UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

RICHARD L. BAUD & MARLENE BAUD,

Appellants,

v.

KRISPEN S. CARROLL,

Appellee.

 /

Case No. 09-10673

Honorable Nancy G. Edmunds

OPINION AND ORDER REVERSING BANKRUPTCY COURT’S FEBRUARY 14, 2009

ORDER CONFIRMING PLAN

This is an appeal from the Bankruptcy Court’s February 14, 2009 order confirming

Richard and Marlene Baud’s amended Chapter 13 plan. For the reasons set forth below,

the Bankruptcy Court’s order is REVERSED. 

I. Facts and Procedural Background

The parties do not dispute the facts relevant to this appeal. On September 26, 2008,

Debtors Richard and Marlene Baud filed a joint petition for relief under Chapter 13 of the

Bankruptcy Code. On October 13, 2008, they filed Schedules I and J showing their current

monthly income and expenses. Schedule I listed a combined average monthly gross

income of $9115.63, comprised of the debtor’s salary and the debtor spouse’s social

security income, and a monthly income of $5348.73 after payroll deductions. Schedule J

listed monthly expenses of $4946.41. Subtracting total monthly expenses from monthly

income left Debtors with a monthly net income of $402.32. Debtors also filed Form 22C,

which required them to calculate their average monthly income for the six months

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preceding the filing of their bankruptcy petition. Form 22C shows an average monthly

income of $7086.72 and an annualized income of $85,040.64. 

Because Debtors’ annual income exceeded the state median income for a family of

two, Debtors checked the box on Form 22C indicating that their applicable commitment

period is 5 years. As above-median debtors, they were required pursuant to 11 U.S.C. §

1325(b)(2) and (3), to calculate their monthly disposable income according to 11 U.S.C.

§707(b)(2)(A) and (B) by subtracting standard IRS expense deductions from their average

monthly income received during the six months prior to the filing of their petition. After

taking allowed deductions, Debtors’ monthly disposable income on Form 22C was negative

$1203.55.

Debtors submitted a Chapter 13 plan, which provided for monthly payments for 36

months. The payments would increase based on the cessation of 401(k) payments, and

would consist of monthly payments of $402.32 for the first seven months, monthly

payments of $881.18 for the next two months, and monthly payments of $1,178.43 for the

following twenty-seven months. Under this plan, general unsecured creditors were to

receive $30,321.65. (Appellants’ Br., at 3.)

The Trustee objected to confirmation of Debtors’ proposed plan on the grounds that

the plan, which does not offer payment in full to unsecured creditors, should be extended

to 60 months because the applicable commitment period pursuant to 11 U.S.C. §

1325(b)(4) for above-median debtors is five years. (R. at 28.) On December 16, 2009, the

Bankruptcy Court held a confirmation hearing and heard oral argument regarding this issue.

The Bankruptcy Court adjourned the hearing until January 27, 2009 to allow the parties to

submit briefing on the issues. At the January 27, 2009 hearing, the Bankruptcy Court

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sustained the Trustee’s objections to confirmation, stating that the Court was not

persuaded by the Debtors’ additional case law to overrule its previous decision interpreting

the “applicable commitment period,” In re Davis, 348 B.R. 449 (Bankr. E.D. Mich. 2006),

and that the Court found two recent opinions of the Eighth Circuit Court of Appeals and the

Sixth Circuit Bankruptcy Appellate Panel persuasive. (Appellants’ Ex. E, at 6.) The

Bankruptcy Court adjourned the hearing to allow Debtors to file an amended Chapter 13

plan.

Debtors submitted an amended Chapter 13 plan, which provided for monthly

payments for 60 months. The payments would consist of monthly payments of $402.32 for

the first seven months, monthly payments of $881.18 for the next two months, and monthly

payments of $1,178.43 for the following fifty-one months. Under this plan, general

unsecured creditors would receive $58,603.97. (Appellants’ Br. at 3.) On February 5,

2009, Debtors filed objections to their own amended plan. (R. at 45.) On February 14,

2009, the Bankruptcy Court issued an order confirming Debtors’ amended plan over

Debtors’ objections. (R. at 47.) The Debtors’ timely appeal of the Bankruptcy Court’s order

is now before the Court. 

