Appeals Court: 60-Month Plans Required for Above-Median Chapter 13 Debtors

30 Oct Appeals Court: 60-Month Plans Required for Above-Median Chapter 13 Debtors

On October 27, 2008, Coop v. Frederickson, No. 07-3391, was decided by the Eighth Circuit Court of Appeals, adding its voice to the national confusion over the required length of chapter 13 payment plans. The court of appeals ruled that for a chapter 13 debtor whose income was above the median, but whose Form B-22C disposable income was negative, the debtor was required to propose either a full payment plan, or a sixty month plan which paid creditors claims in full or in part. The court therefore disagreed with the Ninth Circuit Court of Appeals’ decision in Maney v. Kagenveama, which allowed an over-median but negative B-22C debtor to propose a partial payment plan of 36 months duration.

In Coop, the appeals court also held that despite the presence of a negative disposable income figure on Form B-22C, if the debtor’s Schedules I and J revealed a positive disposable income figure, the debtor may be obligated to pay that dispoable income figure into the plan. This ruling effectively emasculates Form B-22C, rendering it superfluous if the logic of this case is followed to its conclusion. In the words of the court, Form B-22C is a “starting point” for determining the bankruptcy debtor’s disposable income to be devoted to making chapter 13 plan payments. However, from this starting point, the court is required to consider changes in the debtor’s situation, and also the debtor’s actual income and expenses.

This approach contemplates that the debtor’s actual income and expenses, as reported on Schedules I and J, will be used to determine the final chapter 13 plan payment. The court’s ruling in Coop v. Frederickson resurrects Schedules I and J, placing it ahead of Form B-22C in importance. It re-introduces the view that the debtor’s actual ability to pay dictates the amount of the plan payment, and it requires 60 month plans for all above-median chapter 13 debtors.

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Craig Andresen is a Minnesota bankruptcy attorney who represents both consumers and small business owners in chapter 7 and chapter 13 cases. With thirty years experience, Mr. Andresen is a frequent speaker on the topics of stopping mortgage foreclosures, and stripping off second mortgages in chapter 13. His office is located in Bloomington just across the street from the Mall of America. Call his office at (952) 831-1995 for a free consultation about protecting your rights using bankruptcy.
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