Source: https://lundinonchapter13.com/Home/DisplaySectionContent?sectionNumber=101.1
Timestamp: 2019-07-16 12:55:14
Document Index: 107961775

Matched Legal Cases: ['§ 101', '§ 1325', '§ 1325', '§ 101', '§ 1325', '§ 707', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 507', '§ 507', '§ 1322', '§ 507', '§ 507', '§ 507', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 707', '§ 707', '§ 86', '§ 91', '§ 407', '§ 48', '§ 403', '§ 46', '§ 90', '§ 541', '§ 407', '§ 48', '§ 90', '§ 101', '§ 379', '§ 36', '§ 92', '§ 490', '§ 99', '§ 99', '§ 99', '§ 513', '§ 136', '§ 519', '§ 136', '§ 707', '§ 486', '§ 97', '§ 1325', '§ 1325', '§ 470', '§ 93', '§ 1325', '§ 707', '§ 485', '§ 96', '§ 1325', '§ 75', '§ 506', '§ 458', '§ 1322', '§ 88', '§ 1322', '§ 1322', '§ 458', '§ 1322', '§ 88', '§ 1322', '§ 1325', '§ 493', '§ 100', '§ 263', '§ 127', '§ 127', '§ 127', '§ 193', '§ 108', '§ 1322', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1322', '§ 1322', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', 'art, 394', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1322', '§ 1325', '§ 1325', '§ 1325', '§ 1322', '§ 1322', '§ 1325', '§ 707', '§ 707', '§ 707', '§ 707', '§ 507', '§ 707', '§ 1325', '§ 1325', '§ 707', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 707', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 1325', '§ 1325', '§ 1325', '§ 1325', '§ 707', '§ 1325']

101.1 - What Do Unsecured Creditors Get?
§ 101.1 — What Do Unsecured Creditors Get?
Under pre-BAPCPA law, there was a certain logic about what unsecured creditors could expect as distributions under a Chapter 13 plan.1 Somewhat oversimplified, on the asset side, unsecured creditors were entitled to receive the present value of what unsecured creditors would be paid in a hypothetical Chapter 7 case if the debtor’s assets were collected and liquidated (net of exemptions)—the so-called best-interests-of-creditors test.2 On the income side, Chapter 13 trustees policed the disposable income test in § 1325(b) so that debtors were required to pay all projected income after deduction of reasonable and necessary expenses for at least 36 months.3 The disposable income test was based on the best information available at the time of confirmation with respect to the actual income and expenses of the debtor. The maximum that creditors could demand from Chapter 13 debtors was marked by the feasibility test in § 1325(a)(6): the debtor must be able to make the payments proposed by the plan based on financial circumstances at the time of confirmation.4
BAPCPA pulls the props from under two of these three standards for ensuring the rights of unsecured creditors in Chapter 13 cases. With respect to assets, except for the exotic case in which the debtor has homestead equity in excess of $125,000 or in which the debtor has committed crimes or made fraudulent conveyances over a period of years,5 BAPCPA increases the exclusions from property of the estate, reducing the amount that would be available for unsecured creditors in a hypothetical liquidation.6 This is particularly true for debtors with employee benefits such as retirement accounts and health care accounts.
The impact of BAPCPA on distributions to unsecured creditors in Chapter 13 cases is even more pronounced with respect to income issues. For all Chapter 13 debtors, the substitution of current monthly income (CMI) for the pre-BAPCPA evaluation of the debtor’s actual income means that Chapter 13 trustees and unsecured creditors have less leverage at confirmation to require debtors to account for and commit income to payments under the plan. Ironically, this loss of leverage amplifies for wealthier Chapter 13 debtors with CMI greater than applicable median family income. For over-median-income Chapter 13 debtors, “amounts reasonably necessary to be expended—” are determined by a statutory formula that substitutes for the policing function exercised by the Chapter 13 trustee. Without that oversight, the expenses of Chapter 13 debtors with CMI greater than applicable median family income will exhaust a greater portion of CMI than would be allowed by Chapter 13 trustees under the pre-BAPCPA reasonable and necessary test.
Specific examples of how unsecured creditors are likely to suffer under BAPCPA are easily collected. Before BAPCPA, Chapter 13 trustees routinely litigated the extent to which Chapter 13 debtors could exempt pension funds, private retirement accounts, IRAs and the like.7 After BAPCPA, the value of most retirement assets will be unreachable in any individual bankruptcy case. The same will be true for education IRAs and for funds used to purchase tuition credits or contributed to a state tuition program.8
On the income side, there is a double whammy for unsecured creditors. Because the CMI calculation in § 101(10A) is an average of the six months before the month in which the Chapter 13 petition is filed,9 CMI will routinely overestimate the financial ability of some Chapter 13 debtors and underestimate the financial ability of other Chapter 13 debtors. If the debtor has recently lost a well-paying job, CMI will overestimate the amount of income available to fund a plan. If CMI is substantially higher than the debtor’s actual income at confirmation, the feasibility test in § 1325(a)(6) will prevent confirmation of a plan.
On the other hand, if the debtor’s income is improving at the time of confirmation, CMI is still based on the historical six-month average before the petition and the debtor’s actual financial ability to fund a plan may exceed the amount required to satisfy unsecured creditors under the disposable income test as reworked by BAPCPA. The trustee or an allowed unsecured claim holder will be in the awkward position of arguing that some other provision of the Bankruptcy Code requires the debtor to make a greater commitment than the disposable income test.
The second part of the double whammy is the way expenses and priority claims are paid after BAPCPA. In all Chapter 13 cases, to determine disposable income, CMI is reduced by child support, foster care and disability payments, amounts required to repay pension loans and contributions withheld or received by an employer for a retirement plan.10 Before BAPCPA, these amounts were not deducted from income to determine disposable income available for distributions under the plan.
On the expense side, things get even darker. BAPCPA increased the kinds and amounts of debts that will be entitled to priority and full payment ahead of general unsecured creditors in a Chapter 13 case. The class of taxes entitled to priority was enlarged.11 The definition of domestic support obligation (DSO) was enlarged, creating a larger class of alimony, maintenance and support debts that must be paid in full—with postpetition interest—to accomplish confirmation.12 New debts such as claims for personal injury or death resulting from the debtor’s operation of a motor vehicle while intoxicated were added to the list of priority claims that must be paid in full.
Absent consent of the priority claim holder, in any case in which the debtor cannot pay all unsecured claims in full, these new and enlarged priority claims will be separately classified for full payment. The pool remaining for general unsecured creditors will be reduced accordingly.
