text:
§ 126.3 — Does Disposable Income Test Apply?
The Bankruptcy Code is unclear whether the disposable income test in § 1325(b)1 applies at modification after confirmation. The reported decisions on the question are fractured.
On one hand, 11 U.S.C. § 1329(b)(1) specifically references four sections of the Code that "apply to any modification," and § 1325(b) is not among the listed sections. Some courts have interpreted this omission as evidence that Congress did not intend the bankruptcy courts to "re-examine the debtor's disposable income before deciding whether to approve a postconfirmation modification."2
On the other hand, § 1325(a) is among the sections listed in § 1329(b) to be applied to a modified plan. It can be argued that the cross-reference to § 1325(b) in § 1325(a) requires bankruptcy courts to apply both subsections. Section 1325(a) begins "except as provided in subsection (b) . . . ."3 One rule of statutory construction instructs that the exception for § 1325(b) in § 1325(a) captures both subsections; § 1329(b)(1) would then require application of § 1325(a) and (b) to any modification after confirmation.4
Alternatively, § 1325(a)(1) requires that the plan "complies with the provisions of this chapter."5 The disposable income test in § 1325(b) is a "provision of this chapter" incorporated by § 1325(a) into § 1329(b)(1). This argument runs squarely into other rules of construction that argue against redundancy in statutes—most of § 1329(b)(1) becomes redundant if all of Chapter 13 becomes applicable at postconfirmation modification by reference to § 1325(a). There is always a rule of statutory construction to give you the answer you seek.
Though there is no illuminating legislative history, the language of §§ 1329 and 1325 somewhat favors the interpretation that § 1325(b) applies at modification after confirmation. A majority of the reported decisions apply the disposable income test at modification of a confirmed plan, though many do so without comment or analysis.6
A few courts have recited that the disposable income test applies at modification after confirmation but have hedged or conditioned the circumstances under which the test will be imposed—typically limiting its use to "egregious" or "extraordinary" facts.7 Other courts acknowledge the fractured case law and the lack of clarity in the statute and then apply or don't apply § 1325(b) without announcing any general rules.8
At the very least, the courts should agree that the disposable income test does not apply when the proponent of the modification is the trustee or the holder of an allowed unsecured claim and the objecting party is the debtor. This would be true as a matter of statutory construction because § 1325(b) applies only upon objection to confirmation by "the trustee or the holder of an allowed unsecured claim."9 The reported decisions have not consistently recognized this prerequisite to application of the disposable income test. In Max Recovery, Inc. v. Than (In re Than),10 the Bankruptcy Appellate Panel for the Ninth Circuit accurately explained that the disposable income test in § 1325(b) is not applicable on the debtor's objection because § 1325(b) applies only upon the objection of the trustee or the holder of an allowed unsecured claim.11 However, there are many reported decisions applying the disposable income test when the modification was proposed by someone else and the debtor is the objecting party.12
When the motion to modify comes from a party other than the debtor, § 1322(a)(1) may provide an effect similar to the disposable income test without resort to § 1325(b). Discussed in more detail elsewhere,13 § 1322(a)(1) mandates that the plan "provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan."14 Section 1322(a) applies at modification after confirmation under § 1329(b)(1).15 When the trustee or a creditor successfully modifies the plan, for example, to increase payments to creditors to reflect an increase in the debtor's income, § 1322(a)(1) would require the debtor to submit additional earnings or income to fund the modified plan. This effect of § 1322(a)(1) would be similar to the income-capturing effect of the disposable income test, but there are no obstacles from statutory construction to the application of § 1322(a)(1). In one reported decision, the Bankruptcy Court for the District of Nevada acknowledged that the disposable income test in § 1325(b) is not applicable on a trustee's motion to modify after confirmation, but § 1322(a)(1) does apply and would require a postconfirmation increase in payments from the debtor for the benefit of creditors.16
Policy arguments support application of § 1325(b) at modification after confirmation. A significant change in a debtor's disposable income after confirmation is an obvious reason why the trustee or the holder of an allowed unsecured claim would seek to modify the plan to increase payments to creditors.17 Applying the projected disposable income test at modification balances the continuing automatic stay that protects the debtor for the years of the Chapter 13 case—a debtor who experiences a significant improvement in financial condition after confirmation should share the good fortune with prepetition creditors.18 But policy immediately collides with the reality that § 1325(b) is not constructed to apply the disposable income test in the very circumstance it would be most needed—when the debtor objects to a creditor's or trustee's motion to modify to increase payments to creditors.
The internal logic of § 1325(b) does not support its application at modification of a confirmed plan. As discussed above,19 projected disposable income is inherently prospective—it requires bankruptcy courts to assess the debtor's income in the future. Upon objection by the trustee or the holder of an allowed unsecured claim, the disposable income test requires that either the debtor must pay the objecting claim holder in full20 or the plan must provide that all of the debtor's projected disposable income for three years be applied to make payments under the plan.21 It sounds almost silly to say it, but future income so unlikely that it is not projected need not be committed to the plan.
If the projected disposable income test is applied each time the trustee or the holder of an allowed unsecured claim moves for modification of a plan after confirmation, then projected expands to capture all of the debtor's income without regard to whether that income was projected at previous confirmation or modification hearings.22 In Anderson v. Satterlee (In re Anderson),23 the U.S. Court of Appeals for the Ninth Circuit rejected exactly this notion that projected disposable income means "whatever the debtor's income turns out to be."24 If § 1325(b) is applied at modification after confirmation, the result refused in Anderson comes in through the back door—projected disposable income would be recalculated with the passage of time on the motion of any allowed unsecured claim holder.
Application of the disposable income test at modification is at least confusing and may render many postconfirmation modifications impossible altogether. One way to satisfy the disposable income test is to provide that all projected disposable income to be received in the three-year period beginning on the date the first payment is due under the plan will be applied to make payments under the plan.25 Section 1329(b)(2) recites that "the plan as modified becomes the plan unless . . . such modification is disapproved."26 If the original plan is replaced at modification, is the three-year period in § 1325(b) counted anew from the date the first payment is due under the plan as modified or from the date the first payment was due under the original plan? Good arguments can be made that a Chapter 13 debtor should not be required to pay into a plan for longer than the original 36-month period, counted from the first payment due under the original plan. On the other hand, the Code clearly substitutes the modified plan for its predecessor, and "the date the first payment is due under the plan" could be read as the date on which the first payment is due under the plan as modified.
Support for this construction is found in § 1329(c). Section 1329(c) provides that "a plan modified under this section may not provide for payments over a period that expires after three years after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time."27 This language demonstrates Congress contemplated that plans modified after confirmation might extend beyond the original three-year period, and Congress knew how to identify the point in time at which the first payment was due "under the original confirmed plan." No similar language appears in § 1329(b). If § 1329(b) incorporates the projected disposable income test, there is nothing in § 1325(b) or in § 1329(b) to require counting the three-year period in § 1325(b) from the date the first payment was due "under the original confirmed plan."
Notice, however, that counting the three-year disposable-income-test period from the date the first payment is due under the modified plan may preclude modification of a plan that is already more than two years old. Section 1329(c) clearly states that the court may not approve a modified plan that calls for payments after five years after the first payment was due under the original confirmed plan.28 If the projected disposable income test applies at modification and if the three-year period is counted from the date the first payment is due under the plan as modified, then the three years in § 1325(b)(1)(B) must be added to the months already passed; if the sum exceeds five years, then the plan cannot be approved under § 1329(c). Mathematically, no proposed modified plan can satisfy both the disposable income test in § 1325(b) and the five-year limitation in § 1329(c) if the modification is filed after two years after the commencement of payments under the original plan.29
This conundrum illustrates that the interaction of the disposable income test in § 1325(b) and the modification of plans under § 1329 is not well conceived. The 1984 amendment enabling the Chapter 13 trustee and allowed unsecured claim holders to seek postconfirmation modification has exacerbated the problems of statutory construction. It is unlikely that the drafters of § 1329(b) intended to preclude all debtor modifications of plans that have survived two years after the first payment was due under the original plan and in which unsecured claim holders cannot be paid in full in less than three years.
There are many reported decisions in which courts struggle to make the disposable income test work at modification after confirmation. The typical fact pattern is the trustee's motion to modify when the debtor receives "unexpected" income after confirmation. The meaning of income for disposable-income-test purposes and the availability of exemptions from income are difficult issues at confirmation of the original plan,30 and that difficulty is compounded by the passage of time after confirmation.
For example, in Freeman v. Schulman (In re Freeman),31 the confirmed plan called for payment to the trustee of all income tax refunds. The debtors claimed an exemption in the schedules in a tax refund of $200. The debtors discovered after confirmation that the actual tax refund would be between $1,200 and $1,500. The debtors moved to amend the confirmed plan to exempt the larger refund. The trustee objected, citing § 1325(b) for the proposition that the tax refund was projected disposable income that must be applied to payments under the plan. The Sixth Circuit agreed, finding that the tax refund was projected disposable income.32 Because § 1325(b) "makes no express or implied reference to the exempt status of income,"33 the debtors could not keep the refund from their creditors by exemption. The outcome of Freeman is that a tax refund that clearly was not projected income at confirmation became projected and disposable income upon postconfirmation modification.
