CHAPTER 13 AND INDIVIDUAL CHAPTER 11 CASES:
THE DIFFERENCE AND THE SAME SELECTED POST-BAPCPA PLAN AND CONFIRMATION ISSUES

1. Who may file a plan?
1. Chapter 13. Only a debtor may file a chapter 13 plan. §1321.
2. Chapter 11. The debtor may file a Chapter 11 plan. In addition, any party in interest may file a plan if a §1104 trustee has been appointed or the debtor has not timely filed a Chapter 11 plan. §1121.
2. When must a plan be filed?
1. Chapter 13. The debtor may file a Chapter 13 plan with the petition but, in any event, it must be filed within 15 days thereafter, unless the bankruptcy court enters an order extending the time for cause. Bankruptcy Rule 3015(b).
2. Chapter 11. The debtor has the exclusive right to file a plan within 120 days of the petition date or any court-ordered extended period not to exceed 18 months after the petition date. Upon the lapse of the exclusivity period, any party in interest may file a plan. §1121.
3. When must a disclosure statement be filed?
1. Chapter 13. The chapter 13 debtor is not required to file a disclosure statement.
2. Chapter 11. The chapter 11 debtor is required to file a disclosure statement to enable the creditor to make an informed judgment about the plan. §1125(b). The disclosure statement for an individual chapter 11 debtor, however, does not have to provide the same level of disclosure as is required in medium to large business reorganization cases, often when securities are issued. In re Roedemeier, 374 B.R. 264 (Bankr. D. Kan. 2007). [1]
4. When must a debtor pay projected disposable income into a plan? Must the debtorpay such projected disposable income for a specific duration?
1. Chapter 13
1. The provision. Section 1325(b)(1) provides as follows:
   “(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan -
1. the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or
2. the plan provides that all of the debtor’s projected disposal income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.”
Accordingly, if a chapter 13 trustee or the holder or an allowed unsecured claim objects, the debtor must make plan payments so that unsecured creditors receive full payment of their claims [§1325(b)(1)(A)] and, if they do not receive full payment, the debtor must make plan payments equal to any "projected disposable income to be received in the applicable commitment period." [§1325(b)(1)(B)].
2. Who may interpose a §1325(b)(1) objection. The chapter 13 trustee or the holder of an allowed unsecured claim may interpose a §1325(b)(1) objection.
3. Attempting to understand §1325(b)(1)
1. Meaning of "projected disposable income"
1. Section 1325(b)(2) defines "disposable income" as current monthly income (with certain exceptions) [2] received by the debtor minus amounts reasonably necessary to be expended for maintenance and support and for charitable contributions (not to exceed 15% of gross income for each year contributions are made); and, if the debtor is engaged in business (apparently, is self-employed in a sole proprietorship), minus necessary business expenses. §1325(b)(2)(A), (B).
2. Section 1325(b)(3) separately addresses calculation of "amounts reasonably necessary to be expended." That subsection provides that, for above-median income debtors, "amounts reasonably necessary to be expended" are calculated through the use of §707(b)(2) means test utilizing employing Form 22C, without any judicial adjustment unless narrow special circumstances apply. Consistent with §707(b)(2)(B)(i), such special circumstances may include a serious health problem or active military duty. In re Kolb, 366 B.R. 802 (Bankr. S.D. Ohio 2007) (J. Walter). To determine "amounts reasonably necessary to be expended" for below-median income debtors, such debtors may continue to calculate such expenses based on Schedule J, which, upon objection, may be judicially adjusted. In re Kibbe, 342 B.R. 411 (Bankr. D.N.H. 2006).
3. Section 1325(b)(2) only defines "disposable income" and does not define projected "projected disposable income". In the absence of a code definition, courts have adopted different meanings for "projected disposable income." For example:
• § Approach A. Projected disposable income equals disposable income times the months of the applicable commitment period. In re Kolb, 366 B.R. at 818. Approach A is based on the "plain meaning" of the statutory terms. Id. It is an objective, defined, mechanical, bright line test that minimizes judicial discretion. In re Mancl, 381 B.R. 537 (D.W.D. Wis. 2008).