This reduction of available funds in favor of priority claims is even more pronounced because of the way BAPCPA calculates disposable income. When the debtor has CMI greater than applicable median family income, § 707(b)(2)(A)(iv) reduces CMI by 1/60th of the total of all debts entitled to priority.13 In effect, the money necessary to pay priority claims in full is deducted from CMI within the disposable income calculation before the amount available for payment to general unsecured creditors is calculated. The over-median-income debtor pays a DUI claim with the unsecured creditors’ money and can confirm a plan so long as there is enough future income to pay the DUI claim in full, without regard to whether the general unsecureds are left anything. Substitute “taxes” and “DSO claims” for the DUI debt in that sentence and it is clear that BAPCPA pushes the general unsecureds further into the bottom of the available income pool.
The math gets even stranger. Because of the way § 707(b)(2)(A) is constructed, 1/60th of the total of all priority debts comes out of the debtor’s CMI before disposable income is determined for a debtor with CMI greater than applicable median family income. The reduced amount of CMI is then multiplied by the applicable commitment period to determine the amount of disposable income that must be applied to unsecured debt under the plan.14 But after confirmation, priority claims such as taxes, DSOs and DWIs are unsecured debts that will be paid from the disposable income just determined. In other words, when the debtor has CMI greater than median family income, disposable income—the amount that is multiplied by the commitment period to determine what unsecured creditors must be paid—is first reduced by priority debt, and then priority debt is paid from the balance before nonpriority, unsecured creditors get the first cent. This may not be a logical distribution scheme, but it is the way new § 1325(b) works.
On a smaller scale, similar things will happen with respect to debtors with CMI less than applicable median family income. For under-median-income debtors, CMI is reduced by “amounts reasonably necessary to be expended—,” and included in that reduction is a DSO that “first becomes payable after the date the petition is filed.”15 This means that DSOs that first become payable after the petition are taken out of CMI to determine disposable income for a debtor with CMI less than applicable median family income.
That reduced CMI amount is then multiplied by the applicable commitment period to determine the amount that must be applied to make payments to unsecured creditors under the plan.16 Once again, DSO claims will be unsecured claims that share in the pool that has already been reduced to reflect DSOs that first become payable after the petition. This double reduction for a portion of the DSO claims is written into the statute by BAPCPA.
Some folks will undoubtedly say that the drafters of BAPCPA couldn’t have intended to allow Chapter 13 debtors to account for priority claims as a reduction in CMI and then to pay those same priority claims from the resulting reduced pool of money available for unsecured creditors. On the other hand, this is hardly the only reduction in CMI that is not logical if the goal was to maximize the money available to pay general unsecured claims. Don’t forget the statutory reduction of CMI for all scheduled contractually due secured debts when the debtor has CMI greater than applicable median family income.17 Chapter 13 debtors with CMI greater than applicable median family income are instructed by BAPCPA to reduce CMI by the 60-month average of all contractually due secured debts without regard to whether those debts will actually be paid through the Chapter 13 plan. The over-median-income debtor is required to reduce the pool of money available for unsecured creditors by the amount of scheduled contractually due secured debt even if the debtor has no intention of actually paying that secured debt through the plan.
For example, if the debtor owes $10,000 secured by a $10,000 car, that $10,000, plus interest, fees and costs contractually due during the 60-month commitment period is divided by 60 and subtracted from CMI before arriving at disposable income. The $10,000 reduces the pool of money available for unsecured debts. If the debtor surrenders the car through the plan, the $10,000 does not miraculously reappear in the calculation of what general unsecured creditors will get. Instead, the debtor keeps the $10,000, and unsecured creditors receive no part through the new disposable income test.
Under pre-BAPCPA law, when a secured claim provided for by the plan was paid in full in less than the 36-month minimum required by § 1325(b), the money that was being paid each month on account of that secured claim would then become available for distribution to unsecured creditors under the plan. Chapter 13 trustees would be aware of this circumstance at confirmation and would insist that unsecured creditors get their fair share when a secured claim was retired. Because the plan worked “backward” from the actual budget, under pre-BAPCPA law, the trustee could calculate quite precisely when allowed secured claims would be paid off and, accordingly, how much money would be available for unsecured creditors.
BAPCPA explodes all those possibilities because the entitlement of unsecured creditors under § 1325(b) is now determined based on a mathematical formula that does not reflect either the actual financial circumstances of the debtor at confirmation or the terms of the proposed plan. The result is that Chapter 13 trustees are disabled to argue that the entitlement of unsecured creditors exceeds the amount produced by the formula in § 1325(b).
Add to this discussion that BAPCPA has increased the entitlement of some secured creditors at the expense of distributions to unsecured creditors. For example, purchase money car claims incurred within 910 days of a Chapter 13 petition and debts secured by any other property incurred within one year of the petition will often be entitled to special treatment under the hanging sentence at the end of § 1325(a).18 By some interpretations, the BAPCPA amendments to § 1325(a)(5) will require Chapter 13 debtors to pay 910-day PMSI car claims and lienholders with debts incurred within one year of bankruptcy more than they were entitled to under pre-BAPCPA law. It is not that BAPCPA creates more income to be distributed to creditors in Chapter 13 cases; BAPCPA simply changed the distribution scheme to favor some secured creditors over other creditors at confirmation. The inevitable result will be that those lienholders favored by BAPCPA will get more money and unsecured creditors will get less.
There is likely to be painfully disparate treatment of unsecured debt in Chapter 13 cases depending on whether the debtors have CMI less than applicable median family income or greater than applicable median family income. In the example above, for the debtor with CMI less than applicable median family income, if the plan proposes to surrender the car, it is almost unimaginable that the Chapter 13 trustee would allow the debtor to keep the income that would otherwise have been used to pay the car lender through the plan. The Chapter 13 trustee will insist that it is not reasonable or necessary for the debtor to expend that money on a car that the plan proposes to surrender to the car lender. Over the life of the plan, the $10,000 (plus) that would have been paid to the car lender will be dragged back into the debtor’s disposable income and will be applied to payments to unsecured creditors under the plan.
For the Chapter 13 debtor with CMI greater than applicable median family income, the $10,000 comes out of CMI as part of the mathematical calculation in § 707(b)(2)(A), and it is beyond the Chapter 13 trustee’s reach even if the plan proposes to surrender the car. This is a strange outcome. By the happenstance that the debtor has higher CMI, the debtor gets to withhold from the general unsecured creditors $10,000 that a less wealthy debtor would be forced to apply to unsecured debt under a plan.
Something similar happens with respect to the accounting for a DSO that is assigned to a governmental unit under § 507(a)(1)(B). Detailed elsewhere,19 a DSO claim assigned to a governmental unit under § 507(a)(1)(B) is a priority debt that would ordinarily be entitled to payment in full through the Chapter 13 plan. Under new § 1322(b)(4), if the plan provides that all the debtor’s projected disposable income for a five-year period will be applied to make payments under the plan, the debtor can pay less than full payment of a claim entitled to priority under § 507(a)(1)(B).20 For a Chapter 13 debtor with CMI less than applicable median family income, if the plan proposes to pay a DSO assigned to a governmental unit under § 507(a)(1)(B) less than full payment, you can rest assured that the Chapter 13 trustee will capture any savings for payment to other unsecured claim holders. But when the debtor has CMI greater than applicable median family income, the entire amount of the DSO assigned to a governmental unit under § 507(a)(1)(B) is divided by 60 and subtracted from CMI before disposable income is determined under § 1325(b). If the plan then separately classifies the DSO assigned to a governmental unit for less than full payment, the difference does not spring back into CMI—it simply remains in the debtor’s hands under BAPCPA.