II. Jurisdiction

Appellate jurisdiction is conferred on this Court by 28 U.S.C. § 158(a)(1), which

provides that “[t]he district courts of the United States shall have jurisdiction to hear appeals

(1) from final judgments, orders, decrees . . . of bankruptcy judges . . . under Section 157

of this title.” This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2).

III. Standard of Review

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This appeal raises solely questions of law, which this Court reviews de novo.

Westbanco Banke Barnesville v. Rafoth (In re Baker & Getty Fin. Serv., Inc.), 106 F.3d

1255, 1259 (6th Cir. 1997). 

IV. Analysis

This appeal concerns the interpretation of Section 1325 of the Bankruptcy Code, as

amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

(“BAPCPA”). 11 U.S.C. § 1325(b)(1), as amended by BAPCPA, provides in relevant part:

(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 income received by the debtor (other than child support

payments, foster care payments, or disability payments for a dependent child

made in accordance with applicable nonbankruptcy law to the extent

reasonably necessary to be expended for such child) 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 obligations, that first becomes

payable after the date the petition is filed; and

(ii) for charitable contributions . . . ; 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 subparagraph (A)(ii) of paragraph (2), shall be determined in

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accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor

has current monthly income, when multiplied by 12, greater 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

* * * 

(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--

* * * 

(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

* * * 

(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 secured claims over a shorter period. 

The phrase “current monthly income” in § 1325(b)(2) is defined as the average monthly

income of the debtor from all sources during the six-month period preceding the filing of the

petition. 11 U.S.C. § 101(10A).

Debtors contend that the Bankruptcy Court erred by concluding that: (1) the

“applicable commitment period” under 11 U.S.C. § 1325(b)(1)(B) determines the length of

a Chapter 13 plan rather than the dollar amount to be paid to unsecured creditors; and that

(2) the “applicable commitment period” applies to Chapter 13 debtors with no “projected

disposable income.” The Trustee responds that: (1) this Court lacks jurisdiction because

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Debtors do not have standing to appeal confirmation of their own amended plan; and that

(2) the “applicable commitment period” dictates a plan length of 60 months for the abovemedian Debtors who, contrary to their assertions, do have “projected disposable income.”

The Court begins with the threshold question of whether the Debtors have standing

to appeal the Bankruptcy Court’s confirmation of their own amended plan. The Sixth Circuit

has noted that “[a]ppellate standing in bankruptcy cases is more limited than Article III

standing or the prudential requirements associated therewith.” In re Troutman Enters., Inc.,

286 F.3d 359, 364 (6th Cir. 2002). An appellant has standing to appeal a bankruptcy court

order if he was “‘directly and adversely affected pecuniarily by the order.’” Id. (quoting

Fidelity Bank, Nat’l Ass’n v. M.M. Group, Inc., 77 F.3d 880, 882 (6th Cir. 1996)). Under the

“‘person aggrieved’ doctrine” standing is limited to “‘persons with a financial stake in the

bankruptcy court’s order.’” Id. (internal citations omitted). “[A] person may only appeal a

bankruptcy court order when it diminishes their property, increases their burdens, or

impairs their rights.” Id.

In In re Zahn, 526 F.3d 1140 (8th Cir. 2008), the Eighth Circuit held that a debtor had

standing to appeal confirmation of her own amended Chapter 13 plan. Upon the Trustee’s

objection, the debtor in Zahn filed an amended plan increasing her total monthly income

and, thereby, extending the plan length. Id. at 1141-42. The Eighth Circuit explained: 

Zahn was forced, over her express objection, to propose an amended plan.

