Court Opinion

ID: 184311
Source: CourtListenerOpinion
Date Created: 2011-02-05 01:00:53+00
Date Added: 2024-06-11T09:05:05.866056
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                              Pursuant to Sixth Circuit Rule 206
                                      File Name: 11a0033p.06

                 UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________

                                                X
                                  Appellees, -
 RICHARD L. BAUD and MARLENE BAUD,
                                                 -
                                                 -
                                                 -
                                                     No. 09-2164
           v.
                                                 ,
                                                  >
                                                 -
                                  Appellant. -
 KRISPEN S. CARROLL,
                                                 -
                                                N
                  Appeal from the United States District Court
                 for the Eastern District of Michigan at Detroit.
               No. 09-10673—Nancy G. Edmunds, District Judge.
                                    Argued: August 6, 2010
                            Decided and Filed: February 4, 2011
            Before: COLE and CLAY, Circuit Judges; KATZ, District Judge.*

                                      _________________

                                            COUNSEL
ARGUED: Krispen S. Carroll, OFFICE OF THE CHAPTER 13 TRUSTEE, Detroit,
Michigan, for Appellant. Melissa A. Caouette, Livonia, Michigan, for Appellees.
ON BRIEF: Krispen S. Carroll, Maria Gotsis, OFFICE OF THE CHAPTER 13
TRUSTEE, Detroit, Michigan, for Appellant. Melissa A. Caouette, Charles J. Schneider,
Livonia, Michigan, for Appellees.
                                      _________________

                                            OPINION
                                      _________________

        COLE, Circuit Judge. As numerous courts and commentators have noted, the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) has
created many difficult problems of statutory interpretation, none more vexing than those

        *
           The Honorable David A. Katz, United States District Judge for the Northern District of Ohio,
sitting by designation.

                                                  1
No. 09-2164        Baud, et al v. Carroll                                         Page 2

arising from application of the “projected disposable income test” imposed by 11 U.S.C.
§ 1325(b)(1). Under § 1325(b)(1)(B) of the Bankruptcy Code (the “Code”), if the
Chapter 13 trustee or the holder of an allowed unsecured claim objects to the
confirmation of a debtor’s plan that does not provide for full payment of unsecured
claims, the plan may be confirmed only if it “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.”              11 U.S.C.
§ 1325(b)(1)(B) (emphasis added). In addition to replacing the phrase “three-year
period” formerly used in § 1325(b)(1)(B) with the term “applicable commitment period”
and inserting in that subsection the phrase “to unsecured creditors” before “under the
plan,” BAPCPA substantially redefined the term “disposable income” and established
different applicable commitment periods depending on whether the “current monthly
income” (as defined in § 101(10A)) of the debtor and the debtor’s spouse combined,
when multiplied by 12, is above or below the median income of the relevant state. Three
interpretative issues raised by these changes are presented in this appeal. First, if the
trustee or the holder of an unsecured claim objects to the confirmation of a Chapter 13
plan of a debtor with positive projected disposable income who is not proposing to pay
unsecured claims in full, does § 1325(b) require the plan to have a duration equal to the
applicable commitment period in order to be confirmed? Second, how does the amended
definition of disposable income set forth in § 1325(b)(2) affect the calculation of a
debtor’s “projected disposable income”? Third, if the calculation demonstrates that the
debtor has zero or negative projected disposable income, does any temporal requirement
imposed by § 1325(b) apply?

       Krispen Carroll, Chapter 13 Trustee for the Eastern District of Michigan (the
“Appellant”), contends that § 1325(b) imposes a minimum plan length and that there is
no exception for debtors who have zero or negative projected disposable income. Even
if there were such an exception, debtors Richard and Marlene Baud (the “Appellees”)
would not qualify for it, the Appellant argues, contending that they do in fact have
positive projected disposable income. The Appellees counter that § 1325(b) establishes
a minimum amount that must be paid to unsecured creditors, not a minimum duration
No. 09-2164        Baud, et al v. Carroll                                           Page 3

of the plan and that, even if § 1325(b) does mandate a minimum plan length, there is an
exception for debtors, like them, with negative projected disposable income.

       Whether § 1325(b) as amended by BAPCPA requires a Chapter 13 plan that has
drawn an objection and that provides for a less than full recovery for unsecured
claimants to have a duration equal to the applicable commitment period if the debtor has
positive projected disposable income, whether the amended definition of disposable
income signifies that courts must no longer include in the calculation of projected
disposable income certain categories of income they typically included prior to BAPCPA
and must permit above-median-income debtors to deduct certain expenses they might
not have been able to deduct before BAPCPA, and whether any temporal requirement
set forth in § 1325(b) applies to debtors with zero or negative projected disposable
income, are questions that have deeply divided the courts.

       Our holding today is three-fold. First, we hold that, if the trustee or the holder
of an allowed unsecured claim objects to confirmation of a Chapter 13 plan of a debtor
with positive projected disposable income who is not proposing to pay unsecured claims
in full, the plan cannot be confirmed unless it provides that all of the debtor’s projected
disposable income to be received in the applicable commitment period will be applied
to make payments over a duration equal to the applicable commitment period imposed
by § 1325(b). Further, we hold that the calculation of a debtor’s projected disposable
income: (a) must not include items—such as benefits received under the Social Security
Act—that are excluded from the definition of currently monthly income set forth in
§ 101(10A); and (b) must deduct expenses that the Code, as amended by BAPCPA,
permits above-median-income debtors to deduct. Finally, we hold that there is no
exception to the temporal requirement set forth in § 1325(b) for debtors with zero or
negative projected disposable income.         Accordingly, we AFFIRM in part and
REVERSE in part the district court’s opinion and order, and REMAND the case to the
district court with instructions to remand to the bankruptcy court for further proceedings
consistent with this opinion.
No. 09-2164        Baud, et al v. Carroll                                           Page 4

                                  I. BACKGROUND

A.     The Statutory Framework

       Prior to BAPCPA’s passage, the Code required that, if the Chapter 13 trustee or
the holder of an allowed unsecured claim objected to confirmation, then the debtor’s
plan could be confirmed only if it (1) called for full payment of the unsecured claim(s)
or (2) provided that “all of the debtor’s projected disposable income to be received in the
three-year period beginning on the date that the first payment is due under the plan will
be applied to make payments under the plan.” 11 U.S.C. § 1325(b)(1) (2000). The Code
defined “disposable income” loosely as “income which is received by the debtor and
which is not reasonably necessary to be expended . . . for the maintenance or support of
the debtor or a dependent of the debtor, including charitable contributions . . . and . . .
if the debtor is engaged in business, for the payment of expenditures necessary for the
continuation, preservation, and operation of such business.” 11 U.S.C. § 1325(b)(2)
(2000). Bankruptcy courts determined a debtor’s income and reasonably necessary
expenses based on the debtor’s actual financial circumstances, using “the best
information available at the time of confirmation,” 6 Keith M. Lundin, Chapter 13
Bankruptcy § 494.1 (3d ed. 2000 & Supp. 2006), making adjustments to “account [for]
foreseeable changes in a debtor’s income or expenses.” Hamilton v. Lanning, 130 S. Ct.
2464, 2469 (2010) (describing pre-BAPCPA practice).

       BAPCPA extensively amended § 1325(b) by substituting the term “applicable
commitment period” for “three-year period” in § 1325(b)(1), redefining “disposable
income” in § 1325(b)(2), and adding § 1325(b)(3) and (b)(4). Subsections (b)(1) and
(b)(2) now read as follows:

       (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
No. 09-2164          Baud, et al v. Carroll                                              Page 5

                 (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 obligation, that first
                 becomes payable after the date the petition is filed; and
                 (ii) for charitable contributions . . . in an amount not to exceed 15
                 percent of gross income of the debtor for the year in which the
                 contributions are made; and
                 (B) if the debtor is engaged in business, for the payment of
                 expenditures necessary for the continuation, preservation, and
                 operation of such business.

11 U.S.C. § 1325(b)(1)–(2) (Supp. 2010) (emphasis added). Consequently, determining
whether a plan may be confirmed over objection now requires several steps. First, in
order to determine the debtor’s “disposable income” according to the revised definition
in § 1325(b)(2) (which itself expressly excludes certain categories of income), one must
calculate the debtor’s “current monthly income” and the “amounts reasonably necessary
to be expended” for, inter alia, the maintenance or support of the debtor or a dependent
of the debtor.

       Under 11 U.S.C. § 101(10A), the term “current monthly income” means the
average gross monthly income that the debtor receives, derived during a six-month look-
back period, excluding “benefits received under the Social Security Act” and certain
other payments not relevant here. See 11 U.S.C. § 101(10A)(B). Because current
monthly income is based on the debtor’s past income (in most cases, income the debtor
No. 09-2164            Baud, et al v. Carroll                                                     Page 6

receives that is derived during the 6-month period immediately before the bankruptcy1)
and excludes certain payments, it will not necessarily reflect the debtor’s actual income
at the time of confirmation. See 6 Lundin, supra, § 468.1 (describing the calculation of
current monthly income).

         The appropriate method for calculating “amounts reasonably necessary to be
expended” depends on whether the debtor’s current monthly income is above or below
the state median income. For debtors with current monthly income equal to or less than
the applicable median family income, § 1325(b) is silent on how to calculate these
amounts, suggesting that they are to be based (as before BAPCPA) on the debtor’s
reasonably necessary expenses. See Schultz v. United States, 529 F.3d 343, 348 (6th Cir.
2008) (noting that expenditures for below-median-income debtors are to be calculated
as they were pre-BAPCPA); 6 Lundin, supra, § 466.1 (“Chapter 13 debtors with [current
monthly income] less than applicable median family income remain subject to the
familiar reasonable and necessary test for the deductibility of expenses in
§ 1325(b)(2)(A) and (B).”). For debtors with current monthly income exceeding the
applicable median family income, however, § 1325(b)(3) requires courts to determine
the amounts reasonably necessary to be expended in accordance with the “means test,”
i.e., the statutory formula for determining whether a presumption of abuse arises in
Chapter 7 cases. See 11 U.S.C. § 1325(b)(3) (Supp. 2010) (requiring that “[a]mounts
reasonably necessary to be expended under paragraph (2) . . . be determined in
accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has
current monthly income, when multiplied by 12, greater than [the applicable state
median]”); Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 721–22 (2011) (“For a
debtor whose income is above the median for his State, the means test identifies which
expenses qualify as ‘amounts reasonably necessary to be expended.’ The test supplants