There is a more basic consequence of the use of mathematical formulas in BAPCPA that will reduce payments to general unsecured creditors and probably befuddle the bankruptcy courts for years to come. Because the applicable commitment period under § 1325(b)(4) is just a number used in the disposable income test calculation and not a statement of how long the Chapter 13 plan must last,21 it is quite likely that many Chapter 13 plans—especially for debtors with CMI greater than applicable median family income—will be paid in full in relatively few months after confirmation. Under pre-BAPCPA law, the disposable income calculation was based on the debtor’s actual income at confirmation, and earlier payoff could occur if creditors neglected to file claims or if the debtor realized a new source of income after confirmation. Chapter 13 debtors occasionally pay off Chapter 13 plans more quickly than expected from selling assets, using exempt assets or refinancing a house that has appreciated or in the especially unusual case when the debtor’s income increases substantially after confirmation.22 But as a general rule, under pre-BAPCPA law, projected disposable income fairly accurately reflected the financial resources available to the debtor after confirmation and debtors generally needed the full projected length of the plan to meet the confirmation requirement that all projected disposable income be paid to creditors for at least 36 months.
BAPCPA rewired the disposable income test to disconnect from actual income the amount that must be applied to unsecured creditors. A fair number of debtors are likely to have more actual income available than the plan will require to be paid to creditors. Because the difference between actual income and disposable income based on the artificial CMI calculation is not captured for general unsecured creditors by any provision of the Code, debtors will have more opportunities to cash out their plans from income.
Chapter 13 trustees and perhaps unsecured creditors will look for theories to force debtors with actual income greater than the disposable income test reveals to pay that extra income to unsecured creditors. Reminiscent of pre-1984 practice, trustees will argue lack of good faith under § 1325(a)(3) when the Chapter 13 debtor has more income available to pay unsecured creditors than the Bankruptcy Code requires the debtor to pay to unsecured creditors.23 Ironically, it will be debtors who argue that the comprehensive statutory statement in § 1325(b) of the amount of income that must be applied to payment of unsecured debts is not appropriately enlarged by an expansive (new) interpretation of the good-faith requirement for confirmation. And it is reasonable to ask, how can it be “bad faith” for an over-median-income debtor to twice account for priority debts when the statute requires the debtor to do exactly that?
Another odd feature of the treatment of unsecured creditors by BAPCPA is the distinct possibility that some Chapter 13 debtors will strive to have CMI greater than applicable median family income to take advantage of the guaranteed statutory exclusions and reductions of CMI under § 707(b)(2)(A) and (B). It will be especially interesting to watch Chapter 13 trustees and allowed unsecured claim holders argue that a Chapter 13 debtor has less income than the debtor claims to have.
Perhaps the drafters of BAPCPA have created a new paradigm for consumer debtors. Debtors with CMI greater than applicable median family income avoid the possibility of abuse litigation under § 707(b) by filing a Chapter 13 case in the first instance. Once in Chapter 13, by maximizing the statutory reductions and exclusions in § 707(b)(2)(A) and (B), the debtor exhausts most or all CMI, leaving little or nothing that must be applied to payment of unsecured debt under the disposable income test. The plan proposes to pay secured debts as necessary to keep collateral that the debtor wants, and those secured debts are paid in full relatively painlessly in two or three years after confirmation. At that point, all the payments required by the confirmed plan have been made and the debtor is entitled to a discharge.
What happened to unsecured creditors in this discussion? The question is best addressed to those who drafted BAPCPA.
Will Chapter 13 trustees and unsecured claim holders fight back? When the mathematics of BAPCPA at confirmation allows confirmation of a plan that pays little or nothing to unsecured claim holders and allows the debtor to complete payments in two or three years or less, will trustees and creditors file motions to amend to require the debtor to pay more and longer to unsecured creditors?24 There will be many interesting arguments whether modification after confirmation provides unsecured claim holders greater leverage when the only circumstance that has changed is that BAPCPA stacked the deck against general unsecured claim holders at confirmation.
1 See § 86.1 In General.
3 See discussion beginning at § 91.1 In General.
5 See § 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA.
6 See §§ 403.1 [ Property of the Chapter 13 Estate—New Ins and Outs ] § 46.2 Property of the Chapter 13 Estate—Changes by BAPCPA and 464.1 [ New Exclusions and Exemptions ] § 90.3 Exclusions and Exemptions after BAPCPA.
8 11 U.S.C. § 541(b)(5) and (6), discussed in §§ 407.1 [ New Exemptions and New Exemption Limitations ] § 48.3 Exemptions and Exemption Limitations Added by BAPCPA and 464.1 [ New Exclusions and Exemptions ] § 90.3 Exclusions and Exemptions after BAPCPA.
9 See 11 U.S.C. § 101(10A), discussed in §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19 Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3 Current Monthly Income: The Baseline.
10 See §§ 490.1 [ Child Support, Foster Care and Disability Payments ] § 99.3 Child Support, Foster Care and Disability Payments, 491.1 [ Pension Loan Repayments ] § 99.4 Pension Loan Repayments and 492.1 [ Employee Benefit Plan Contributions ] § 99.5 Employee Benefit Plan Contributions.
11 See § 513.1 [ Taxes ] § 136.3 Taxes after BAPCPA.
12 See § 519.1 [ Domestic Support Obligations ] § 136.21 Domestic Support Obligations after BAPCPA.
13 See 11 U.S.C. § 707(b)(2)(A)(iv), discussed in § 486.1 [ Total Priority Debts and Divide by 60 ] § 97.1 Total Priority Debts and Divide by 60.
14 See 11 U.S.C. § 1325(b)(1)(B).
15 11 U.S.C. § 1325(b)(2)(A)(i), discussed in § 470.1 [ Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Applicable Median Family Income ] § 93.1 Section 1325(b)(2)(A) and (B): “Amounts Reasonably Necessary to Be Expended—” When CMI Is Less Than Median Family Income.
16 See 11 U.S.C. § 1325(b)(1)(B).
17 See 11 U.S.C. § 707(b)(2)(A)(iii), discussed in § 485.1 [ Average Monthly Payments on Account of Secured Debts ] § 96.1 Average Monthly Payments on Account of Secured Debts.