In McDonald v. Burgie (In re Burgie),34 the plan proposed a 34 percent dividend. Five days after confirmation, the debtors were granted court approval to sell their residence. Net proceeds of $63,000 were received from the sale, and the debtors claimed a homestead exemption in all but $20,000. The Chapter 13 trustee moved to modify the plan to pay the $20,000 to unsecured claim holders. Assuming without deciding that § 1325(b) applied, the Bankruptcy Appellate Panel for the Ninth Circuit held that the net nonexempt proceeds were not disposable income without regard to the debtors' exemptions:
The proceeds of the sale of a debtor's real estate in a chapter 13 case never become disposable income . . . . This result applies in a chapter 13 case whether or not the property is exempt from execution. While a debtor may voluntarily use such proceeds to make payments to creditors under a chapter 13 plan, a debtor cannot be compelled to use the proceeds for this purpose. . . . Postpetition disposable income does not include prepetition property or its proceeds. This is the chapter 13 debtor's bargain. Creditors of a chapter 13 debtor have no claim to any of these assets. . . . The sale of a capital asset does not create "disposable income" pursuant to § 1325. . . . A debtor's prepetition homestead is a capital asset, not postpetition income. . . . The test is whether the asset in question is an anticipated stream of payments. If it is a stream of payments, the payments must be included in projected income. If the asset is not a stream of payments, it is not included. . . . The key inquiry in this case is not whether the sale proceeds were exempt. Rather the question is whether the sale proceeds constitute "future earnings or other future income of the debtor." See § 1322(a)(1). Clearly, the proceeds from the sale of a prepetition asset (whether exempt or not) are not future earnings or income.35
Contrast Burgie with In re Martin.36 The confirmed plan in Martin provided 10 percent to unsecured claim holders. Two years after confirmation, the debtors moved to modify to cash out the balance of the plan from the refinancing of their home. The bankruptcy court held that the disposable income test applied to the postconfirmation modification and that a further hearing was necessary to determine whether the proposed payoff satisfied § 1325(b):
[B]efore I can rule on the propriety of the proffered lump sum payment in this case, I must first determine whether the Debtors have satisfied § 1325(b) by paying creditors the equivalent of the Debtors' disposable income during the life of the plan. . . . If the Debtors' disposable income is greater after the refinancing, the lump sum amount might have to be higher to account for the greater disposable income during the remainder of the Plan. Because the Debtors did not file updated Schedules, I have insufficient information to rule on the propriety of their proffered lump sum payment.37
For § 1325(b) purposes, it is hard to distinguish the proceeds from the sale in Burgie from the proceeds of the refinancing in Martin. As discussed above,38 the logic of Martin would include appreciation in the value of property after confirmation in the tests for modification of a plan. Burgie would exclude from the disposable income test at modification the cash generated from the sale or refinancing of any asset without regard to the source of the new value, unless that value comes in the form of a stream of payments. It is not obvious why a stream of payments is income for § 1325(b) purposes at modification after confirmation, but a lump-sum payment is not.
The argument for exemptions from disposable income has received inconsistent treatment in the context of postconfirmation modification.39 For example, in In re Kerr,40 on a trustee's motion to modify to pay creditors proceeds from the sale of the debtor's homestead, the court held the proceeds were not projected disposable income because the debtor exempted the equity and § 522(c) prohibited reaching exempt income through § 1325(b).41 In In re Jackson,42 the disposable income test captured the portion of workers' compensation received after confirmation that was not reasonably necessary for the maintenance or support of the debtors, notwithstanding that all of the workers' compensation award was exempt property.43
Insurance proceeds and settlements have generated disposable-income-test problems at modification after confirmation.44 In Collier v. Valley Federal Savings Bank (In re Collier),45 the bankruptcy court applied the disposable income test to modify a confirmed plan to pay creditors insurance proceeds from destruction of rental property.46 Another court used § 1325(b) at modification to preclude a debtor's proposal to use excess car insurance proceeds as a down payment on a replacement car.47 In contrast, in In re Moore,48 the court defined income for § 1325(b) purposes to exclude the conversion of a car into cash insurance proceeds after confirmation.49 Somewhere in the middle, the bankruptcy court in In re Baker50 held that the proceeds of life insurance on a Chapter 13 debtor who passed away after confirmation were not projected disposable income, but interest earned on those proceeds was and could not be exempted.51
Bankruptcy courts in Florida have sliced and diced insurance proceeds and accident settlements at modification after confirmation. In In re Florida,52 the Bankruptcy Court for the Middle District of Florida held that insurance proceeds at the postconfirmation death of the debtor's husband were projected disposable income that was not reasonably necessary for support of the surviving debtor and § 522(c) did not protect the proceeds from treatment as disposable income. The same bankruptcy court in In re Graham53 held that settlement proceeds from a postpetition personal injury accident were not captured by § 1325(b) because the debtor's exemption trumped the disposable income test. Earlier, in In re Studer,54 on the trustee's motion to modify after confirmation, the same bankruptcy court applied § 1325(b) to require the debtors to pay the proceeds from a postpetition accident to the plan subject only to proof whether any portion was reasonable and necessary for maintenance and support. In In re Ferretti,55 a bankruptcy court in the district adjoining Studer held that the disposable income test applied on the trustee's motion to modify to distribute proceeds from a prepetition car accident; however, because the debtor claimed the proceeds exempt without objection, no portion was payable to creditors through the plan.
1 See discussion of projected disposable income before and after BAPCPA beginning at § 91.1 In General, § 92.1 In General, § 93.1 Section 1325(b)(2)(A) and (B): "Amounts Reasonably Necessary to Be Expended—" When CMI Is Less Than Median Family Income, § 94.1 Big Picture: Too Many Issues, § 95.1 In General, § 96.1 Average Monthly Payments on Account of Secured Debts, § 97.1 Total Priority Debts and Divide by 60, § 98.1 Additional Expenses or Adjustments to CMI and § 99.1 In General.
2 In re Moss, 91 B.R. 563, 566 (Bankr. C.D. Cal. 1988). Accord Forbes v. Forbes (In re Forbes), 215 B.R. 183, 191–92 (B.A.P. 8th Cir. 1997) ("We agree that Congress omitted Code Section 1325(b) in the requirements for postconfirmation plan modification, and further, decline to take its prerogative as our own. . . . [O]ur conclusion is supported by the absurd result which would have obtained had the best efforts test been applied under these facts. . . . We thus conclude that the 'best efforts' test is not a factor to be considered by a court in approving postconfirmation modifications."); In re Sounakhene, 249 B.R. 801, 805 (Bankr. S.D. Cal. 2000) ("This Court joins those courts that uphold the statute's plain language. Section 1329(b)(1) reincorporates most of the requirements for plan confirmation, but the disposable income test is omitted. The Court declines to read the disposable income test into Section 1329(a) and declines to hold that its omission was oversight. Rather, the better approach is to utilize the analysis underlying the disposable income test in exercising the court's judgment and discretion."); In re Coleman, 231 B.R. 397, 401 (Bankr. S.D. Ga. 1999) (In dicta, in the context of a postconfirmation modification to surrender a car and treat the balance of the car lender's claim as unsecured, "the 'disposable income' test of Section 1325(b) is not specifically incorporated into modifications. 11 U.S.C. § 1329(b)."); In re Anderson, 153 B.R. 527, 528–29 (Bankr. M.D. Tenn. 1993) (Upon the debtors' postconfirmation motion to modify the plan to reflect repossession and sale of a car, "compliance with § 1325(b) is not required for post-confirmation modification of a Chapter 13 plan.").
3 11 U.S.C. § 1325(a).
4 Don't push too hard on this analysis. Section 1329(b)(1) specifically cross-references both subsections 1322(a) and 1322(b). Section 1322(b) cross-references § 1322(a) with the introductory provision "subject to subsections (a) and (c) of this section, the plan may . . . ." 11 U.S.C. § 1322(b). The rule of statutory construction that the cross-reference to § 1322(a) in § 1322(b) captures § 1322(a) then collides with the rule that statutes should be interpreted to avoid redundancies—§ 1329(b)(1) would then twice incorporate § 1322(a).
5 11 U.S.C. § 1325(a)(1).
