Must I pay my creditors in less than 5 years in a chapter 13 case?

16 Feb Must I pay my creditors in less than 5 years in a chapter 13 case?

We frequently represent people in chapter 13 cases who have good income.  In one recent case, we represent an air traffic controller.  According to the “means test” form, he could pay his creditors 100% of their debt over a period of 38 months.

His family budget tells a different story.  It would take him at least 4  years and maybe 5 years to pay his creditors off in full.  Obviously, it would be easier for him and his family if he could take a longer time.

The chapter 13 trustee wants the debtor to pay all of his disposable income to her so the debts are paid off as soon as possible, even though this debtor is paying off 100% of his debts under the plan.

Who is right?  We don’t know.  Different judges interpret the law differently, even though the law is supposed to be crystal clear.  Why is this?

The Bankruptcy Code requires all projected disposable income to be paid under the plan during the applicable commitment period.   However, the Bankruptcy Code says that this is the alternative to paying all creditors in full.  So, if all creditors are paid in full, must all “projected disposable income” be paid under the plan.

The trustee’s motion to deny confirmation of the Debtor’s plan is pending.  We’ll let you know what the judge decides.  But we think that if creditors are being paid in full over a five year period, it is not the chapter 13 trustee’s job to require the debtor to pay the creditors in a period less than five years in chapter 13 cases.

This case is pending in the United States Bankruptcy Court, Northern District of Illinois, Western Division.  Lakelaw represents people in bankruptcy in Illinois and Wisconsin.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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