As the BAP noted, Zahn ‘preferred her original plan.’ Zahn amended her

plan with provisions she believed were erroneous and not required by the

Bankruptcy Code, in order to avoid dismissal. ‘That a party may appeal from

a judgment in his favor when there has been some error prejudicial to him,

or he has not received all he is entitled to, has quite generally been held by

the courts, and there is no sound reason otherwise.’ The extended length of

Zahn’s plan—a consequence of the inclusion of her non-filing husband’s IRA

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distributions—is material and prejudicial to Zahn. Zahn is thereby an

aggrieved party.

In re Zahn, 526 F.3d at 1142 (internal citations omitted). The Court finds the Eighth

Circuit’s reasoning to be persuasive. The Bauds desired a plan length of 36 months and

only submitted an amended plan of 60 months upon the Trustee’s objection in order to

avoid dismissal. The Bankruptcy Court’s confirmation of their amended Chapter 13 plan

resulted in the Bauds having to make monthly payments for an additional 24 months, at an

added expense of $28,282.32. As such, the order confirming Debtors’ amended plan

increased Debtors’ burden and “‘directly and adversely’” affected them “‘pecuniarily.’” In

re Troutman Enters., Inc., 286 F.3d at 364 (citing Fidelity Bank, Nat’l Ass’n, 77 F.3d at 882).

The Court finds that they are “aggrieved parties” with appellate standing. 

The Court now turns to the merits of Debtors’ appeal. The Bankruptcy Court

sustained the Trustee’s objection that Debtors’ original 36-month Chapter 13 plan did not

satisfy 11 U.S.C. § 1325(b)(1)(B) because, as above-median debtors who were not paying

their unsecured claims in full, the Bauds were required to provide payments over the entire

applicable commitment period of five years. Debtors had contended that their original 36-

month Chapter 13 plan satisfied the requirements of 11 U.S.C. § 1325(b) because the

applicable commitment period does not determine plan length but is, instead, a multiplier

in a formula used to determine the projected disposable income that Debtors must pay to

unsecured creditors. The Bankruptcy Court incorporated its decision in In re Davis, 348

B.R. 449, 458 (Bankr. E.D. Mich. 2006), in which it held that: 

[A] debtor’s applicable commitment period, as determined by §1325(b)(4),

does impose a minimum length of plan rather than a minimum amount, by

application of § 1325(b)(1)(B) to debtors whose Chapter 13 plans do not pay

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unsecured creditors in full and whose plans are the subject of an objection

by a trustee or an unsecured creditor. 

(Appellants’ Ex. E, at 6.) Debtors contend that the Bankruptcy Court’s conclusion was

erroneous. The Court agrees with the Bankruptcy Court that “applicable commitment

period” is temporal in nature, mandating a minimum plan length for the payment of

projected disposable income. The Court finds, however, that “applicable commitment

period” does not apply to debtors with no projected disposable income. 

The Court begins its analysis with the language of the statute, itself. United States

v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). “‘When the statute’s 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. U.S. Trustee, 540 U.S. 526, 534

(2004) (internal citations omitted). Section 1325(b)(1)(B) provides that if a trustee or holder

of an unsecured claim objects, a plan may not be confirmed unless “the plan provides 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 under the plan.”

Section 1325(b)(4) defines the “applicable commitment period” as 3 years for below-median

debtors and 5 years for above-median debtors. 

“Two threshold requirements are apparent from this language.” Musselman v. eCast

Settlement Corp., 394 B.R. 801 (Bankr. E.D. N.C. 2008). In order for this subsection to

apply, a debtor must have “unsecured creditors” and “projected disposable income.” Id.

(noting that “if none of the subsection’s provisions are relevant to a debtor’s situations, then

that subsection does not apply”); see also In re Davis, 392 B.R. 132, 146-47 (Bankr. E.D.

Pa. 2008) (likening application of ‘applicable commitment period’ to debtors with no

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projected income to absurd result of requiring five-year plan for debtors with no unsecured

creditors); In re Green, 378 B.R. 30, 39 (Bankr. N.D. N.Y. 2007) (noting that “it simply

makes no sense to invoke §1325(b)(1)(B) and its mandates by pointing to a negative

number which will not be received”).

