What is the Applicable Commitment Period in a Chapter 13 Bankruptcy Where a Debtor Has No Disposable Income, Law Office of Christine A. Wilton Opines on Recent Hearing

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The outcome of In re Danielson is pending, which could have an impact on Chapter 13 Debtors seeking to remove liens who otherwise have no disposable income.

The 9th Circuit Court of Appeals heard oral arguments on Tuesday March 19, 2013 in In re Rod Danielson v. Cesar Ivan Flores, et al., No 11-55452. The United States Court of Appeals for the Ninth Circuit confirmed that its ruling in In re Kagenveama, 541 F.3d 868, 872 (9th Cir. 2008), that under 11 U.S.C. §1325(b) a debtor with no "projected disposable income" may confirm a plan that is shorter in duration than the "applicable commitment period" established by Section 1325, was not implicitly overruled by Hamilton v. Lanning, 130 S. Ct. 2464 (2010). In re Flores, 692 F. 3d 1021 (9th Cir. (Cal.) 2012). Subsequent to the ruling in Kagenveama, the Chapter 13 Trustee sought this recent en banc hearing.

Oral arguments were heard by counsel for the Chapter 13 Trustee and American Express in an attempt to secure any amount of income commitment from Debtors seeking relief in Chapter 13. Arguments included the Bankruptcy Court's supervision of Debtor's affairs for the long term, i.e. five years to procure any tax returns, windfalls or otherwise attempting to "catch" later income.

Also discussed was a recent Supreme Court case such as Lanning and the meaning of "Projected Disposable Income" provided by 11 U.S.C. Section 1325(b)(1) as only being triggered when an objection to confirmation of a plan is raised.

"The outcome of this case could have a major impact on how Chapter 13 plans are proposed on behalf of clients," said attorney Christine A. Wilton. "Debtors still must pass a 'best efforts' test and propose a repayment plan in Chapter 13 that is 'feasible,' regardless of the outcome of the Danielson case. Chapter 13 Bankruptcy case are suited for debtors seeking to avoid liens on their properties. However, those debtors who have no projected disposable income may be forced into a five year repayment period, which would overturn the recent Kagenveama case and needlessly wasted the court's time in monitoring these cases."

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