9th Cir. 1995).
A. “Projected Disposable Income”
The parties dispute whether “projected disposable income”
means “disposable income,” as defined by § 1325(b)(2), pro-
jected over the “applicable commitment period,” as Kagen-
veama contends, or whether that phrase connotes a forward-
looking concept that only uses the “disposable income” calcu-
lation as a starting point, as the Trustee contends. Based on
the plain meaning of the statute, we hold that the debtor’s
interpretation is correct.
IN RE: KAGENVEAMA 6369
The starting point for resolving a dispute over the meaning
of a statute begins with the language of the statute itself.
United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241
(1989). Where statutory language is plain, “the sole function
of the courts—at least where the disposition required by the
text is not absurd—is to enforce it according to its terms.”
Lamie v. United States Tr., 540 U.S. 526, 534 (2004).
Here, each party claims that the plain text of the statute
supports its respective interpretation of projected disposable
income. Kagenveama argues that the term “disposable
income,” as used in § 1325(b)(1)(B), is specifically defined in
§ 1325(b)(2). She asserts that the word “projected” is a modi-
fier of “disposable income” that requires multiplying “dispos-
able income” out over the “applicable commitment period.”
The Trustee argues that “disposable income” and “projected
disposable income” are not directly linked concepts. Under
the Trustee’s approach, “projected” necessarily implies a
forward-looking concept of “disposable income,” which
would allow a court to depart from the § 1325(b)(2) “dispos-
able income” calculation and consider other evidence to
derive “projected disposable income.”
[1] We begin our analysis with the statute. If a trustee or
holder of an allowed unsecured claim objects to the confirma-
tion of a plan that does not propose to pay unsecured claims
in full, the court may confirm the plan only if the plan pro-
vides that all of the debtor’s “projected disposable income”
received during the “applicable commitment period” is
applied to make payments under the plan. 11 U.S.C.
§ 1325(b)(1). “Projected disposable income” is not a defined
term in the Bankruptcy Code. However, “disposable income”
is defined in § 1325(b)(2).1 Reading the statute as requiring
1
Disposable income is defined as “current monthly income received by
the debtor . . . less amounts reasonably necessary to be expended . . . .”
11 U.S.C. § 1325(b)(2). Current monthly income, as used here, is a new
term under BAPCPA defined as “the average monthly income from all
6370 IN RE: KAGENVEAMA
“disposable income,” as defined in subsection (b)(2), to be
projected out over the “applicable commitment period” to
derive the “projected disposable income” amount is the most
natural reading of the statute, and it is the one we adopt.
[2] Courts must give meaning to every clause and word of
a statute. Negonsott v. Samuels, 507 U.S. 99, 106 (1993). Sec-
tion 1325 uses the term “disposable income” in only two
places—§ 1325(b)(1)(B) (“projected disposable income”) and
§ 1325(b)(2) (defining “disposable income”). The substitution
of any data not covered by the § 1325(b)(2) definition in the
“projected disposable income” calculation would render as
surplusage the definition of “disposable income” found in
§ 1325(b)(2). There can be no reason for § 1325(b)(2) to exist
other than to define the term “disposable income” as used in
§ 1325(b)(1)(B). “If ‘disposable income’ is not linked to ‘pro-
jected disposable income’ then it is just a floating definition
with no apparent purpose.” In re Alexander, 344 B.R. 742,
749 (Bankr. E.D.N.C. 2006). The plain meaning of the word
“projected,” in and of itself, does not provide a basis for
including other data in the calculation because “projected” is
simply a modifier of the defined term “disposable income.”
Therefore, to give meaning to every word of § 1325(b), “dis-
posable income,” as defined in § 1325(b)(2), must be “pro-
jected” in order to derive “projected disposable income.”