In order to hold that Debtors are required to propose a 60-month plan even though

they have no projected disposable income, the Court would have to conclude that Section

1325(b)(4) constitutes an independent plan-length requirement. But the phrase “For the

purposes of this subsection” in §1325(b)(4) shows that the term “applicable commitment

period” in that subsection and the requirement of 3 or 5 years is “exclusively linked” to

§1325(b)(1)(B). In re Alexander, 344 B.R. 742, 751 (Bankr. E.D. N.C. 2006). As the Ninth

Circuit explained:

There is no language in the Bankruptcy Code that requires all plans to be

held open for the ‘applicable commitment period.’ Section 1325(b)(4) does

not contain a freestanding 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 ‘applicable

commitment period’ . . . will be applied to make payments under the plan.’

When read together, only ‘projected disposable income’ has to be paid out

over the ‘applicable commitment period.’ When there is no ‘projected

disposable income,’ there is no ‘applicable commitment period.’

Kagenveama v. Maney, 541 F.3d 868, 876 (9th Cir. 2008); see also Musselman, 394 B.R.

at 814 (noting that section 1325(b)(1)(B) “delineates the situations in which the definition

of ‘applicable commitment period’ set forth in § 1325(b)(4) will apply”); In re Brady, 361 B.R.

765, 777 (Bankr. D. N.J. 2007) (holding that ‘applicable commitment period’ “must . . . be

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read in the context of section 1325(b)(1)(B)” and is “irrelevant” for debtors with no projected

disposable income).

Several bankruptcy courts also point to 11 U.S.C. § 1322(d), which sets a maximum

Chapter 13 plan length of 5 years for all above-median debtors and note that “if Congress

had intended to mandate the minimum chapter 13 plan length without regard to whether

a debtor had unsecured creditors or projected disposable income, it could have easily

amended section 1322(d) to so state.” In re Davis, 392 B.R. at 148; cf. In re Alexander,

344 B.R. at 751. The Court finds this reasoning persuasive. See Robinson v. Shell Oil Co.,

519 U.S. 337, 341 (1997) (instructing courts to consider “the broader context of the statute

as a whole” in assessing “[t]he plainness or ambiguity of statutory language”).

In his dissent in Kagenveama, Judge Bea contends that above-median debtors with

no projected disposable income are still bound by a five-year ‘applicable commitment

period.’ Judge Bea explains that requiring debtors to remain in the plan for 3 or five years

provides unsecured creditors with a longer period of time within which to file for plan

modification under 11 U.S.C. § 1329 should the debtors’ financial situation improve.

Kagenveama, 541 F.3d at 877-81 (Bea, J., concurring in part and dissenting in part). But,

as the majority noted:

[T]here is nothing in the Bankruptcy Code that requires a debtor with no

‘projected 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

considerations because that is the job of Congress . . . Because Congress

directly addressed the modification of plans in other sections, we need not

transform § 1325 into a plan modification tool. 

Kagenveama, 541 F.3d at 877. Moreover, countervailing policy considerations—such as

providing Chapter 13 debtors with a “fresh start”—are served by not requiring debtors to

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 The Bankruptcy Court did not make explicit whether it was sustaining Trustee’s

objection and denying confirmation of Debtors’ plan because it concluded that “applicable

commitment period” does apply to Debtors with negative disposable income or because

it concluded that Debtors did not actually have negative disposable income. In light of the

fact that the Bankruptcy Court noted that it found In re Frederickson and Petro “helpful and

supportive”— cases addressing the meaning of “projected disposable income”— this Court

assumes it was the latter. (Appellants’ Ex. E, at 6.)

11

remain in Chapter 13 when they have no required payments to unsecured creditors. In re

Davis, 392 B.R. at 146.

Because the Bauds have no projected disposable income, the ‘applicable

commitment period’ requirement “simply does not come into play.” In re Alexander, 344

B.R. at 751. “Any money other than ‘projected disposable income’ that [Debtors] propose[]

to pay does not have to be paid out over the ‘applicable commitment period,’” and so they

were not required to propose a five-year plan. Kagenveama, 541 F.3d at 876. 