6 See Freeman v. Schulman (In re Freeman), 86 F.3d 478 (6th Cir. 1996) (Disposable income test in § 1325(b) applies on trustee's objection to modification after confirmation under § 1329.); In re Studer, 237 B.R. 189, 193 (Bankr. M.D. Fla. 1998) (On trustee's postconfirmation motion to require debtors to pay postpetition accident settlement to creditors, court applies disposable income test without discussion. "[I]f the amount necessary for the debtor's maintenance and support cannot be determined by reference to the debtor's schedules, due to changed circumstances such as increased medical expenses or otherwise, an evidentiary hearing is required to determine whether post-confirmation assets should be included in distributions to creditors. . . . In this case, an evidentiary presentation is necessary to determine whether the Debtors need the Settlement Proceeds for reasonable maintenance and support based on any changed circumstances."); In re Richardson, 283 B.R. 783 (Bankr. D. Kan. 2002) (Without discussion, when Chapter 13 trustee objects to discharge on the ground that insurance proceeds received after confirmation should be committed to increase payments to creditors: proceeds are not property of the estate; proceeds are not projected disposable income; and proceeds are not captured for creditors by trustee's motion to modify.); In re Fields, 269 B.R. 177, 180 (Bankr. S.D. Ohio 2001) (Citing Freeman v. Schulman (In re Freeman), 86 F.3d 478 (6th Cir. 1996), "it appears that courts within the Sixth Circuit are to apply § 1325(b) within the context of a debtor's motion to modify. It is unclear whether the Sixth Circuit would apply § 1325(b) within the context of a trustee's or unsecured creditor's motion to modify."); In re Florida, 268 B.R. 875 (Bankr. M.D. Fla. 2001) (Without discussion of § 1325(b), on trustee's motion to modify confirmed plan, court applies disposable income test and concludes that insurance proceeds payable at postconfirmation death of debtor husband are projected disposable income not reasonably necessary for debtor wife's support and maintenance.); In re Baines, 263 B.R. 868, 871–72 (Bankr. S.D. Ill. 2001) (Although proceeds of prepetition lawsuit and workers' compensation are projected disposable income, at modification after confirmation, the trustee cannot compel distribution of those proceeds only to unsecured creditors. "To be included in the definition of 'disposable income' under 11 U.S.C. § 1325(b)(2) merely means that the income is available to fund a Chapter 13 plan. . . . While the class action/worker's compensation proceeds at issue here constitute disposable income, as both [In re Watters, 167 B.R. 146 (S.D. Ill. 1994),] and the Debtors' plans indicate, no special distribution to the Debtors' unsecured creditors is warranted."); In re Graham, 258 B.R. 286 (Bankr. M.D. Fla. 2001) (On trustee's motion to modify to require the debtors to pay unsecured creditors a portion of the settlement proceeds from a postpetition personal injury action, settlement proceeds are not captured by § 1325(b) because $1 exemption trumps the disposable income test.); In re Euler, 251 B.R. 740, 748 (Bankr. M.D. Fla. 2000) (Applying disposable income test on trustee's motion to modify the plan after confirmation to capture appreciation in real property, "the court believes that the better view is that '[t]he proceeds of the sale of a debtor's real estate in a chapter 13 case never become disposable income for purposes of chapter 13.' . . . Post-petition disposable income does not include pre-petition property or its proceeds."); In re Martin, 232 B.R. 29, 32, 36, 37–38 (Bankr. D. Mass. 1999) (Disposable income test applies at modification after confirmation, and lack of evidence precludes confirmation of modified plan that would cash out the 10% payment to unsecured claim holders from the refinancing of the debtors' home. "There is a split of authority as to whether § 1325(b) applies to post-confirmation modification. . . . I find that the arguments excluding the application of the subsection are not as strong as the ones to include it. I conclude that the Trustee may object to the proposed modification on the basis of § 1325(b)." Nothing in the Code prohibits prepayment of plan from refinancing of the debtors' home, but further hearing was required to determine whether the proposed payoff satisfied § 1325(b). "[B]efore I can rule on the propriety of the proffered lump sum payment in this case, I must first determine whether the Debtors have satisfied § 1325(b) by paying creditors the equivalent of the Debtors' disposable income during the life of the plan. . . . If the Debtors' amended Schedules I and J reflect an increase in their disposable income, . . . that increase may have resulted in more disposable income. If the Debtors' disposable income is greater after the refinancing, the lump sum amount might have to be higher to account for the greater disposable income during the remainder of the Plan. Because the Debtors did not file updated Schedules, I have insufficient information to rule on the propriety of their proffered lump sum payment."); In re Gibson, 218 B.R. 900, 905 (Bankr. E.D. Ark. 1997) (Overrules disposable-income-test objection to confirmation of a modified plan because the lender "has not established that the Debtor is not making his best effort." After postconfirmation destruction of the debtor's truck, debtor moved to modify confirmed plan to use insurance proceeds to pay the allowed secured portion of the undersecured lender's claim with the balance of the insurance proceeds to be paid to the Chapter 13 trustee. Debtor also sought a reduction of his plan payment by $485 a month to reflect elimination of the payment on the truck loan. Debtor also stated intention to seek a refund of a portion of the insurance proceeds from the Chapter 13 trustee to repair another vehicle. The court found this use of the portion of the proceeds to be "a reasonable use" and appears to reject the lender's disposable-income-test argument based on a failure of proof from the lender.); In re Guentert, 206 B.R. 958 (Bankr. W.D. Mo. 1997) (Disposable income test applies at modification under § 1329; debtor cannot amend to pay off plan from insurance proceeds when effect would be to complete payments in less than 36 months.); In re Ferretti, 203 B.R. 796 (Bankr. S.D. Fla. 1996) (Disposable income test applies on trustee's motion to modify to distribute debtor's portion of settlement of prepetition automobile accident; because debtor claimed proceeds exempt and no creditor objected, § 522(c) precludes trustee's motion.); In re Kerr, 199 B.R. 370 (Bankr. N.D. Ill. 1996) (On trustee's motion to modify after confirmation, proceeds from sale of homestead are not projected disposable income because debtor exempted equity and § 522(c) prohibits reaching that exempt income through § 1325(b).); In re Baker, 194 B.R. 881, 885 (Bankr. S.D. Cal. 1996) (Proceeds of life insurance on codebtor who passed away after confirmation are not projected disposable income, but interest earned on proceeds is. "If the exempt asset in question is an anticipated stream of payments, it is included in projected income; if the exempt asset is other than a stream of payments, it is not included. In this case the Debtor satisfies the 'projected disposable income' test by including in her income the Interest generated by the Insurance Proceeds. She will not be required to invade the Proceeds to fund the Plan."); In re Torres, 193 B.R. 319 (Bankr. N.D. Cal. 1996) (Some but not all objections to confirmation by the Chapter 13 trustee triggered disposable-income-test analysis. Because trustee did not object to confirmation of the original plan on disposable-income-test ground, postconfirmation motion to modify by a creditor based on § 1325(b) is barred by § 1327.); In re McKinney, 191 B.R. 866, 869 (Bankr. D. Or. 1996) ("Although [the] statutory language is not a model of clarity, it generally has been interpreted as incorporating, upon objection, the requirements of § 1325(b)."); In re Moore, 188 B.R. 671 (Bankr. D. Idaho 1995) (Applies disposable income test at modification after confirmation, but conversion of debtor's car into insurance proceeds did not produce income for purposes of test.); In re Jackson, 173 B.R. 168 (Bankr. E.D. Mo. 1994) (Without discussion, the disposable income test under § 1325(b) also applies at postconfirmation modification and captures workers' compensation proceeds received after confirmation notwithstanding the debtor's claim of exemption.); In re Boothe, 167 B.R. 943 (Bankr. D. Colo. 1994) (Disposable income test applies at modification after confirmation and precludes plan that fails to pay excess car insurance proceeds to the general unsecured claim holders.).
7 See Collier v. Valley Fed. Sav. Bank (In re Collier), 198 B.R. 816, 817 (Bankr. N.D. Ala. 1996) ("'The confirmation order is res judicata on the disposable income test, except in extraordinary circumstances.' . . . [W]here 'substantial unanticipated changes' occur, post-confirmation modification of plan payments is appropriate. . . . to reflect the debtors' increased disposable income."); In re McCray, 172 B.R. 154, 158 (Bankr. S.D. Ga. 1994) ("The plan in the case before the Court has been confirmed. Issues of disposable income are therefore precluded from being raised unless the court should find the circumstances 'extraordinary.' Modification of payments is not justified under the facts of this case." Tax refund of $1,698 is not projected disposable income where debtor is living below subsistence levels and refund "is neither an 'extraordinary' nor 'substantial' change in debtor's circumstances which would justify disturbing the plan of reorganization."); In re Wilson, 157 B.R. 389, 390–92 (Bankr. S.D. Ohio 1993) ("[F]acially, § 1329 does not incorporate the disposable [income] test set forth in § 1325(b). . . . Given the uncertainty about the application of the disposable income test to a post-confirmation modification on the motion of a creditor or the trustee, such modifications should be limited to egregious situations designed to protect the Chapter 13 remedy from misuse or abuse. Such egregious circumstances can be seen in reported cases such as [Arnold v. Weast (In re Arnold),] 869 F.2d 240 (4th Cir.1989) and In re Koonce, 54 B.R. 643 (Bankr.D.S.C.1985). . . . Where there is no evidence of bad faith or even of the use of the Chapter 13 superdischarge, the Court cannot understand why the debtor should be penalized for filing a Chapter 13 instead of Chapter 7. Elevating a modest improvement in financial condition to the status of a substantial change in circumstances would be such a penalty."). See also § 257.1 [ Changed-Circumstances Requirement? ] § 126.5 Changed-Circumstances Requirement? for discussion of changed circumstances as a condition for modification after confirmation.
8 See, e.g., McDonald v. Burgie (In re Burgie), 239 B.R. 406, 409 (B.A.P. 9th Cir. 1999) (Assuming without deciding that § 1325(b) applies on a trustee's motion to modify after confirmation, nonexempt proceeds from postconfirmation sale of debtors' homestead are not disposable income. "Section 1329 makes no reference to § 1325(b) . . . . We assume without deciding that § 1325(b) applies to the modification motion in this case . . . . A party has an absolute right to request modification of a plan between its confirmation and the completion of the plan. . . . However, a motion by a trustee to modify a chapter 13 plan is subject to the bankruptcy judge's discretion and good judgment."); In re Flaming, No. 02-03680, 2003 WL 22848925, at *4 (Bankr. D. Idaho Nov. 10, 2003) (unpublished) (Without objection from creditor or trustee, disposable income test prohibits modification to pay off plan six months after confirmation from a postpetition inheritance. "[T]his Court feels a modification must also satisfy § 1325(b)(1)(B). Even if that test is not strictly applicable, it is quite clear the Court nevertheless has the ability to evaluate Debtors' current income and expenses in passing on their request to modify." $22,000 inheritance received by the debtor on his mother's postconfirmation death income that must be added to the amount promised by the confirmed plan.); In re Edwards, 190 B.R. 91, 93–94 (Bankr. M.D. Tenn. 1995) ("The application of the § 1325(b)'s disposable income test to postconfirmation modifications is largely unsettled. . . . Congress probably intended the disposable income test to apply to postconfirmation modifications as a matter of policy. . . . It is unlikely that Congress intended the debtor to enjoy financial good fortune, but that unexpected fortune would not be shared among the prepetition creditors. . . . Whether the disposable income test even applies, however, is academic if neither Chrysler nor the Debtor can prove that their respective motions are even warranted."); In re Grissom, 137 B.R. 689, 691 (Bankr. W.D. Tenn. 1992) ("It is not at all clear that the disposable income test is applicable to post-confirmation modification motions.").