18 See 11 U.S.C. § 1325(a), discussed beginning at § 75.1 In General: Modification Without § 506.
19 See § 458.1 [ Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) ] § 88.5 Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) after BAPCPA.
20 See 11 U.S.C. § 1322(b)(4), discussed in § 458.1 [ Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) ] § 88.5 Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) after BAPCPA.
21 See 11 U.S.C. § 1325(b)(4), discussed in § 493.1 [ Applicable Commitment Period Calculation ] § 100.1 Applicable Commitment Period Calculation.
22 See §§ 263.1 [ To Sell or Refinance Property of the Estate ] § 127.6 To Sell or Refinance Property of the Estate, 267.1 [ To Account for Payments Other Than under the Plan ] § 127.10 To Account for Payments Other Than under the Plan and 268.1 [ To Extend or Reduce the Time for Payments ] § 127.11 To Extend or Reduce the Time for Payments.
23 See § 193.1 [ Economic Components of Good Faith—In General ] § 108.1 Economic Components of Good Faith—In General.
Renteria v. Skelton (In re Renteria), 420 B.R. 526, 530 (S.D. Cal. Dec. 17, 2009) (Benitez) (Because payment to priority creditors is accounted for to calculate disposable income, it would be inappropriate for priority tax claimant to participate in distributions from projected disposable income. "Debtors' disposable income (which must be distributed to 'unsecured creditors' pursuant to Section 1325) already carves out full payment to Debtors' priority unsecured creditors. To then allow priority unsecured creditors to receive a distribution from Debtors' disposable income under the Chapter 13 plan would mean that priority unsecured creditors receive payment from two sources, i.e., the carve-out and Debtors' Chapter 13 plan. The practical effect of this outcome would be that not all of Debtors' disposable income would be used to pay unsecured creditors because, after the priority unsecured creditors are paid from Debtors' disposable income, the carve-out from the disposable income that was originally intended for those creditors would remain.").
In re Hemker, No. 15-90023, 2015 WL 5262080, at *2 (Bankr. C.D. Ill. Sept. 8, 2015) (Altenberger) (Debtors with CMI greater than applicable median family income can pay unsecured, priority attorney fees from disposable income, reducing the amount payable to general unsecured creditors. "Many courts have addressed the issue of whether the term 'unsecured creditors' includes both priority and nonpriority creditors and have reached different results. . . . [U]nlike trustee's fees, attorney fees will be counted only once if courts allow above median income debtors to pay attorney fees from their disposable income. . . . '[D]isposable income' should be interpreted in a way that allows all priority unsecured claims to be 'counted once, no more, no less.' . . . Debtors are entitled to deduct their attorney fees before calculating the amount that should be paid to nonpriority unsecured creditors.").
In re Smith, No. 09-64409, 2012 WL 6553786 (Bankr. N.D. Ohio Dec. 14, 2012) (unpublished) (Kendig) (Postconfirmation attorney fees not previously deducted as priority claims to determine projected disposable income are payable from the "pot" designated for unsecured creditors.).
In re Wise, 476 B.R. 653, 664 (Bankr. D.D.C. Aug. 16, 2012) (Teel) (Projected disposable income need not be paid in every month but can be paid in months after mortgage arrearage is paid in full. Plan proposed to cure mortgage arrearages for 15 months and to then pay projected disposable income to unsecured creditors for remaining 21 months of plan. "During the early months of the plan, . . . there is no projected disposable income because Wise is incurring the necessary expense of curing the Wells Fargo mortgage arrears claim within a reasonable time as required by § 1322(b)(5), but once that claim has been fully paid all of the plan payments, equaling Wise's projected disposable income, are intended for the benefit of unsecured creditors. Accordingly, Wise is complying with § 1325(b)(1)(B).").
In re Grabarczyk, No. 10-37007, 2012 WL 909511, at *6-*8 (Bankr. N.D. Ohio Mar. 14, 2012) (Whipple) ("Unsecured creditors" in § 1325(b)(1)(B) means nonpriority unsecureds. "A literal interpretation of the statute would thus permit Debtors to use their disposable income to pay both priority unsecured creditors, the claims for which a deduction has been taken in calculating their disposable income, as well as general unsecured creditors. However, courts that have addressed the application of § 1325(b)(1)(B) . . . have persuasively concluded that priority claims and Chapter 13 administrative expenses deducted from CMI on Form B22C cannot be paid from the pot of funds that constitute a debtor's disposable income. . . . Disposable income, . . . under § 1325(b)(1)(B), is to be paid to unsecured creditors . . . . Among the deductions allowed under 707(b)(2)(A) are deductions for a debtor's payments on prepetition priority unsecured claims and for Chapter 13 administrative expenses. See 11 U.S.C. § 707(b)(2)(A)(ii)(III) and (iv). Because this calculation yields the presumptive projected disposable income of the debtor to be applied to payment of unsecured creditors, courts have generally concluded that the only reasonable interpretation of this process is that it is designed to determine the amount available to pay nonpriority unsecured creditors and, thus, that Congress intended the term 'unsecured creditors' in § 1325(b)(1)(B) to refer to nonpriority unsecured creditors . . . . [A]n interpretation of § 1325(b)(1)(B) that includes priority creditors in the definition of 'unsecured creditors' who must be paid from projected disposable income 'obtains an absurd result.' . . . [I]nterpreting the term 'unsecured creditors' in § 1325(b)(1)(B) to categorically exclude priority unsecured claims would leave below-median income debtors' [sic] with no funds to pay those creditors. . . . [T]he only reasonable interpretation of the term 'unsecured creditors,' as used in § 1325(b)(1)(B), is one that refers to all unsecured creditors for whose claims the debtor has not included an expense deduction in calculating disposable income.").
In re Edwards, No. 11-80962, 2012 WL 3584769 (Bankr. W.D. La. Jan. 5, 2012) (Hunter) (Unlike projected disposable income test, best-interests-of-creditors test is satisfied when distributions to priority creditors would exhaust liquidation value of estate.).
In re Jiter, No. 10-37421-svk, 2011 WL 477823, at *1 (Bankr. E.D. Wis. Feb. 3, 2011) (Kelley) (Because priority tax payments (but not attorney fees) are deducted to determine projected disposable income, plan fails test in § 1325(b) when amount to be paid to nonpriority unsecured creditors is net of tax payments. Debtors with CMI greater than applicable median family income had "bottom line" disposable income in excess of $50,000 over life of the plan. Plan proposed to pay $29,000 to unsecured creditors, but debtors contended that a $24,000 priority tax claim should be added to the $29,000 to satisfy the projected disposable income requirement. "[T]o reach their monthly disposable income of $843.17, the Debtors already deducted $407.12 for their estimated pre-petition priority claims. To dedicate their disposable income to those same priority claims would indeed be double counting the priority claims. That double counting causes the Plan to fail the disposable income test which requires that all disposable income must be paid to general unsecured creditors. . . . While the Debtors' attorney's fees may properly share in this distribution, . . . the priority tax claim cannot be included, as the tax claim has already been counted in determining disposable income.").
