CHAPTER 13 DEBTORS MAY TAKE SIXTY MONTHS TO FULLY REPAY UNSECURED DEBTS

Let’s assume that you are an above median debtor. You are a single person who makes $60,000 annually which is above the state median of $48,000 for a single debtor (unmarried & no dependents). Your disposable income is $1,000 monthly. In your Chapter 13 plan you propose to pay your credit card debt of $20,000 over the maximum period of time allowed by bankruptcy law, 60 months, in equal monthly payments of $333.33 even though your disposable income is $1,000. The trustee objects to your plan arguing that since you are an above median debtor, you must off your $20,000 of credit card debt in 20 months, instead of 60, at the rate of $1,000 monthly, the amount of your disposable income. Can you stand your ground and insist on the court approving your $333.33 plan payment over the objection of the trustee?

 In Re Richall, debtors Schedules I and J, income and expense, showed that the above median income Chapter 13 debtor had actual monthly net income of $886. According to their means test form B22C, the debtors had monthly disposable income of $1,756. Why the difference; because the means test does not allow certain deductions to arrive at disposable income. For example, you send your child to a private high school where tuition is $1,000 a month. The means test only allows you to deduct $146, not $1,000. But in reality, you are paying $1,000. The means test argument is that debtor should not be allowed to choose to pay tuition for private high school at the expense of his creditors. In other words, debtor should be paying his creditors instead of sending his child to a private high school.

The court noted that the changes made by the new bankruptcy law eliminated the 36 month plan for above median income debtors. The standard plan is now 60 months unless the debtors choose to fully repay unsecured creditors in less time. If the debtors’ income was below the applicable median, then they could be forced to complete their plan in 36 months unless there was cause to allow them to extend plan payments to 60 months. “The debtors’ plan provides for payment of all unsecured claims in full during a five year term through payments of approximately one-half of their disposable income. Thus, the debtors’ plan complies with Section 1325(b)(1)(A). While the debtors could pay off their unsecured creditors in a shorter period of time if they contributed all of their monthly disposable income to plan payments, they are not required to do so under the plain and unambiguous language of the Bankruptcy Code,” the court said. In other words, can’t you read Ingrish? The Court believes that this result is contrary to the intent of Congress in enacting BAPCPA. The Court also does not understand why a debtor would elect to remain in a Chapter 13 proceeding any longer than necessary. Maybe debtors plan to attend the summer Olympics in London and need the difference to pay for their accommodations and plan fare? However, this result is mandated by the clear and unambiguous language in Sections 1322(d)(l) and 1324(b)(1) of the Bankruptcy Code.” Because the debtors did not exhibit serious misconduct or abuse or unfairly manipulate the Code, other than threatening to cut the trustee’s cajones and use them as Christmas decoration, the court found that their plan was filed in good faith and confirmed their plan.

 Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.