9 11 U.S.C. § 1325(b)(1). See § 91.1 In General, § 116.1 Standing to Object, § 126.2 Application of Tests for Confirmation and § 126.6 Modification after Confirmation after BAPCPA.
11 Accord In re Profit, 269 B.R. 51 (Bankr. D. Nev. 2001) (Disposable income test in § 1325(b) is not applicable on a trustee's motion to modify after confirmation under § 1329.), rev'd on other grounds, 283 B.R. 567 (B.A.P. 9th Cir. 2002); In re Tolliver, 257 B.R. 98, 100 (Bankr. M.D. Fla. 2000) (On trustee's motion to modify plan after confirmation to capture settlement proceeds from workers' compensation action, although § 1325(b) ordinarily would not apply, "because Debtors failed to inform the Trustee of the potential settlement proceeds or of Tolliver's involvement in a lawsuit prior to entry of the confirmation order, the Court could not previously make an appropriate determination as to whether the proceeds constituted disposable income. . . . Accordingly, the Court now addresses the issue."). See also In re Fields, 269 B.R. 177, 180 (Bankr. S.D. Ohio 2001) ("It is unclear whether the Sixth Circuit would apply § 1325(b) within the context of a trustee's or unsecured creditor's motion to modify.").
12 See, e.g., In re Florida, 268 B.R. 875 (Bankr. M.D. Fla. 2001) (On trustee's motion to modify confirmed plan, court applies disposable income test and concludes that insurance proceeds payable at postconfirmation death of debtor husband are projected disposable income not reasonably necessary for debtor wife's support and maintenance.); In re Baines, 263 B.R. 868 (Bankr. S.D. Ill. 2001) (Proceeds of prepetition lawsuit and workers' compensation are projected disposable income, at modification after confirmation; however, trustee cannot compel distribution of those proceeds only to unsecured creditors.); In re Graham, 258 B.R. 286 (Bankr. M.D. Fla. 2001) (Applying disposable income test on trustee's motion to modify after confirmation to require the debtors to pay unsecured creditors a portion of the settlement proceeds from a postpetition personal injury accident, court holds that settlement proceeds are not captured by § 1325(b) because debtor claimed an exemption in the proceeds and the exemption trumps the disposable income test.); In re Euler, 251 B.R. 740, 748 (Bankr. M.D. Fla. 2000) (Applying disposable income test on trustee's motion to modify the plan after confirmation to capture appreciation in real property, court concludes that "'proceeds of the sale of a debtor's real estate in a chapter 13 case never become disposable income.'"); In re Studer, 237 B.R. 189 (Bankr. M.D. Fla. 1998) (On trustee's postconfirmation motion to require debtors to pay postpetition accident settlement to creditors, court applies disposable income test without discussion of § 1325(b).); In re Ferretti, 203 B.R. 796 (Bankr. S.D. Fla. 1996) (Disposable income test applies on trustee's motion to modify to distribute debtor's portion of settlement of prepetition automobile accident.); In re Kerr, 199 B.R. 370 (Bankr. N.D. Ill. 1996) (On trustee's motion to modify after confirmation, court applies § 1325(b) but determines that proceeds from sale of homestead are not projected disposable income because the debtor claimed an exemption in the proceeds.); Collier v. Valley Fed. Sav. Bank (In re Collier), 198 B.R. 816 (Bankr. N.D. Ala. 1996) (On court's own motion, applies disposable income test to require debtor to pay to creditors excess insurance proceeds from destruction of rental property.).
13 See § 203.3 [ Submission of Future Income ] § 113.5 Submission of Future Income.
15 See § 254.1 [ Application of Tests for Confirmation ] § 126.2 Application of Tests for Confirmation.
16 In re Profit, 269 B.R. 51 (Bankr. D. Nev. 2001), rev'd on other grounds, 283 B.R. 567 (B.A.P. 9th Cir. 2002).
17 See § 266.1 [ To Increase Payments to Creditors ] § 127.9 To Increase Payments to Creditors.
18 See also § 91.2 Projected (Disposable) Income, § 92.2 Projected Disposable Income: All Debtors, § 94.1 Big Picture: Too Many Issues and § 123.3 What to Do If Debtor's Financial Condition Improves.
19 See § 91.2 Projected (Disposable) Income. For projected disposable income after BAPCPA see discussion beginning at § 92.1 In General.
20 See § 168.1 [ Payment-in-Full Option ] § 91.7 Payment-in-Full Option.
21 11 U.S.C. § 1325(b)(1)(A), (B). See § 91.1 In General. For projected disposable income after BAPCPA see discussion beginning at § 92.1 In General.
23 21 F.3d 355 (9th Cir. 1994). See also § 91.2 Projected (Disposable) Income. For projected disposable income after BAPCPA see discussion beginning at § 92.1 In General.
24 21 F.3d at 356–58 ("Projected disposable income" does not mean actual disposable income. "At a § 341 meeting, the Trustee requested that the Andersons sign a 'Best Efforts Certification.' The parties agree the Certification, if signed, would constitute an agreement by the Andersons to pay all actual disposable income to the trustee. The Trustee would determine the Andersons' actual disposable income by periodic review of their financial status and automatically adjust their payments. The Andersons refused to sign the Certification. . . . [Section] 1325(b)(1)(B) does not require debtors to give such an assurance. Instead, § 1325(b)(1)(B) requires provision for 'payment of all projected disposable income' as calculated at the time of confirmation, and we reject the Trustee's attempt to impose a different, more burdensome requirement on the debtors' plan as a prerequisite to confirmation. . . . The Trustee's efforts to force the Andersons to agree to a periodic adjustment to their payments without a court order is inconsistent with the procedures established for modifying a debtor's plan. . . . Under § 1329, the trustee may request modification of the debtor's plan. . . . If the debtor or a creditor objects to the modification, the trustee 'must bear the burden of showing a substantial change in the debtor's ability to pay since the confirmation hearing and that the prospect of the change had not already been taken into account at the time of confirmation.' . . . [T]he Trustee asks us to ignore § 1329 and sanction the use of the Certification requirement as a means of vesting the Trustee with the authority to unilaterally adjust the Andersons' payments without a court order. . . . By providing in § 1329 a mechanism to modify a confirmed plan, Congress plainly did not intend to vest trustees with such unfettered authority.").
25 11 U.S.C. § 1325(b)(1)(B). See discussion of disposable income before and after BAPCPA beginning at § 91.1 In General, § 92.1 In General, § 93.1 Section 1325(b)(2)(A) and (B): "Amounts Reasonably Necessary to Be Expended—" When CMI Is Less Than Median Family Income, § 94.1 Big Picture: Too Many Issues, § 95.1 In General, § 96.1 Average Monthly Payments on Account of Secured Debts, § 97.1 Total Priority Debts and Divide by 60, § 98.1 Additional Expenses or Adjustments to CMI and § 99.1 In General.
27 11 U.S.C. § 1329(c) (emphasis added).
28 11 U.S.C. § 1329(c), quoted in the text immediately above.
29 That is, unless the debtor can satisfy § 1325(b) by the alternative route of payment in full. See § 168.1 [ Payment-in-Full Option ] § 91.7 Payment-in-Full Option.
30 See § 91.2 Projected (Disposable) Income, § 91.3 Reasonably Necessary for Maintenance or Support, § 91.4 Debtor or Dependent, § 91.5 Counting the Three-Year Period and § 91.6 Debtor Engaged in Business. For projected disposable income after BAPCPA see discussion beginning at § 92.1 In General.
32 Accord In re Fields, 269 B.R. 177, 180 (Bankr. S.D. Ohio 2001) (Citing Freeman v. Schulman (In re Freeman), 86 F.3d 478 (6th Cir. 1996), "it appears that courts within the Sixth Circuit are to apply § 1325(b) within the context of a debtor's motion to modify. It is unclear whether the Sixth Circuit would apply § 1325(b) within the context of a trustee's or unsecured creditor's motion to modify.").
