In re: Henderson, No. 10-03114-JDP (Bankr. D. Idaho, April 18, 2011).
How long must a Chapter 13 plan be? This is the question recently addressed by an Idaho bankruptcy court.
The debtors in this case, David and Candice Henderson, filed a Chapter 13 bankruptcy. Their financial schedules indicated a monthly net income of $1140, yet their Form 22C indicated a negative disposable income of -$184.48 a month. The discrepancy was accounted for by the fact that Form 22C has standard expenses that an average debtor would take. On the other hand, the Hendersons' schedules demonstrate their individual financial circumstances. Thus, in real life, the debtors had less expenses than the standard bankruptcy forms predicted.
In response to this scenario, the Hendersons proposed a Chapter 13 plan that would pay their creditors $1140 a month to only their secured creditors, such as their mortgage lender, and administrative expenses. Further, the plan was to take place over a three year period, the shortest period possible under the Bankruptcy Code. However, the trustee in the case objected to the plan, believing that the Hendersons were required to complete a five year plan.
In a Chapter 13 plan, section 1325(b)(1)(B) of the Bankruptcy Code specifies that the plan's length shall be three years or, if the current monthly income of the debtor is above a certain amount, the length shall be five years. The trustee argued that the debtors' current monthly income was above the specified amount, and that they must therefore complete a five year plan.
Because the Hendersons lacked projected disposable income, a debtor is not required to complete a five year plan. In the 9th Circuit, a debtor with no projected disposable income is not required to confirm a five year plan, and therefore a trustee cannot object successfully on those grounds.
