The Debtors moved to modify their Chapter 13 plan, surrendering two pieces of real property and seeking to reduce their plan payment to the lowest amount possible to pay a 100% dividend to unsecured creditors over a total period of 60 months. The Chapter 13 Trustee objected, seeking a higher monthly payment, which would have repaid the debts over a shorter period of time, on the basis that the Winns could afford the higher monthly payment. This higher payment would have been feasible except for the proposed housing rent and the retention of a piece of real property in South Carolina.
The Bankruptcy Court agreed, finding that the proposed housing expense was excessive and that the real property in South Carolina neither had any equity to protect nor served as a residence.
Those unnecessary expenses aside, however, the Bankruptcy Court held that 11 U.S.C. § 1329 requires compliance with, among other sections, either of the two prongs § 1325(b)(1), viz. either that the claims are paid in full or that the projected disposable income during the applicable commitment period is paid. As the Winns were proposing to pay all claims in full, the requirements of § 1325(b)(1)(A) was satisfied and there was not requirement to pay disposable income under § 1325(b)(1)(B). Accordingly, the modification with the lower payment was approved.
While the Bankruptcy Court would be correct most of the time in its statement that “it may make sense for the Debtors to pay off their plan as early as possible”, this is not necessarily the case. For example, if the Debtors’ income were to subsequently decrease, then they would have received the benefit of the lower payment under § 1325(b)(1)(A) until the loss of income, followed by an even lower payment under § 1325(b)(1)(A).
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