• § Approach B. The Form 22C data is an initial, presumptive guide (but not an exclusive guide) to determine projected disposable income. Accordingly, the debtor may rebut the amount of projected disposable income based on Form 22C if such debtor can show substantial changed circumstances. Approach B allows significant judicial discretion. In re Slusher, 359 B.R. 290 (Bankr. D. Nev. 2007); In re Jass, 340 B.R. 411 (Bankr. D. Utah 2006).
2. Meaning of "applicable commitment period"
1. The "applicable commitment period" for below median income debtors "shall be 3 years," but the court may approve a plan for longer than three years so long as such plan does not exceed five years. §§1325(b)(4)(A)(1); §1322(d)(2). The "applicable commitment period" for above median income debtors "shall be not less than 5 years,” but no longer than five years. §1325(b)(4)(A)(ii); §1322(d)(1). [3]
3. Temporal or multiplier requirement? In a chapter 13 setting, does §1325(b) impose a temporal requirement or a multiplier requirement? More specifically:
• § Does §1325(b) impose a temporal requirement - i.e., must the debtor remain in the chapter 13 case for the entire duration of the 3/5 year applicable commitment period and pay the required plan payments over that period of time, with the result that the debtor may possibly undergo periodic review of projected disposable income and cannot "cash out" before the end of such period?
• § Does §1325(b) impose a multiplier requirement -- i.e., to determine the aggregate amount to be paid into the chapter 13 plan, does the debtor simply multiply the number of months of the applicable commitment period times the amount of debtor’s monthly projected disposable income which the debtor may then pay over less than the 3/5 year applicable commitment period?
• To address this issue, courts have adopted differing positions. Specifically:
• § The applicable commitment period is temporal. See, e.g., In re Schanuth, 342 B.R. 601 (Bankr. W.D. Mo. 2006) (applicable commitment period is a temporal rather than a monetary concept; therefore, plan must extend for a minimum of 3/5 years unless payment provides for full payment of all allowed unsecured claims for a shorter period of time); In re McGuire, 342 B.R. 608 (Bankr. W.D. Mo. 2006) (above-median income debtor did not satisfy chapter 13 five year plan requirement when plan proposed to pay in less than 60 months an amount equal to current monthly income multiplied by 60 months).
• § The applicable commitment period is a multiplier. See, e.g., In re Fredrickson, 375 B.R. 829 (8th Cir. BAP 2007) (applicable commitment period does not mandate a plan term, but a plan amount - it signifies the number of years by which to multiply the annualized disposable income to derive the total sum a debtor must pay to unsecured creditors under the plan.); In re Fuger, 347 B.R. 94, 101 (Bankr. D. Utah 2006) (if a debtor receives a windfall, such debtor could pay off plan amounts prior to the termination of the three year period without paying unsecured creditors the full amount of their claims); In re Richardson, 283 B.R. 783, 801-802 (Bankr. Kan. 2002) (same); In re Forte, 341 B.R. 859 (Bankr. N.D. Ill. 2005); (same); In re Miller, 325 B.R. 539, 542 (Bankr. W.D. Pa. 2005) (voluntary early payoff is not a modification where debtor seeks no change in total payment amount and actually increases the economic worth by paying plan obligations earlier than promised); In re Sunahara, 327 B.R. 768 (9th Cir. Bap. 2005). See also: In re Kolb, 366 B.R. at 819 (in dicta, Judge Walter cites cases that hold that applicable commitment period is a multiplier; therefore, he appears to hint how he may rule on this issue in the future).
2. Chapter 11
1. The provision. Section 1129(a)(15) provides as follows:
   “(15) In a case in which the debtor is an individual and in which the holder of an allowed unsecured claim objects to the confirmation of the plan -
1. the value, as of the effective date of the plan, of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or
2. the value of the property to be distributed under the plan is not less than the projected disposal income of the debtor (as defined in section 1325(b)(2)) to be received during the 5-year period beginning on the date that the first payment is due under the plan or during the period for which the plan provides payments, whichever is longer.”
Accordingly, if the holder of an allowed unsecured claim objects, the individual chapter 11 debtor must make plan payments to be distributed under the plan in an amount not less than projected disposable income to be received during the longer of five years or the period for which the plan provides payment.