[3] Furthermore, “projected disposable income” has been
linked to the “disposable income” calculation before BAP-
sources that the debtor receives” during the 6-month period preceding the
commencement of the case or a date upon which the current income is
determined by the court. 11 U.S.C. § 101(10A)(A). Rule 1007(b)(6) of the
Federal Rules of Bankruptcy Procedure requires a debtor to file a state-
ment of current monthly income on Form B22C. Section 1325(b)(3)
requires that if a debtor’s annualized current monthly income is greater
than the median family income of similarly-sized households, then
“amounts reasonably necessary to be expended” are determined in accor-
dance with § 707(b)(2).
IN RE: KAGENVEAMA 6371
CPA. Any change in how “projected disposable income” is
calculated only reflects the changes dictated by the new “dis-
posable income” calculation; it does not change the relation-
ship of “projected disposable income” to “disposable income.”2
Pre-BAPCPA, “projected disposable income” was determined
by taking the debtor’s “disposable income,” under
§ 1325(b)(2)(A) & (B), and projecting that amount over the
“applicable commitment period.” In re Anderson, 21 F.3d
355, 357 (9th Cir. 1994).
In Anderson, a pre-BAPCPA case, the trustee objected to
the confirmation of the debtors’ Chapter 13 bankruptcy plan
because the debtors proposed to pay only their “projected dis-
posable income” as calculated at the time of the filing of their
plan. 21 F.3d at 356. The trustee demanded that the debtors
sign a certification that they would devote to the plan all of
their actual “disposable income,” as determined by the
trustee, as a prerequisite for plan confirmation. Id. at 356-57.
The bankruptcy court denied plan confirmation because the
debtors refused to sign the certification. Id. at 357. We
reversed, holding that § 1325(b)(1)(B) requires payment of
“projected disposable income” as calculated at the time of
confirmation. Id. at 357-58. Anderson shows that, prior to the
2
BAPCPA significantly changed the definition of “disposable income.”
Before BAPCPA, “disposable income” was defined as income “received
by the debtor and which is not reasonably necessary to be expended for
the maintenance or support of the debtor . . . .” 11 U.S.C. § 1325(b)(2)
(2000), amended by Bankruptcy Abuse Prevention and Consumer Protec-
tion Act of 2005, Pub. L. No. 109-8, § 102(h)(2), 119 Stat. 23. Determin-
ing what was “reasonably necessary” for the maintenance or support of the
debtor was dependent on each debtor’s individual facts and circumstances.
This amorphous standard produced determinations of a debtor’s “dispos-
able income” that varied widely among debtors in similar circumstances.
BAPCPA replaced the old definition of what was “reasonably necessary”
with a formulaic approach for above-median debtors. 11 U.S.C.
§ 1325(b)(3). This formula significantly changed the way in which “dis-
posable income” is calculated. However, as demonstrated in Anderson,
“disposable income” has always been linked to “projected disposable
income.”
6372 IN RE: KAGENVEAMA
enactment of BAPCPA, courts determined the debtor’s “dis-
posable income” and then “projected” that sum into the future
for the required duration of the plan when considering
whether to confirm the plan. Id. at 357.
The Trustee presents two lines of authority to support his
argument that § 1325(b)(1)(B) requires a forward-looking
determination of “projected disposable income.” The first line
holds that the calculation of “ ‘projected disposable income’
must be based upon the debtor’s anticipated income during
the term of the plan, not merely an average of [the debtor’s]
prepetition income” as computed on Form B22C. In re Hard-
acre, 338 B.R. 718, 722 (Bankr. N.D. Tex. 2006). This
authority reasons that “projected disposable income” is not
related to “disposable income”; therefore courts are free to
arrive at a calculation of “projected disposable income” that
ignores the § 1325(b)(2) definition of “disposable income.”
Id. at 723.
We reject this position because the plain language of
§ 1325(b) links “disposable income” to “projected disposable
income,” and we are bound by the definition of “disposable
income” provided in § 1325(b)(2)(B). Even before the enact-
ment of BAPCPA, we held that “projected” modified “dispos-
able income,” thus foreclosing the argument that “projected
disposable income” has no relationship to “disposable
income.” Anderson, 21 F.3d at 357. In light of Anderson, we
cannot read the word “projected” to be synonymous with the
word “anticipated” in this context. See id. “Those courts that
argue Congress intended something more when it referred to
‘projected disposable income’ in § 1325(b)(1)(B) fail to
address the fact that Congress defined ‘disposable income’
subsequently in § 1325(b)(2).” In re Miller, 361 B.R. 224,
235 (Bankr. N.D. Ala. 2007) (citing In re Rotunda, 348 B.R.
