National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

disposable income

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Ninth Circuit en Banc Decision Overrules Kagenveama

In a blow to debtors, the Ninth Circuit, in an en banc decision, has reversed its position with respect to the applicable commitment period when the debtor has less than or equal to zero disposable income. Danielson v. Flores (In re Flores), No. 11-55452 (9th Cir. Aug. 29, 2013). [Read more…] about Ninth Circuit en Banc Decision Overrules Kagenveama

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Fourth Circuit Takes on Applicable Commitment Period Issue

The Fourth Circuit has accepted two direct appeals presenting the issue of whether the applicable commitment period for a chapter 13 plan applies when there is no projected disposable income. Both cases first treat the issue of whether an expected change in payments during the course of the plan should be considered when determining the debtor’s projected disposable income at the outset, and then deal with the relevance of the applicable commitment period where the debtor has zero or negative disposable income as calculated by the means test. [Read more…] about Fourth Circuit Takes on Applicable Commitment Period Issue

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Social Security Income May Not Be Considered in Good Faith Analysis

The Ninth Circuit today held that “Congress’s adoption of the BAPCPA forecloses a court’s consideration of a debtor’s Social Security income or a debtor’s payments to secured creditors as part of the inquiry into good faith under 11 U.S.C. § 1325(a).” Drummond v. Welsh (In re Welsh), No. 12-60009 (9th Cir. March 25, 2013), aff’g Drummond v. Welsh (In re Welsh), 465 B.R. 843 (B.A.P. 9th Cir. 2012).
[Read more…] about Social Security Income May Not Be Considered in Good Faith Analysis

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Kagenveama Survives Direct Assault

Wielding Hamilton v. Lanning, 130 S. Ct. 2464 (2010), the trustee in the Ninth Circuit case of In re Flores, launched a full-scale attack on Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868 (9th Cir. 2008). Kagenveama won. The Ninth Circuit stood by its previous position that an above-median debtor with zero or negative disposable income does not need to confirm a 60 month plan under section 1325(b). Danielson v. Flores (In re Flores), No. 11-55452 (9th Cir. Aug. 31, 2012). NACBA assisted in drafting the debtor’s brief in this case. [Read more…] about Kagenveama Survives Direct Assault

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Bad Faith Cannot Be Based on Income Determined in Compliance with Code

The Ninth Circuit BAP found that a chapter 13 plan could not be determined to be in bad faith solely on the basis of debtors’ deduction of payments made on secured debts, without regard to “necessity” of those debts, and their exclusion of social security income from their calculation of disposable income. Drummond v. Welsh (In re Welsh), No. 10-1465 (B.A.P. 9th Cir. Feb. 17, 2012).

Welsh judgment [Read more…] about Bad Faith Cannot Be Based on Income Determined in Compliance with Code

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Post-Petition Funds from 401(k) Loan Payoff May Not Be Voluntarily Contributed to Retirement Fund

In an opinion that strains to uphold the conclusion that the “core purpose” of BACPA is to “maximize[e] creditor’s recover[y],” the Sixth Circuit has held that “post-petition income that becomes available to debtors after their 401(k) loans are fully repaid is ‘projected disposable income’ that must be turned over to the trustee for distribution to unsecured creditors pursuant to § 1325(b)(1)(B) and may not be used to fund voluntary 401(k) plans.” Seafort v. Burden, No. 10-6248 (6th Cir. Feb. 15, 2012). The debtor appealed the Bankruptcy Appellate Panel’s reversal of the Bankruptcy Court’s decision in debtor’s favor.

Seafort Opinion [Read more…] about Post-Petition Funds from 401(k) Loan Payoff May Not Be Voluntarily Contributed to Retirement Fund