         1
           See 11 U.S.C. § 101(10A)(A)(i). Sections 101(10A)(A)(ii) and 521(i)(3) of the Code also offer
a Chapter 13 debtor the option of seeking leave to delay the filing of “Schedule I – Current Income of
Individual Debtor(s)” (“Schedule I”) and requesting that the bankruptcy court select a six-month period
that is more representative of the debtor’s future monthly income in calculating current monthly income.
See In re Dunford, 408 B.R. 489, 497 (Bankr. N.D. Ill. 2009) (granting Chapter 13 debtor an extension of
the time to file Schedule I and resetting the six-month period for calculation of current monthly income).
Such a request must be made within 45 days after the filing of the petition. See 11 U.S.C. § 521(i)(3).
No. 09-2164           Baud, et al v. Carroll                                                     Page 7

the pre-BAPCPA practice of calculating debtors’ reasonable expenses on a case-by-case
basis, which led to varying and often inconsistent determinations.”); Lanning, 130 S. Ct.
at 2470 n.2 (“The formula for above-median-income debtors is known as the ‘means
test’ and is reflected in a schedule (Form 22C) that a Chapter 13 debtor must file.”). The
result of determining these expenditures in accordance with the means test is that above-
median-income debtors must use several standardized expenditure figures in lieu of their
own actual monthly living expenses, see 11 U.S.C. § 707(b)(2)(A)(ii)(I),2 a fact
recognized by the Advisory Committee on Bankruptcy Rules when it promulgated
Official Form 22C. See Official Form 22C, Chapter 13 Statement of Current Monthly
Income and Calculation of Commitment Period and Disposable Income, lines 24–29
(Dec. 2010). The standardized figures are derived from the IRS National Standards (for
allowable living expenses and out-of-pocket health care) and IRS Local Standards (for
housing, utilities and transportation expenses).                        See Means Testing:      Census
Bureau,        IRS      Data      and      A d mi n i s t r a t i v e     Expenses     Multipliers,
http://www.justice.gov/ust/eo/bapcpa/meanstesting.htm (last visited Jan. 31, 2011)
(listing amounts for Local and National Standards). Above-median-income debtors also
are allowed to deduct their “actual monthly expenses for the categories specified as
Other Necessary Expenses issued by the Internal Revenue Service for the area in which
the debtor resides[.]” See 11 U.S.C. § 707(b)(2)(A)(ii)(I); Ransom, 131 S. Ct. at 727
(“For the Other Necessary Expense categories . . . the debtor may deduct his actual
expenses, no matter how high they are.”). These Other Necessary Expenses include
certain taxes, involuntary employment deductions, life insurance on the debtor, certain
court-ordered payments, certain educational expenses, childcare, unreimbursed health
care and telecommunications services.                   See Official Form 22C, lines 30–37.
Expenditures of above-median-income debtors for other items—including health and
disability insurance, contributions to the care of certain household or family members,
protection against family violence, home energy costs in excess of the allowance

         2
          See Ransom, 131 S. Ct. at 727 (“Although the expense amounts in the Standards apply only if
the debtor incurs the relevant expense, the debtor’s out-of-pocket cost may well not control the amount
of the deduction. If a debtor’s actual expenses exceed the amounts listed in the tables, for example, the
debtor may claim an allowance only for the specified sum, rather than for his real expenditures.”).
No. 09-2164            Baud, et al v. Carroll                                                       Page 8

specified by IRS Local Standards, certain limited educational expenses, additional food
and clothing expenses in excess of the applicable IRS National Standards and a certain
amount of charitable contributions—are based on debtors’ own reasonably necessary
needs. See 11 U.S.C. § 707(b)(2)(A)(ii)(I)–(V); Official Form 22C, lines 39–45. The
means test and the Official Form allow certain deductions on account of ongoing
payments contractually due on secured debts and priority claims without regard to
whether      those      payments        are    reasonably        necessary.          See     11     U.S.C.
§ 707(b)(2)(A)(iii)–(iv); Official Form 22C, lines 47–49. Because standardized expense
figures are used in portions of the calculation, however, the amounts reasonably
necessary to be expended by above-median-income debtors are unlikely to reflect these
debtors’ actual expenses. Cf. 6 Lundin, supra, § 500.1 (“The amount of disposable
income determined by the formula in § 1325(b)(1) will bear no certain relationship to
the debtor’s actual financial ability to make payments . . . because the deductions from
[current monthly income] to determine disposable income are artificial and not based on
the debtor’s actual financial circumstances . . . .”).3

         After calculating the amounts reasonably necessary to be expended on, among
other things, the maintenance or support of the debtor, the next step in determining
whether a plan may be confirmed over objection is to subtract these amounts (as well as
any additional amounts excluded from disposable income by § 1325(b)(2) itself and
other sections of the Code4) from the debtor’s current monthly income in order to derive
the debtor’s “disposable income.” See 11 U.S.C. § 1325(b)(1)–(2). Notably, however,
§ 1325(b)(1) requires that all of the debtor’s “projected disposable income” over the
applicable commitment period be applied to make payments to unsecured creditors.
Determining what the term “projected” adds to § 1325(b)(2)’s definition of disposable

         3
           In addition to Form 22C, Chapter 13 debtors are required to disclose their current and anticipated
future income and actual expenses, as set out in Schedule I and “Schedule J – Current Expenditures of
Individual Debtor(s)” (“Schedule J”). Schedules I and J normally will better capture debtors’ current
financial circumstances as of the date of filing or, if amended, as of confirmation. The schedules, however,
often times will not reflect debtors’ disposable income as defined under BAPCPA.
         4
          See 11 U.S.C. § 1322(f) (excluding from disposable income amounts required to repay certain
retirement loans) and § 541(b)(7) (excluding from disposable income amounts withheld or received by an
employer for payment as contributions to certain plans and annuities).
No. 09-2164           Baud, et al v. Carroll                                                     Page 9

income led to a split among the courts. See 6 Lundin, supra, § 467.1 (discussing the
different approaches to calculating projected disposable income). The Supreme Court
has weighed in on this question.              In Lanning, the Supreme Court rejected the
“mechanical” approach to calculating projected disposable income, under which the
debtor’s average monthly disposable income figure was simply multiplied by the number
of months of the applicable commitment period. Lanning, 130 S. Ct. at 2473–77.
Instead, the Supreme Court adopted the “forward-looking” approach, under which the
debtor’s projected disposable income is calculated by taking into account any “known
or virtually certain changes” in the debtor’s disposable income at the time of
confirmation. Id. at 2478. As discussed in more detail below, in our decision in
Darrohn v. Hildebrand (In re Darrohn), 615 F.3d 470 (6th Cir. 2010), we applied the
holding in Lanning to an expense—the debtors’ monthly mortgage payment—that the
above-median-income debtors would have been able to deduct except for the “known
or virtually certain” change in the debtors’ circumstances occasioned by their decision
to surrender the property to the mortgagee. See Darrohn, 615 F.3d at 477.

         The amount of the debtor’s projected disposable income also depends on the
“applicable commitment period,” which in turn depends on whether the current monthly
income of the debtor and the debtor’s spouse combined, when multiplied by 12, is above
or below the state median. Section 1325(b)(4) provides that, unless the plan provides
for full payment of allowed unsecured claims over a shorter time frame, the applicable
commitment period is three years for below-median-income debtors and not less than
five years for above-median-income debtors:5

         (4) For purposes of this subsection, the “applicable commitment
         period”—

         5
           A Chapter 13 plan may not provide for payments over a period that is longer than 5 years. See
11 U.S.C. § 1322(d). Thus, although § 1325(b)(4) provides that the applicable commitment period is “not
less than 5 years” for above-median-income debtors, the applicable commitment period effectively is five
years for such debtors, and we will refer to the applicable commitment period for above-median-income
debtors as five years. See In re Johnson, 400 B.R. 639, 644 & n.5 (Bankr. N.D. Ill. 2009) (“The statute
actually provides that the applicable commitment period for above-median income debtors is ‘not less than
five years.’ However, an applicable commitment period of more than five years is not possible under
§ 1322(d), which states that a plan may not provide for payments over a period longer than five years.”),
aff’d, 382 Fed. App’x 503 (7th Cir. June 21, 2010) (unpublished).
No. 09-2164        Baud, et al v. Carroll                                        Page 10

       (A) subject to paragraph (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—
                       [the applicable median income]
       (B) may be less than 3 or 5 years, whichever is applicable under
       subparagraph (A), but only if the plan provides for payment in full of all
       allowed unsecured claims over a shorter period.

11 U.S.C. § 1325(b)(4) (Supp. 2010).

B.     Procedural Background

       On September 26, 2008 (the “Petition Date”), the Appellees filed for Chapter 13
protection with the United States Bankruptcy Court for the Eastern District of Michigan.
See Baud v. Carroll, 415 B.R. 291, 293 (E.D. Mich. 2009). The Appellees’ Form 22C,
which they filed on October 13, 2008, listed current monthly income of $7,086.72
(which was above the state median for a family of two), see id., and monthly disposable
income of negative $1,203.55. See id. at 303. As required, the Appellees also filed
Schedule I, listing gross monthly income of $9,115.63 (including Social Security
benefits for one of the Appellees and income from employment for the other), and
Schedule J, listing actual monthly expenses of $4,946.41. Id. at 293. Subtracting payroll
deductions and Schedule J expenses from gross monthly income in Schedule I, the
Appellees’ monthly net income was $402.32, as compared to disposable income of
negative $1,203.55 on their Form 22C. See id.

       On October 13, 2008, the Appellees submitted a Chapter 13 plan that provided
for monthly payments to general unsecured creditors totaling $30,321.65 over a 36-
month period, which would result in less than full payment on those unsecured claims.
Id. at 293–94. The Appellant objected to confirmation of the proposed plan, arguing that
it should be extended to 60 months to conform to the applicable commitment period for
above-median-income debtors. Id. at 294. The bankruptcy court, following briefing and
No. 09-2164            Baud, et al v. Carroll                                                   Page 11

a hearing, sustained the Appellant’s objection. The Appellees then filed an amended
plan providing for monthly payments to general unsecured creditors totaling $58,603.97
over a period of 60 months. The bankruptcy court issued an order confirming the
amended plan over the Appellees’ objection. Id.6

         The Appellees then filed an appeal with the United States District Court for the
Eastern District of Michigan, arguing that the bankruptcy court erred in determining that
the applicable commitment period under § 1325(b) imposes a temporal rather than a
monetary requirement that applies to Chapter 13 debtors with zero or negative projected
disposable income. Id. at 295. The Appellant countered that § 1325(b) requires a
minimum plan length of 60 months for the Appellees who, their assertions to the
contrary notwithstanding, had positive projected disposable income, as indicated by their
Schedule I and Schedule J, on the date of the confirmation of their plan. Id. Adopting
the forward-looking approach to calculating projected disposable income that the
Supreme Court has since endorsed in Lanning, the district court held that the applicable
commitment period imposes a minimum plan length of 60 months for above-median-
income debtors, but that this requirement does not apply when debtors, like the
Appellees, have negative projected disposable income. Id. at 297–303. Accordingly,
the district court reversed the bankruptcy court’s order and remanded the case to allow
the Appellees to modify their amended Chapter 13 plan. Id. at 303.

         The Appellant now challenges the district court’s decision.

                                          II. ANALYSIS

         The issues presented by this appeal are questions of law that we decide de novo.
See Nuvell Credit Corp. v. Westfall (In re Westfall), 599 F.3d 498, 501 (6th Cir. 2010).
We review the bankruptcy court’s order directly, giving no deference to the district
court. Id. at 500.