2. Who may interpose §1129(a)(15) objection. Only a holder of an allowed unsecured claim may interpose a §1129(a)(15) objection. The holder of such claim may object even if a sufficient number and amount of the class of unsecured claims of which the objecting unsecured debtor is a party has accepted the plan. [4] If the holder of an allowed unsecured claim does not object, the court is not required to consider §1129(a)(15). In re Roedemeier , 374 B. R. at 271. Therefore, unlike an unsecured creditor in a chapter 13 proceeding who typically relies on the standing trustee interposing a §1325(b)(1) objection, because there is no standing trustee in a chapter 11 proceeding, the holder of an allowed unsecured claim must be vigilant and interpose a §1129(a)(15) objection so as to attempt to receive maximum benefit.
3. Attempting to understand §1129(a)(15)
1. Meaning and calculation of “projected disposable income”
1. Section 1129(a)(15) specifically provides that “projected disposable income" is "as defined in Section 1325(b)(2).” This new section, therefore, only references §1325(b)(2) but does not also reference §1325(b)(3), which requires that the means test must determine the reasonable and necessary expenses for above-median income debtors. In addition, Form 22 B (see attached), used for chapter 11 debtors, only requires data with respect to current monthly income and does not also require such debtor to complete information with respect to expenses based on the means test. For these reasons, one Court recently held that Form 22 B must be used to determine disposable income, but that Schedule J and not the means test must be used to determine reasonable and necessary expenses for an above- median income debtor. In re Roedemeier, 374 B.R. at 272-73. [5]
2. Other courts, however, may well reason that §1325(b)(3), which imposes the means test upon above-median income debtors, does apply. These courts may well note that, even though §1127(a)(15) only refers to §1325(b)(2), and not also §1325(b)(3), but because §1325(b)(3) defines §1325(b)(2) terms, the above-median income individual chapter 11 debtor still must comply with the means test as required by §1325(b)(3) and, therefore, Form 22B is simply wrong. To date, it does not appear that any court has so ruled.
2. Temporal or multiplier requirement?
1. Unlike §1325(b)(1)(B), §1129(a)(15) does not refer to an "applicable commitment period." Nevertheless, as in a chapter 13 setting, the question still arises whether §1129(a)(15) imposes a temporal requirement or a multiplier requirement.
2. To date, no cases address this point. Nevertheless, in ruling on this issue, a court may well note that, historically, debt adjustment utilizing chapter 11 has been contract-based; for example, defaults of a confirmed plan is commonly remedied in state court. In addition, historically, chapter 11 plans do not include a specific term and, instead, a case could be dismissed once a debtor substantially consummates the plan, and such consummation does not require full payment of all plan payments. §1101(2). In light of this, a court may well conclude that §1129(a)(15) does not mandate a minimum plan period (i.e., is not temporal), but only mandates a minimum plan amount (i.e., is a multiplier). For this reason, it would appear that courts would approve a chapter 11 “cash out” (for example, exit financing) earlier than the period necessary to make required plan payments.
3. Who benefits from application of §1325(b) and §1123(a)(15)?
1. Chapter 13. In a chapter 13 setting, if there is a §1325(b)(1) objection, the required payment of projected disposable income will only "be applied to make payments to unsecured creditors under the plan." §1325(b)(1)(B). Therefore, if there is any projected disposable income, unsecured creditors will receive a direct benefit.
2. Chapter 11. In a chapter 11 setting, however, if there is a §1129(a)(15) objection, the required payment of projected disposal income is "to be distributed under the plan." §1129(a)(15). Therefore, the individual chapter 11 debtor may first use any projected disposal income to pay holders of secured claims and administrative expenses and, if any projected disposable income is left, then to pay priority and non-priority unsecured creditors. Accordingly, even assuming there is any projected disposal income, in a chapter 11 setting, it is less likely that unsecured creditors will receive any meaningful benefit.
5. When must payments commence?
1. Chapter 13. Unless the bankruptcy court indicates otherwise, the chapter 13 debtor must commence payments no later than thirty days after the petition date of plan filing date. §1326(a)(1); S.D. Ohio General Order.