35 239 B.R. at 409–12. Accord In re Profit, 269 B.R. 51 (Bankr. D. Nev. 2001) (Disposable income test in § 1325(b) is not applicable on a trustee's motion to modify after confirmation and, applying In re Burgie, 239 B.R. 406 (B.A.P. 9th Cir. 1999), forgiveness of indebtedness income resulting from employer's forgiveness of debt on debtors' residence is not income for purposes of § 1322(a)(1) because no stream of payments resulted when debtors sold residence. Proceeds are captured by § 1325(a)(4).), rev'd on other grounds, 283 B.R. 567 (B.A.P. 9th Cir. 2002); In re Euler, 251 B.R. 740, 748 (Bankr. M.D. Fla. 2000) (Bankruptcy court denies trustee's motion to modify the plan to capture appreciation in real property filed in response to the debtor's motion to sell the real property and pay off the plan. Citing McDonald v. Burgie (In re Burgie), 239 B.R. 406 (B.A.P. 9th Cir. 1999), "the court believes that the better view is that '[t]he proceeds of the sale of a debtor's real estate in a chapter 13 case never become disposable income for purposes of chapter 13.'"); In re Sounakhene, 249 B.R. 801, 805 (Bankr. S.D. Cal. 2000) (Debtors can pay the balance of their plan in a lump sum a year after confirmation from refinancing of their home, and the disposable income test does not support the trustee's motion to increase the dividend to unsecured claim holders. Citing McDonald v. Burgie (In re Burgie), 239 B.R. 406 (B.A.P. 9th Cir. 1999), "the Trustee is unfairly penalizing the Debtors. They borrowed against the equity in their home to complete the plan instead of defaulting or seeking to reduce their plan payments. The Debtors' equity in their home is a capital asset, not disposable income; they cannot be compelled to apply it toward their plan.").
36 232 B.R. 29 (Bankr. D. Mass. 1999).
39 See also § 91.2 Projected (Disposable) Income. For projected disposable income after BAPCPA see discussion beginning at § 92.1 In General.
40 199 B.R. 370 (Bankr. N.D. Ill. 1996).
41 199 B.R. at 373–74 ("Section 522(c) states in pertinent part: . . . 'property exempted under this section is not liable during or after the case for any debt of the debtor that arose, or that is determined under section 502 of this title as if such debt had arisen, before the commencement of the case.' . . . [T]he clear language of Section 522(c) protects exempt property, regardless of form, from prepetition debts. The Court cannot ignore this express limitation for purposes of defining disposable income under Section 1325(b)(2). To include exempt property within the confines of Section 1325(b)(2) directly conflicts with Section 522(c)."). Accord In re Graham, 258 B.R. 286, 293 n.2 (Bankr. M.D. Fla. 2001) (On trustee's motion to modify to require the debtors to pay unsecured creditors a portion of the settlement proceeds from a postpetition personal injury action, settlement proceeds are not captured by § 1325(b) because $1 exemption trumps the disposable income test. In a footnote, "although the personal injury settlement became conclusively exempt, and perhaps conclusively 'indisposable,' upon the expiration of the Rule 4003(b) period, the Court maintained the power to withhold confirmation of the Plan on § 1325(a)(3) good faith grounds until the moment of confirmation. A debtor may be obliged to sacrifice some exempt income in order to satisfy the good faith standard, or the 'disposable income' standard if an objection to confirmation is timely brought. Indeed, every Chapter 13 debtor before this Court must sacrifice some exempt income, because, under Florida law, wages are essentially exempt."); In re Tolliver, 257 B.R. 98 (Bankr. M.D. Fla. 2000) (Distinguishing Gamble v. Brown (In re Gamble), 168 F.3d 442 (11th Cir. 1999), and In re Ferretti, 203 B.R. 796 (Bankr. S.D. Fla. 1996), workers' compensation proceeds are disposable income at modification after confirmation because the workers' compensation proceeds were not exempted under § 522(c) and no effort was made to amend the schedules.); In re Ferretti, 203 B.R. 796, 800 (Bankr. S.D. Fla. 1996) (Disposable income test applies on trustee's motion to modify to distribute debtor's portion of settlement proceeds from prepetition automobile accident; because debtor claimed proceeds exempt and no creditor objected, § 522(c) precludes trustee's motion. That debtor valued accident proceeds at $1.00 for exemption purposes does not defeat exemption in $22,876.47 because in Allen v. Green (In re Green), 31 F.3d 1098 (11th Cir. 1994), the Eleventh Circuit found that a $1.00 exemption reaches the entire value of a lawsuit. "The clear language of 11 U.S.C. § 522(c) protects exempt property, regardless of form, from pre-petition debts. . . . To include exempt property within the parameters of 11 U.S.C. § 1325(b)(2) directly conflicts with § 522(c). . . . As Debtor herein has claimed the full value of the Auto Accident Claim proceeds as exempt and no objections to the claim were filed, the property is deemed exempt. The Debtor is entitled to the balance of the undistributed proceeds of the Auto Accident Claim, even though auto accident claim proceeds are not entitled to exemption under existing law.").
42 173 B.R. 168 (Bankr. E.D. Mo. 1994).
43 173 B.R. at 171 ("Unlike the asset based best interest of creditors test, § 1325(b) looks at income which can be derived from many sources including exempt property. . . . This Court shall follow the reasoning in [Watters v. McRoberts, 167 B.R. 146 (S.D. Ill. 1994), In re Schnabel, 153 B.R. 809 (Bankr. N.D. Ill. 1993), and In re Solomon, 166 B.R. 832 (Bankr. D. Md. 1994),] and will not read § 1325(b) with a limitation on the word 'income,' such that all exempt property would be excluded from its definition. Thus, even though the Debtors' workers compensation proceeds are exempt, the Debtors are required to include these proceeds as income which must be devoted to the Chapter 13 plan unless 'reasonably necessary for maintenance or support of the debtor[s].'" Four thousand dollars of the $6,027 workers' compensation award was reasonable and necessary for roof repairs. New cabinets and fixtures were not reasonably necessary for maintenance and support.). Accord Freeman v. Schulman (In re Freeman), 86 F.3d 478, 480 (6th Cir. 1996) (Larger than expected tax refund is projected disposable income at modification after confirmation without regard to whether the refund would be exempt property under Tennessee law. "The plain language of [§ 1325] makes no express or implied reference to the exempt status of income under state law."); In re Florida, 268 B.R. 875, 880 (Bankr. M.D. Fla. 2001) ("A majority of courts have held § 522(c) does not render income from exempt property immune from treatment as disposable income.").
44 See also § 91.2 Projected (Disposable) Income, for projected disposable income after BAPCPA see discussion beginning at § 92.1 In General and § 122.3 Loss, Destruction or Surrender of Property after Confirmation.
45 198 B.R. 816 (Bankr. N.D. Ala. 1996).
46 198 B.R. at 817 (Confirmed plan paid mortgage on rental property directly by the debtor and 55% dividend to unsecured creditors. After confirmation, rental property was destroyed by fire, and insurance company tendered $25,600 more than the balance due on the mortgage. "[T]he insurance proceeds constitute an unexpected and extraordinary change in the debtors' financial circumstances necessitating the modification of the debtors' confirmed Chapter 13 plan to conform with the debtors' increased disposable income. . . . [T]he Court hereby modifies the debtors' Chapter 13 plan to increase the dividend to the unsecured claim holders to reflect the debtors' increased disposable income.").
47 In re Boothe, 167 B.R. 943, 945 (Bankr. D. Colo. 1994) (Disposable income test applies at modification after confirmation and precludes plan that fails to pay excess car insurance proceeds to the general unsecured claim holders. At confirmation of the original plan, car was valued at $1,900 and the car lender's allowed secured claim was limited to that amount. After confirmation, the car was destroyed, and an insurance company tendered a check for $2,900. At the time of destruction of the car, the balance of the allowed claim secured by the car was $1,038. The debtor proposed to use the difference—approximately $1,862—as a down payment on a replacement car. Confirmation of the modified plan was refused; "[b]ecause the Debtors now have an additional amount of disposable income not otherwise accounted for, i.e., approximately $1,852 [sic], that sum should now be contributed to any plan proposed by the Debtors."). Compare In re Gibson, 218 B.R. 900, 905 (Bankr. E.D. Ark. 1997) (Overrules disposable-income-test objection to confirmation of a modified plan because the lender "has not established that the Debtor is not making his best effort." After postconfirmation destruction of the debtor's truck, debtor moved to modify confirmed plan to use insurance proceeds to pay the allowed secured portion of the undersecured lender's claim, with the balance of the insurance proceeds to be paid to the Chapter 13 trustee. Debtor also sought a reduction of his plan payment by $485 a month to reflect elimination of the payment on the truck loan. Debtor also stated intention to seek a refund of a portion of the insurance proceeds from the Chapter 13 trustee to repair another vehicle. The court found this use of the portion of the proceeds to be "a reasonable use" and appears to reject the lender's disposable-income-test argument based on a failure of proof from the lender.).
48 188 B.R. 671 (Bankr. D. Idaho 1995).
49 188 B.R. at 675–77 ("'Income' is not defined by the Code. Some courts have adopted the Internal Revenue Code's definition of income. . . . I am not aware of any decision adopting a comprehensive definition of 'income'. Instead the courts have adopted a piece meal [sic] approach. . . . I disagree with In re Boothe [167 B.R. 943 (Bankr. D. Colo. 1994)]. Under Boothe, any cash received during the pendency of the plan would be considered income. I believe this would undercut the rational [sic] of Chapter 13. If a debtor meets all the requirements of sections 1325(a) and (b), the debtor may keep all prepetition assets (whether exempt or nonexempt). . . . I would include within the definition of income for this purpose assets (monetary or otherwise) received by the debtor which are not attributable to the appreciation, sale or conversion of the debtor's pre-confirmation assets. . . . Essentially the payment of insurance proceeds for the Ford Explorer was no more than the conversion of the Debtors' property from one form to another. Had the Debtors simply traded the Ford Explorer for a similar vehicle, the Trustee would not be contending that the new vehicle was income. The fact that in this case the vehicle was forcibly converted into cash does not change this result. The mere conversion of the debtors' pre-conversion assets from one form to another (even cash) does not produce income. . . . [T]he Trustee shall return the remainder of the insurance proceeds to the Debtors.").