         6
           Following the Eighth Circuit’s decision in Zahn v. Fink (In re Zahn), 526 F.3d 1140 (8th Cir.
2008), the district court concluded that debtors have standing to appeal a bankruptcy court’s confirmation
of their own amended plan when they have been “‘directly and adversely affected pecuniarily by the
order.’” 415 B.R. at 296 (quoting Harker v. Troutman (In re Troutman Enters., Inc.), 286 F.3d 359, 364
(6th Cir. 2002)).
No. 09-2164        Baud, et al v. Carroll                                        Page 12

A.     Section 1325(b) Imposes a Temporal Requirement for Debtors with Positive
       Projected Disposable Income.
       The question of whether § 1325(b) sets forth a temporal requirement or a
monetary requirement has split the courts into several interpretive camps. The United
States Court of Appeals for the Eleventh Circuit and a majority of other courts have held
that, if the trustee or the holder of an allowed unsecured claim objects to confirmation
of a Chapter 13 plan that provides for a less than full recovery for unsecured claimants,
the plan cannot be confirmed unless its length is equal to the applicable commitment
period; according to these courts, this temporal requirement applies whether the debtor
has positive, zero or negative projected disposable income. See, e.g., Whaley v.
Tennyson (In re Tennyson), 611 F.3d 873, 877–78 (11th Cir. 2010); In re King, No. 10-
18139, 2010 WL 4363173, at *2 (Bankr. D. Colo. Oct. 27, 2010); Baxter v. Turner (In
re Turner), 425 B.R. 918, 920–21 (Bankr. S.D. Ga. 2010); In re Moose, 419 B.R. 632,
635–36 (Bankr. E.D. Va. 2009); In re Meadows, 410 B.R. 242, 245–47 (Bankr. N.D.
Tex. 2009); In re Brown, 396 B.R. 551, 554–55 (Bankr. D. Colo. 2008); In re Lanning,
Nos. 06-41037, 06-41260, 2007 WL 1451999, at *7–8 (Bankr. D. Kan. May 15, 2007),
aff’d, 380 B.R. 17 (B.A.P. 10th Cir. 2007), aff’d, 545 F.3d 1269 (10th Cir. 2008), aff’d,
130 S. Ct. 2464 (2010); In re Kidd, 374 B.R. 277, 280 (Bankr. D. Kan. 2007); In re
Nance, 371 B.R. 358, 369–70 (Bankr. S.D. Ill. 2007); In re Beckerle, 367 B.R. 718,
719–21 (Bankr. D. Kan. 2007); In re Pohl, No. 06-41236, 2007 WL 1452019, at *3
(Bankr. D. Kan. May 15, 2007); In re Strickland, No. 06-81060C-13D, 2007 WL
499623, at *1–*2 (Bankr. M.D.N.C. Feb. 13, 2007); In re Casey, 356 B.R. 519, 527–28
(Bankr. E.D. Wash. 2006); In re Davis, 348 B.R. 449, 456–58 (Bankr. E.D. Mich. 2006).
The United States Court of Appeals for the Eighth Circuit and other courts have held
that, if the trustee or the holder of an allowed unsecured claim objects to the
confirmation of a Chapter 13 plan of a debtor with positive projected disposable income
whose plan provides for a less than full recovery for unsecured claimants, the plan
cannot be confirmed unless its length is equal to the applicable commitment period;
these courts, however, have declined to decide whether this temporal requirement
applies when the debtor has zero or negative projected disposable income. See Coop v.
No. 09-2164           Baud, et al v. Carroll                                                Page 13

Frederickson (In re Frederickson), 545 F.3d 652, 660 & n.6 (8th Cir. 2008), cert.
denied, 129 S. Ct. 1630 (2009); In re Wirth, 431 B.R. 209, 213 (Bankr. W.D. Wis.
2010); In re Slusher, 359 B.R. 290, 300 n.17 (Bankr. D. Nev. 2007). The United States
Court of Appeals for the Ninth Circuit as well as other courts have held that § 1325(b),
although not establishing a minimum plan duration, does require a debtor with positive
projected disposable income facing a plan objection and whose plan provides for a less
than full recovery for unsecured claimants to pay unsecured creditors for the duration
of the applicable commitment period, but that this temporal requirement does not apply
if the debtor has zero or negative projected disposable income. See, e.g., Maney v.
Kagenveama (In re Kagenveama), 541 F.3d 868, 875–77 (9th Cir. 2008); Musselman v.
eCast Settlement Corp., 394 B.R. 801, 814 (E.D.N.C. 2008); In re Green, 378 B.R. 30,
38 (Bankr. N.D.N.Y. 2007); In re Lawson, 361 B.R. 215, 220 (Bankr. D. Utah 2007);
In re Alexander, 344 B.R. 742, 751 (Bankr. E.D.N.C. 2006). Finally, a significant
minority of lower courts have followed the “monetary” approach, holding that § 1325(b)
does not require the debtor to propose a plan that lasts for the entire length of the
applicable commitment period; rather, as long as the plan provides for the payment of
the monetary amount of disposable income projected to be received over that period, the
court may confirm a plan that lasts for a shorter time.7 See, e.g., In re Burrell, No. 08-
71716, 2009 WL 1851104, at *3–*5 (Bankr. C.D. Ill. June 29, 2009); Dehart v. Lopatka
(In re Lopatka), 400 B.R. 433, 436–40 (Bankr. M.D. Pa. 2009); In re Williams, 394 B.R.
550, 566–570 (Bankr. D. Colo. 2008); In re McGillis, 370 B.R. 720, 734–39 (Bankr.
W.D. Mich. 2007); In re Mathis, 367 B.R. 629, 632–36 (Bankr. N.D. Ill. 2007); In re
Swan, 368 B.R. 12, 24–27 (Bankr. N.D. Cal. 2007); In re Brady, 361 B.R. 765, 776–77
(Bankr. D.N.J. 2007); In re Fuger, 347 B.R. 94, 97–101 (Bankr. D. Utah 2006).

        This question also has divided the commentators. Although it does not address
the issue directly, Collier’s authoritative bankruptcy treatise appears to assume a

        7
         This approach also is known as the “multiplier” or “multiplicand” approach. It should not be
confused with the mechanical approach to the calculation of projected disposable income, which the
Supreme Court rejected in Lanning in favor of the forward-looking approach, allowing consideration of
“known or virtually certain changes” to debtors’ projected disposable income. See Lanning, 130 S. Ct.
at 2478.
No. 09-2164           Baud, et al v. Carroll                                                Page 14

temporal requirement. See 8 Collier on Bankruptcy ¶ 1325.08[4][d] (Alan N. Resnick
& Henry J. Sommer eds., 16th ed. 2010). By contrast, in the leading treatise on Chapter
13, Judge Lundin supports the monetary approach. See 6 Lundin, supra, § 500.1 (“The
applicable commitment period does not require that the debtor actually make payments
for any particular period of time. Rather, it is the multiplier in a formula that determines
the amount of disposable income that must be paid to unsecured creditors.”).

        Although tenable arguments support each approach, today we join the Eighth,
Ninth and Eleventh Circuits in holding that, if the trustee or the holder of an allowed
unsecured claim objects to confirmation of a Chapter 13 plan of a debtor with positive
projected disposable income whose plan provides for a less than full recovery for
unsecured claimants, the plan cannot be confirmed unless it provides that all of the
debtor’s projected disposable income to be received in the applicable commitment period
will be applied to make payments over a duration equal to the applicable commitment
period set forth in § 1325(b).8 Our analysis of the meaning of § 1325(b) begins “‘where
all such inquiries must begin: with the language of the statute itself.’” Palmer v. United
States (In re Palmer), 219 F.3d 580, 583 (6th Cir. 2000) (quoting United States v. Ron
Pair Enters., Inc., 489 U.S. 235, 241 (1989)). In this regard, certain courts adopting the
temporal approach have relied, at least in part, on the temporal connotation of the term
“applicable commitment period.” As the Eleventh Circuit recently stated:

        [W]e first look at the term “applicable commitment period” and note that
        “applicable” and “commitment” are modifiers of the noun, the core
        substance of the term, “period.” The plain meaning of “period” denotes
        a period of time or duration. “Applicable commitment period” at its
        simplest is a term that relates to a certain duration, and based on its
        presence in § 1325, it is a duration relevant to Chapter 13 bankruptcy.
        The modifier “commitment” then reveals that “applicable commitment
        period” is a duration to which the debtor is obligated to serve [if the
        debtor chooses to remain in Chapter 13]. Finally the meaning of
        “applicable” reflects the fact that there are alternate “commitment
        periods” depending on the debtor’s classification as an above median
        income debtor or a below median income debtor.

        8
            In Section II.C. we explain why we part with Kagenveama and agree with Tennyson in holding
that this requirement applies to debtors with zero or negative projected disposable income.
No. 09-2164        Baud, et al v. Carroll                                         Page 15

Tennyson, 611 F.3d at 877 (citations omitted). Certain bankruptcy courts have followed
this line of reasoning as well. See Turner, 425 B.R. at 920–21; Brown, 396 B.R. at
554–56; In re Schanuth, 342 B.R. 601, 607–08 (Bankr. W.D. Mo. 2006); Lanning, 2007
WL 1451999, at *7–8. The Ninth Circuit has found this rationale persuasive to the
extent that the debtor has positive projected disposable income. See Kagenveama, 541
F.3d at 876 (“The plain meaning of the word ‘period’ indicates a period of time.”).

       Although persuasive, the evident temporal connotation of the term “applicable
commitment period” is not dispositive in and of itself. Indeed, adherents of the
monetary approach generally concede that applicable commitment period has a temporal
connotation, but conclude that the time period it establishes is simply one part of
§ 1325(b)(1)(B)’s calculation of the amount of the debtor’s projected disposable income
that must be devoted to unsecured creditors in order for a plan to be confirmed. Thus,
proponents of the monetary approach contend that, although § 1325(b)(1)(B) requires
that all of the debtor’s projected disposable income to be received over the course of the
applicable commitment period be paid to unsecured creditors, the section does not
mandate that these payments be made over any particular period of time or that the plan
last for any particular duration.     See, e.g., Mathis, 367 B.R. at 633 (“[Section
1325(b)(1)(B)] does not say that 36 or 60 plan payments must be made, or that the plan
must remain open for any particular duration of time. If Congress wanted to require a
debtor to make 36 or 60 plan payments over three or [five] years, it would have said
so.”); 6 Lundin, supra, § 493.1 (“The disposable income test, as modified by BAPCPA,
does not require that the plan last any particular period of time.”). Reading § 1325(b)(1)
in isolation, we might find the monetary approach to be the more plausible interpretation
of the statute. As explained below, however, we conclude that the reasoning employed
in Lanning—in which the Supreme Court relied both on the lack of explicit multiplier
language in § 1325(b)(1) and on pre-BAPCPA practice—compels us to adopt the
temporal approach. We also find that the reasoning employed in Ransom—in which the
Supreme Court relied on BAPCPA’s purpose of ensuring that debtors “repay creditors
the maximum they can afford,” Ransom, 131 S. Ct. at 725 (internal quotation marks
omitted)—leads to the same conclusion.
No. 09-2164        Baud, et al v. Carroll                                       Page 16

       1.      The Lack of Explicit Multiplier Language or Other Indication that
               Congress Intended Simple Multiplication
       In Lanning, the Supreme Court rejected the mechanical approach to calculating
projected disposable income and, in so doing, stated that “we need look no further than
the Bankruptcy Code to see that when Congress wishes to mandate simple
multiplication, it does so unambiguously—most commonly by using the term
‘multiplied.’” Lanning, 130 S. Ct. at 2472. Similarly, one strong indicator that
§ 1325(b) should be interpreted as establishing a temporal requirement is that, if
Congress had intended the applicable commitment period simply to act as a multiplier
in a calculation determining the amount of money that must be paid to unsecured
creditors, it would have said so explicitly. For example, § 1325(b) itself establishes a
debtor’s applicable commitment period based on the current monthly income of the
debtor and the debtor’s spouse combined “when multiplied by 12[.]” 11 U.S.C.
§ 1325(b)(4). Other Code provisions illustrating that Congress has been explicit when
requiring simple multiplication include § 707(b)(2) (presuming abuse if current monthly
income “multiplied by 60” and reduced by permitted expenses is not less than a certain
amount) and § 1322(d)(1) & (2) (establishing maximum plan lengths based on the
current monthly income of the debtor and the debtor’s spouse combined “multiplied by
12”). It could be argued that, had Congress intended to impose maximum plan lengths
as well as a minimum time for the payments of projected disposable income in response
to an objection, addressing the two requirements in separate statutory
sections—§§ 1322(d) and 1325(b)—was an inelegant way to accomplish this goal.
Inelegant drafting, however, does not provide a sufficient reason to reject an otherwise
correct interpretation of the Code. See Lamie v. United States Tr., 540 U.S. 526, 534
(2004) (accepting an interpretation of a Code provision even though “[t]he statute is
awkward”). Moreover, neither § 1322(d) nor § 1325(b) is superfluous under the
temporal approach. See, e.g., Tennyson, 611 F.3d at 878; Kagenveama, 541 F.3d at 879
(Bea, J., concurring in part and dissenting in part) (concluding that the “applicable
commitment period is congruous, rather than superfluous, to § 1322(d)”).            The
provisions are not superfluous because they address different concerns. Section 1322(d)
No. 09-2164           Baud, et al v. Carroll                                                   Page 17

establishes maximum plan lengths out of a concern for keeping debtors in Chapter 13
an unduly long time (of up to ten years).9 By contrast, § 1325(b) establishes the
minimum time (upon the filing of an objection) for the payment of projected disposable
income and does so, as discussed further below, out of a concern for maximizing creditor
recoveries.