The Trustee argues in the alternative that Debtors do have “projected disposable

income,” and so must propose a five-year plan. The parties essentially dispute the

meaning of the phrase “projected disposable income” in 11 U.S.C. § 1325(b)(1)(B).

Debtors interpret “projected disposable income” to mean “disposable income,” as defined

by § 1325(b)(2), projected over the “applicable commitment period.” By this definition, the

Debtors’ projected disposable income is negative $1203.55 per month, as shown on their

Form 22C. The Trustee contends that “projected disposable income” under §

1325(b)(1)(B) is not necessarily the same as “disposable income” as calculated under §

1325(b)(2). The Trustee points to Debtor’s current monthly income of $402.32, as shown

on their Schedules I and J, as proof that Debtors do, in fact, have projected disposable

income.1

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Prior to BAPCPA, a court would ensure that a debtor was devoting his disposable

income to the plan by looking at the debtor’s monthly income at the time of filing, as shown

on Schedule I, and assessing whether the actual expenses that he was deducting, as

shown on Schedule J, were reasonably necessary for his support. In re Kolb, 366 B.R.

802, 804-05 (Bankr. S.D. Ohio 2007). Determining whether expenses were ‘reasonably

necessary’ “was dependent on each debtor’s individual facts and circumstances,” and

“[t]his amorphous standard produced determinations of a debtor’s ‘disposable income’ that

varied widely among debtors in similar circumstances.” Kagenveama, 541 F.3d at 873 n.2.

BAPCPA replaced this definition of ‘disposable income’ with a “formulaic approach

for above median debtors.” 11 U.S.C. § 1325(b)(1), as amended by BAPCPA, provides

that upon objection, a debtor’s Chapter 13 plan that does not provide payment in full to

unsecured creditors may only be confirmed if: 

(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 income received by the debtor . . . less amounts reasonably

necessary to be expended . . . 

11 U.S.C. § 1325(b)(1)-(2). The term “current monthly income” in § 1325(b)(2) is defined

as the average monthly income of the debtor from all sources over the six-month period

preceding the filing of the petition. 11 U.S.C. § 101(10A)(A). A debtor is now required to

file along with Schedules I and J, a statement of current monthly income on Form 22C. For

an above-median debtor, “amounts reasonably necessary to be expended” “shall be

determined in accordance with subparagraphs (A) and (B) of section 707(b)(2).” 11 U.S.C.

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§ 1325(b)(3). 11 U.S.C. § 707(b)(2) substitutes IRS standard expense deductions for the

debtor’s actual expenses recorded on Schedule J. The issue before this Court is how

“projected disposable income,” which is not defined in the Bankruptcy Code, should be

interpreted in light of the recently amended definition of “disposable income.” 

The Ninth Circuit, as well as a number of bankruptcy courts, have held that the plain

meaning of § 1325(b) dictates a “mechanical” approach whereby “projected disposable

income” is calculated simply by projecting “disposable income,” as defined in subsection

(b)(2), over “the applicable commitment period.” Kagenveama, 541 F.3d at 872; see also,

e.g., In re Musselman, 394 B.R. at 807-13; In re Green, 378 B.R. at 35-39; In re Kolb, 366

B.R. 802 (Bankr. S.D. Ohio 2007); In re Rotunda, 349 B.R. 324 (Bankr. N.D. N.Y. 2006);

In re Alexander, 344 B.R. at 748-50. The Ninth Circuit held that because the term

“disposable income” appears in only two places in section 1325 — in the phrase “projected

disposable income” in section 1325(b)(1)(B) and in the definition of “disposable income” in

section 1325(b)(2)—treating “projected” as “simply a modifier of the defined term

‘disposable income,’” gives meaning to every word of the statute. Kagenveama, 541 F.3d

at 872-73. The Ninth Circuit explained:

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

‘projected disposable income’ then it is just a floating definition with no

apparent purpose.’ 