2. Chapter 11. When a holder of an allowed unsecured claim interposes an §1129(a)(15) objection, the plan must provide that payments commence on the date the first payment is due under the plan (usually as of the "effective date" which is typically the later of 30/60 days after entry of the confirmation order or the date that all plan conditions have been satisfied). §1129(a)(15)(B). Otherwise, there is no chapter 11 provision equivalent to §1326(a)(1).
6. Post-BAPCPA, what is property of the estate?
1. Section 541. Pre-BAPCPA, §541 sets forth categories of property interests that are considered "property of the estate." These interests consist of all legal and equitable pre-petition interests as well as discrete post-petition interests. Section 541(a)(6), however, expressly excepts as property of the estate "earnings from services performed by an individual debtor after the commencement of the case." Despite this, pre-BAPCPA and post-BAPCPA, chapter 13, and now, post-BAPCPA, chapter 11 provisions provide otherwise.
2. Chapter 13. In addition to property interests referenced in §541, in a chapter 13 setting, post-petition earnings and property interest acquired post-petition are also property of the estate. §1306.
3. Chapter 11.
1. Pre-BAPCPA. Pre-BAPCPA, there was no chapter 11 provision equivalent to §1306; therefore, pursuant to §541(a)(6), an individual chapter 11 debtor's post-petition earnings and property interest acquired post-petition were not property of the estate.
2. Post-BAPCPA. In an apparent effort to make a chapter 11 proceeding for individual debtors more functionally equivalent to a chapter 13 proceeding, the BAPCPA amendments added §1115. This section (very similar to §1306) provides that, in addition property interests set forth in §541, a debtor's post-petition earnings and property interests acquired post-petition are now property of the estate. [6]
7. Best interest test. In both a chapter 13 and in a chapter 11 setting, a court will not confirm a plan unless the debtor satisfies the best interest test - plan distributions with respect to allowed unsecured claims (in a chapter 13 case) or to each impaired class of claims or interests (in a chapter 11 case) will receive treatment in an amount no less than what would be received in a chapter 7 liquidation. §1325(a)(4); §1129(a)(7).
8. Absolute priority rule.
1. In general. In general, if unsecured creditors do not receive full payment of their claims, pursuant to the absolute priority rule, junior interests are not entitled to receive anything.
2. Chapter 13. In a chapter 13 setting, there is no absolute priority rule. Therefore, even though a debtor may retain post-petition earnings and the property interests (pre-and post-petition) without paying unsecured creditors the full amount of their claims, a court may still confirm a chapter 13 debtor's plan, so long as such plan satisfies the best interest test [§1325(a)(4)]; upon objection, such debtor pays into the plan all projected disposable income to be received for the applicable commitment period [§1325(b)(1)]; such debtor otherwise uses post-petition earnings and property interests as necessary to effectuate the plan [§1322(a)]; and, under such circumstances, the debtor may otherwise retain its post-petition earnings and property interests acquired post-petition.
3. Chapter 11
1. In a chapter 11 setting, the absolute priority rule is a cramdown requirement. §1129(b)(2)(B). Specifically, pre-BAPCPA, when an impaired class of unsecured claims rejects a plan, the court may still confirm the plan if the absolute priority rule is satisfied - i.e., each holder of an unsecured claim receives the present value of its claim equal to 100% of its allowed unsecured claim or, if each holder is to be paid less than 100% of its allowed unsecured claim, no junior class of claims or interests may receive anything. [7] However, Courts in the 6th Circuit and other (but not all other) jurisdictions, have engrafted a judicial exception to the absolute priority rule known as the "new value exception." By virtue of this exception, a debtor's shareholders (i.e., the junior class of interests) may retain their equity position in the corporate debtor if such person make a new, present capital contribution and not a future contribution, such as sweat equity); [8] such new capital infusion is necessary and essential to make the reorganization work; and the new value contribution equals or exceeds the going concern value of the interest acquired. In re U.S. Truck Company, Inc., 800 F.2d 581 (6th Cir. 1986).
2. Pre-BAPCPA, courts applied this absolute priority rule in connection with individual chapter 11 cases. Accordingly, prior to BAPCPA, a court would not confirm a chapter 11 plan of an individual debtor, in a cramdown scenario, unless the plan satisfied the absolute priority rule or, in jurisdictions which accept the new value exception, the plan satisfies the new value exception to the absolute priority rule.