         Contrasting § 1325(b) with § 1129(a)(15) is also informative.                           Under
§ 1129(a)(15), if the holder of an allowed unsecured claim that is not proposed to be paid
in full objects to confirmation of a Chapter 11 plan of an individual debtor, the plan can
be confirmed, if at all, only if the value of the property to be distributed is not “less than
the projected disposable income of the debtor (as defined in section 1325(b)(2)) to be
received during the 5-year period beginning on the date that the first payment is due
under the plan, or during the period for which the plan provides payments, whichever
is longer.” 11 U.S.C. § 1129(a)(15). In this provision Congress made clear that a
Chapter 11 plan of any length may be confirmed as long as the value of the property to
be distributed is not less than the projected disposable income of the debtor to be
received over five years (or the length of the plan, whichever is longer). See Randolph
J. Haines, Chapter 11 May Resolve Some Chapter 13 Issues, 2007 No. 8 Norton Bankr.
L. Adviser 1, 1 (Aug. 2007) (“[Chapter 11] provides that if creditors are not paid in full
and someone objects, then the plan must distribute at least the amount of the annualized
disposable income to be received in five years or during the term of the plan, whichever
is longer. This process yields a dollar amount, and nothing else. . . . All of § 1129(a)(15)
is only about the value of the property to be distributed under the plan, and this is
entirely consistent with pre-BAPCPA Chapter 11 practice, which never imposed a
minimum plan duration.”). Judge Haines suggests that this supports a monetary
approach to § 1325(b), questioning why Congress would “make Chapter 13 more
difficult than Chapter 11, by imposing a minimum plan term that is longer than would

         9
          See In re Mandarino, 312 B.R. 214, 216 n.3 (Bankr. E.D.N.Y. 2002) (“The rationale underlying
section 1322(d), expressed in the House Judiciary Committee Report and discussed in 8 Collier on
Bankruptcy, ¶ 1322.17[1], 15th Edition Revised (Matthew Bender 2002) is: ‘Extensions on plans . . . and
newly incurred debts put some debtors under court supervised repayment plans for seven to ten years. This
has become the closest thing there is to involuntary servitude . . .”).
No. 09-2164        Baud, et al v. Carroll                                         Page 18

be required of the same debtor in a Chapter 11[.]” Id. But contrasting the statutory
language of §§ 1325(b) and 1129(a)(15) seems to support, rather than undercut, the
temporal approach. For if Congress had desired the same result in Chapter 13 as it did
in Chapter 11, it presumably would have used the same construction in § 1325(b) that
it used in § 1129(a)(15). All in all, we conclude that the lack of explicit multiplier
language in §1325(b)—or some other clear indication that mere multiplication was
intended, as in § 1129(a)(15)—strongly supports the temporal approach.

       2. Pre-BAPCPA Practice

       In Lanning, the Supreme Court also looked to pre-BAPCPA practice, concluding
that such practice “is telling because we ‘will not read the Bankruptcy Code to erode
past bankruptcy practice absent a clear indication that Congress intended such a
departure.’” Lanning, 130 S. Ct. at 2473 (quoting Travelers Cas. & Sur. Co. of Am. v.
Pac. Gas & Electric Co., 549 U.S. 443, 454 (2007)). Likewise, pre-BAPCPA practice
in the context of plan confirmation counsels in favor of the temporal approach.

       To understand why this is so, a brief history is in order. There was a time when
the Code imposed no disposable-income requirement on a debtor facing an objection to
plan confirmation. At that time, bankruptcy courts would, despite an objection,
sometimes confirm plans of less than three years. See In re Markman, 5 B.R. 196
(Bankr. E.D.N.Y. 1980). Cf. In re Ali, 33 B.R. 890, 895–97 (Bankr. D. Kan. 1983)
(holding, in the context of examining the good-faith requirement under § 1325(a)(3), that
a Chapter 13 plan proposing to pay zero percent to unsecured creditors over 25 months
would be confirmed only if it were extended to 36 months). In Markman, after the
debtor proposed an 18-month Chapter 13 plan that would not have resulted in full
payment of creditors, the Chapter 13 trustee objected to confirmation, contending that
the Code required the debtor to commit to make payments over a three-year period. The
bankruptcy court confirmed the plan over the trustee’s objection, concluding that
“[c]reditors are not prejudiced when, as in the present case, they are paid more under the
Chapter 13 plan than they would receive under a Chapter 7 liquidation.” Markman,
5 B.R. at 198 n.3. This, however, was before the Bankruptcy Amendments and Federal
No. 09-2164        Baud, et al v. Carroll                                         Page 19

Judgeship Act of 1984 (“BAFJA”) became effective. With BAFJA, Congress introduced
the disposable-income requirement to the Code. Courts presented with a disposable-
income objection to confirmation after the enactment of BAFJA distinguished Markman
and declined to confirm plans of less than three years. See In re Turpen, 218 B.R. 908,
916 (Bankr. N.D. Iowa 1998) (“Debtors provide [Markman] as support for their proposal
to make payments of a fixed amount over less than three years. Markman does not aid
debtors because it was decided before the disposable income requirement was added to
Chapter 13 in 1984.”); In re Schwarz, 85 B.R. 829, 830–31 (Bankr. S.D. Iowa 1988)
(stating in a Chapter 12 case that “[t]he language in section 1225(b) closely parallels the
language in section 1325(b)” and concluding that “the cases upon which the debtors rely
[including Markman] no longer are apposite to the issue at hand because they were
rendered prior to the enactment of the disposable income provision of section 1325(b).”).
See also In re Greer, 60 B.R. 547, 555 (Bankr. C.D. Cal. 1986) (“If the proposed plan
is less than 36 months, it must be extended to 36 months upon objection of a creditor or
the Chapter 13 Trustee.”); In re Wobig, 73 B.R. 292, 296 (Bankr. D. Neb. 1987) (“[T]he
[Chapter 12] plan must be changed to provide that the plan will remain open for three
years. . . .”).

         Several courts adopting the temporal approach have pointed out that pre-
BAPCPA practice is consistent with that approach. See Fridley v. Forsythe (In re
Fridley), 380 B.R. 538, 544 (B.A.P. 9th Cir. 2007) (“Before BAPCPA, the §1325(b)(1)
‘three-year period’ operated as a temporal requirement.            After BAPCPA, the
§ 1325(b)(1) ‘applicable commitment period’ continues to operate as a temporal
requirement. Nothing in the statutory structure suggests that Congress meant to alter this
aspect of the statute.”) (citations omitted); King, 2010 WL 4363173, at *3 (“The Court
also looks to past bankruptcy practice. Before [BAPCPA] . . . . [c]ourts construed
[§ 1325(b)(1)(B)] as a temporal minimum, at least at the time of confirmation, when an
objection was filed.” citations and internal quotation marks omitted)); In re King, 439
B.R. 129, 135 (Bankr. S.D. Ill. 2010); Schanuth, 342 B.R. at 608 (“Under pre-BAPCPA
practice, in the face of an objection to confirmation by an unsecured creditor or the
trustee, § 1325(b)(1) required a debtor to devote all of the debtor’s disposable income
No. 09-2164           Baud, et al v. Carroll                                                   Page 20

to the plan for a minimum of three years. . . . BAPCPA’s revision of § 1325, albeit
significant, has not changed this tenet of pre-BAPCPA practice.”). By contrast, as courts
adopting the temporal approach also have noted, the monetary approach is inconsistent
with post-BAFJA, pre-BAPCPA practice. See Pohl, 2007 WL 1452019, at *3 (holding
that the monetary approach “is a significant departure from the pre-BAPCPA practice
requiring a minimum period of payments that is simply not justified by the language or
structure of the statute, or by the admittedly scant legislative history”10); Strickland,
2007 WL 499623, at *2; Lanning, 2007 WL 1451999, at *8; Davis, 348 B.R. at 457. See
also 3 Lundin, supra, § 199.1 (“A plan shorter than 36 months will likely face an
objection to confirmation unless the plan proposes to pay all claim holders in full.”
(citing pre-BAPCPA version of § 1325(b)(1)(A))). Post-BAPCPA decisions adopting
the monetary approach in which the courts point to pre-BAPCPA practice in support of
their position rely on cases decided in the context of plan modification or early-payoff,
not confirmation. See Fuger, 347 B.R. at 97–101; Swan, 368 B.R. at 25. By contrast,
as discussed above, pre-BAPCPA decisions addressing plan confirmation support the
temporal approach.

         Before leaving the issue of pre-BAPCPA practice, it bears noting that, prior to
BAPCPA, § 1325(b)(1)(B) required that all of the debtor’s projected disposable income
to be received in the specified three-year period be applied to make payments “under the
plan.” Section 1325(b)(1)(B) now requires that all of the debtor’s projected disposable
income to be received in the applicable commitment period be applied to make payments
“to unsecured creditors under the plan.” 11 U.S.C. § 1325(b)(1)(B) (emphasis added).
The addition of the phrase “to unsecured creditors” may raise certain issues that we need
not reach today. See, e.g., In re Johnson, 408 B.R. 811, 817 (Bankr. W.D. Mo. 2009)
(denying confirmation of a Chapter 13 plan that provided for projected disposable
income to be paid to priority unsecured creditors, which the court held were not
“unsecured creditors” within the meaning of § 1325(b)). Whatever its effect, however,

         10
            “[S]cant legislative history” is a reference to H.R. Rep. 109-31(I), p. 79, 2005 U.S.C.C.A.N.
88, 146. In adopting the temporal approach, some courts have relied in part on this House Report, which
has a section heading entitled “Chapter 13 Plans to Have 5-Year Duration in Certain Cases.” See, e.g.,
Tennyson, 611 F.3d at 879.
No. 09-2164        Baud, et al v. Carroll                                        Page 21

we do not believe that the addition of the phrase “to unsecured creditors” evinces a clear
indication that Congress intended bankruptcy courts to depart from their pre-BAPCPA
practice of declining to confirm plans of less than the required length if there was an
objection to confirmation.

       3. BAPCPA’s Purpose

       The facts of Ransom presented the issue of whether a debtor who owns a vehicle
but does not have any ongoing loan or lease payments to make on the vehicle may take
an ownership deduction for that vehicle when calculating projected disposable income.
In holding that such a debtor may not take the deduction, the Supreme Court stated that
“the text, context, and purpose of the statutory provision at issue” precludes the debtor
from taking the deduction. Ransom, 131 S. Ct. at 721 (emphasis added). Regarding the
purpose of the statutory provision, the Supreme Court stated:

               Congress enacted [BAPCPA] to correct perceived abuses of the
       bankruptcy system. In particular, Congress adopted the means test . . .
       to help ensure that debtors who can pay creditors do pay them.
       ....
       . . . [C]onsideration of BAPCPA’s purpose strengthens our reading of the
       [statute]. Congress designed the means test to measure debtors’
       disposable income and, in that way, to ensure that [they] repay creditors
       the maximum they can afford. This purpose is best achieved by
       interpreting the means test, consistent with the statutory text, to reflect
       a debtor’s ability to afford repayment. Cf. [Lanning, 130 S. Ct. at
       2475-2476] (rejecting an interpretation of the Bankruptcy Code that
       “would produce [the] senseless resul[t]” of “deny[ing] creditors
       payments that the debtor could easily make”).
       ....
       . . . Ransom’s interpretation would run counter to the statute’s overall
       purpose of ensuring that debtors repay creditors to the extent they can[.]
       ....
              Ransom . . . contends that his view of the means test is necessary
       to avoid senseless results not intended by Congress. At the outset, we
       note that the policy concerns Ransom emphasizes pale beside one his
       reading creates: His interpretation, as we have explained, would frustrate
No. 09-2164         Baud, et al v. Carroll                                            Page 22

        BAPCPA’s core purpose of ensuring that debtors devote their full
        disposable income to repaying creditors.