324, 331 (Bankr. N.D.N.Y. 2006)). To get from the statutorily
defined “disposable income” to “projected disposable
income,” “one simply takes the calculation . . . and does the
math.” In re Alexander, 344 B.R. at 749.
IN RE: KAGENVEAMA 6373
The second line of cases that the Trustee urges us to follow
holds that calculation of “disposable income” under
§ 1325(b)(2) is merely a starting point for deriving “projected
disposable income.” In re Jass, 340 B.R. 411, 415 (Bankr. D.
Utah 2006). Under this line of cases, the data from Form
B22C creates a presumptively correct definition of or a rebut-
table presumption of “disposable income.” Id. at 418. The
presumptively correct calculation can be rebutted or supple-
mented by other evidence to arrive at “projected disposable
income.” Id. Courts may consider both the future and histori-
cal finances of the debtor to make the calculation. Id. at 416.
This line of authority is unpersuasive because no text in the
Bankruptcy Code creates a presumptively correct definition of
“disposable income” subject to modification based on antici-
pated changes in income or expenses. In fact, the textual
changes enacted by BAPCPA compel the opposite conclu-
sion. The revised “disposable income” test uses a formula to
determine what expenses are reasonably necessary. See 11
U.S.C. § 1325(b)(2)-(3). This approach represents a deliberate
departure from the old “disposable income” calculation,
which was bound up with the facts and circumstances of the
debtor’s financial affairs. In re Winokur, 364 B.R. 204, 206
(Bankr. E.D. Va. 2007); In re Farrar-Johnson, 353 B.R. 224,
231 (Bankr. N.D. Ill. 2006) (stating that “[e]liminating flexi-
bility was the point: the obligations of [C]hapter 13 debtors
would be subject to clear, defined standards, no longer left to
the whim of a judicial proceeding”) (internal quotations omit-
ted).
Moreover, BAPCPA’s changes to the Bankruptcy Code
made it clear that Congress knows how to create a presump-
tion. See 11 U.S.C. § 707(b)(2) (stating when the court shall
presume abuse exists). Congress could have included a pre-
sumption in § 1325(b)(1)-(2), but it did not. When Congress
includes language in one part of a statute and excludes it from
another part of the same statute, it is presumed that Congress
acted purposely in the disparate inclusion or exclusion. Barn-
6374 IN RE: KAGENVEAMA
hart v. Sigmon Coal Co., Inc., 534 U.S. 438, 439-40 (2002)
(citing Russello v. United States, 464 U.S. 16, 23 (1983));
Camacho v. Bridgeport Fin. Inc., 430 F.3d 1078, 1081 (9th
Cir. 2005). We decline to follow the line of cases holding that
Form B22C creates a presumptively correct definition of “dis-
posable income.”
[4] Finally, the disposition required by the plain text of
§ 1325(b) is not absurd. Section 1325(b)’s new approach to
calculating “disposable income” for above-median debtors
produces a less favorable result for unsecured creditors when
“disposable income” is plugged into the “projected disposable
income” calculation. We “will not override the definition and
process for calculating disposable income under § 1325(b)(2)-
(3) as being absurd simply because it leads to results that are
not aligned with the old law.” In re Alexander, 344 B.R. at
747. Furthermore, we will not de-couple “disposable income”
from the “projected disposable income” calculation simply to
arrive at a more favorable result for unsecured creditors, espe-
cially when the plain text and precedent dictate the linkage of
the two terms. See Anderson, 21 F.3d at 358 (stating that
“§ 1325(b)(1)(B) requires provision for ‘payment of all pro-
jected disposable income’ as calculated at the time of confir-
mation, and we reject the Trustee’s attempt to impose a
different, more burdensome requirement on the debtors’ plan
as a prerequisite to confirmation”). If the changes imposed by
BAPCPA arose from poor policy choices that produced unde-
sirable results, it is up to Congress, not the courts, to amend
the statute. See Lamie, 540 U.S. at 542.