3. However, now, because of the BAPCPA amendments, §1129(b)(2)(B)(ii) provides an exception for an individual chapter 11 debtor. [9] As a result, even if members of a class of unsecured claims receive less than 100% of their allowed unsecured claims, the individual chapter 11 debtor "may retain property included in the estate under §1115…" This exception is apparently a trade-off for the new provision that requires post-petition earnings and property acquired post-petition are property of the estate (§1115) and requires the chapter 11 individual debtor to pay into the plan projected disposable income if an unsecured creditor interposes a §1129(a)(15) objection.
4. As indicated above, §1129(b)(2)(B) provides that the "debtor may retain property included in the estate under §1115." It is unclear, however, whether this provision includes all property of the estate, including §541 property interests, or, is to be read narrowly so as only to include the property interests added by §1115 (i.e., post-petition earnings and property acquired post-petition), in which latter event, the individual chapter 11 debtor would still have to comply with the new value exception to the absolute priority rule as to §541 property interests. Addressing this issue, two courts hold that §1115 property includes an individual debtor's §541 property interests and also post-petition earnings and property and, therefore, the absolute priority rule does not apply as to any property interests of an individual chapter 11 debtor. In re Tegeder , 369 B.R. 477 (Bankr. D. Neb. 2007); In re Roedemeier , 374 B.R. at 276 (stating that the broad interpretation of §1115 is necessary to effectuate the other BAPCPA amendments pertaining to individual chapter 11 debtors). See also : Norton, Bankruptcy Law and Practice 3d §113.21, page 113.61 - 62. Consistently, the individual chapter 11 debtor may also retain the exempt portion of all property interests. In re Bullard , 358 B.R. 541, 544-45 (Bankr. D. Conn. 2007).
5. In a chapter 11 setting, even though an individual chapter 11 debtor is entitled to retain its post-petition earnings and property interests (pre-and post-petition) without paying unsecured creditors the full amount of their claims, the Court can still confirm a chapter 11 individual debtor’s plan, so long as such plan satisfies the best interest test [§1129(a)(7)]; upon objection, such debtor must pays into the plan all projected disposable income for the longer of five years or the period of plan payments [§1129(a)(15)]; such debtor uses post-petition earnings and property interests as necessary to execute the plan [§1123(a)(8)]; and the plan does not discriminate unfairly and otherwise is fair and equitable [§1129(b)(1)].
9. Treatment of allowed secured claims
1. Chapter 13
1. Holders of allowed secured claims must receive periodic, equal monthly payments and, when personal property is the collateral, the amount of such payment must satisfy adequate protection requirements. §1325(a)(5)(B)(ii), (iii). The apparent purpose of this requirement is to ensure that, in the event of default, the collateral will still have remaining value when sold to satisfy the outstanding balance.
2. When collateral is personal property, valuation is based upon replacement cost with no deduction for marketing or sale expenses, §506(a)(2).
3. There is no cramdown of a "910 car claim." As a result, if a secured creditor has a purchase money security interest in motor vehicle collateral, the debt was incurred within in 910 days preceding the petition date and the debtor acquired the motor vehicle for personal use, §506 shall not apply; therefore, the creditor's secured claim is equal to the claim amount and not the value of the collateral. In re Sparks , 346 B.R. 767 (Bankr. S.D. Ohio 2006), aff'd, 2007 W.L. 2080289 (S.D. Ohio 2007) (July 18th 2007). The same rule applies with respect to other collateral if the debt was incurred during the one year period prior to the petition date. §1325(a) (hanging paragraph).
4. If a secured creditor is a mortgagee secured only by a interest in real property which the debtor uses as a principal residence, the plan cannot modify such creditor's rights. §1322(b)(2). However, when the final payment under such obligation is due after the final plan date, a debtor may modify such mortgagee's rights so long as it cures any default within a reasonable time and maintains loan payments during the duration of the plan. §1322(b)(5). In addition, when a balloon payment under such obligation is due within the applicable commitment period, the debtor may pay such payment over the terms of the plan. §1322(c)(2).