Id. at 721, 725, 727, 729 (citations and internal quotation marks omitted).

        In Ransom, therefore, the Supreme Court chose the interpretation of the statutory
provision at issue that was at least as “consistent with the statutory text,” id. at *6, as the
competing interpretation, but that also would serve “BAPCPA’s core purpose of
ensuring that debtors devote their full disposable income to repaying creditors.” Id. at
*10.   Likewise, in adopting the temporal approach here, we are choosing the
interpretation of the statutory provision at issue that is at least as consistent with the
statutory text as the competing interpretation; as explained above, we also are choosing
the interpretation that is consistent with pre-BAPCPA practice—from which we see no
clear indication that Congress intended bankruptcy courts to depart. As explained
further below in connection with our determination that the applicable commitment
period applies to debtors with zero or negative projected disposable income, we also
believe that our interpretation better serves BAPCPA’s core purpose, recognized by the
Supreme Court in Ransom, of ensuring that debtors devote their full disposable income
to repaying creditors. And applying the applicable commitment period as a temporal
requirement avoids the “senseless result[] that we do not think Congress intended” of
“deny[ing] creditors payments that the debtor could easily make” if additional disposable
income were to become available after confirmation. Lanning, 130 S. Ct. at 2475–76.
Moreover, our holding in no way implicates the Supreme Court’s statement in Lanning
that it was rejecting an interpretation of the Code that in certain instances would “deny
the protection of Chapter 13 to debtors who meet the chapter’s main eligibility
requirements.” Id. at 2476. At most, courts that reject the temporal approach contend
that it would delay Chapter 13 debtors receipt of the discharge in certain instances. See,
e.g., Swan, 368 B.R. at 24 (“[T]he absurdity [of the temporal approach] is having a
debtor remain in chapter 13 awaiting discharge where, after a certain point, he has
fulfilled all of the Code requirements and his plan payment is reduced to zero.”). No
court or commentator of which we are aware, however, has argued that the temporal
No. 09-2164        Baud, et al v. Carroll                                        Page 23

approach would ultimately deny any debtor a discharge or any other protection afforded
by Chapter 13.

       The arguments set forth above provide compelling support for the temporal
approach. In sum, therefore, we hold that, if the trustee or the holder of an allowed
unsecured claim objects to confirmation of a Chapter 13 plan of a debtor with positive
projected disposable income whose plan provides for a less than full recovery for
unsecured claimants, the plan cannot be confirmed unless it provides that all of the
debtor’s projected disposable income to be received in the applicable commitment period
will be applied to make payments over a duration equal to the applicable commitment
period set forth in § 1325(b). This holding is consistent with the better reading of the
text of § 1325(b), with pre-BAPCA practice and with the core purpose of BAPCPA. Our
holding also is consistent with the decisions of each of the federal appellate courts to
have considered this issue. See Tennyson, 611 F.3d at 877–78; Frederickson, 545 F.3d
at 660; Kagenveama, 541 F.3d at 875–77.

B.     The Appellees’ Projected Disposable Income as of the Date of Confirmation.

       Whether the Appellees had zero, negative or positive projected disposable
income as of the date of confirmation of their Chapter 13 plan turns on our answer to two
questions: (1) whether benefits received under the Social Security Act can be included
in the calculation of projected disposable income and (2) whether above-median-income
debtors can be precluded from deducting their full mortgage payment as part of the
calculation. According to the Appellant, the Appellees’ Form 22C, which lists a
disposable income figure of negative $1,203.55, underestimates the actual income
available to fund the Appellees’ plan in three ways. The Appellant points out that Form
22C (1) does not include the Appellees’ Social Security benefits ($1,758 per month);
(2) allows for standardized deductions for living expenses, healthcare, and
transportation, even if the Appellees did not incur these costs; and (3) permits the
Appellees to deduct their entire monthly mortgage payment of $1,699.93, even though
this exceeds the IRS Local Standard of $791. The Appellant also argues that Form 22C
does not reflect that the Appellees earned almost $300 more in monthly wages on the
No. 09-2164           Baud, et al v. Carroll                                                Page 24

Petition Date than in the six months before the month of the Petition Date, nor that they
would complete their monthly 401(k) loan repayments of approximately $480 seven
months after confirmation. Relying on the Supreme Court’s decision in Lanning and our
decision in Darrohn, the Appellant concludes that all of this additional income should
be included in the calculation of projected disposable income. The parties, however,
agree that the determination of whether the Appellees had zero, negative or positive
projected disposable income as of the confirmation date turns primarily on the issue of
whether benefits received under the Social Security Act can be included in the
calculation. Given the numbers, it also matters whether the Appellees are permitted to
deduct their entire monthly mortgage payment. We will consider the question presented
by the benefits under the Social Security Act first and then turn to the Appellees’
mortgage payment.

        We conclude that benefits received under the Social Security Act—such as the
benefits the Appellees receive—should not be included in the calculation of projected
disposable income.11 As previously noted, in Lanning the Supreme Court rejected the
mechanical approach to calculating projected disposable income, under which the
debtor’s monthly disposable income figure simply is multiplied by the number of months
comprising the applicable commitment period. See Lanning, 130 S. Ct. at 2473–77.
Noting that in most cases “nothing more is required” in calculating projected disposable
income than projecting the disposable income figure from Form 22C over the term of the
plan, the Supreme Court held that “in unusual cases . . . a court may go further and take
into account other known or virtually certain information about the debtor’s future
income or expenses.” Id. at 2475. Thus, the Supreme Court held that the bankruptcy
court could take into account the fact that the disposable-income figure on Lanning’s
Form 22C was inflated greatly by a one-time buyout from her former employer. Id. at
2470. In Darrohn, we considered Lanning’s application to a situation in which changes

        11
            The benefits the Appellees are receiving are not on account of unemployment compensation.
Thus, we do not decide the question—which also has split the courts—of whether unemployment-
compensation benefits are “benefits received under the Social Security Act” within the meaning of
§ 101(10A)(B). See Washington v. Reding (In re Washington), 438 B.R. 348, 350 (M.D. Ala. 2010)
(collecting cases on both sides of the issue).
No. 09-2164        Baud, et al v. Carroll                                       Page 25

in the debtors’ financial circumstances led to Form 22C’s understating their income and
overstating their expenditures. During the six months prior to filing, David Darrohn had
been unemployed for ninety days, but subsequently secured another job, leading to a
historical income-figure on Form 22C that was substantially lower than the income
figure on the Schedule I; in addition, the Form 22C expenditure figure included
mortgage payments on two properties, notwithstanding the Darrohns’ undisputed intent
to surrender both properties in their Chapter 13 plan. See Darrohn, 615 F.3d at 476. We
held that these changes fell squarely within Lanning’s holding. Because the changes to
the debtors’ income and mortgage payment were both “known or virtually certain” at the
time of confirmation, the bankruptcy court had the authority to take them into account
when calculating the debtors’ projected disposable income. Id. at 477. Neither Lanning
nor Darrohn, however, supports the view that a court may disregard the Code’s
definition of disposable income (which incorporates the income exclusions of
§101(10A)) simply because there is a disparity between the amount calculated using that
definition and the debtor’s actual available income as set forth on Schedule I. In other
words, the discretion Lanning affords does not permit bankruptcy courts to alter
BAPCPA’s formula for calculating disposable income (i.e., does not permit the court to
alter the items to be included in and excluded from income). Permitting the bankruptcy
court—as the Appellant would have us do—to include Social Security benefits in the
calculation of the Appellees’ projected disposable income essentially would read out of
the Code BAPCPA’s revisions to the definition of disposable income. Courts so held
prior to the Supreme Court’s decision in Lanning. See Kibbe v. Sumski (In re Kibbe), 361
B.R. 302, 311–12 (B.A.P. 1st Cir. 2007) (“[I]n its adherence to Schedule I, the
bankruptcy court abandoned the new definition for ‘disposable income.’ But Congress
apparently intended to exclude certain categories of income when it defined ‘disposable
income’ generally and then in the chapter 13 context. Not to be included in the income
determination under chapter 13 are . . . benefits received under the Social Security Act
. . . .”); In re Bartelini, 434 B.R. 285, 295–96 (Bankr. N.D.N.Y. 2010) (same); Lanning,
2007 WL 1451999, at *5 n.21 (same); In re Barfknecht, 378 B.R. 154, 161–62 (Bankr.
W.D. Tex. 2007) (same); In re McCarty, 376 B.R. 819, 825 (Bankr. N.D. Ohio 2007)
No. 09-2164            Baud, et al v. Carroll                                                   Page 26

(same); In re Upton, 363 B.R. 528, 534–35 (Bankr. S.D. Ohio 2007) (same); Schanuth,
342 B.R. at 605 (same); see also Baud, 415 B.R. at 302 (“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[.]”).12 And nothing in Lanning suggests that bankruptcy courts may ignore the
statutory definition of disposable income in this manner. See 8 Collier on Bankruptcy
¶ 1325.08[4][a] (“There is no suggestion [in Lanning] that a bankruptcy court may rely
on the term ‘projected’ to otherwise deviate from the formula—for example, by
including income that the formula excludes, such as Social Security benefits, or altering
expense allowances permitted by the formula.”). Thus, post-Lanning, courts have
continued to exclude from the calculation of projected disposable income the items
excluded by § 101(10A). See In re Johnson, 382 Fed. App’x 503, 506 (7th Cir. June 21,
2010) (unpublished) (affirming, post-Lanning, the bankruptcy court’s “‘harmonizing’
approach” to the projected disposable income calculation, which “employ[s] the
inclusions and exclusions from ‘current monthly income’ set forth in section 101(10A),
but appl[ies] them not in the retrospective manner specified by that provision but rather
in the forward-looking manner envisioned by section 1325(b)”); In re Welsh, 440 B.R.
836, 851 (Bankr. D. Mont. 2010) (“Current monthly income defined under BAPCPA,
§ 101(10A)(B), excludes benefits received under the Social Security Act; Section
101(10A)(B) is a clear indication that Congress intended a departure from pre-BAPCPA
practice and [to] exclude SSI income from the disposable income calculation.”). But see
In re Cranmer, 433 B.R. 391, 399 (Bankr. D. Utah 2010) (holding that a case where the
debtor has Social Security benefits is the “‘unusual’ case the Supreme Court meant in
[Lanning] where there are other known sources of income that should be included in the
calculation of [projected disposable income]”).13

         12
            Contra In re Timothy, No. 08-28332, 2009 WL 1349741, at *6 (Bankr. D. Utah May 12, 2009)
(holding that Social Security benefits can be included in the calculation of projected disposable income),
aff’d, Nos. UT-10-003, 08-28332, 2010 WL 5383897, at *6 (B.A.P. 10th Cir. Dec. 29, 2010).
         13
           Courts are split on the issue of whether a bankruptcy court may consider an above-median-
income debtor’s decision to not commit available Social Security benefits to unsecured creditors in the
good-faith analysis under 11 U.S.C. § 1325(a)(3). Cf. Fink v. Thompson (In re Thompson), 439 B.R. 140,
142–43 (B.A.P. 8th Cir. 2010) (holding that debtors’ exclusion of Social Security benefits as source of
payment under Chapter 13 plan could not be considered in good-faith analysis), and Barfknecht, 378 B.R.
No. 09-2164            Baud, et al v. Carroll                                                      Page 27

         Prior to BAPCPA, courts typically included Social Security benefits in the
calculation of disposable income. See Hagel v. Drummond (In re Hagel), 184 B.R. 793,
796 (B.A.P. 9th Cir. 1995); In re Cornelius, 195 B.R. 831, 835 (Bankr. N.D.N.Y. 1995);
In re Schnabel, 153 B.R. 809, 817 (Bankr. N.D. Ill. 1993). See also Bartelini, 434 B.R.
at 296 (stating that, prior to BAPCPA, courts “consistently included social security
income in the calculation of projected disposable income.” (internal quotation marks
omitted)). This appears to be indicative of a pre-BAPCPA practice to include benefits
received under the Social Security Act in the calculation of projected disposable income.
If so, we see a “clear indication that Congress intended . . . a departure” from any such
pre-BAPCPA practice, Lanning, 130 S. Ct. at 2473, in the combined effect of
BAPCPA’s (1) defining current monthly income to expressly exclude benefits received
under the Social Security Act and (2) amending the definition of disposable income to
incorporate the definition of current monthly income. And this clear indication by
Congress that Social Security benefits are to be treated differently post-BAPCPA must
override BAPCPA’s purpose of ensuring that debtors “repay creditors the maximum they
can afford,” Ransom, 131 S. Ct. at 725 (internal quotation marks omitted), because any
application of that purpose must be “consistent with the statutory text[.]” Id.