[5] Furthermore, Chapter 13 trustees were aware of the
change in the law and notified Congress of their concerns
before BAPCPA was passed, but Congress failed to act. In re
Alexander, 344 B.R. at 747-48; Marianne B. Culhane &
Michaela M. White, Catching Can-Pay Debtors: Is the Means
Test the Only Way, 13 Am. Bankr. Inst. L. Rev. 665, 682
(2005). Absent any revision by Congress, we presume that it
was aware of the new result, and the decision not to amend
IN RE: KAGENVEAMA 6375
the statute was intentional. Lamie, 540 U.S. at 541. While the
new law may produce less favorable results for unsecured
creditors when applied to above-median income Chapter 13
debtors, it is far from absurd to hold that debtors with no “dis-
posable income” have no “projected disposable income.” See
In re Alexander, 344 B.R. at 750. Furthermore, if the debtor’s
income increases after the plan is confirmed, the trustee may
seek plan modification under § 1329.
B. “Applicable Commitment Period”
The Trustee argues that “applicable commitment period”
mandates a temporal measurement, i.e., it denotes the time by
which a debtor is obligated to pay unsecured creditors, while
Kagenveama argues that it mandates a monetary multiplier,
i.e., it is merely useful in calculating the total amount to be
repaid by a debtor. Based on the plain language of the statute,
we conclude that the Trustee’s interpretation is correct, but
that the “applicable commitment period” requirement is inap-
plicable to a plan submitted voluntarily by a debtor with no
“projected disposable income.”
[6] Prior to BAPCPA, the Bankruptcy Code provided for a
three-year period. However, BAPCPA changed “three year”
to “applicable commitment,” but left the word “period”
unchanged. Based on widely accepted temporal connotation
of “period,” the bankruptcy court noted that § 1329(c) “makes
clear that ‘applicable commitment period’ has a temporal
meaning . . . .” However, the bankruptcy court went on to
observe that in this case the “applicable commitment period”
is irrelevant because it is applicable only to the payment of
“projected disposable income,” and, in this case, there is no
“projected disposable income.” The bankruptcy court also
noted that the plain language of the Code compels the conclu-
sion that the “applicable commitment period” is not the mini-
mum plan duration, but instead “represents the period over
which payments of projected disposable income must be
devoted to unsecured creditors.”
6376 IN RE: KAGENVEAMA
[7] If the trustee or the holder of an allowed unsecured
claim objects to confirmation of the plan and the debtor is
unable to provide for full payment of allowed unsecured
claims, the debtor must propose a plan in which all “projected
disposable income” is submitted to make payments for the
“applicable commitment period” in order for the plan to be
confirmed. 11 U.S.C. § 1325(b)(1). The plain meaning of the
word “period” indicates a period of time. In re Alexander, 344
B.R. at 750 (citing Webster’s New World Dictionary 1004
(3d College ed. 1994)). However, “applicable commitment
period” is exclusively linked to § 1325(b)(1)(B) and the “pro-
jected disposable income” calculation. In re Alexander, 344
B.R. at 751. Thus, only “projected disposable income” is sub-
ject to the “applicable commitment period” requirement. Id.Any money other than “projected disposable income” that the
debtor proposes to pay does not have to be paid out over the
“applicable commitment period.” Id.[8] There is no language in the Bankruptcy Code that
requires all plans to be held open for the “applicable commit-
ment period.” Section 1325(b)(4) does not contain a free-
standing plan length requirement; rather, its exclusive purpose
is to define “applicable commitment period” for purposes of
the § 1325(b)(1)(B) calculation. Subsection (b)(4) states “For
purposes of this subsection, the ‘applicable commitment
period’ . . . shall be . . . not less than 5 years” for above-
median debtors. Subsection (b)(1)(B) states that “the debtor’s
‘projected disposable income’ to be received in the ‘applica-
ble commitment period’ . . . will be applied to make payments
under the plan.” When read together, only “projected dispos-
able income” has to be paid out over the “applicable commit-
ment period.” When there is no “projected disposable
income,” there is no “applicable commitment period.”