In re Stewart-Harrel, 443 B.R. 219 (Bankr. N.D. Ga. Jan. 25, 2011) (Hagenau) (Plan satisfies § 1325(b)(1)(A) that pays unsecured creditors in full without interest notwithstanding that monthly net income is available to pay creditors faster and/or with interest.).
In re Sharp, 415 B.R. 803, 813 (Bankr. D. Colo. Oct. 6, 2009) (Brown) (Projected disposable income is paid to nonpriority unsecured creditors; attorney fees, costs and trustee fees must be deducted from disposable income before multiplying by applicable commitment period to determine what must be paid to nonpriority unsecured creditors. "The statute does not specifically indicate whether 'unsecured creditors' means priority unsecured creditors and/or nonpriority unsecured creditors. This Court has previously interpreted this phrase to require a debtor to pay PDI only to nonpriority unsecured creditors. . . . Debtors must calculate [projected disposable income] according to Form [B]22C, then include a further deduction granted by statute (but omitted from the form) that represents the amount of unpaid attorneys' fees and costs, and adjust the trustee fee deduction to 10%. This amount is then multiplied by the applicable commitment period to arrive at the 'pot' that must be paid to nonpriority unsecured creditors only.").
In re Johnson, 408 B.R. 811 (Bankr. W.D. Mo. July 6, 2009) (Venters) (Projected disposable income must be applied to unsecured, nonpriority claims. "[I]nterpreting the term 'unsecured creditors' in § 1322(b)(2) to include priority creditors would, in essence, permit a debtor to 'double-count' payments on priority claims." This outcome is supported by requirement in § 1322(a)(2) that plans must provide for full payment of all priority claims and by interaction between § 1325(b)(1)(B) and § 707(b)(2).).
In re Williams, 394 B.R. 550 (Bankr. D. Colo. Sept. 12, 2008) (Brown) ("[T]o avoid producing an illogical reading of the Code," the phrase "to unsecured creditors" in § 1325(b) means that Chapter 13 debtors subtract all priority claims, including administrative expenses, to determine projected disposable income; priority debts are accounted for only once in this calculation and the balance after deduction of priority debts is then paid only to nonpriority, unsecured creditors. "This Court agrees that the only sensible interpretation is one which allows the subtraction of priority claims for all debtors, 'once, no more, no less.' . . . [T]o avoid producing an illogical reading of the Code, the Court adopts an interpretation of the phrase 'to unsecured creditors' that allows debtors to subtract all of their priority claims in determining the amount of their [projected disposable income]. The resulting figure must then be paid only to the nonpriority unsecured creditors.").
In re Degrosseilliers, No. 08-10942-SSM, 2008 WL 2725808, at *3 (Bankr. E.D. Va. July 11, 2008) (Mitchell) (Plan fails § 1325(b) when total payments reduced by trustee's commissions, priority tax claims and secured debt is less than disposable income times 60 months. "[W]here a plan also pays secured and priority claims, it is not sufficient that the plan payment equals projected disposable income. Secured and priority debts (including the chapter 13 trustee's fee) are already accounted for in the disposable income calculation. Accordingly, the payments into the plan must equal at least the debtor's disposable income over the commitment period plus the amounts needed to pay secured and priority debts under the plan.").
In re Nething, No. 07-27145, 2008 WL 2246072, at *4 (Bankr. E.D. Wis. May 30, 2008) (McGarity) (Attorney fees are unsecured claims for purposes of disposable income test and are paid from disposable income after calculation under § 1325(b). "I find the [In re Puetz, 370 B.R. 386 (Bankr. D. Kan. 2007),] reasoning persuasive. Congress . . . allowed for deduction of amounts needed to pay the trustee, which means the creditors, not the debtor, foot the cost of administration by the trustee. This is because the trustee still collects from the amount paid in, even though that cost was deducted from the amount the debtor must pay. Thus, it appears Congress thought about administering a case and made a provision for who pays for it. It follows then that the beneficiaries of the administration of the case were also considered and provided for, and those beneficiaries are 'unsecured' creditors, without limitation as to priority or general. This is no stealth distinction, as the need for a debtor's attorney, unpaid at the start of a case, was well known to the drafters as commonplace. Other unspecified and unsecured administrative expenses must be paid as well. The end result is that creditors who receive distributions, or at least qualify to, share in the cost of administering the case, including the cost of the debtor's attorney who helped file it.").
In re Vining, No. 06-12593, 2008 WL 2073966, at *4 (Bankr. N.D.N.Y. May 14, 2008) (Littlefield) (Because § 1325(b)(1)(B) requires that projected disposable income "will be applied to make payments to unsecured creditors under the plan," debtor with $182.16 of disposable income must pay at least that amount to unsecured creditors during every month after confirmation; plan that pays attorney fees and secured creditors first and delays distributions to unsecured creditors for 27 months cannot be confirmed. "[U]nder the law in effect prior to October 17, 2005, a proposal to leave funding of unsecured claims to the end of the plan, as in the plan sub judice, would not have been ipso facto improper. Presumably, in effectuating the 2005 amendments, Congress wanted heightened protection for the unsecured creditor body. This is accomplished by requiring immediate, in effect, protected status of the Debtors' disposable income that is tendered to the Trustee every month for unsecured creditors. . . . By vesting the funds in the unsecured creditors immediately and requiring concurrent payment of secured and unsecured claims, Congressional intent is achieved, and there is maximum incentive for a debtor to remain in a chapter 13 plan.").
In re Brown, No. 07-14264, 2008 WL 4372675, at *2 (Bankr. S.D. Ohio Apr. 15, 2008) (Hopkins) (Attorney fees are payable from projected disposable income whether debtor has CMI above or below applicable median family income; no double accounting results because neither § 1325(b)(3) nor Form B22C provide deduction for attorney fees. "If the words 'unsecured creditors' in § 1325(b)(1)(B) are given their plain meaning, then attorney's fees, constituting a priority unsecured claim, may be paid from disposable income. If § 1325(b)(3) and Official Form B22C render such a construction absurd, then the Debtors may still pay their attorney's fees from disposable income because attorney's fees are not part of the disposable income calculus specifically addressed under § 1325(b)(3) and Official Form B22C. . . . [T]here would be no double counting.").