50 194 B.R. 881 (Bankr. S.D. Cal. 1996).
51 194 B.R. at 885 ("If the exempt asset in question is an anticipated stream of payments, it is included in projected income; if the exempt asset is other than a stream of payments, it is not included. In this case the Debtor satisfies the 'projected disposable income' test by including in her income the Interest generated by the Insurance Proceeds. She will not be required to invade the Proceeds to fund the Plan."). See McDonald v. Burgie (In re Burgie), 239 B.R. 406, 410 (B.A.P. 9th Cir. 1999) (Proceeds from sale of debtors' home are not disposable income at modification after confirmation, without regard to exemptions, because only assets that produce a stream of payments can qualify as income for § 1325(b) purposes. "A debtor's prepetition homestead is a capital asset, not postpetition income. . . . The test is whether the asset in question is an anticipated stream of payments. If it is a stream of payments, the payments must be included in projected income. If the asset is not a stream of payments, it is not included.").
55 203 B.R. 796 (Bankr. S.D. Fla. 1996).
Mattson v. Howe (In re Mattson), 468 B.R. 361, 370 (B.A.P. 9th Cir. Apr. 5, 2012) (Jury, Hollowell, Kirscher) (Disposable income test does not apply at modification after confirmation, thus applicable commitment period is not a bar to modification that shortens length of plan; good-faith test applies and length of plan is proper consideration with respect to good faith. "[T]he bankruptcy court acknowledged our holding in [Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt),] that § 1329(b)(1) does not reference or otherwise incorporate the provisions concerning the disposable income test and applicable commitment period contained in § 1325(b). . . . [I]f a debtor's plan modification was challenged, he or she need not show that all of their projected disposable income was devoted to making plan payments under the modified plan.").
In re Sunahara, 326 B.R. 768, 781, 782 (B.A.P. 9th Cir. June 27, 2005) (Section 1329(b) does not incorporate disposable income test at modification after confirmation. Confirmed plan required payments totaling $41,400 over 60 months with estimated dividend of 50%. Model plan contained provision that unless all claims were paid in full, plan could not be completed sooner than 36 months. Shortly after confirmation, debtor proposed modification to refinance home and pay off plan immediately. Trustee objected, arguing that debtor was obligated to commit income for a minimum of 36 months. Debtor argued that 36-month requirement was not a measure of time but measured value creditors must receive. "Section 1329(b) expressly applies certain specific Code sections to plan modifications but does not apply § 1325(b). Period. The incorporation of § 1325(a) is not, as has been posed by some courts, the functional equivalent of an indirect incorporation of § 1325(b). Under § 1329(b), only the 'requirements of § 1325(a)' apply to modifications under § 1329(a). . . . Simply put, the plain language of § 1329(b) does not mandate satisfaction of the disposable income test of 1325(b)(1)(B) with respect to modified plans. Had Congress intended to impose such a requirement, it could have easily done so by making the appropriate incorporating reference." Court must still consider carefully whether modification has been proposed in good faith: "Such a determination necessarily requires an assessment of a debtor's overall financial condition including, without limitation, the debtor's current disposable income, the likelihood that the debtor's disposable income will significantly increase due to increased income or decreased expenses over the remaining term of the original plan, the proximity of time between confirmation of the original plan and the filing of the modification motion, and the risk of default over the remaining term of the plan versus the certainty of immediate payment to creditors.").
Neidich v. Lorenzo, No. 13-23100-CIV, 2014 WL 1877408 (S.D. Fla. May 9, 2014) (Rosenbaum) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), § 1329(b) does not incorporate § 1325(b), thus projected disposable income test is not applicable at modification after confirmation.).
King v. Robenhorst, No. 11-C-573, 2011 WL 5877081 (E.D. Wis. Nov. 23, 2011) (Griesbach) (Adopting In re Sunahara, 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), and Forbes v. Forbes (In re Forbes), 215 B.R. 183 (B.A.P. 8th Cir. Dec. 9, 1997) (Kressel, Hill, Dreher), disposable income test does not apply to postconfirmation modification under § 1329(b). Bankruptcy court properly considered good faith in plan modification that did not dedicate one-half of tax refunds to plan.), aff'g No. 10-25094-svk, 2011 WL 1434696, at *2 (Bankr. E.D. Wis. Apr. 14, 2011) (Kelley) ("Although some courts have read § 1325(b) into § 1329(b) . . . this Court has previously held that the plain meaning of § 1329(b) explicitly excludes a disposable income inquiry under § 1325(b). . . . To the extent that the Trustee's Objection to the Debtors' plan modification is based on the argument that the tax refunds are disposable income, the Objection fails, because the approval of a plan modification under § 1329(b) is not subject to the disposable income requirements. Although the disposable income test is absent, § 1329(b) does incorporate § 1325(a)(3), requiring a good faith determination before a plan modification can be approved. . . . In analyzing good faith, the Court examines the totality of the circumstances, including the debtor's income and expenses.").
In re McCollum, 363 B.R. 789, 795, 797 (E.D. La. Feb. 22, 2007) (Vance) (Under Bayshore National Bank of La Porte v. Smith, 252 B.R. 107 (E.D. Tex. 2000), aff'd without opinion, 252 F.3d 1357 (5th Cir. 2001), "early termination with full payment need not be deemed a plan modification[,]" with court concluding that home sale proceeds are not disposable income, since they "lack the regularity inherent in the term 'monthly income.'" If construed as modification, § 1329 includes best-interests-of-creditors test, which is met, but does not include disposable income test.), aff'g 348 B.R. 377 (Bankr. E.D. La. 2006).).
Marshall v. Mangum (In re Mangum), Nos. 06 C 3847, 04 B 41017, 06 A 879, 2007 WL 495300 (N.D. Ill. Feb. 12, 2007) (unpublished) (Proceeds of sale of debtor's residence would not have been disposable income for purposes of modification.), aff'g 343 B.R. 185 (Bankr. N.D. Ill. 2006).).
In re Brown, No. 17-52324-CAG, 2018 WL 2425968 (Bankr. W.D. Tex. May 23, 2018) (Gargotta) (Notwithstanding disagreement among courts within the district with respect to whether Chapter 13 debtor with excess disposable income can be prohibited to modify the plan to pay less than 100% of unsecured debt, bankruptcy court denies motion for direct appeal of confirmation after bankruptcy court required debtor to choose either to pay 100% of disposable income to creditors or agree not to modify plan to less than 100%.).
In re Ripley, No. 14-01265-5-DMW, 2018 WL 737678, at *5 (Bankr. E.D.N.C. Feb. 6, 2018) (Warren) (At modification after confirmation, § 1325(b) does not apply, but income and expenses should be considered based on updated actual income and expense information. "'[I]t is not likely that the Fourth Circuit would apply § 1325(b) to a proposed plan modification. . . . ' . . . The Debtors' actual income and expenses, as stated on the Updated Schedules, should be used to determine a modified plan payment under § 1329(a). An updated Form B22C would have little relevance to modification because it reflects a snapshot in time of a debtor's income during the six months prior to the calculation and uses . . . national and local standards, rather than actual amounts, to estimate expenses.").
In re Alonso, 570 B.R. 622 (Bankr. D. Idaho May 2, 2017) (Pappas) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), disposable income test does not apply to modification after confirmation. Exempt portion of postconfirmation tax refund is not captured by the disposable income test on trustee's motion, but increase in income must be accounted for and paid to unsecured creditors for remaining months of plan to satisfy good faith.).
In re Alcaraz, No. 15-00091-TLM, 2017 WL 978982, at *3–*4 (Bankr. D. Idaho Mar. 13, 2017) (Myers) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), "while § 1325(a)(3) is applicable to modifications under § 1329, the projected disposable income requirements of § 1325(b) are not similarly incorporated. . . . [A] failure to meet § 1325(b) guidelines does not establish ipso facto an inability to modify nor establish a lack of good faith.").
In re Portell, 557 B.R. 161 (Bankr. W.D. Mo. Sept. 9, 2016) (Federman) (Because projected disposable income test in § 1325(b) does not apply at modification after confirmation under § 1329, postpetition inheritance received by one debtor in a joint case is not measured against § 1325(b) standard when trustee seeks to capture the inheritance for creditors. The inheritance became property of the estate of one of the joint debtors and plan can be modified after confirmation to pay in full the receiving debtor's creditors.).
In re Ladieu, 548 B.R. 49 (Bankr. D. Vt. Apr. 11, 2016) (Brown) (Section 1325(b) does not apply at modification after confirmation.).
In re Etwaroo, 546 B.R. 516, 521 (Bankr. E.D.N.Y. Mar. 2, 2016) (Grossman) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), and Fridley v. Forsythe (In re Fridley), 380 B.R. 538 (B.A.P. 9th Cir. Dec. 18, 2007) (Klein, Montali, Jury), at modification after confirmation "it is appropriate to conduct a new income and expense analysis, separate and apart from the means test, to determine a debtor's actual ability to pay.").