[9] Subsections (b)(2) (“disposable income”) and (b)(3)
(“amounts reasonably necessary to be expended”) exist only
to define terms relevant to the subsection (b)(1)(B) calcula-
tion. Subsection (b)(4), which defines “applicable commit-
IN RE: KAGENVEAMA 6377
ment period,” is no different. Aside from the definitional
subsection (b)(4), the term “applicable commitment period” is
used only once in § 1325: the court may approve the plan over
objection if all of the debtor’s “projected disposable income”
received during the “applicable commitment period” is
applied to plan payments. Thus, the “applicable commitment
period” applies only to plans that feature “projected dispos-
able income.”3 Here there is none.
A recent decision by the Eighth Circuit Bankruptcy Appel-
late Panel (“BAP”) supports limiting the application of the
“applicable commitment period” to plans that have “projected
disposable income.” In re Frederickson, 375 B.R. 829, 835
(2007). In Frederickson, the BAP held that “applicable com-
mitment period” does not refer to a minimum plan duration,
but rather it refers to the time in which the debtor must pay
“projected disposable income” to the trustee. Id. Another stat-
utory provision, § 1322(d), governs plan duration for above
median income debtors. Id. The BAP concluded that “[§]
1322(d) would be superfluous if § 1325(b)(4) set the length of
the plan.” Id. We find this reasoning persuasive.
The Trustee suggests that we should require a five-year
plan for confirmation under § 1325 to allow an extended
period for unsecured creditors to seek modification under
§ 1329. If a debtor proposes a three-year plan, receives a dis-
charge, and experiences an increase in income in year four,
then the debtor receives a windfall at the expense of creditors.
While this approach would promote the sound policy of
3
The only other mention of the “applicable commitment period” in
Chapter 13 lends support to this position. Section 1329 references the “ap-
plicable commitment period under section 1325(b)(1)(B)” when discuss-
ing plan modification requirements. This reference shows that the
“applicable commitment period” only has meaning when applied to the
§ 1325(b)(1)(B) calculation. While reading subsection (b)(4) in isolation
may lend support to the Trustee’s position, reading it in conjunction with
subsection (b)(1)(B) shows that subsection (b)(4) governs the length of the
plan only where there is “projected disposable income.”
6378 IN RE: KAGENVEAMA
requiring debtors to repay more of their debts, there is nothing
in the Bankruptcy Code that requires a debtor with no “pro-
jected disposable income” to propose a five-year plan. We
must enforce the plain language of the Bankruptcy Code as
written. We may not make changes to the plain language of
the Bankruptcy Code based on policy concerns because that
is the job of Congress. Nothing in the Bankruptcy Code states
that the “applicable commitment period” applies to all Chap-
ter 13 plans.
We stress that nothing in our opinion prevents the debtor,
the trustee, or the holder of an allowed unsecured claim to
request modification of the plan after confirmation pursuant
to § 1329. Here, we are dealing with the plan confirmation
requirements of § 1325, not plan modification under § 1329.
Another section of the Bankruptcy Code governs modification
of the plan before confirmation. 11 U.S.C. § 1323. Because
Congress directly addressed the modification of plans in other
sections, we need not transform § 1325 into a plan modifica-
tion tool.
[10] Here, the “applicable commitment period” is irrelevant
because it applies only to the payment of “projected dispos-
able income,” and, in this case, there is no “projected dispos-
able income.” Kagenveama’s voluntary payments come from
money other than “projected disposable income”; therefore,
there is no requirement that these payments occur for five
years. Because her “projected disposable income” was zero or
less and, therefore, the “applicable commitment period” did
not apply, the bankruptcy court properly confirmed her plan.