         Were we to follow the approach espoused by the Appellant, bankruptcy
courts—contrary to what the Supreme Court contemplated in Lanning and contrary to
the express statutory language—would be permitted to depart from the definition of
disposable income set forth in § 1325(b)(2) in virtually every case, given the
improbability of a debtor’s actual financial circumstances matching perfectly the
disposable-income calculation set out by BAPCPA. See 6 Lundin, supra, § 500.1
(noting that “[t]he amount of disposable income determined by the formula in
§ 1325(b)(1) will bear no certain relationship to the debtor’s actual financial ability to

at 164 (“[W]hether plan payment must include income derived from Social Security benefits is already
specifically addressed elsewhere in the Bankruptcy Code. The trustee’s proposed reading of the good faith
standard would swallow up these other explicit statutory treatments, effectively rendering them nullities.”),
with Bartelini, 434 B.R. at 297 (holding that a debtor’s decision to not commit Social Security benefits to
pay unsecured creditors may be “considered as one of many factors under a totality of the circumstances
inquiry to determine good faith”), and Upton, 363 B.R. at 536 (same). Because the Appellees have chosen
to devote Social Security benefits to unsecured creditors, this good-faith issue is not before us today.
No. 09-2164           Baud, et al v. Carroll                                                   Page 28

make payments”); cf. Frederickson, 545 F.3d at 658 (“In enacting BAPCPA, Congress
reduced the amount of discretion that bankruptcy courts previously had over the
calculation of an above-median debtor’s income and expenses. . . . Congress wanted to
eliminate what it perceived as widespread abuse of the system by curtailing the
bankruptcy courts’ discretion . . . . Accordingly, Congress rigidly defined ‘disposable
income’ . . . .”).

         Turning to the Appellees’ mortgage payments, we conclude that § 1325(b)
permits the Appellees to deduct their ongoing mortgage payments in accordance with
the formula set forth in § 707(b)(2)(A)(iii). We note that there is a split of authority on
the issue of what the phrase “amounts reasonably necessary to be expended” as set forth
in § 1325(b)(2) means in the context of secured-debt payments by above-median income
debtors. Section 1325(b)(3) states that, for such debtors, “amounts reasonably necessary
to be expended” in § 1325(b)(2) “shall be determined in accordance with subparagraphs
(A) and (B) of section 707(b)(2)[.]” 11 U.S.C. § 1325(b)(3). Thus, a majority of courts
have held that above-median-income debtors may deduct ongoing monthly payments on
secured debt in accordance with the formula set forth in § 707(b)(2)(A)(iii) for property
that debtors intend as of the date of confirmation to retain, regardless of whether the
payments are subjectively reasonably necessary to be expended for the maintenance or
support of the debtors or the debtors’ dependents. See Musselman, 394 B.R. at 818–19;
In re Davis, No. 08-13693-SSM, 2008 WL 5786921, at *4 & n.5 (Bankr. E.D. Va. Nov.
18, 2008); In re Hays, No. 07-41285, 2008 WL 1924233, at *3–6 (Bankr. D. Kan. Apr.
29, 2008); In re Moore, No. 07-11528C-13G, 2008 WL 895668, at *3–4 (Bankr.
M.D.N.C. Apr. 2, 2008); In re Van Bodegom Smith, 383 B.R. 441, 445–49 (Bankr. E.D.
Wis. 2008); In re Austin, 372 B.R. 668, 681 (Bankr. D. Vt. 2007); In re Edmondson, 371
B.R. 482, 485–86 (Bankr. D. N.M. 2007); In re Carlton, 362 B.R. 402, 411 (Bankr. C.D.
Ill.2007); In re Martin, 373 B.R. 731, 733–34 (Bankr. D. Utah 2007).14 Other courts

         14
            Some of these courts distinguish between ongoing payments on secured debt and payments to
cure arrearages on secured debt, concluding that ongoing payments may be deducted without regard to
whether or not they are subjectively reasonably necessary for the maintenance or support of the debtor or
the debtor’s dependents, while cure payments are deductible only if they are so necessary. We need not
reach this issue here because, according to the Appellees’ confirmed Chapter 13 plan, their secured
mortgage payment is an ongoing payment only; the Appellees list no amount for payment of an arrearage.
No. 09-2164              Baud, et al v. Carroll                                                   Page 29

have held that bankruptcy courts have the authority after BAPCPA to continue to engage
in a subjective analysis of what is reasonably necessary, even for above-median-income
debtors. Some courts find this authority to be implicit in Lanning. See In re Collier, No.
09-33187, 2010 WL 2643542, at *3 (Bankr. M.D. Ala. June 29, 2010) (“[A] per se rule
in which all payments to secured creditors are reasonable necessary deductions under
Section 707(b) is not in keeping with the holding in Lanning.”). Other courts find the
authority in § 707(b)(2)(A)(iii).15 See In re Owsley, 384 B.R. 739, 748 (Bankr. N.D.
Tex. 2008) (“[T]he court concludes that the limiting language in subclause (II) also
applies to subclause (I).”).

         Prior to BAPCPA, bankruptcy courts had the discretion to determine whether
debtors’ mortgage expenses were reasonably necessary and were permitted to exercise
this discretion for all debtors, regardless of their income. We conclude that § 1325(b)(3)
provides a clear indication that Congress intended a departure from such pre-BAPCPA
practice with respect to above-median-income debtors. Thus, the Appellees should be
permitted to deduct their mortgage payment in accordance with the formula set forth in
§ 707(b)(2)(A)(iii), unless there is some other basis other than the disposable-income test
for disallowing the deduction.16 Concluding otherwise would limit above-median-

         15
              This subsection provides as follows:
         (iii) The debtor’s average monthly payments on account of secured debts shall be
         calculated as the sum of—

          (I) the total of all amounts scheduled as contractually due to secured creditors in each
         month of the 60 months following the date of the petition; and
           (II) any additional payments to secured creditors necessary for the debtor, in filing a
         plan under chapter 13 of this title, to maintain possession of the debtor’s primary
         residence, motor vehicle, or other property necessary for the support of the debtor and
         the debtor’s dependents, that serves as collateral for secured debts;
         divided by 60.
11 U.S.C. § 707(b)(2)(A)(iii) (emphasis added).
         16
             There is a split of authority on the issue—which we do not reach—of whether a bankruptcy
court may consider an above-median-income debtor’s decision to continue making payments on secured
debt in the good-faith analysis under 11 U.S.C. § 1325(a)(3). Cf. Davis, 2008 WL 5786921, at *4 (holding
that above-median-income debtors’ decision to continue making monthly mortgage payment of $5,768 was
evidence of bad faith and denying confirmation in part on that basis), with Van Bodegom Smith, 383 B.R.
at 456 (stating in the context of a mortgage payment that “the question of whether the debtors committed
all of their projected disposable income into the plan is a matter solely for review under § 1325(b), and is
not pertinent to engaging in a review of good faith under §1325(a)(3).”), and Austin, 372 B.R. at 683
No. 09-2164            Baud, et al v. Carroll                                                    Page 30

income debtors to deducting the categories of expenses set forth in § 707(b)(2)(A) &
(B)—a result that is required but that is different than that for below-median income-
debtors17—but at the same time would not allow them to take full advantage of the
amounts that those subsections would permit them to deduct. We see nothing in
§ 1325(b)(2) as construed in Lanning—nor anything in § 707(b)(2)(A)(iii)—that would
support such a result.

         In sum, it is appropriate to calculate a debtor’s projected disposable income using
the inclusions and exclusions from disposable income set forth in the Code and the
deductions permitted by the Code, supplemented as of the date of confirmation and
adjusted to take into account changes during the applicable commitment period that are
known or virtually certain at the time of confirmation. Cf. Johnson, 400 B.R. at 651
(“[I]n order to report disposable income projected to be received during the applicable
commitment period, a debtor must supplement Official Form 22C with a statement of
any changes in the ‘current monthly income’ as reported in the form, and any changes
in the expenses allowed, anticipated to take place during the applicable commitment
period.”).18

(holding in the context of an objection to the above-median-income debtors’ decision to continue making
a payment on secured debt that “post-BAPCPA, [t]he disposable income a debtor decides to commit to his
plan is not the measure of his good faith in proposing the plan”) internal quotation marks omitted)).
         17
           See Lanning, 130 S. Ct. at 2470 (“If a debtor’s income is below the median for his or her State,
‘amounts reasonably necessary’ include the full amount needed for ‘maintenance or support,’ see
§ 1325(b)(2)(A)(i), but if the debtor’s income exceeds the state median, only certain specified expenses
are included, see §§ 707(b)(2), 1325(b)(3)(A).” (footnote omitted)).
         18
            The Appellant makes three additional arguments in support of her position that the Appellees
had positive projected disposable income as of the date of confirmation. First, she contends that the
Appellees’ projected repayment of a retirement loan during the term of the plan must be taken into account
in the calculation of their projected disposable income. The issue of whether disposable income includes
amounts that become available as a result of a debtor repaying a retirement-plan loan is on appeal from
the Bankruptcy Appellate Panel for the Sixth Circuit. See Burden v. Seafort (In re Seafort), 437 B.R. 204
(B.A.P. 6th Cir. 2010), appeal docketed, No. 10-6248 (6th Cir. Dec. 1, 2010). Second, the Appellant
argues that the Appellees may not deduct certain standardized deductions allowed by § 1325(b)(3) and
§ 707(b)(2)(A) and (B) if they did not actually incur the expenses. We need not address either of these
issues because the exclusion of Social Security benefits from disposable income and the deduction of the
mortgage payment together mean that the Appellees had negative projected disposable income as of the
confirmation date. The Appellant also contends that the Appellees must include in the calculation of
projected disposable income any income from employment that is known or virtually certain as of the date
of confirmation even if they did not have that income during the six-month period reflected on Form 22C.
Under Lanning and Darrohn, such income must be included in the calculation of projected disposable
income so long as the income does not fall within the categories of income excluded from disposable
income by the Code. See Darrohn, 615 F.3d at 476.
No. 09-2164        Baud, et al v. Carroll                                         Page 31

