In re Williams

IN RE: Peter Williams and Carmen J. Williams, Debtor.

CASE NO.: 09-42400 (NLW)

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW JERSEY

Dated: January 24, 2014

NOT FOR PUBLICATION

CHAPTER 13

OPINION

Before: HON. NOVALYN L. WINFIELD

APPEARANCES:

John F. Bracaglia, Jr., Esq.

Mauro, Savo, Camerino, Grant & Schalk, P.A.

Attorneys for Debtor

Brian M. Knapp, Esq.

Marie-Ann Greenberg, Chapter 13 Standing Trustee

Attorney for Chapter 13 Trustee The matter before the court is the Chapter 13 Trustee's objection to the Debtors' motion to modify their Chapter 13 plan. The Debtors propose to pay-off their plan prior to the conclusion of the 60-month applicable commitment period to which they are subject as above-median income debtors. The court agrees with the Chapter 13 Trustee that § 1325(b)(4)(B) applies to a modified plan and that the Debtors may only shorten the applicable commitment period if the Debtors' plan provides for full payment of allowed unsecured creditor claims. Because the Debtors' modified plan does not provide for full payment, the Court denies the Debtors' request to modify the Chapter 13 plan.

JURISDICTION

The court has jurisdiction to decide this matter pursuant to 28 U.S.C. §§ 1334 and 157, and the Standing Order of Reference issued by the United States District Court for the District of New Jersey on September 18, 2012. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (L). The following constitutes the court's findings of fact and conclusions of law under Fed. R. Bankr. P. 7052.

STATEMENT OF FACTS

Peter Williams and Carmen Williams (collectively, the "Debtors") filed a Chapter 13 petition on December 1, 2009 (the "Petition Date"). The Debtors' monthly income is classified as above the median, and, therefore, the Debtors were required to commit to a 60-month plan in accordance with § 1325(b)(4)(A)(ii). The Debtors plan was confirmed by an order entered on February 16, 2010, under which the Debtors were required to pay $59,650.00 into the plan—$650.00 for the first month and then $1,000 for the remaining 59 months.¹ The Debtors have tendered payment as required by the plan.

In June of 2013 during the 42^nd month of the plan, the Debtors approached the Trustee to obtain a pay-off amount for their plan. According to Debtors' counsel, Mrs. Williams had become eligible for a pension loan, and the Debtors wished to borrow against her pension to pay off their plan. The Trustee apparently advised the Debtors that they could not pay off the plan early and, instead, were required to remain in Chapter 13 for the full 60 months. Disagreeing with the Trustee, the Debtors filed a modified plan proposing a pay-off of the plan on or before July 31, 2013.

DISCUSSION

The Debtors contend that the Chapter 13 Trustee fails to appreciate the difference between the requirements of Bankruptcy Code § 1325 and § 1329. In particular, the Debtors argue that the Chapter 13 Trustee is mistaken in her position that a plan modified under Bankruptcy Code § 1329 must comply with the requirements of § 1325(b), which requires, inter alia, an applicable commitment period of three to five years, depending on whether the debtors are above the median family income of the applicable state. The Debtors point out that Bankruptcy Code § 1329(b)(1) specifically incorporates §§ 1322(a), 1322(b), 1322(c) and 1325(a), but omits any reference to § 1325(b). The Debtors urge the court to find this omission dispositive, citing to In re Tibbs, where the court stated "If Congress intended to incorporate § 1325(b) into § 1329(b)(1), it would have done so explicitly." 478 B.R. 458, 464 (Bankr. S.D. Fla. 2012).