If her income changes in the future before completion of the
plan, the Trustee or the holder of an unallowed secured claim
may seek modification of the plan under § 1329.
III. Conclusion
For the foregoing reasons, we AFFIRM the order of the
bankruptcy court.
IN RE: KAGENVEAMA 6379
BEA, Circuit Judge, concurring in part and dissenting in part:
This case deals with how long a Chapter 13, “wage-earner”
debtor in bankruptcy proceedings will have to worry about
whether his unpaid creditors can bring up any good changes
in his fortunes, to get paid his debts to them. The majority
lays down a rule: So long as the debtor can calculate no “dis-
posable income” at the time his creditor plan is confirmed, he
can rest easy. The debtor can propose as short a time period
as he wants: a day, a week or a month. I dissent because Con-
gress pretty clearly stated his creditors should have up to five
years to keep an eye on the debtor to perhaps share in any of
his new good times. Respectfully to the majority, I think the
rule they adopt creates an incentive for the picaresque, by
encouraging a debtor to fiddle with his expenses and income
just before he presents his creditor plan for confirmation. So
long as he can push up his expenses and delay receipt of
income so as to show no “disposable income” at the time of
plan confirmation, he can propose such a short period of time
that he can save any postponed income from the creditors’
clutches. The majority’s result is not required by a close read-
ing of the Bankruptcy Code; indeed, quite the opposite is the
correct reading. For this reason, I partially dissent from the
majority opinion.
I concur in the majority opinion’s holding as to the calcula-
tion of “projected disposable income.” I agree projected dis-
posable income in 11 U.S.C. § 1325(b)(1)(B) is calculated
according to § 1325(b)(2)’s statutory definition of “disposable
income”, using Form B22C—regardless the debtor’s actual
disposable income on the date of plan confirmation—and then
projected out over the “applicable commitment period.” Opin-
ion at 6368-75.
I also concur in the majority opinion’s holding that “appli-
cable commitment period,” as defined in § 1325(b)(4) and
used in § 1325(b)(1)(B) provides a temporal requirement for
the length of a Chapter 13 Plan. Opinion at 6374-75. I part
6380 IN RE: KAGENVEAMA
company with the majority, however, in its determination the
applicable commitment period is mandatory only when the
debtor has projected disposable income at the time of plan
confirmation. Opinion at 6375-77.
Section 1325(b)(1)(B) provides:
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 . . . the plan provides that
all of the debtor’s projected disposable income to be
received in the applicable commitment period begin-
ning on the date that the first payment is due under
the plan will be applied to make payments to unse-
cured creditors under the plan.
11 U.S.C. § 1325(b)(1) & (b)(1)(B).
The applicable commitment period—not less than 5 years
for an above median debtor, § 1325(b)(4)(A)(ii), and 3 years
for a below median debtor, § 1325(b)(4)(A)(i)—can be short-
ened “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). The majority agrees the applicable commit-
ment provides a temporal requirement, but holds this temporal
requirement should not apply to a debtor who has no pro-
jected disposable income at the commencement of the com-
mitment period. The language of the statute provides no such
exception. The statute requires a plan to “provide that all of
the debtor’s projected disposable income to be received in the
applicable commitment period . . . will be applied to make
payments to unsecured creditors.” 11 U.S.C. § 1325(b)(1)(B)
(emphasis added). Thus, even if a debtor’s projected dispos-
able income is zero at the time he seeks plan confirmation, he
must commit to pay such disposable income as he receives it
—should he receive it—during the applicable commitment
period. He can make such a commitment only by proposing
IN RE: KAGENVEAMA 6381
a plan that will be in existence at that later date (or otherwise
commit to pay all he owed to unsecured creditors in a shorter
period of time).