2. Chapter 11
1. There is no chapter 11 provision equivalent to §1325(a)(5)(B)(iii) which requires periodic, equal monthly payments. At the same time, in a cramdown scenario, treatment of unsecured creditors must be fair and equitable. §1129(b)(1). Accordingly, a secured creditor should object to plan treatment unless the payments, albeit irregular, are in an amount such that, in the event of default, the collateral will still have remaining value when sold to satisfy the outstanding balance.
2. There is no chapter 11 provision equivalent to §506(a)(2); therefore, valuation of personal property which a debtor is to retain in a chapter 11 case is based on replacement value, based on "what a retail merchant would charge," but "without deduction for cost of sale or marketing." Associates Commercial Corp. v. Rash , 520 U.S. 953, 117 S. Ct. 1879 (1997). Accordingly, the §506(a)(2) valuation standard would not apply in an individual chapter 11 case.
3. There is no chapter 11 provision equivalent to §1325(a) (hanging paragraph); therefore, in a chapter 11 setting, secured creditors with a purchase money security interest in a motor vehicle acquired less than 910 days before the petition date receive no preferred treatment and, instead, are only entitled to receive as the holder of an allowed secured claim an amount equal to the value of the collateral.
4. Section 1123(b)(5) is an anti-modification provision identical to §1322(b)(2). However, there is no chapter 11 provision equivalent to §1322(b)(5) and §1322 (c)(2) (the cure provisions). As a consequence, an individual chapter 11 debtor cannot modify the rights of a mortgagee secured only by a security interest in real property which the debtor uses as a principal residence and must fully pay the outstanding amount due in the form of plan payments to be entitled to receive the §1141 discharge. [10]
10. Is plan acceptance required?
1. Chapter 13. In a chapter 13 setting, a court may confirm a chapter 13 plan if there is creditor acceptance [§1325(a)(5)]; however, there is no formal voting procedure. Therefore, if a holder of a claim does not accept the plan, to prevent the plan confirmation, that creditor must interpose a confirmation objection.
2. Chapter 11. In a chapter 11 setting, a court may confirm a chapter 11 plan if the plan proponent satisfies all §1129(a) requirements, including the requirement that each class of impaired claims formally vote to accept the plan. §1129(a). [11]
11. What is required to modify a plan?
1. Chapter 13
1. Pre-confirmation modification. So long as the debtor continues to comply with §1322 requirements, the debtor may modify the plan prior to confirmation and the modified plan becomes the plan. §1323(a), (b).
2. Post-confirmation modification. So long as the debtor, chapter 13 trustee or holder of an allowed unsecured claim complies with §1322(a), (b), (c) and §1325(a), for the period after plan confirmation until completion of plan payments, such parties in interest may file a motion to modify the confirmed plan for the following purposes:
• § To increase or reduce plan payments.
• § To extend the plan period
• § To alter plan payments if otherwise paid.
• § To reduce plan payments if projected disposal income is needed to pay for health insurance and new provisions in connection therewith are satisfied. §1329.
In light of BAPCPA amendments imposing a means test requirement, it is uncertain, however, whether a party in interest can seek post-confirmation modification in the amount of plan payments based on the means test calculation. Nevertheless, it would seem that, if there were post-confirmation change of circumstances, the court should allow plan modification.
2. Chapter 11
1. Pre-confirmation modification. Post-BAPCPA, so long as the individual debtor complies with §§1121-1129, including the §1125 disclosure requirement, a court may approve a plan modification prior to confirmation and the modified plan becomes the plan. §1127(a).
2. Post-confirmation modification. A non-individual chapter 11 debtor may modify a plan after confirmation, but before substantial consummation [as defined at §1101(2)] so long as the modification continues to comply with §§1121-1123. §1127(b). Post-BAPCPA, an individual chapter 11 debtor, a trustee, the U.S. trustee, or the holder of an allowed unsecured claim may seek modification of a plan after confirmation (for the same purposes as set forth at §1329) until completion of the plan payments and before or after substantial consummation. §1127(e).
   