In re Wood, 543 B.R. 915 (Bankr. D. Idaho Jan. 4, 2016) (Pappas) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), because disposable income test in § 1325(b) does not apply at modification, debtor cannot rely on Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. Mar. 25, 2013) (Ripple, Trott, Paez), to bar consideration of proposed payments to secured creditors in good-faith analysis under § 1329. Proposed modified plan would reduce payments to unsecured creditors while paying liens with respect to a small tractor and a large boat. Chapter 13 trustee objected on good-faith grounds. Debtor raised Welsh in defense. Because Welsh was a disposable income test and § 1325(b) does not apply at modification, bankruptcy court found retention of the tractor and boat and payment of those secured debts were unreasonable for good-faith purposes.).
In re Wills, No. 10-72120, 2014 WL 2442275, at *4 (May 30, 2014) (Gorman) ("[D]isposable income test of § 1325(b) is not a consideration in ruling on the proposed modification. But changes in a debtor's income and expenses which have occurred over the term of a plan may be relevant in evaluating a proposed plan modification for feasibility and good faith." Trustee's proffer of pro forma Form B22C prepared under assumption debtor filed new case as a single person at time of modification was rejected.).
In re Swain, 509 B.R. 22, 33-34 (Bankr. E.D. Va. Apr. 1, 2014) (Phillips) (Section 1325(b) does not apply at modification after confirmation under § 1329; modifications must be assessed under § 1325(a), including feasibility, best interests of creditors and good faith. Trustee's motion to modify based on revised Form B22C denied. "Recalculation of MDI by the use of Form [B]22C is unnecessary, as is the application of § 707(b)(2) as incorporated by § 1325(b)(3)." Amended Schedules I and J establish feasibility of debtors' modification. "[I]ncreased payments will generate greater distributions to the unsecured creditors without prejudicing creditors holding administrative, secured and priority claims; therefore, the modification is in the best interest of creditors. . . . [T]here is no evidence to indicate that the Debtors are not proceeding in good faith.").
In re Maxwell, No. 11-17873-B-13, 2013 WL 6000455, at *3-*4 (Bankr. E.D. Cal. Nov. 8, 2013) (Lee) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), disposable income test may not be "absolute requirement" at modification, but good-faith totality-of-circumstances test "includes 'important components of the disposable income test. . . . ' . . . In other words, once a chapter 13 plan is confirmed, the question of 'disposable, income' merges into the 'good faith' analysis which 'necessarily requires an assessment [o]f a debtor's overall financial condition including, without limitation, the debtor's current disposable income. . . . ' . . . One of the 'good faith circumstances' . . . is the mandate that debtors who can pay their creditors should pay their creditors. . . . Debtors have enjoyed a substantial increase in their monthly income . . . . They have also negotiated a modification of their mortgage . . . . The combined monthly benefit from these two events is more than $2,400. Yet, the Debtors are not willing to share any of this benefit with their unsecured creditors, and are essentially asking the creditors to fund the cost of their comfortable lifestyle, a lifestyle they weren't allowed under the Means Test. The record is devoid of any evidence to suggest that the Debtors, who are no longer constrained by the statutory Means Test, have made any adjustments to their lifestyle in an effort to pay the unsecured creditors as much as they reasonably can. . . . [T]he modified Plan is [not] proposed in good faith.").
In re Cormier, 478 B.R. 88, 98 (Bankr. D. Mass. Sept. 27, 2012) (Boroff) (Section 1325(b) applies at modification after confirmation; when debtors with CMI less than applicable median family income modify plan to extend beyond 36 months to pay priority and administrative claims, debtors must commit all projected disposable income for the extension period—notwithstanding that modified plan need not pay general unsecured creditors during the extension period. "[B]elow-median debtors who voluntarily seek a plan extension for cause beyond the applicable three-year commitment period must devote all of their disposable income toward the plan for its entire duration. The Court would be hard-pressed to find cause to extend the term of a below-median debtor's plan if the debtor is not paying all of his or her disposable income into the plan until its completion. . . . [F]ailure to provide all of the Debtors' disposable income toward completing the plan would unfairly extend the automatic stay and other protections afforded by the Bankruptcy Code[.]").
In re Tibbs, 478 B.R. 458, 461-64 (Bankr. S.D. Fla. Sept. 4, 2012) (Kimball) ("[Section] 1329 does not incorporate § 1325(b), and thus a chapter 13 plan may be modified so that it has a term shorter than the applicable commitment period, so long as the plan as modified satisfies the other requirements of § 1329 . . . . Because § 1329(b)([1]) references only §§ 1322(a), 1322(b), and 1323(c), and the requirements of § 1325(a), it 'excludes other provisions.' . . . To determine that § 1329(b)(1) incorporates § 1325(b) because of the introductory text in § 1325(a) referring to § 1325(b) 'collides with the rule that statutes should be interpreted to avoid redundancies,' as doing so would cause § 1329(b)(1) to incorporate § 1322(a) twice, once directly and once as a result of reference to § 1322(b) which also refers to § 1322(a).").
In re Coay, No. 09-71814, 2012 WL 2319100 (Bankr. C.D. Ill. June 19, 2012) (Gorman) (Disposable income test does not apply at modification after confirmation; trustee's motion to modify confirmed plan to increase payments to unsecured creditors based on tax return showing increase in income is rejected because only ground stated was increase in disposable income and disposable income calculation is not "reset" at modification under § 1329.).
In re Morris, No. 09-06014-PB13, 2012 WL 2341537, at *5 (Bankr. S.D. Cal. June 7, 2012) (unpublished) (Mann) (Citing Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt), "[t]he § 1325(b) test [sic] disposable income test, while it does not technically apply to post-confirmation modifications under § 1329, applies here as an element of good faith.").
In re Stretcher, 466 B.R. 891, 896-97 (Bankr. W.D. Tex. Dec. 14, 2011) (Akard) (Adopting "minority position," § 1325(b) applies at modification after confirmation—at least on motion of the debtors—because § 1325(a)(1) indirectly requires compliance with disposable income test. Proceeds of unscheduled, prepetition cause of action received four years into Chapter 13 case are projected disposable income that must be paid to unsecured creditors at modification. Applying Nowlin v. Peake (In re Nowlin), 576 F.3d 258 (5th Cir. July 17, 2009) (King, Dennis, Elrod): "This court finds that, in accordance with the Fifth Circuit's conclusion that 'analysis of a debtor's "projected disposable income," as defined in section 1325(b)(1), should take into account "evidence of present or reasonably certain future events that [will] substantially change the debtor's financial situation,"['] . . . the present Debtors' settlement proceeds must be included in the Debtors' projected disposable income for purposes of plan modification. The Debtors have received $12,633.00 in settlement proceeds and this has substantially changed their financial situation. In short, under the Fifth Circuit's forward-looking approach to 'projected disposable income,' these proceeds must be included in the Debtors' projected disposable income and added to the base of the Debtors' plan in order to satisfy the section 1325(b) disposable income test.").
In re Crim, 445 B.R. 868 (Bankr. M.D. Tenn. Mar. 10, 2011) (Paine) (Disposable income test is not applicable to plan modification. Debtor's motion to modify confirmed plan, reducing distribution to unsecured creditors from 100% to 30%, while maintaining private school tuition payments, was granted. Testimony demonstrated that $500 tuition cost was reasonable and necessary for chronically ill child for whom no public school option was available.).
In re Davis, 439 B.R. 863 (Bankr. N.D. Ill. Dec. 16, 2010) (Wedoff) (Disposable income test in § 1325(b) applies at confirmation but not at postconfirmation modification; postconfirmation modification initiates a different process for court approval or disapproval. Three reasons § 1325(b) does not apply at modification: (1) language of § 1325(b) does not apply to plan modification—it applies only when there is an objection to confirmation; (2) § 1325(b) is not applicable to plan modification by § 1329(b)'s specific language; and (3) no absurd result arises from not applying § 1329(b)—good faith protects against abusive modification efforts.).
In re Kearney, 439 B.R. 694, 698 (Bankr. E.D. Wis. Dec. 3, 2010) (Kelley) (Disposable income test does not apply to postconfirmation modification, but debtor failed good-faith analysis by misrepresenting expenses. "[T]o support a reduced plan payment in the face of an increase in income, the Debtor manipulated the expense deductions for her own benefit. But the determination of a debtor's reasonably necessary expenses must seek to balance the needs of the debtor with the interests of creditors. . . . [T]he Court will continue to evaluate good faith on a case by case basis.").
In re Buck, 443 B.R. 463, 469-70 (Bankr. N.D. Ga. Nov. 10, 2010) (Diehl) (Section 1325(b) applies at modification after confirmation; debtors who had CMI greater than applicable median family income at confirmation can modify plan 40 months later to reduce plan payments to reflect lost income but cannot reduce applicable commitment period or length of plan from 60 months to 36 months. "[T]here is a compelling textual basis to incorporate § 1325(b) into plan modifications . . . . While it might have been clearer if Congress had explicitly listed § 1325(b) or had referenced the requirements of § 1325 generally, this clause in § 1325(a) does, in fact, include subsection (b). Read together, the best efforts test of § 1325(b) is incorporated into § 1329 plan modifications when there is an objection by a trustee or holder of an allowed unsecured claim. . . . [Section] 1329 does include an explicit reference to § 1325(b)(1)(B). . . . [Section] 1325(a)(1) requires that a modification comply with the provisions of 'this chapter . . .' . . . . BAPCPA's addition of the ACP . . . restricts the ability of above-median income debtors to reduce the duration of their plan under § 1329(a)(2). . . . The statutory text, with the overlay of Tennyson's temporal ACP holding, leads the Court to find that § 1329 plan modifications are subject to the requirements of § 1325(a) and (b).").