Although the purpose of Chapter 13 bankruptcy is to pro-
vide debtors a second chance, it is not a pardon of debt or, at
least, a pardon right away. Chapter 13 bankruptcy is a statu-
torily constructed second chance for debtors that, through the
plan modification procedures in § 1329, also provides a sec-
ond chance for creditors to be repaid by a bankrupt debtor
whose financial situation has improved. Section 1329 specifi-
cally allows for periodic adjustments to § 1325’s disposable
income calculation. 11 U.S.C. § 1329(b) (stating § 1325’s
requirements “apply to any modification under subsection (a)
of [§ 1329].”). The applicable commitment period allows
unsecured creditors who are otherwise not receiving payment
from a debtor five years to monitor the debtor’s finances and,
in the event the debtor’s disposable income increases during
that time, file for plan modification under § 1329. Plan modi-
fication may occur only “after confirmation of the plan but
before the completion of payments under such plan,” and a
modified plan “may not provide for payments over a period
that expires after the applicable commitment period under
section 1325(b)(1)(B).” 11 U.S.C. § 1329(a), (c).
The majority agrees that § 1329’s provision for plan modi-
fication after confirmation is the proper way for a creditor to
deal with a possible change in the debtor’s income. Opinion
at 6378. It then states that, because different sections of the
Bankruptcy Code provide for plan modification,1 “we need
not transform § 1325 into a plan modification tool.” Id. The
five-year requirement of § 1325, however, is a necessary
component of plan modification. If the plan is not continued
1
The majority also cites 11 U.S.C. § 1323’s provision for plan modifica-
tion before plan confirmation. Opinion at 6378. Of course, this pre-
confirmation modification provision has no bearing on an analysis of why
Congress required a confirmed plan to last for a certain period of years.
6382 IN RE: KAGENVEAMA
for a five-year period (post-confirmation), an unsecured credi-
tor who discovers the debtor’s finances have dramatically
improved will find that there is no extant plan to modify. 11
U.S.C. § 1329(a), (c).
Section 1325 governs plan confirmation by providing the
requirements a plan must meet before it may be confirmed
(when an unsecured creditor or the plan trustee has objected
to confirmation of the plan). One of those plan confirmation
requirements is that a plan propose an applicable commitment
period of a certain length—for an above median income
debtor, five years—or pay all owed to unsecured creditors in
a shorter period. 11 U.S.C. § 1325(b)(4).
The majority states the duration of an above-median debt-
or’s plan is governed only by § 1322(d);2 it incorrectly states
that to hold that § 1325(b)(4)’s applicable commitment period
requirement sets the length of the plan would render
§ 1322(d) superfluous. Opinion at 6377. First, § 1322(d) sets
the maximum length of all plans and says nothing of a mini-
mum duration. Section 1325(b)(4)’s applicable commitment
period is congruous, rather than superfluous, to § 1322(d);
section 1325(b)(4) mirrors § 1322(d)’s maximum plan length
of five years for above-median debtors, but applies only to
those plans where the plan trustee or an unsecured creditor
has objected to the plan’s confirmation, and allows for a
shorter plan period than § 1322(d)’s maximum period for
above-median debtors who propose to pay all they owe to
unsecured creditors in a shorter period of time. Further, the
majority statement that § 1325’s applicable commitment
period provides a temporal requirement for a debtor with pro-
2
Under § 1322(d), if the debtor is an above-median debtor, “the plan
may not provide for payments over a period that is longer than 5 years.”
11 U.S.C. § 1322(d)(1). If the debtor is a below-median debtor, “the plan
may not provide for payments over a period that is longer than 3 years,
unless the court, for cause, approves a longer period, but the court may not
approve a period that is longer than 5 years.” 11 U.S.C. § 1322(d)(2).
IN RE: KAGENVEAMA 6383
jected disposable income at the time of plan confirmation is
inconsistent with its later statement that reading § 1325 to
require a plan length would render § 1322(d)’s maximum plan
length provisions superfluous.