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[1] For example, the Roedemeier court approved the disclosure statement of an individual chapter 11 debtor with a one-dentist dental practice which described debtor's business and its history, contained financial information, outlined contents of the plan and facts respecting its execution, contained a liquidation analysis, identified management and its compensation and any transactions with insiders, and described the tax consequences of the plan in a manner sufficient to allow unsecured creditors to make an informed judgment about the plan.

[2] Section 101(10A) defines "current monthly income" as the average of the income that debtor received for the six months immediately prior to the petition date.

[3] If the Form 22B calculation yields negative projective disposable income for an above median income debtor, courts have held that there is no applicable commitment period and a court may approve a plan shorter than five years. See, e.g., In re Fredrickson, 375 B.R. 829 (8th Cir. BAP 2007). Somewhat consistently, if projected disposable income for an above median income debtor is negative, Kellner, chapter 13 trustee for the Southern District of Ohio at Dayton, may only object to a proposed chapter 13 plan if such plan term is less than 36 months.

[4] This parallels the right of a creditor of an accepting class to object to plan confirmation on the basis that the plan does not satisfy the §1129(a)(7) best interest test.

[5] As a result, if an above-median income debtor originally files a chapter 13 petition and if the projected disposable income based on Form 22 B is more than the net income derived from Schedules I and J, upon a §1325(b)(1) objection, such debtor must pay all of its projected disposable income for the applicable commitment period and, if such debtor is unable to do so, that debtor may have to convert the case to a chapter 11 proceeding so that expenses can be based on Schedule J, not the means test. Alternatively the debtor could also convert the chapter 13 case to a chapter 7 case. In re Miller, 381 B.R. 736 (Bankr. W.D. Ark. 2008). (Chapter 13 case can be converted to chapter 7 and the case will not be dismissed even if the debtor has income that exceeds the allowed §707(b)(2)(A) minimum and has primarily consumer debt; the means test only comes into play if the debtor originally "filed under this chapter" (i.e., chapter 7)).

[6] Section 1115(a) provides as follows:

(a) In a case in which the debtor is an individual, property to the estate includes, in addition to the property specified in section 541-

(1) all property of the kind specified in section 541 that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a case under chapter 7, 12 or 13, whichever occurs first; and
(2) earnings from services performed by the debtor after the commencement of the case but before the case is closed, dismissed or converted to a case under chapter 7, 12 or 13, whichever occurs first.

[7] Pre-BAPCPA, 1129(b)(2)(B) provides as follows:

"(B) With respect to a class of unsecured claims -

(i) The plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the effective date of the plan, equal to the allowed amount of such claim; or

(ii) The holder of any claim or interests that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property.

[8] Norwest Bank Worthington v. Ahlers, 485 U.P.S. 197, 108 (S. Ct. 963, 99 L. Ed. 2d 169 (1988) (Addressing the absolute priority rule and the applicability of the new value exception in an individual chapter 11 case, the United States Supreme Court held that, even if it were to recognize a new value exception to the absolute priority rule, the sweat equity of an individual chapter 11 debtor paid into the plan over time would not qualify as new value). In so holding, the Supreme Court assumed without discussion that the individual debtor's interest in debtor's own property is equivalent to the junior interest of equity holders.

[9] Post-BAPCPA, §1129(b)(2)(B)(ii) now provides:

(ii) The holder of any claim or interests that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property, except that in a case in which the debtor is an individual, the debtor may retain property included in the estate under section 1115 subject to the requirements of subsection (a)(14) of this section" (emphasis added)." It is curious that the exception to the absolute priority rule is just subject to §1129(a)(14) that addresses domestic support orders. Perhaps this is one more drafting error and Congress intended to reference §1129(a)(15).

[10] cf. In re Clay, 204 B.R. 786 (Bankr. N.D. Ala. 1996) (Because the 1994 amendments added §1123(b)(5), but did not add a chapter 11 provision equivalent to §1322(c)(2), an individual chapter 11 debtor cannot spread the balloon payment over the period of the plan and, instead, must immediately pay the balloon payment). But see: In re Lennington, 288 B.R. 802 (Bankr. C.D. Ill. 2003) (individual chapter 11 debtor may cure pre-petition arrearage; even though there is no chapter 11 counterpart to §1322(b)(5), §1124 provides that a claim is not impaired if the plan provides for cure of a default and reinstatement of the loan terms, but does not otherwise alter the mortgagee's rights and §1123(b)(5) does not prohibit the exercise of such "cure" rights. "Cure" is separate from" modification" - "cure" deals with past defaults and "modification" refers to future obligations; therefore a plan cannot modify rights by bifurcating claims into secured/unsecured components, changing the interest rate on a going forward basis, etc).

Note:

If an unsecured creditor interposes a §1129(a)(15) objection, unless the court, pursuant to §1141(d)(4) approves an exception to discharge as to the claim of the long term residential mortgagee and if §1129(a)(15) is deemed to be temporal, that debtor will have to pay projected disposable income into the plan for an extended duration (i.e., until the mortgage obligation is fully paid) and will also have to pay quarterly fees to the U.S. Trustee; but, if §1129(a)(15) is deemed to be a multiplier and if the debtor is able to "cash out," perhaps with exit to financing, such debtor will be able to avoid paying projected disposable income and U.S. Trustee fees for an extended period of time.

[11] An impaired class accepts a plan if two thirds of the amount of the claims of such class and more than one-half of the members of such class vote in favor of the plan §1126(c).