Id. at 872-73 (quoting In re Alexander, 344 B.R. at 749). Courts adopting the mechanical

approach also note that “projected disposable income” was linked to the “disposable

income” calculation prior to BAPCPA, and reason that “[a]ny change in how ‘projected

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disposable income’ is calculated [should] only reflect[] the changes dictated by the new

‘disposable income’ calculation.” Id. at 873; see also Kolb, 366 B.R. at 816 n.20.

By contrast, the majority of courts to have addressed the issue have held that

“projected disposable income” should not be mechanically based on the historical

“disposable income” calculation. Some courts adopting this “forward-looking” approach

conclude that “projected disposable income” bears little or no relationship to the “disposable

income” calculation, which is based on pre-petition income and expenses. See, e.g., In re

Hardacre, 338 B.R. 718 (Bankr. N.D. Tex. 2006); In re Riggs, 359 B.R. 649 (Bankr. E.D.

Ky. 2007). Other courts treat “disposable income,” as shown on Form 22C, as the

presumptively correct calculation of “projected disposable income” but permit this

presumption to be rebutted with evidence of a change in the debtor’s circumstances that

renders the historical figure an inaccurate predictor of disposable income during the

pendency of the plan. See, e.g., In re Lasowski, __F.3d__, No. 08-2017, 2009 WL

2448246 (8th Cir. Aug. 12, 2009); In re Turner, __F.3d__, No. 08-2163, 2009 WL 2136867

(7th Cir. July 20, 2009); In the Matter of Nowlin, __F.3d__, No. 08-20066, 2009 WL

2105356 (5th Cir. July 17, 2009); In re Lanning, 545 F.3d 1269 (10th Cir. 2008); In re

Frederickson, 545 F.3d 652 (8th Cir. 2008); In re Thomas, 395 B.R. 914 (6th Cir. B.A.P.

2008); In re Petro, 395 B.R. 369 (6th Cir. B.A.P. 2008); In re Gonzalez, 388 B.R. 292

(Bankr. S.D. Tex. 2008); In re Davis, 392 B.R. 132 (Bankr. E.D. Pa. 2008); In re Jass, 340

B.R. 411 (Bankr. D. Utah 2006). The Court finds the reasoning of the courts adopting the

“forward-looking” “presumption” approach to be persuasive for several reasons.

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First, by equating “projected disposable income” with “disposable income,” the

mechanical approach fails to give effect to the word, “projected.” As the Hardacre court

explained:

The court is to presume that ‘Congress acts intentionally and purposefully

when it includes particular language in one section of a statute but omits it in

another...’ While Congress could have used the phrase ‘disposable income’

in section 1325(b)(1)(B) and thereby invoked its definition as set forth in

section 1325(b)(2), it chose not to do so. Consequently, Congress must

have intended ‘projected disposable income’ to be different than ‘disposable

income.’

In re Hardacre, 338 B.R. at 723 (internal citations omitted). The Court agrees with the Fifth

Circuit that “the independent definition of ‘projected,’”—“‘to calculate, estimate, or predict

(something in the future), based on present data or trends’”—necessitates “a forwardlooking view” of ‘projected disposable income’ “grounded in the present via the statutory

definition of ‘disposable income premised on historical data.’” Nowlin, 2009 WL 2105356,

at *3 (internal citations omitted). 

Second, as other courts have pointed out, the mechanical approach fails to give effect

to section 1325(b)(1)(B)’s inclusion of the phrases, “to be received in the applicable

commitment period,” “as of the effective date of the plan,” and “will be applied to make

payments,” which all “suggest[] consideration of the debtor’s actual financial circumstances”

as of plan confirmation and in the future. In re Lanning, 545 F.3d at 1279-80; Nowlin, 2009

WL 2105356, at *4. Focusing solely on a debtor’s pre-petition income under the

“disposable income” calculation renders these phrases “superfluous.” In re Lanning, 545

F.3d at 1280.