C.     The Temporal Requirement of the Applicable Commitment Period Applies
       to Debtors with Zero or Negative Projected Disposable Income as of the
       Date of Confirmation.
       This brings us to the issue of whether there is an exception to the temporal
requirement set forth in § 1325(b) for debtors with zero or negative projected disposable
income. The Eleventh Circuit and certain bankruptcy courts have held that the
applicable commitment period applies to debtors with zero or negative projected
disposable income. See, e.g., Tennyson, 611 F.3d at 876–77; Moose, 419 B.R. at 635;
Meadows, 410 B.R. at 245–46; Brown, 396 B.R. at 554–55; Nance, 371 B.R. at 371–72;
Casey, 356 B.R. at 527–28. See also Kagenveama, 541 F.3d at 879 (Bea, J., concurring
in part and dissenting in part) (concluding that the applicable commitment period applies
whether or not the debtor has positive projected disposable income). By contrast, the
Ninth Circuit and several other courts, including the district court below, have held that
the applicable commitment period does not apply to debtors with zero or negative
projected disposable income. See, e.g., Kagenveama, 541 F.3d at 875–77; Baud, 415
B.R. at 293; Musselman, 394 B.R. at 813–14; Green, 378 B.R. at 38; Lawson, 361 B.R.
at 220; Alexander, 344 B.R. at 751. See also In re Davis, 392 B.R. 132, 146 (Bankr.
E.D. Pa. 2008) (assuming for the sake of argument that the applicable commitment
period imposes a temporal requirement and holding that, if so, it does not apply to
debtors with zero or negative projected disposable income). In holding that there is no
exception to the applicable-commitment-period requirement for debtors with zero or
negative projected disposable income, the Eleventh Circuit applied a plain-meaning
analysis, pointing out that § 1325(b)(4) “does not state that the ‘applicable commitment
period’ exists solely for the § 1325(b)(1)(B) calculation and it certainly does not state
that the ‘applicable commitment period’ becomes inconsequential if disposable income
is negative.” Tennyson, 611 F.3d at 877. The Eleventh Circuit also noted that the
applicable commitment period “shall be” three years or five years and that the length of
the period to be applied to a particular debtor is based solely on “the current monthly
income of the debtor and the debtor’s spouse combined,” 11 U.S.C. § 1325(b)(4), not on
the debtor’s having positive projected disposable income. See Tennyson, 611 F.3d at
877. By contrast, the Ninth Circuit—also applying a plain-meaning analysis—held that
No. 09-2164         Baud, et al v. Carroll                                         Page 32

there is an exception to the applicable-commitment-period requirement for debtors with
zero or negative projected disposable income. In so doing, the Ninth Circuit agreed that
the applicable commitment period imposes a period of time over which projected
disposable income is to be paid, but concluded that, if the debtor’s projected disposable
income is zero or negative, the applicable commitment period is “irrelevant.”
Kagenveama, 541 F.3d at 877.

        In addressing this difficult issue, we begin once again with the language of the
statute itself. Under § 1325(b), a plan that does not propose to pay the holders of
unsecured claims in full may not be confirmed over objection unless it “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.” 11
U.S.C. § 1325(b)(1)(B) (emphasis added). Under the express language of § 1325(b)(4),
the applicable commitment period does not depend on the amount of the debtor’s
projected disposable income. To the contrary, the applicable commitment period
depends on the current monthly income of the debtor and the debtor’s spouse combined.
See 11 U.S.C. § 1325(b)(4); Tennyson, 611 F.3d at 877; Nance, 371 B.R. at 371 (“The
definition of ‘applicable commitment period’ . . . is linked exclusively to the amount of
a debtor’s current monthly income.”). Section 1325(b)(4) expressly states that the
applicable commitment period shall be three years, unless the debtor’s current monthly
income is above the applicable state median, in which case it shall be not less than five
years. See 11 U.S.C. § 1325(b)(4)(A). Confirmation of a plan of less than three or five
years in length, respectively, is permissible “only if the plan provides for payment in full
of all allowed unsecured claims over a shorter period.” 11 U.S.C. § 1325(b)(4)(B).
Accordingly, the express statutory language strongly suggests that, upon the filing of an
objection to confirmation of a plan that does not propose to pay unsecured claims in full,
in order for the plan to be confirmed under § 1325(b)(1)(B), it must provide that all of
the debtor’s projected disposable income will be applied to make payments over a
duration equal to the applicable commitment period and that this is the case whether the
debtor has negative, zero or positive projected disposable income. See Tennyson, 611
F.3d at 877–78 (“[Section 1325(b)(4)] certainly does not state that the ‘applicable
No. 09-2164        Baud, et al v. Carroll                                         Page 33

commitment period’ becomes inconsequential if disposable income is negative.” (citing
Atl. Sounding Co. v. Townsend, 129 S. Ct. 2561, 2575 (2009) (“[W]e will not attribute
words to Congress that it has not written.”)). Accordingly, we conclude that the better
reading of § 1325(b) is that the temporal requirement of the applicable commitment
period applies to debtors facing a confirmation objection even if they have zero or
negative projected disposable income.

       This, however, does not end our inquiry. Although we find the interpretation of
§ 1325(b) that applies the applicable commitment period to debtors with zero or negative
projected disposable income to be more persuasive than the competing interpretation,
we also recognize that the plain-language arguments supporting each approach are
nearly in equipoise, and that the circuit-level decisions on the issue are entirely so. For
assistance in interpreting the statute, therefore, we turn once again to the guideposts
provided by the Supreme Court in Lanning and Ransom.

       In rejecting the mechanical approach to calculating projected disposable income,
the Supreme Court in Lanning relied primarily on the lack of explicit multiplier language
in § 1325(b) and on the state of pre-BAPCPA practice. See Lanning, 130 S. Ct. at 2478
(“Consistent with the text of § 1325 and pre-BAPCPA practice, we hold that when a
bankruptcy court calculates a debtor’s projected disposable income, the court may
account for changes in the debtor’s income or expenses that are known or virtually
certain at the time of confirmation.”). But these guideposts do not aid us here.
Although, as discussed earlier, the lack of explicit multiplier language in § 1325(b)(1)(B)
leads us to an interpretation of § 1325(b) under which a Chapter 13 plan that does not
provide for full payment of creditors and that is subject to an objection must provide that
all of the debtor’s projected disposable income will be applied to make payments for the
duration of the applicable commitment period, the lack of explicit multiplier language
does not answer the question of what the plan must provide if the debtor has no positive
projected disposable income with which to make payments. And pre-BAPCPA practice
sheds no light here because “[t]o veterans of Chapter 13 practice, it runs afoul of basic
principles to suggest that a debtor with no disposable income can nonetheless propose
No. 09-2164            Baud, et al v. Carroll                                                     Page 34

a confirmable plan[,] [y]et BAPCPA permits precisely that.” Alexander, 344 B.R. at
750.19 Thus, we turn next to the third guidepost set forth in Lanning. In rejecting the
mechanical approach to calculating disposable income, the Supreme Court—in addition
to primarily relying on the lack of explicit multiplier language in § 1325(b) and on the
state of pre-BAPCPA practice—also noted that its holding would avoid “senseless
results”:

         In cases in which a debtor’s disposable income during the 6-month
         look-back period is either substantially lower or higher than the debtor’s
         disposable income during the plan period, the mechanical approach
         would produce senseless results that we do not think Congress intended.
         In cases in which the debtor’s disposable income is higher during the
         plan period, the mechanical approach would deny creditors payments that
         the debtor could easily make. And where, as in the present case, the
         debtor’s disposable income during the plan period is substantially lower,
         the mechanical approach would deny the protection of Chapter 13 to
         debtors who meet the chapter’s main eligibility requirements.

Lanning, 130 S. Ct. at 2475–76. As we previously discussed, in response to an argument
made by the debtor in Ransom that the Ninth Circuit decision from which he was
appealing would lead to senseless results, the Supreme Court made clear that any
analysis predicated on purported senseless results must be cabined by still another
guidepost—BAPCPA’s purpose of ensuring that debtors repay creditors using their full
disposable income. See Ransom, 131 S. Ct. at 729 (“Ransom finally contends that his
view of the means test is necessary to avoid senseless results not intended by Congress.
At the outset, we note that the policy concerns Ransom emphasizes pale beside one his
reading creates: His interpretation, as we have explained, would frustrate BAPCPA’s
core purpose of ensuring that debtors devote their full disposable income to repaying

         19
             Under BAPCPA, a debtor with zero or negative projected disposable income may propose a
confirmable plan by making available income that falls outside of the definition of disposable
income—such as the Appellees’ benefits under the Social Security Act—to make payments under the plan
to administrative, priority and secured creditors and to make any payments to unsecured creditors required
to satisfy other confirmation requirements. Other confirmation requirements would include the best-
interests test set forth in § 1325(a)(4). See 11 U.S.C. § 1325(a)(4) (providing that, in order for a Chapter
13 plan to be confirmable, “the value, as of the effective date of the plan, of property to be distributed
under the plan on account of each allowed unsecured claim is not less than the amount that would be paid
on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date”).
No. 09-2164             Baud, et al v. Carroll                                                       Page 35

creditors. ).20 The Supreme Court’s approach in Ransom is consistent with Lanning, in
which the Supreme Court noted that its holding would avoid the “senseless result[] that
we do not think Congress intended” of “deny[ing] creditors payments that the debtor
could easily make.” Lanning, 130 S. Ct. at 2475–76.

         Courts that have applied the applicable commitment period to debtors with zero
or negative projected disposable income have concluded without extended analysis that
this approach would best serve BAPCPA’s goal of ensuring that debtors repay creditors
the maximum amount they can afford. See, e.g., Tennyson, 611 F.3d at 879 (“[A]llowing
Tennyson to confirm a plan for less than five years would deprive the unsecured
creditors of their full opportunity to recover on their claims from Tennyson by way of
post confirmation plan modifications.”); Moose, 419 B.R. at 635 (“[A]llowing
above-median income debtors to exit chapter 13 in less than five years deprives the
trustee and creditors of the right to seek an increase in plan payments if the debtors’
financial situation were to improve dramatically during that period.”). We agree with
the conclusion those courts have reached, but find that adequately explaining it requires
a more extended analysis, including a brief discussion of post-confirmation modification
of Chapter 13 plans. Section 1329(a) provides that “[a]t any time after confirmation of
the plan but before the completion of payments under such plan, the plan may be
modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured
claim[.]” 11 U.S.C. § 1329(a) (emphasis added).21 A few courts have held that the