Under the majority’s rule, a debtor could mischievously
“game the system” and avoid repaying debt to his unsecured
creditors by inflating his pre-plan confirmation expenses3 and
deferring income until after plan confirmation.4 That debtor
could gain confirmation of his plan with a short commitment
period and then reduce his actual expenses and accept his
deferred income. Unsecured creditors who discover the debt-
or’s improved financial situation would be limited to seek
3
A debtor could inflate the expenses used to calculate his disposable
income. Although the IRS National Standards and Local Standards—
instead of the debtor’s actual expenditures—sets the amount for many of
an above-median income debtor’s expenses (e.g., food, clothing, housing,
and transportation), 11 U.S.C. § 707(b)(2)(A)(ii)(I), some expenses are not
fixed by such IRS standards. Specifically, the disposable income calcula-
tion deducts from the debtor’s “current monthly income” (i.e., the average
monthly income from all sources the debtor received during the 6-month
period before filing for bankruptcy, 11 U.S.C. § 101(10A)) his actual
expenditures for, among other things: charitable contributions, childcare,
dependent care, life insurance, optional telephone and telephone services,
internet service. See Form B22C, http://www.uscourts.gov/rules/
BK_Forms_08_Official/B_022C_0108v2.pdf (Every debtor files “Form
B22C” with his Chapter 13 Plan to determine whether he is an above or
below median income debtor. An above median income debtor must com-
plete additional sections on the form to calculate his “disposable income”
based on his “current monthly income” and the expenses provided for in
11 U.S.C. § 707(b)(2). 11 U.S.C. § 1325(b)(2)-(3)).
4
Although Chapter 13 bankruptcy may be sought only by an “individual
with regular income” (i.e., an “individual whose income is sufficiently sta-
ble and regular to enable such individual to make payments under a
[Chapter 13] plan . . . .”, 11 U.S.C. § 101(30)), a debtor could defer
income until after plan confirmation the following ways: (1) the debtor
could ask his employer to defer payment of some of his expected income
until after plan confirmation, perhaps receiving such payment through a
post-confirmation bonus; or (2) the debtor could continue working at his
current job and defer accepting a higher paying job opportunity until after
plan confirmation.
6384 IN RE: KAGENVEAMA
modification of the debtor’s plan only within the short com-
mitment period; indeed, a short commitment period might
prevent unsecured creditors ever from receiving payment
from a crafty debtor of his unsecured debt. There are many
imaginable instances where a debtor’s financial situation will
dramatically improve after plan confirmation—either through
good fortune or clever planning. In such instances, only if a
debtor is required to keep his plan active for some period of
time (i.e., an “applicable commitment period,” which Con-
gress set at five years for an above-median income debtor),
will unsecured creditors receive repayment of monies the
debtor owes them.
Accordingly, I would hold that regardless whether an
above-median debtor’s projected disposable income is zero,
the debtor whose income is above-median is required to pro-
pose a five-year plan,5 unless his plan otherwise proposes to
pay all he owes to unsecured creditors in a shorter period of
time. In the case of an above-median debtor who has no pro-
jected disposable income, at the moment of plan confirmation,
pursuant to the statutory definition of disposable income, this
temporal requirement would allow unsecured creditors to
monitor the debtor’s finances and, in the event the debtor’s
disposable income increases during the five-year period, file
for plan modification under § 1329, seek a recalculation of
projected disposable income per Form B22C, and seek to
obtain some repayment from the debtor. In the event a debtor
wished to pay 100% of his unsecured debt in less than five
years, there is no justification for requiring him to drag out the
payment process. Obviously, creditors entitled to payment in
full under the plan would rather receive such payment sooner
than later.
In Kagenveama’s case, the fact the six-month period used
5
The debtor is required to provide a plant even if the plan were to show
no payments planned to be made to unsecured creditors over the five-year
period.
IN RE: KAGENVEAMA 6385
in calculating the original projected disposable income
yielded a zero does not mean that a different six-month
period, some time down the five-year line, will also yield a
zero. Accordingly, I would reverse the bankruptcy judge’s
order rejecting the Trustee’s objection to Kagenveama’s fail-
ure to propose a plan that either adheres to the five-year appli-
cable commitment period or pays all she owes to unsecured
creditors in a shorter period of time.