by NCBRC filed an amicus brief on behalf of the NACBA membership in the case of In re Pliler, No. 13-1445 (4th Cir. June 20, 2013). NACBA’s brief argues that the Bankruptcy Court erred when it held that section 1325(b)(4)(B) created a minimum plan length of sixty months for above-median debtors, and that the disposable income formula set forth by Congress and reflected on Form 22C could be abandoned if it was inconsistent with income and expenses as reflected on Schedules I and J.
With respect to the applicable commitment period, the lower court in Pliler erroneously adopted the “temporal approach” which treats that period as a mandatory temporal obligation that the debtor must serve in the plan. In its brief NACBA argues that the correct interpretation of the applicable commitment period supports a “monetary approach,” under which “projected disposable income” is calculated by multiplying the number of months in the debtor’s “applicable commitment period” by the debtor’s “disposable income” to produce the minimum dollar amount that must be paid to unsecured creditors. Once that amount is paid, the debtor has fulfilled his or her obligations and may be discharged without regard to whether the debtor completed the plan prior to the 5 year period. This approach has advantages for all concerned. Creditors get their money sooner, thereby lessening the risk of the debtor’s failure to complete the plan, the bankruptcy moves more quickly through the system thereby relieving judicial costs, and the debtor can benefit sooner from the fresh start he or she has earned.
Furthermore, from a statutory construction standpoint, if section 1325(b)(4) establishes a freestanding plan length even in the absence of objection from the trustee or unsecured creditor, section 1325(b)(1) would be rendered superfluous, as that section only refers to the applicable commitment period upon such objection. This is an untenable result of the “temporal approach” applied by the lower court.
NACBA’s position is supported by Hamilton v. Lanning,506 U.S. __, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010), in which the Court found that once income and expenses are adjusted by “known or virtually certain changes,” the resulting amount should be multiplied by 36 or 60 months to arrive at the “projected disposable income.” This is in harmony with pre-BAPCPA treatment of the issue which Lanning endorsed.
The brief argues that the contrary decisions out of the Sixth and Eleventh Circuits, Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011); Whaley v. Tennyson, 611 F.3d 873 (11th Cir. 2010), were wrongly decided.
Finally, the brief argues that the bankruptcy court erred in finding that it could jettison the results of the means test in favor of calculating an amount the debtor is able to pay based on schedules I and J, thereby rendering the means test—one of the most significant BAPCPA amendments—superfluous.
Thanks to Norma Hammes for authoring NACBA’s brief.