In re Musselman, 379 B.R. 583, 595 & n.7 (Bankr. E.D.N.C. Nov. 30, 2007) (Doub) (When projected disposable income is zero but applicable commitment period is five years, length of plan is five years and debtor must make payments for five years with possibility that unsecured creditors will receive more than projected disposable income. Debtors with CMI greater than applicable median family income but with negative disposable income proposed 55-month plan that paid $459 per month to pay administrative, priority and secured claims in full. "Base" amount of $459 per month was apparently determined by subtracting Schedule J from Schedule I "which the debtor must have concluded was his ability to pay." Although projected disposable income is based on formula in § 1325(b)(2) and (3) and does not involve Schedules I and J, debtor must "remain in his plan for the applicable commitment period of 5 years, during which time, he must devote his base amount into the plan. Therefore, Musselman's plan may be confirmed if the plan proposes $459.00 per month for five years." In an enigmatic footnote: "For clarification purposes, had Musselman had positive projected disposable income, it would have been necessary for him to propose a plan payment in the amount of his base amount (I minus J) plus his projected disposable income for a period of 5 years, unless unsecured creditors were paid in full prior to the expiration of 5 years."), aff'd in part, rev'd in part, 394 B.R. 801, 818-20 (E.D.N.C. 2008).).
In re Echeman, 378 B.R. 177, 180-81 (Bankr. S.D. Ohio Nov. 7, 2007) (Walter) (Priority unsecured claims are not "unsecured creditors" for purposes of projected disposable income test. Debtors deducted child support arrearages as priority debts in projected disposable income calculation and then proposed to pay child support arrearages from net projected disposable income. "Under this seductively simple plain meaning view advanced by the Debtors . . . the 'unsecured creditors' in § 1325(b)(1)(B) would appear to refer to both priority and nonpriority unsecured creditors since both sets of creditors are indisputably not secured. . . . [A]mong the deductions allowed under 11 U.S.C. § 707(b)(2)(A) . . . is a deduction for a debtor's payments on priority unsecured claims. . . . [A] debtor deducts payment of priority unsecured claims from his or her current monthly income before reaching the calculation of the amount of disposable income available each month for unsecured creditors. The only reasonable interpretation of this statutorily mandated calculation process is that it is designed to determine the amount available to pay nonpriority unsecured creditors after deduction of living expenses and payments to secured creditors and priority unsecured creditors. In other words, the language of § 1325(b)(1)(B), when read in context, makes it clear that the resulting projected disposable income is intended to be paid only to nonpriority unsecured creditors. . . . [T]he alternative view that both priority and nonpriority unsecured creditors are 'unsecured creditors' who must be paid projected disposable income obtains an absurd result. Based on the statutory scheme, if a debtor is allowed to deduct priority unsecured claims before reaching the calculation of disposable income and then pay priority unsecured claims out of projected disposable income under § 1325(b)(1)(B), the debtor would in effect be allowed to 'double-count' or deduct the same priority claims twice before paying nonpriority unsecured creditors.").
In re Knight, 370 B.R. 429, 432-33 (Bankr. N.D. Ga. June 27, 2007) (Maintaining payment of long-term, nondischargeable student loans under § 1322(b)(5) satisfies requirement in § 1325(b)(1) that projected disposable income be paid to unsecured creditors. "[T]he plan meets the requirement of § 1325(b)(1)(B) that all [projected disposable income] 'be applied to make payments to unsecured creditors under the plan.' . . . [T]he language in [§ 1325(b)(1)(B)] does not address the allocation of payments among various types of unsecured creditors. . . . [A]nother provision, § 1322(b)(1), which permits classification of unsecured claims, governs the allocation issue. . . . Section 1322(b)(5) permits a plan to provide for the curing of defaults and the continuation of payments while the case is pending 'on any unsecured claim . . .' . . . . This provision . . . expressly authorizes separate classification and different treatment of long-term unsecured debt. For § 1322(b)(5) to have meaning with regard to a long-term unsecured debt, § 1325(b)(1)(B) must permit the use of PDI to cure defaults and maintain payments on it.").
In re Puetz, 370 B.R. 386, 390-92 (Bankr. D. Kan. June 22, 2007) (Attorney fees are not otherwise accounted for in projected disposable income calculation for debtor with CMI greater than applicable median family income and thus are payable from unsecured creditor pool; other priority and administrative claimants that are specifically provided for by § 707(b)(2)(A) and Form B22C are deducted before calculation of disposable income. "Some unsecured creditors are provided for under § 707(b)(2)(A), but not all. For example, prepetition priority claims are specifically provided for under 11 U.S.C. § 707(b)(2)(A)(iv), and postpetition trustee's fees are specifically provided for under 11 U.S.C. § 707(b)(2)(A)(ii)(III). On the other hand, a debtor's anticipated attorney's fees are not specifically referenced even though the debtor's attorney's fees are an unsecured administrative claim given priority under 11 U.S.C. § 507(a)(2). Thus, while the plain language of the statute, at first glance, appears to provide a debtor's projected disposable income for all unsecured creditors, both priority and non-priority, the statutory scheme as a whole itemizes a budget in which some unsecured creditors are provided for outside the unsecured creditors pool, while others are not. . . . Creditors specifically provided for under § 707(b)(2)(A) need not share in the unsecured creditors pool under § 1325(b)(1)(B). . . . Unsecured creditors in § 1325(b)(1)(B) do not include administrative, priority, or any other actual expense claimants budgeted for under § 707(b)(2)(A)(ii)(II)-(V) and (iii)-(iv); however, unsecured creditors do include all other unsecured creditors. Further, in the event post-confirmation trustee's fees and other priority claims exceed the estimates made on Form B22C, the difference shall be paid first from the unsecured creditors pool as required by the Code's priority scheme.").
In re Amato, 366 B.R. 348, 352-53 (Bankr. D.N.J. Mar. 20, 2007) ("This Court is persuaded by the holdings in [In re Wilbur, 344 B.R. 650 (Bankr. D. Utah 2006),] and [In re McDonald, 361 B.R. 527 (Bankr. D. Mont. 2007)], that claims for attorney's fees and trustee commissions do not fall within the class of 'unsecured creditors' found in 11 U.S.C. § 1325(b) . . . . [N]either the Trustee's commission nor the Debtors' attorney's fees in this case should be deducted from the projected disposable income received by the Trustee during the applicable commitment period.").
In re Casey, 356 B.R. 519, 524 (Bankr. E.D. Wash. Oct. 27, 2006) ("[I]t has been the experience in this District that above-median income debtors will pay less to unsecured creditors under BAPCPA than under the prior law. In this District, many of the standard expenses allowed by § 707(b) would have been considered unreasonable and unnecessary and would have been disallowed under the prior law, resulting in greater plan payments. But it is the prerogative of Congress to define disposable income, and it has done so.").