         20
             In reaching this conclusion, the Supreme Court consulted the legislative history to BAPCPA.
See id. We believe that it also is appropriate to consult legislative history in this case because where, as
here, a “textual analysis fails to produce a conclusive result, or where it leads to ambiguous or [arguably]
unreasonable results, a court may look to legislative history to interpret a statute.” Limited, Inc. v. C.I.R.,
286 F.3d 324, 332 (6th Cir. 2002). A portion of the legislative history that was not relevant in Ransom but
that is relevant here supports the view that there is no exception to the applicable commitment period for
debtors with zero or negative projected disposable income. See H.R. Rep. 109-31(I), p. 79, 2005
U.S.C.C.A.N. 88, 146 (“Paragraph (1) of section 318 of the Act amends Bankruptcy Code sections 1322(d)
and 1325(b) to specify that a chapter 13 plan may not provide for payments over a period that is not less
than five years if the current monthly income of the debtor and the debtor’s spouse combined exceeds
certain monetary thresholds.”). As this legislative history suggests, BAPCPA requires certain debtors to
make payments over a “period that is not less than fives years”—a clearly temporal requirement—and the
determination of which debtors must do so is based solely on “the current monthly income of the debtor
and the debtor’s spouse combined,” not on whether the debtor has positive projected disposable income.
         21
            Presumably designed in part to assist creditors and the Chapter 13 trustee in deciding whether
to bring motions to modify, § 521(f)(4)(B), which was added by BAPCPA, requires Chapter 13 debtors
(at the request of the Court, the United States Trustee or any party in interest) to provide annual statements
No. 09-2164            Baud, et al v. Carroll                                                    Page 36

phrase “completion of payments” has a temporal connotation and that payments are not
completed until the time period in which the payments are to be made has passed. See
Fridley, 380 B.R. at 546 (“[T]he statutory concept of ‘completion’ of payments includes
the completion of the requisite period of time.”); Buck, 2010 WL 5463063, at *6 (“Even
where, as in the case of these Debtors, no funds are available on a monthly basis for
payment to the Trustee, Debtors could propose a modified plan with monthly payments
of zero dollars to the Trustee. If neither the Trustee nor a creditor propose a further
modification to the Plan during the remaining portion of the [applicable commitment
period], Debtors will have completed their payments under the Plan and will be eligible
for a Chapter 13 discharge at the conclusion of their original [applicable commitment
period], assuming all other requirements for discharge set out in § 1328 have been
met.”); In re McKinney, 191 B.R. 866, 869 (Bankr. D. Or. 1996) (holding that
completion of payments under a plan occurs only when the debtor has fulfilled the
temporal requirement of § 1325(b)(1)). See also 3 Lundin, supra, § 253.1 (“Completion
of payments under a Chapter 13 plan could be measured in terms of the passage of
time—for example, if the confirmed plan required the debtor to make payments for 36
months, when 36 months pass, the debtor has completed the payments required by the
plan.”). Other courts, however, have held that the completion of payments under the
plan does not require the passage of the period of time contemplated in the plan or that
the debtor make the number of payments contemplated by the plan; rather, completion
generally is held to have occurred once the debtor has tendered the monetary amount
required by the plan to the Chapter 13 trustee or, at the latest, once creditors receive,
either directly from the debtor or through the trustee, the recovery on their claims called
for by the plan. See In re Jacobs, 263 B.R. 39, 44 (Bankr. N.D.N.Y. 2001) (“[T]hose
courts addressing the completion of payments issue have generally . . . held that a plan
is complete when the debtor makes all the payments to the trustee.” (internal quotation

(after the case is confirmed and until it is closed) of their income and expenditures. See 11 U.S.C.
§ 521(f)(4); Fridley, 380 B.R. at 544 (“The obvious purpose of this self-reporting obligation is to provide
information needed by a trustee or holder of an allowed unsecured claim in order to decide whether to
propose hostile § 1329 plan modifications.”); Nance, 371 B.R. at 371 (“The purpose of [§ 521(f)],
ostensibly, is to allow interested parties to monitor a debtor’s financial situation during the pendency of
the bankruptcy case and to seek modification of the plan pursuant to § 1329 if changes in that situation
occur.”).
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marks omitted)); 3 Lundin, supra, § 253.1 & n.28 (collecting cases holding that
payments under the plan are completed once the debtor has tendered the amount required
to pay creditors as provided for in the plan).

        The question of whether applying the applicable commitment period to debtors
with zero or negative projected disposable income would produce senseless results
ultimately turns on an issue—the meaning of “completion of payments” as used in
§ 1329(a)—that is not before us. That is, whether applying the applicable commitment
period to debtors with zero or negative projected disposable income would result in
potentially greater recoveries for creditors or instead would only lead down the path to
potentially absurd results for debtors without any benefit to creditors turns on which
interpretation of “completion of payments” this Court or, ultimately, the Supreme Court,
were to adopt if presented with the issue. As explained below, if this Court or the
Supreme Court were ever to hold that completion has a temporal connotation, then an
interpretation of § 1325(b) that applies the applicable commitment period to debtors with
zero or negative projected disposable income could result in greater recoveries for
creditors and would not necessarily lead to absurd or senseless results; conversely, if this
Court or the Supreme Court were ever to hold that completion does not have a temporal
connotation, then an interpretation of § 1325(b) that applies the applicable commitment
period to debtors with zero or negative projected disposable income would not result in
greater recoveries for creditors and could lead to absurd or senseless results.

        To see why this is so, assume that a Chapter 13 trustee or an unsecured claimant
objects to the confirmation of a hypothetical debtor’s plan, but that the bankruptcy court
declines to apply the applicable commitment period on the basis that the debtor has zero
or negative projected disposable income. The debtor proposes, and the court confirms,
a plan providing for payments to be made in less than what would have been the
applicable commitment period had it been applied. The debtor has sources of income
that do not constitute projected disposable income. It also turns out that the debtor needs
less than the time period that would have been the applicable commitment period had
it been applied to make payments to administrative, priority and secured claimants and
No. 09-2164        Baud, et al v. Carroll                                        Page 38

to make any payments the debtor must make to unsecured creditors in order to comply
with confirmation requirements such as the best-interests test. Assume that the debtor
needs nine months and proposes a plan of that length.          Because the applicable
commitment period was not applied at confirmation, completion of payments under the
plan within the meaning of § 1329(a) will have occurred as soon as the nine-month
period passes and the last payment under the plan is made. And, because a party in
interest may request a plan modification only before the completion of payments under
the plan, the trustee and unsecured creditors would have no opportunity to seek a
modification of the plan. Creditors effectively would be barred from maximizing their
recoveries by obtaining a distribution on their claims from disposable income that may
become available after the completion of payments but before the end of what would
have been the applicable commitment period if it had been applied.

       On the other hand, if the bankruptcy court had applied the applicable
commitment period at the time of confirmation and the view that completion of
payments is temporal were followed, then completion of payments under the plan would
have occurred only after the applicable commitment period had passed; by applying the
applicable commitment period to debtors with zero or negative projected disposable
income, creditors would have a longer period of time in which to realize a greater
recovery on their claims. Again, however, if completion were interpreted as not having
a temporal connotation, any opportunity to augment creditor recoveries with additional
disposable income that becomes available post-confirmation would be illusory in cases
where payments required under the plan already have been made. In sum, whether
applying the applicable commitment period to debtors with zero or negative projected
disposable income would result in potentially greater recoveries for creditors depends
ultimately on the meaning of the phrase “completion of payments” contained in
§ 1329(a).

       Whether applying the applicable commitment period to debtors with zero or
negative projected disposable income could lead to senseless or absurd results also turns
No. 09-2164            Baud, et al v. Carroll                                                   Page 39

in large part on the meaning of the same phrase.22 The concern has been expressed that
applying the applicable commitment period to such debtors would be senseless because
it would essentially trap them in bankruptcy even after unsecured creditors would no
longer have an opportunity to recover any disposable income that would happen to
become available. Under the majority view of the meaning of the phrase “completion
of payments,” any opportunity to capture additional disposable income by attempting to
modify the plan would be impossible where payments under the plan already have been
made. And requiring debtors who already have completed payments to remain in
Chapter 13 beyond the time that it takes them to cure arrearages (see § 1322(b)(5)) and
pay secured, priority and administrative claims arguably serves no purpose if they have
no positive disposable income available to pay unsecured creditors. It also would not
benefit creditors if those creditors lack the means to recover any disposable income that
becomes available because payments under the plan already have been completed. On
the other hand, under the temporal view of the phrase “completion of payments” adopted
by some courts, payments would not be considered completed until the end of the
applicable commitment period and the trustee and creditors could request a modification
to recover future disposable income.

         The meaning of “completion of payments” under § 1329(a) is an interesting
question that is not before us and therefore must await another day. We cannot predict
how this Court would resolve the issue if it came before us. We are certain, however,
that there is nothing we can glean from the legislative history to BAPCPA that would
suggest that Congress was focused on this issue or on the potential problems posed by
“trapping” debtors in Chapter 13 for the full applicable commitment period. To the

         22
            Some courts have pointed out that applying the applicable commitment period to debtors with
zero or negative projected disposable income will result in a portion of such debtors remaining in their
Chapter 13 plans for several years even when they have no income—and never will—to pay unsecured
creditors. See Meadows, 410 B.R. at 246 (while adopting the temporal approach, noting that “[o]ne
criticism of requiring an ‘applicable commitment period’ in cases where there is no projected disposable
income is that it can require sixty-month plans in cases where there is little, if any, prospect of future
increases in projected disposable income.”). So long as the possibility remains that changes could occur
in the debtor’s circumstances and that such changes could result in disposable income becoming available
before the end of the applicable commitment period—and it would be rare cases in which there would be
no such possibility—keeping the debtor in Chapter 13 could conceivably result in some benefit to
creditors, a result that is not senseless.
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contrary, as the Supreme Court recognized in both Ransom and Lanning, the legislative
history makes clear that the focus of Congress in enacting BAPCPA was on maximizing
the amount of disposable income that debtors would pay to creditors. And there are
numerous circumstances in which disposable income might become available to the
Appellees and to other debtors after confirmation, even those who have zero or negative
projected disposable income as of confirmation. Just by way of example: income that
is properly included in the calculation of disposable income could increase after
confirmation; taxes might decrease, as might other items included as “Other Necessary
Expenses;” and secured debt payments (especially on vehicles) and payments on account
of qualified retirement deductions may come to an end during the plan, as will be the
case for the Appellees. See Kagenveama, 541 F.3d at 880 (Bea, J., concurring in part
and dissenting in part) (“There are many imaginable instances where a debtor’s financial
situation will dramatically improve after plan confirmation—either through good fortune
or clever planning.”).

       We believe it is now clear that, where each competing interpretation of a Code
provision amended by BAPCPA is consistent with the plain language of the statute, we
must, as the Supreme Court did in Lanning and Ransom, apply the interpretation that has
the best chance of fulfilling BAPCPA’s purpose of maximizing creditor recoveries.
Here, that interpretation is the one under which the applicable commitment period
applies to all debtors facing a plan objection, even those who have zero or negative
projected disposable income. Although this interpretation may not benefit creditors in
all cases to a greater extent than the competing interpretation, although it may in certain
circumstances lead to unfortunate situations in which some debtors will remain in
Chapter 13 for no good reason, and although our interpretation could be undermined by
a subsequent controlling interpretation of § 1329(a), this does not appear to us to be a
situation where our interpretation of the statute “would lead to patently absurd
consequences, that Congress could not possibly have intended[.]” Pub. Citizen v. United
States Dep’t of Justice, 491 U.S. 440 (1989) (Kennedy, J., concurring) (citation and
internal quotation marks omitted). On balance, we conclude that applying the applicable
commitment period to debtors with zero or negative projected disposable income would
No. 09-2164          Baud, et al v. Carroll                                       Page 41

best serve BAPCPA’s goal of ensuring that debtors repay creditors the maximum amount
they can afford.

       In sum, we adopt the interpretation of § 1325(b) that is not only more consistent
with the language of the statute than the competing interpretation, but that also is
consistent with the legislative history and the overriding purpose of BAPCPA as
recognized in Lanning and Ransom.

                                   III. CONCLUSION

       To summarize, we hold: (1) if the trustee or the holder of an allowed unsecured
claim objects to confirmation of a Chapter 13 plan of a debtor with positive projected
disposable income, the plan cannot be confirmed unless it provides that all of the
debtor’s projected disposable income to be received in the applicable commitment period
will be applied to make payments over a duration equal to the applicable commitment
period set forth in § 1325(b); (2) the calculation of a debtor’s projected disposable
income (a) must exclude income—such as benefits received under the Social Security
Act—that are excluded from the definition of currently monthly income set forth in
§ 101(10A) and (b) must deduct “amounts reasonably necessary to be expended” as
defined in § 1325(b)(3) which, for an above-median-income debtor, means that the
debtor’s average monthly payments on account of secured debts calculated pursuant to
§ 707(b)(2)(A)(iii) must be subtracted if the debtor intends as of the date of confirmation
to continue making those payments; and (3) there is no exception to the temporal
requirement set forth in § 1325(b)(1) for debtors with zero or negative projected
disposable income. For the reasons stated above, we AFFIRM in part and REVERSE
in part the district court’s opinion and order, and REMAND the case to the district court
with instructions to remand to the bankruptcy court for further proceedings consistent
with this opinion.