Applicable Commitment Period with No Disposable Income

26 Oct Applicable Commitment Period with No Disposable Income

The Bankruptcy Appellate Panel for the Eighth Circuit recently held that an above-median income debtor’s applicable commitment period is 0 months when the debtor has no disposable income. In re Frederickson, — B.R. —-, 2007 WL 2752769 (8th Cir.BAP 2007).

An applicable commitment period is defined as the period of time that Chapter 13 debtor must pay his disposable income to the bankruptcy trustee for payment to his unsecured creditors. For above-median income debtors the applicable commitment period is usually five years. However, the BAP Panel held that if a debtor has no disposable income, there is no applicable commitment period. Consequently, in circumstances such as these an above-median income debtor can obtain confirmation of a plan that is shorter than five years.

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