By permitting courts to take into account evidence of changed circumstances affecting

or likely to affect a debtor’s disposable income post-confirmation, the “forward-looking”

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“presumption” approach gives effect to the statute’s future-oriented words and phrases.

While “projected disposable income” will often be the same as the calculation of

“disposable income” based on pre-petition income, discrepancies will exist when a debtor’s

income has substantially increased or decreased around the time of filing or is reasonably

certain to substantially increase or decrease in the future. In re Petro, 395 B.R. at 376

(debtors’ ‘projected disposable income’ calculation may be rebutted by evidence of

unemployment during six months prior to filing of petition (id. at 372-73)); see also Nowlin,

2009 WL 2105356, at *1, *8 (affirming denial of confirmation where debtor’s ‘disposable

income’ calculation included 401(k) loan payments scheduled to cease in two years); In re

Lanning, 545 F.3d at 1270-71 (‘disposable income’ calculation produced inaccurate

‘projected disposable income’ because debtor had received buyout from employer during

six-month pre-petition period); In re Turner, 2009 WL 2136867, at *1, *7 (Trustee could

rebut presumption of Form 22C’s accuracy with evidence that debtor took deduction for

house that he planned to surrender after plan confirmation). 

The Court rejects, however, the approach taken by some courts adopting a “forwardlooking” interpretation whereby a debtor’s “projected disposable income” is determined by

looking solely at net income at the time of filing as shown on Schedules I and J. See, e.g.,

In re Riggs, 359 B.R. at 652-53. Divorcing “projected disposable income” from the

“disposable income” calculation ignores the plain language of section 1325(b) linking the

two phrases and would render the amended section 1325(b)(2) “just a floating definition

with no apparent purpose.” In re Alexander, 344 B.R. at 749; see also Kagenveama, 541

F.3d at 872-73. By contrast, the “forward-looking” “presumption” view gives effect to future2:09-cv-10673-NGE-RSW Doc # 12 Filed 09/03/09 Pg 16 of 20 Pg ID 160
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 The Court acknowledges that this approach reads a presumption into the statute,

“requir[ing] a certain disregard of the notion that Congress knows how to create a

presumption when it intends one.” In re Lanning, 545 F.3d at 1279 (citing In re

Kagenveama, 541 F.3d at 874). 

17

oriented words in section 1325(b) while remaining grounded in the amended ‘disposable

income’ calculation. As the Fifth Circuit explained:

[W]e are not persuaded that considering a present or reasonably certain

future change of circumstances, and adjusting the debtor’s projected

disposable income accordingly, renders § 1325(b)(2)’s definition of

‘disposable income’ surplusage . . . the mechanical projection of the debtor’s

statutorily defined ‘disposable income’ serves as the starting point, subject

to rebuttal by appropriate evidence of changed circumstances. Thus, the

statute’s definition is central to the court’s task of projecting disposable

income. 

Nowlin, 2009 WL 2105356, at *6.2

In this case, the Trustee has presented no evidence of changed circumstances to

rebut the presumption that Debtors’ “disposable income” as shown on Form 22C is also

Debtors’ “projected disposable income.” See, e.g., In re Davis, 392 B.R. at 41-42 (Trustee

failed to rebut presumption of Form 22C computation when “no evidence offered that the

debtors’ pre-bankruptcy average income and expenses have improved recently in any

material aspect”); In re Jass, 340 B.R. at 419 (debtors failed to rebut presumption that

“projected disposable income” is number shown on Form 22C when wife did not testify as

to how husband’s recent hospitalization would affect their projected income and expenses).

The Trustee merely points to the fact that the Debtor’s net monthly income at the time of

filing, as shown on Schedules I and J, was $402.32. But the Court declines to find a

positive net income at the time of filing, as shown on Schedules I and J, sufficient to rebut

the presumption of Form 22C’s accuracy.

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Congress revised the ‘disposable income’ test to employ a formula to determine what

expenses are reasonably necessary and to base projected disposable income on a debtor’s

income during the six months prior to filing rather than income at filing. As such, BAPCPA

“represents a deliberate departure from the old ‘disposable income’ calculation.”