In re Zirtzman, No. 06-00015, 2006 WL 3000103, at *3-*4 (Bankr. N.D. Iowa Oct. 4, 2006) (unpublished) (When debtor with CMI greater than applicable median family income proposes to pay unsecured creditors $300 per month for 36 months, applicable commitment period requires $300 per month for 60 months, notwithstanding that Form B22C shows no disposable income. "Form B22C shows disposable income of less than zero. The parties, however, have agreed that Debtors will make plan payments of $300 per month. This agreement rebuts the presumption from Form B22C, Line 58 that there is no requirement that Debtors pay a dividend to unsecured creditors. Indeed, Debtors' Second Amended Chapter 13 Plan proposes to pay unsecured creditors $2,768.18 over 36 months. . . . Debtors' plan may not be confirmed unless Debtors pay their projected disposable income over five years. Debtors assert in their Plan that there is no projected disposable income according to their Statement of Current Monthly Income, Form B22C. In these circumstances, however, because Debtors and Trustee agree that Debtors have monthly net income of $300 to pay into the plan, this amount is their project disposable income under § 1325(b)(1)(B). Because the duration of the Debtors' plan is 36 months, rather than 60 months, it cannot be confirmed.").
In re Girodes, 350 B.R. 31, 35 n.4, 36-37 (Bankr. M.D.N.C. Sept. 20, 2006) (For debtor with CMI less than applicable median family income, projected disposable income means CMI minus expenses shown in Schedule J, applied to payments to unsecured creditors for applicable commitment period. When Schedule J subtracted from CMI produced disposable income of $40.42 per month, debtor must apply that amount to payments for 36 months to satisfy disposable income test. That actual disposable income shown by subtracting Schedule J from Schedule I was $151 per month is relevant to feasibility but not to projected disposable income. "While pre-BAPCPA, the court did look to Schedules I and J to determine the amount the debtor should commit to a plan, that analysis is no[ ] longer valid under BAPCPA. This court agrees with the court in [In re Alexander, 344 B.R. 742 (Bankr. E.D.N.C. 2006),] that disposable income and projected disposable income are one and the same and have been defined by 11 U.S.C. § 1325(b)(2). . . . [R]easonably necessary expenses for the below-median debtor are the expenses that the debtor has set forth in Schedule J, and are subject to review by the court. To arrive at a projected disposable income figure for a below-median debtor, the debtor's monthly expenses from Schedule J must be subtracted from CMI as calculated pursuant to Part I of B22C. In this case, the Debtor's CMI less her Schedule J expenses results in the sum of $40.42 in excess income, which she must apply each month to the payment of unsecured debt." In an enigmatic footnote, "[t]his court respectfully disagrees with the holding in Alexander that a debtor may get a discharge in less than 36 months if the debtor shows no disposable income as of the date of the petition.").
In re LaSota, 351 B.R. 56 (Bankr. W.D.N.Y. Sept. 19, 2006) (Arguably in dicta, when debtor with CMI greater than applicable median family income shows surplus income on Schedules I and J but no disposable income on Form B22C, either "projected" disposable income test or "good faith" or some combination of two requires that unsecured creditors receive "rough justice" that reflects debtor's actual ability to pay creditors at confirmation.).
In re Rotunda, 349 B.R. 324, 332-33 (Bankr. N.D.N.Y. Sept. 1, 2006) (It was Congress's choice to exclude Social Security income from CMI, and it is Congress's choice that some debtors with CMI above applicable median family income will pay little or nothing to unsecured creditors notwithstanding net monthly income available on Schedules I and J. Debtors had $157.77 of disposable income on Form B22C and $3,299.03 of monthly net income on Schedules I and J—the difference being mostly Social Security income excluded from CMI. "[W]ith the enactment of BAPCPA, the court's discretion to review the totality of circumstances and determine the reasonableness of a debtor's expenses in calculating disposable income has been curtailed, in some instances, by the new provisions that allow, whether or not intentionally, a debtor to propose a plan which provides zero payments to unsecured creditors despite having the financial wherewithal to make some payments to them. If this was not Congress' intent, then it is up to Congress to rectify the situation. It was also Congress' decision to exclude Social Security benefits from the payment of unsecured creditors' claims even in a chapter 13 context. This is a policy decision that the Court may perhaps question but it cannot alter. . . . [T]he Trustee's objection, based on the fact that the Debtors in this case are not providing for the payment of the entire net income as calculated on Schedules I and J, which includes Social Security benefits, in satisfying not only secured, priority and administrative claims but also the unsecured claims, is without merit.").
In re Nevitt, Nos. 05-77798, 05-77943, 2006 WL 2433491, at *5 (Bankr. N.D. Ill. Aug. 18, 2006) (unpublished) (For debtors with CMI less than applicable median family income, unsecured creditors are entitled to Schedule I income less Schedule J expenses less payments on account of secured claims and less payment of trustee's administrative expenses; amount thus determined must be paid for applicable commitment period. "Form B22C does not determine the projected disposable income for debtors whose income falls below the median family income. Instead, the amount listed on Schedule J minus any payments on account of secured debt not already listed therein should be utilized. This amount constitutes a debtor's projected monthly disposable income. This amount must be paid for a three-year applicable commitment period required for below median income debtors.").
In re Alexander, 344 B.R. 742, 746-52, 753 n.7 (Bankr. E.D.N.C. June 30, 2006) (Unsecured creditors are entitled to disposable income—CMI less expenses from Schedule J or from § 707(b)(2)—over the applicable commitment period; "unsecured" in § 1325(b) means nonpriority unsecured creditors, and good faith can be satisfied even when there is no projected disposable income. "The debtor reports her current monthly income in Part I of Form B22C . . . . [A]n above-median income debtor calculates her disposable income figure using the remainder of Form B22C taking allowed deductions under § 707(b)(2). . . . [F]or a below-median income debtor, one takes the debtor's currently monthly income from Part I of Form B22C and subtracts the total monthly expenses from Schedule J. While there is rigidity in arriving at the disposable income figure for the above-median debtor, the court has more flexibility in determining whether the expenses of the below-median income debtor are reasonably necessary. . . . [R]esults seem to differ based upon individualized circumstances regarding whether a below-median income debtor has more disposable income under the old or new law. . . . [A]bove-median income debtors . . . uniformly have less disposable income using the new calculation method. . . . Perhaps Congress, in an effort to make higher income debtors pay more to their unsecured creditors, unwittingly reached the opposite result. . . . [T]his court 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 Hardacre, 338 B.R. 718 (Bankr. N.D. Tex. 2006),] and its progeny appear to view 'projected disposable income' as a term separate and apart from the new definition of 'disposable income.' . . . This court disagrees . . . . If 'disposable income' is not linked to 'projected disposable income' then it is just a floating definition with no apparent purpose. . . . This court disagrees with [In re McGuire, 342 B.R. 608 (Bankr. W.D. Mo. 2006),] . . . as it is based upon the old definition of disposable income that included 'income which is received by the debtor.' . . . What is now considered 'disposable' is based upon historical data—current monthly income derived from the six-month period preceding the bankruptcy filing. . . . [T]o arrive at 'projected disposable income,' one simply takes the calculation mandated by § 1325(b)(2) and does the math. . . . [D]ebtors with no disposable income under the new law have no projected disposable income. . . . Because applicable commitment period is a term the statute makes relevant only with regard to the required payment of projected disposable income to unsecured creditors and not to any other plan payments or requirements, it simply does not come into play where no projected disposable income must be taken into account. . . . [I]f a debtor follows the calculation method for determining disposable income under § 1325(b)(2), the debtor is not manipulating the statute. . . . [T]he debtor's disposable income must be determined under § 1325(b) and not as an element of good faith under § 1325(a)(3)." In a footnote, "[t]he court concurs with the view expressed in In re Wilbur, [344 B.R. 650 (Bankr. D. Utah 2006),] that [projected disposable income] is the amount payable to unsecured creditors other than priority creditors; credit for payment of priority claims has already been provided the debtors in the calculation of disposable income by the subtraction permitted by § 707(b)(2)(A)(iv), as incorporated by § 1325(b)(3).").
