Keywords: Applicable commitment period . Chapter 13 plan .
"Income tax refunds are disposable income as long as the plan is in effect, and Section 1325(b)(1)(b) requires that this disposable income be used to pay unsecured creditors."
"The custom in this district of committing only one half of the tax refund to the plan is a compromise that takes into consideration debtors' inability to predict future expenses, including taxes, and debtors' motivation to retain as much money as possible for day-to-day living, thereby running the risk of under-withholding. This might occur if all the tax refund were required to be paid into the plan (as is the rule in some, if not most, districts) or it only actual taxes were allowed in determining projected disposable income. However, income tax refunds are disposable income as long as the plan is in effect, and Section 1325(b)(1)(b) requires that this disposable income be used to pay unsecured creditors. By using these refunds to shorten the plan, the debtor's proposal in this case is directing those payments to secured creditors, who are virtually the only recipients of distributions under this plan."
below median income debtor proposed using tax refund to shorten plan to 3 years. Trustee objects noting that longer plan would help creditors by extending payments from tax refund. Court agrees.
Means Test > Income > CMI six month window Chapter 13: "applicable commitment period" issues / rebuttal / conversions § 1325(b)16 Cases , IssueID 17 |
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Ch 7 Means Test |
Ch 13 Means Test |
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Topic Description:A debtor's income determines the lenght of a Chapter 13 plan, also called the "applicable commitment period" that is the result of the Chapter 13 version of the means test. (See section § 132___ . Caselaw centers on timing income measurement in conversions from Chapter 7 (do you restart the clock?), whether a zero-payment plan has to be 5 years, and issues about certain types of income that is excluded from income for this'bright-line" provisio, while still relevant under other parts of the code (e.g. good faith, ability to pay, etc.) Lines of Cases:
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ACP is a temporal requirement, not just a multiplier. So a zero payment plan must last 60 months.
below median income debtor proposed using tax refund to shorten plan to 3 years. Trustee objects noting that longer plan would help creditors by extending payments from tax refund. Court agrees.
An above median income debtor whose disposable income is negative as calculated under the means test, is not precluded from proposing a three-year Chapter 13 plan.
If a debtor has zero or negative "projected disposable income," then there is nothing "to be received in the applicable commitment period." Id. If there is nothing for a debtor to receive in the "applicable commitment period," there is nothing to "appl[y] to make payments, to unsecured creditors under the plan." Id. If none of the subsection's provisions are relevant to a debtor's situations, then that subsection does not apply. Therefore the term "applicable commitment period" simply does not apply to Musselman.
ACP is a temporal requirement, not just a multiplier. So a zero payment plan must last 60 months.
below median income debtor proposed using tax refund to shorten plan to 3 years. Trustee objects noting that longer plan would help creditors by extending payments from tax refund. Court agrees.
An above median income debtor whose disposable income is negative as calculated under the means test, is not precluded from proposing a three-year Chapter 13 plan.
If a debtor has zero or negative "projected disposable income," then there is nothing "to be received in the applicable commitment period." Id. If there is nothing for a debtor to receive in the "applicable commitment period," there is nothing to "appl[y] to make payments, to unsecured creditors under the plan." Id. If none of the subsection's provisions are relevant to a debtor's situations, then that subsection does not apply. Therefore the term "applicable commitment period" simply does not apply to Musselman.
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