Kagenveama, 541 F.3d at 874. In this case, the difference between Schedules I and J and

the Form 22C calculation could be attributable to the fact that current monthly income

under the new definition excludes Debtors’ social security income, see In re Kibbe, 361

B.R. 302, 311-12 (1st Cir. B.A.P. 2007), or Debtors’ actual expenses could be less than the

permissible IRS deductions used in the amended “disposable income’ test. “[W]e are

bound by the definition of “disposable income” provided in § 1325(b)(2)(B),” and allowing

Schedules I and J to rebut the presumption of Form 22C’s accuracy would override the

changes imposed by BAPCPA. Kagenveama, 541 F.3d at 874; see also In re Davis, 392

B.R. at 140-41 (noting that “‘[i]f the existence of net monthly income in Schedules I and J,

by itself, were determinative of PDI . . . the elaborate statutory means test methodology for

determining PDI required by § 1325(b)(3), commonly viewed as the cornerstone of the

BAPCPA reforms, would be nullified” (internal citations omitted)).

That Debtors show surplus income on their Schedules I and J that they are not

required to commit to their plan “appears to be at odds with the Congressional intent in

enacting BAPCPA to “‘‘ensure that those who can afford to repay some portion of their

unsecured debts [be] required to do so.’’” In re Brady, 392 B.R. at 774 (quoting In re

Hardacre, 338 B.R. at 725 (quoting 151 Cong. Rec. S 2470 (March 10, 2005))); see also

In re Frederickson, 545 F.3d at 658-59 (permitting positive net income on Schedules I and

J to rebut presumption because doing so effectuates congressional intent to require above2:09-cv-10673-NGE-RSW Doc # 12 Filed 09/03/09 Pg 18 of 20 Pg ID 162
 3

 If Debtors’ income changes after confirmation, the Trustee or an unsecured creditor

is free to seek modification of the plan pursuant to 11 U.S.C. § 1329. Kagenveama, 541

F.3d at 877.

19

median debtors to pay more of their unsecured debt). But “Congress established very

clearly the fixed formulas for identifying the debtors who can afford to repay their unsecured

debts” and “[t]he statute must be applied according to its terms.” In re Brady, 392 B.R. at

774. 

Moreover, as the court in Brady noted: 

Absent a known or expected change in the debtors’ income and/or expenses,

Schedules I and J only provide a different snapshot of the debtors’ financial

circumstances at the time of the filing of the petition, and do not reflect more

accurately than any other formula the debtors’ anticipated income going

forward during the Chapter 13 plan.

In re Brady, 392 B.R. at 774-75. Congress was permitted to decide that a debtor’s income

during the six months prior to filing of the petition is a more accurate predictor of projected

disposable income than income at the time of filing. Similarly, Congress was permitted to

conclude that replacing judicial discretion regarding the reasonableness of expenses with

standard IRS expense deductions would result in a more accurate or more uniform method

of calculating projected disposable income. The Court will not override these legislative

decisions. 

Since the Trustee has not rebutted the presumption with evidence of changed

circumstances, the Court derives Debtors’ “projected disposable income” from Form 22C.

In this case, that figure is negative $1203.55. Because Debtors’ do not have “projected

disposable income,” they were not required to propose a 60-month Chapter 13 plan.3

V. Conclusion

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For the foregoing reasons, the Bankruptcy Court’s February 14, 2009 order confirming

Debtors’ amended Chapter 13 plan is REVERSED and the case is REMANDED to the

Bankruptcy Court to allow Debtors to modify their amended Chapter 13 plan in a manner

consistent with this opinion.

s/Nancy G. Edmunds 

Nancy G. Edmunds

United States District Judge

Dated: September 3, 2009

I hereby certify that a copy of the foregoing document was served upon counsel of record

on September 3, 2009, by electronic and/or ordinary mail.

s/Carol A. Hemeyer 

Case Manager

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