In re Wilbur, 344 B.R. 650, 654 (Bankr. D. Utah June 21, 2006) (Plain meaning of "unsecured creditors" in § 1325(b)(1)(B) is rejected in favor of excluding priority debts because pre-BAPCPA practice paid projected disposable income to only nonpriority unsecured creditors, and plain meaning leads to an "absurd" double-counting of priority debt. Form B22C showed monthly disposable income of $330.90 after deduction for payments to priority unsecured creditors. Section 1325(b)(1)(B) required the debtors to pay at least $19,854 to unsecured creditors. The plan proposed to pay priority unsecured creditors $40,802 and nonpriority unsecured creditors at least $4,000. "Congress amended the Bankruptcy Code under the BAPCPA to require the debtor's calculation of his return to unsecured creditors by using Form B22C. Form B22C tracks the pre-BAPCPA calculation of the debtor's return to non-priority unsecured creditors. It requires the debtor to start with gross income and first deduct living expenses. It then asks the debtor to subtract payments to secured and priority creditors. As the basic inquiry under Form B22C is the same as the debtor's former pre-BAPCPA inquiry, it follows that the purpose behind Form B22C should also be the same—to calculate the return to non-priority unsecured creditors. Thus, it seems clear to this Court that the reference to 'unsecured creditors' in § 1325(b)(1)(B) is more specifically referring to non-priority unsecured creditors. . . . If the Court interpreted 'unsecured creditors' to include priority unsecured creditors, the debtor would, in effect, be double-counting. Allowing the debtor to double-count in this fashion would undermine the purpose and efficacy of § 707(b)(2) and Form B22C. This would be an absurd result.").
In re Gress, 344 B.R. 919, 923 (Bankr. W.D. Mo. June 14, 2006) (Form B22C is starting point and Schedules I and J are properly consulted to determine disposable income; applicable commitment period is temporal measurement, and plan must pay all disposable income for applicable commitment period to unsecured creditors or pay unsecured creditors in full. Form B22C showed negative $5.69. Schedules I and J showed available funds of $2,182.17. Plan proposed to pay $4,800 to unsecured creditors—an amount that would be paid off in 33 months. "[T]he plan as proposed violates §§ 1325(b)(1) and (4)(B) because it does not provide either that all of the Debtors' projected disposable income to be received in the five years after the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan, or that 100% of unsecured claims will be paid.").
In re McGuire, 342 B.R. 608, 615 (Bankr. W.D. Mo. June 1, 2006) (For debtors with CMI greater than applicable median family income, Form B22C is the starting point, not the determinative amount that unsecured creditors must be paid. Form B22C showed debtors with disposable income of $178.10. Schedules I and J showed disposable income of $1,292.37 per month. Debtors proposed a $600-per-month "pot" plan that would pay the amount required by Form B22C ($10,686) in less than 60 months. "[F]or purposes of § 1325(b) plan confirmation, the Form B22C disposable income calculation is merely a starting point, not a determinative number.").
In re Barr, 341 B.R. 181, 184-86 (Bankr. M.D.N.C. Apr. 5, 2006) (Amount that must be paid to unsecured creditors is determined by the disposable income test in § 1325(b) and not by the good-faith requirement in § 1325(a)(3); debtor with no disposable income calculated consistently with § 707(b)(2)(A) and (B) need not pay anything to unsecured creditors even though disposable income appears in Schedules I and J. "While BAPCPA made significant changes to section 1325(b), nothing in those changes or elsewhere in BAPCPA suggests any legislative intent that any section of the Bankruptcy Code other than section 1325(b) should be controlling in dealing with a Chapter 13 debtor's ability to pay. . . . [I]t appears that Congress intended to adopt a specific test to be rigidly applied rather than a standard to be applied according to the facts and circumstances of the case. Calculating 'disposable income' for above-median-income debtors under new section 1325(b) is now separated from a review of Schedules I and J and no longer turns on the court's determination of what expenses are reasonably necessary for the debtor's support. . . . The use of 'shall' in section 1325(b)(3) is mandatory and leaves no discretion with respect to the expenses and deductions that are to be deducted in arriving at disposable income. The legislative history reflects that Congress was aware that section 1325(b)(3) represented a departure from using the debtor's actual expenses in favor of IRS standards that might differ markedly from the debtor's actual expenses. . . . Congress has created a set of rules under which—as here—a debtor may be left with uncommitted income that the debtor is not required to commit to the debtor's plan under the new section 1325(b) analysis. . . . Depending upon whether a debtor's actual expenses and deductions are greater or less than those specified in section 707(b)(2), an above-median-income debtor may have 'excess' income that such debtor is not required to commit to the payment of unsecured creditors. . . . [S]ince the Debtor does not have disposable income under section 1325(b), the Debtor's plan will be confirmed even though the plan does not provide for a payment to unsecured creditors.").
In re Jass, 340 B.R. 411, 418 (Bankr. D. Utah Mar. 22, 2006) (If Chapter 13 debtors can show a substantial change in circumstance such that Form B22C does not represent the debtor's ability to pay unsecured creditors, then "projected" income will be based on a budget like Schedules I and J. Form B22C indicated that the debtors had disposable income of $3,625.63 per month. The plan proposed to pay unsecured creditors $790. Debtors testified that medical problems reduced their future income below the "disposable income" shown on Form B22C. "Form B22C will always be the starting point for the Court's inquiry into whether the debtor is complying with the 'projected disposable income' requirement of § 1325(b)(1)(B). The Court will presume that the number resulting from Form B22C is the debtor's 'projected disposable income' unless the debtor can show that there has been a substantial change in circumstances such that the numbers contained in Form B22C are not commensurate with a fair projection of the debtor's budget in the future. . . . If the Court finds adequate evidence to rebut the presumption in favor of Form B22C, the Court will allow the debtor to use a projected budget in the form of Schedules I and J to determine the debtor's 'projected disposable income.'").