The Chapter 13 Trustee's response is twofold. First, the trustee points out that all nine requirements for confirmation set out in § 1325(a) are subject to its opening sentence, which states "Except as provided in subsection (b), the court shall confirm a plan if ___" 11 U.S.C. § 1325(a)(emphasis added) The Trustee posits that effect of this opening sentence is to make confirmation under § 1325(a) dependent upon compliance with § 1325(b) if the trustee or creditor objects. Second, the Chapter 13 Trustee contends that § 1325(b)(4) imposes a fixed durational period for a plan, during which the Chapter 13 debtors must pay all of their projected disposable income to their creditors.² The trustee submits that consistent with § 1325(b)(4)(B), as above median debtors, the Williams may only shorten the duration of their plan if they pay all allowed unsecured claims in full. The Trustee also observes that the majority of appellate courts have found that § 1325(b)(4) imposes a durational requirement for the applicable commitment period. See Baud v. Carroll, 634 F.3d 327, 336-38 (6^th Cir. 2011); Whaley v. Tennyson (In re Tennyson), 611 F.3d 873, 877-78 (11^th Cir. 2010); Coop v. Frederickson (In re Frederickson), 545 F.3d 652, 660 (8^th Cir. 2008); Timothy v. Anderson (In re Timothy), 442 B.R. 28, 37 (B.A.P. 10^th Cir. 2010); Fridley v. Forsythe (In re Fridley), 380 B.R. 538, 543 (B.A.P. 9^th Cir. 2007). The Chapter 13 Trustee urges the court to find this line of cases persuasive and to also find that a plan modified under § 1329 must comply with § 1325(b).

1. Applicable Commitment Period

Prior to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), § 1325(b)(1) required that if the Chapter 13 Trustee or the holder of an allowed unsecured claim objected to confirmation, the debtor's plan could be confirmed only if iteither provided for full payment of allowed unsecured claims, or if "all of the debtor's projected disposable income to be received in the three year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan." 11 U.S.C. § 1325(b)(1)(2004).

BAPCPA made several changes to the Bankruptcy Code. A notable change made by BAPCPA to confirmation requirements in § 1325 was the inclusion of the term "applicable commitment period" to replace the three-year repayment period previously set forth in 11 U.S.C. § 1325(b)(1). Under BAPCPA § 1325(b)(1) now reads as follows:

If the trustee or holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or

(B) the plan provides that all of the debtor's projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.

11 U.S.C. § 1325(b)(1) (emphasis added)(2006).

Additionally, under BAPCPA Section 1325(b)(4) now describes the required length of the "applicable commitment period." Specifically, if a debtor's annualized current monthly income is below the median family income for the applicable State, the plan must be 3 years in duration. 11 U.S.C. § 1325(b)(4)(A)(i). If, however, the debtor's annualized current monthly income is above the median family income for the applicable State, the plan must be 5 years in duration. 11 U.S.C. § 1325(b)(4)(A)(ii). Further, under § 1325(b)(4)(B), if the trustee or the holder of an allowed unsecured claim objects, a plan may be shorter than the mandated 3 or 5 year applicablecommitment period only if the debtor proposes full payment to all allowed unsecured claims. 11 U.S.C. § 1325(b)(4)(B).

Courts are divided as to whether the applicable commitment period is a durational requirement or simply a monetary requirement that calls for debtors to pay into their plans the equivalent of their estimated disposable income multiplied by the number of months in the applicable commitment period. Courts have utilized the terms "temporal" and "multiplier" to describe these differing interpretations of the applicable commitment period.

Courts that employ the multiplier approach grant confirmation of plans that are shorter than the applicable commitment periods stated in § 1325(b) so long as the amount paid into the plan is equal to the projected disposable income multiplied by the number of months in the applicable commitment period. In re Filion, 452 B.R. 329, 332 at ftn. 19 (Bankr. D. Mass. 2011)(collecting cases). Courts that adhere to the view that the applicable commitment period is a temporal requirement permit confirmation of plans by debtors with positive disposable income only if all of the projected disposable income is committed to the plan for a duration equal to the applicable commitment periods set forth in § 1325(b). Id., at ftn. 20 (collecting cases).

These different interpretations regarding the proper construction of the term 'applicable commitment period' demonstrate that the language of § 1325(b) is not entirely clear. The court observed in In re Slusher that "Although apparently straightforward, as with much of BAPCPA, the text Congress used plausibly lends itself to at least two different interpretations of what exactly 'applicable commitment period' means." 359 B.R. 290, 300 (Bankr. D. Nev. 2007). To discern legislative intent, the Supreme Court has instructed that the starting point is the existing statutory text and not the predecessor statutes. Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004) citing Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999); Blum v. Stenson, 465 U.S. 886, 896 (1994) ("Where as here, the resolution of a question of federal law turns on a statuteand the intention of Congress, we look first to the statutory language and then to the legislative history if the statute is unclear.").

This court is persuaded by the Eleventh Circuit's application of the traditional standards of statutory construction to arrive at its determination that "the 'applicable commitment period' is a temporal term that prescribes the minimum duration of a debtor's Chapter 13 bankruptcy...