How long must a Chapter 13 repayment plan last?
I. The Statutory Authority
Section 1325(b)(4) of the Bankruptcy Code makes reference to the “applicable commitment period”:
[T]he “applicable commitment period”—
(A) subject to subparagraph (B), shall be—
(i) 3 years; or
(ii) not less than 5 years, if the current monthly income of the debtor and the debtor’s spouse combined, when multiplied by 12, is not less than—
(I) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;
(II) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or
(III) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4; and
(B) may be less than 3 or 5 years, whichever is applicable under subparagraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.
Huh? What does this mean in plain English? The gist is this: calculate the current monthly income (“CMI”) as the six-month average of gross income from all sources — other than social security — for the six full calendar months prior to the month you file your bankruptcy papers. Annualize CMI by multiplying by twelve to get the annualized CMI (“ACMI”). If ACMI is less than the median income for a family of your size, you’re in a three-year plan, which can be lengthened with Court approval. Otherwise, you’re in a five-year plan. That seems simple enough.
Continue Reading In re Flores: An Important Recent Chapter 13 Bankruptcy Case