4th Circuit: In re Pliler- Applicable Commitment Period is a Temporal Requirement

Summary:

At issue in this case was first whether the Applicable Commitment period, as defined by 11 U.S.C. § 1325(b)(4), was a temporal requirement, i.e. 3 years for below median income debtors or 5 years for those with income above median, or was not applicable if the Debtors had no disposable income under § 1325(b)(1). Agreeing with now all of the Circuit Courts that have answered this question, the 4th Circuit held that the Applicable Commitment Period is, in fact temporal. This conclusion was based first on the language of the Bankruptcy Code, with the Court of Appeals, citing Tennyson from the 11th Circuit, that:

that “‘applicable’ and ‘commitment’ are modifiers of the noun, the core substance of the term, ‘period’. The plan meaning of ‘period’ denotes a period of time or duration.” 611 F. 3d. 873, at 877.

The 4th Circuit also found that this reading also ‘harmonize[d] with the ‘core purpose’ underpinning the 2005 bankruptcy code revisions” of “ensuring that debtors devote their full disposable income to repaying creditors.” Ransom v. FIA Card Servs., N.A., 131 S.Ct 716, 729 (2011).

Secondarily, the Court of Appeals found that as the debtors had proposed a plan with payments of $1,784.00 a month for 15 months, then decreasing to $1,547.00 a month, it was not in error for the bankruptcy court to find that the debtors had “professed … that they could make payments” of the higher amount for the full 5-year Applicable Commitment Period.

This did not, however, put the bankruptcy court “at liberty to abandon completely” the disposable income formula of the Means Test simply because there is a disparity with Schedule I and J. Such differences can be evaluated considering the “known or virtually certain” changes to the debtor’s income under Lanning, but cannot be simply be disregarded absent meeting the Lanning standard.

Commentary:

The purpose of a step-down plan was to allow for payment of attorneys’ fees pursuant to the Local Rule in the amount of $225.00 a month over up to 18 months. Absent other changes to the system of disbursements, debtors’ attorneys are in the difficult dilemma of either spreading attorneys’ fees over the length of the plan (which greatly decreases the value of such fees) or constructing plans that pay attorneys’ fees in 18 months, but then continue to pay that the same amount. This can result in substantial payments to creditors, that would not otherwise be required by the Bankruptcy Code.

For a copy of the opinion, please see:

Pliler- Applicable Commitment Period is a Temporal Requirement

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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