Chapter 13 plans are based in part in reality and in part – fantasy. In all consumer Bankruptcy petitions, there is a test called a ‘means test.’ This test determines whether you will be in a Chapter 13 or a Chapter 7.
In Chapter 13, if you are above the median income in the ‘means test’, then a further value is established. This value is called the amount of money you have available in ‘projected disposable income’. If you have $10.00 in disposable income, then this is the amount of money you end up paying for sixty months.
However, with a recent court case called ‘In Re Kagenveama’, the Cout has determined that if you have no ‘projected disposable income’ or $0.00 pdi, then the Plan length of 60 months no longer applies. In fact, the Court went so far to reason that there was no temporal requirement whatsoever. A Chapter 13 plan with $0.00 pdi could last as short as is needed to pay administrative costs and secured creditors. This could be 1-2 months in some cases.
The Court’s reasoning in the 9th Circuit went as follows:
The code says that “the plan [must pay] all of the Debtor’s ‘projected disposable income’ received during the ‘applicable commitment period.’” Section 1325(b)(1). “Disposable income” is defined in Section 1325(b)(2) but “projected disposable income” is not. “There can be no reason for § 1325(b)(2) to exist other than to define the term ‘disposable income’ as used in § 1325(b)(1)(B). ‘If ‘disposable income’ is not linked to ‘projected disposable income’ then it is just a floating definition with no apparent purpose.” “The plain meaning of the word ‘projected,’ in and of itself, does not provide a basis for including other data in the calculation because ‘projected’ is simply a modifier of the defined term ‘disposable income.’”
Not every circuit agrees with this reasoning and it is likely that the Court’s will close this loophole in the future. But for now, if you live in the 9th circuit and are above the median income level but with $0.00 pdi, your Chapter 13 is going to be less than the required 60 month term set forth in the Code.