ACP:Temporal Measure or Math Problem? 8th Circuit BAP Weighs In

24 Sep ACP:Temporal Measure or Math Problem? 8th Circuit BAP Weighs In

The Eighth Circuit Bankruptcy Appellate Panel ruled that the “applicable commitment period” is a math formula, as far as “above median” income Chapter 13 debtors with no “disposable monthly income” are concerned. If this view prevails in the circuit, higher income folks with high fixed-costs may end up being able to skirt the five-year requirement in BAPCPA.

There are a lot of complicated issues in the 2005 bankruptcy law, and the disposable income test and how long a plan must be scheduled for payment are among the worst. Although BAPCPA was under consideration for many years, the number of provisions which are poorly drafted still manages to astonish practitioners almost two-years into its lifespan.

In this case case, the debtor’s current monthly income was above the median income for his household size in his state but, after deducting allowed expenses in the means test, he had a negative disposable monthly income, meaning on paper he lacked any money left over each month to repay unsecured creditors. But the debtor did, in fact, have funds available and proposed to pay a large percentage of his unsecured debt back. However, he proposed to do so in 48 months, not 60 months.

The trustee objected and argued that an above-median income debtor must propose a plan of no less than 60-months, regardless of whether there was any disposable income on paper. The bankruptcy court — and now the BAP — concluded that the provision (section 1325(b)(4)) dictating the ACP of 60-months is only triggered by a debtor in fact having positive disposable monthly income. As this debtor did not, he was free to propose a shorter-period repayment.

Judge Federman of Western Missouri dissented from the decision. He argued that Congress intended to make the duration of a plan for above-median income debtors 5-years, regardless of the disposable income calculation.

The 8th Circuit BAP is joining a long line of cases splitting on this issue. There is little doubt that either this case or one like it will ultimately rise both to the Circuit Court level in each circuit but, ultimately, to the Supreme Court. Unless Congress acts first to clear up the ambiguities created by BAPCPA.

Post-Script: This case was later reversed by the Circuit Court of Appeals, agreeing with the dissent instead.

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2018 I am also serving on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website:

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