BAP says District’s Model Chapter 13 Plan did Not Exceed the Bankruptcy Court’s Rule-Making Authority

BAP says District’s Model Chapter 13 Plan did Not Exceed the Bankruptcy Court’s Rule-Making Authority

When Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), a primary purpose was to help ensure that debtors who can pay creditors do pay them the maximum they can afford. Ransom v. FIA Card Servs., N.A.,
131 S. Ct. 716, 721 (2011).

This Circuit embraced this ideal by ruling that if the provisions of § 1325(b)(1)(B)1 are triggered by an objection, debtors must commit to a fixed plan term (either 36 or 60 months) because a minimum duration for Chapter 13 plans is crucial to an important purpose of § 1329’s modification process: to ensure that unsecured creditors have a mechanism for seeking increased (that is, non-zero) payments if a debtor’s financial circumstances improve unexpectedly.

Notwithstanding this background and purpose, debtors in this District sought to modify the district’s mandatory Model Plan, which required a fixed plan term, so that the plan would be for an indeterminate duration. Such plan therefore could be completed without further modification and debtor discharged as soon as all priority and secured debt was repaid, insuring that the unsecured creditors would never receive any payment on their claims. Not only did the debtors propose such plans, but their chapter 13 trustee devised a mechanism by which she could avoid filing an objection to the proposed plan — an act which would trigger the mandatory imposition of the applicable commitment period under  — by providing debtors’ attorneys with a “draft objection” which allowed them to make required amendments to the plan outside the court proceeding. The brash purpose of the “draft objection” was to create a work-around of the impact of circuit opinion for the local debtors’ bar so that debtors could avoid paying unsecured creditors what they might be entitled to receive.

 

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