Ana Flores v. Rod Danielson

I. Background

Debtors Cesar and Ana Flores filed a petition for relief under Chapter 13 of

the Bankruptcy Code. They have unsecured debts. They proposed a plan of

reorganization under which they would pay $122 per month (1%) of allowed,

unsecured, nonpriority claims for three years. Chapter 13 Trustee Rod Danielson

objected to the plan, arguing, as now relevant, that § 1325(b) requires a minimum

duration of five years for persons in Debtors’ circumstances.1

The bankruptcy court sustained the Trustee’s objection, holding that Debtors

were not entitled to a shorter plan duration because the Supreme Court’s decision

1 The Trustee has never questioned Debtors’ good faith in proposing the plan. See 11 U.S.C. § 1325(a)(3) (setting forth requirement of the debtors’ good faith). 2 in Hamilton v. Lanning, 130 S. Ct. 2464 (2010), is clearly irreconcilable with

Kagenveama.2 The bankruptcy court confirmed a plan of five years’ duration,

which provided for monthly payments of $148 to unsecured creditors.3

Debtors timely appealed to the Bankruptcy Appellate Panel. The bankruptcy

court then certified the plan-duration issue for direct appeal to this court pursuant

to 28 U.S.C. §…

dissenting, with whom

The majority overrules our holding in Maney v. Kagenveama that the Chapter 13 “applicable commitment • period” does not mandate a five-year plan length for above median debtors with no projected disposable income. 541 F.3d 868, 876 (9th Cir.2008). The majority’s interpretation of 11 U.S.C. § 1325 (b)(1)(B) promotes goals that are at odds with Congress’s purpose when it enacted Chapter 13 to “provide the debtor with a fresh start.” H.R. Rep. No. 95-595, at 117 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6079. The majority also reads language into Chapter 13 bankruptcy law that is not present in the plain text of § 1325(b)(1)(B).

I. Bankruptcy’s Purpose is to Provide Debtors with a Fresh Start

Congress enacted the Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 92 Stat. 2549 to make “bankruptcy a more effective remedy for the unfortunate consumer debtor.” H.R. Rep. No. 95-595, at 4 (1977). At the time, Congress lamented that “[e]xtensions on, plans, new cases, and newly incurred debts put some debtors under court supervised repayment plans for seven to ten years.” Id. at 117 . Congress went on to say that such lengthy repayment plans were “the closest…

In Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868, 875 (9th Cir.2008), we held that 11 U.S.C. § 1325 (b)(1)(B) does not impose a minimum duration for a Chapter 13 bankruptcy plan if the debtor has no “projected disposable income,” as defined in the statute. Today, sitting en banc, we overrule that aspect of Kagenvea-ma and hold that the statute permits confirmation only if the length of the proposed plan is at least equal to the applicable commitment period under § 1325(b)(4). Accordingly, we affirm the judgment of the bankruptcy court.

I. Background

Debtors Cesar and Ana Flores filed a petition for relief under Chapter 13 of the Bankruptcy Code. They have unsecured debts. They proposed a plan of reorganization under which they would pay $122 per month (1 %) of allowed, unsecured, nonpriority claims for three years. Chapter 13 Trustee Rod Danielson objected to the plan, arguing, as now relevant, that § 1325(b) requires a minimum duration of five years for persons in Debtors’ circumstances. 1

The bankruptcy court sustained the Trustee’s objection, holding that Debtors were not entitled to a shorter plan duration because the Supreme Court’s decision in Hamilton v.…