In re Walker, No. 07-70358, 2010 WL 4259274, at *9-*10 (Bankr. C.D. Ill. Oct. 21, 2010) (Gorman) (Projected disposable income analysis was not required at modification after confirmation. "Since the adoption of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), the reasons why § 1325(b) should not apply to § 1329 modifications have become more evident. Under BAPCPA, projected disposable income is based on a debtor's 'current monthly income' which is generally calculated by using a debtor's actual income during the six calendar months prior to filing. 11 U.S.C. § 1325(b)(2); 11 U.S.C. § 101(10A). The income from that period is only modified by changes which are known at the time of confirmation or virtually certain to occur during the term of the plan. See Hamilton v. Lanning, [560 U.S. 505, 130 S. Ct. 2464, 2478, 177 L. Ed. 2d 23 (June 7, 2010)]. Because the current definition of projected disposable income results in a calculation that is, in large part, fixed by pre-petition circumstances, reviewing that calculation at the time of a post-confirmation modification may not be particularly meaningful. Because of its statutory definition, 'current monthly income' once correctly calculated should not change over time. Thus, attempting to apply § 1325(b) to a § 1329 modification is not favored by postBAPCPA cases. . . . This is not to say that changes in circumstances related to income and expenses cannot be considered when reviewing proposed modifications. It is to say that, because the plain language of § 1329 does not include § 1325(b), plan modifications are not analyzed under a disposable income test.").
In re King, 439 B.R. 129 (Bankr. S.D. Ill. Oct. 20, 2010) (Grandy) (Section 1325(b) applies at modification after confirmation; debtors with CMI greater than applicable median family income cannot modify plan after confirmation to reduce length of plan or applicable commitment period, but changes in income and expenses can change payments.).
In re Prieto, No. 3:08-bk-3308-PMG, 2010 WL 3959610 (Bankr. M.D. Fla. Sept. 22, 2010) (Glenn) (The projected disposable income test in § 1325(b) does not expressly apply at modification after confirmation under § 1329; instead, actual income and expenses determine whether payments should be adjusted.).
In re Hall, 442 B.R. 754, 761 (Bankr. D. Idaho Aug. 31, 2010) (Pappas) (Disposable income test does not apply to postconfirmation modification under plain reading of § 1329. "If Congress' omission of § 1325(b) throughout the years has been an oversight, and it, instead, intended that the disposable income and other requirements of § 1325(b) apply to plan modifications, Congress, not the courts, must clarity its intent. [Sunahara v. Burchard (In re Sunahara), 326 B.R. 768, 781 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt).]").
In re Rodger, 423 B.R. 591, 595 (Bankr. D.N.H. Feb. 5, 2010) (Deasy) (At modification after confirmation on trustee's motion, disposable income test captures tax refunds for entire five years of plan notwithstanding that under-median debtor was not required to confirm five-year plan. "Nothing in § 1322 states, or even suggests, that below median debtors are not required to submit their disposable income to fund their chapter 13 plan for the full term of the plan. Thus, § 1325(b)(1) acts solely to set the minimum term of a chapter 13 plan that debtors may be compelled to propose. If a below median debtor elects to propose a longer term than three years, and the Court for cause approves such longer term, the requirements for payment of disposable income in years four and five of the plan remain the same as those in the first three years of the plan.").
In re Midgley, No. 05-30162-tmb 13, 2009 WL 960380 (Bankr. D. Or. Jan. 7, 2009) (Brown) (On trustee's motion, in a pre-BAPCPA case, In re Sunahara, 326 B.R. 768 (B.A.P. 9th Cir. 2005), does not prevent consideration of debtors' current disposable income as factor bearing on whether to modify plan to increase payments to creditors.).
In re Knighton, No. 07 B 71560, 2008 WL 5644891, at *2 (Bankr. N.D. Ill. Nov. 14, 2008) (Barbosa) (Without deciding whether § 1325(b) applies at modification after confirmation, plan is modified to capture postconfirmation tax refund in excess of $2,000 because "good faith test requires consideration of whether there is excess income above the current plan payments that is available for the debtor to pay into the plan.").
In re Hill, 386 B.R. 670 (Bankr. S.D. Ohio Apr. 29, 2008) (Humphrey) (Projected disposable income test in § 1325(b) does not apply at modification after confirmation; nothing in BAPCPA requires a contrary result. Citing Sunahara v. Buchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. 2005), "the better, plain meaning interpretation of [§ 1329] is that it does not incorporate § 1325(b). The court bases its holding on the references in § 1329(b)(1) to various, specific Chapter 13 subsections, which include § 1325(a), but do not include § 1325(b). . . . [T]he separate reference in § 1325(a) to '[e]xcept as provided in subsection (b)' . . . does not demonstrate an intent to incorporate § 1325(b). This indirect incorporation of § 1325(b) proves unworkable when compared to a similar cross-reference in § 1329(b)(1). Specifically, Congress, in drafting § 1329(b)(1), deemed it necessary to directly incorporate 11 U.S.C. § 1322(a) and (b), despite the fact that § 1322(b) begins by referencing subsection (a). . . . [W]hen Congress wanted to incorporate a particular subsection of Chapter 13 into § 1329, it did so explicitly, directly and unambiguously.").
In re White, 411 B.R. 268, 275 (Bankr. W.D.N.C. Apr. 17, 2008) (Hodges) ("[Section] 1329 simply does not require compliance with § 1325(b) for post-confirmation modifications.").
In re Braune, 385 B.R. 167, 171 (Bankr. N.D. Tex. Apr. 2, 2008) (Lynn) (When trustee is party moving to modify confirmed plan, disposable income test does not apply. "In the context of modification, the disposable income test applies only when either the chapter 13 trustee or an unsecured creditor objects to the modification pursuant to Code § 1325(b)(1).").
In re Heyward, 386 B.R. 919 (Bankr. S.D. Ga. Mar. 6, 2008) (Davis) (Applying § 1325(b) at modification after confirmation because "applicable commitment period" in § 1325(b)(4) is temporal, debtor cannot incur debt to pay off Chapter 13 plan in less than the 36 months.).
In re Wetzel, 381 B.R. 247, 252 (Bankr. E.D. Wis. Jan. 29, 2008) (Kelley) (Applying plain language of § 1329(b), disposable income test of § 1325(b) does not apply to postconfirmation modifications; however, change in income and expenses are factors used by bankruptcy court in its discretion whether to grant trustee's motion to modify to increase payments to unsecured creditors. "This approach allows the Court to take into account the essential components of the disposable income test while upholding the plain language of § 1329 that omits the test.").
In re Tudtud, No. 05-50029, 2007 WL 3274241, at *1 (Bankr. D.S.D. Nov. 2, 2007) (Confirmation order that provided personal injury action was "subject to . . . disposable income analysis" captures settlement proceeds and increases distributions withouit the need for trustee's motion to modify plan.).
In re Baxter, 374 B.R. 292, 295-96 (Bankr. M.D. Ala. Aug. 20, 2007) (Williams) (Disposable income test applies to trustee's motion to modify plan after confirmation to capture settlement proceeds from cause of action for violation of automatic stay and violation of Fair Debt Collection Practices Act that accrued after confirmation; settlement proceeds are not property of Chapter 13 estate but may be disposable income for § 1325(b) purposes. "[T]he trustee moves to modify the plan to increase the payments (currently 0%) to unsecured creditors predicated on the additional disposable income provided by the settlement proceeds. . . . [S]ection 1329 makes the provisions of section 1325(a) applicable to modified plans. . . . The exception for subsection (b) found in subsection (a) has the effect of capturing both subsections making the disposable income requirement of § 1325(b) applicable to modified plans. Further, section 1325(a)(1) makes all provisions of chapter 13 applicable to plan confirmation. The disposable income requirements are a provision of chapter 13. Therefore, this court finds that the disposable income provisions of § 1325(b)(1) are applicable to plan modifications. . . . Disposable income may include property that is not property of the estate. . . . [N]othing in the statutory definition limits disposable income to only income that is property of the estate. . . . [W]hile the proceeds of a post-confirmation cause of action are not property of the chapter 13 estate, they are nevertheless properly considered as additional disposable income warranting modification of the plan."), order denying certification for direct appeal, No. 06-10672-DHW, 2007 WL 2848829 (Bankr. M.D. Ala. Sept. 24, 2007).).
In re McPike, No. 05-30518-svk, 2007 WL 2317420 (Bankr. E.D. Wis. Aug. 8, 2007) (Section 1325(b) disposable income requirement is not included in postconfirmation modification under § 1329(b)(1), citing In re Young, 2007 Bankr. LEXIS 2197, at *5, *6 (Bankr. E.D. Wis. July 2, 2007).).
In re Demske, 372 B.R. 85 (Bankr. M.D. Fla. July 6, 2007) (Commitment of projected disposable income in original confirmed plan cannot be modified after confirmation, but amount of disposable income can be modified based upon changed circumstances; refinancing home does not qualify as disposable income, but if refinancing increases or decreases disposable income, then increase or decrease must be projected for balance of three-year period.).
In re Young, 370 B.R. 799, 802 (Bankr. E.D. Wis. July 2, 2007) (Disposable income test in § 1325(b) is "not among the provisions required to confirm a plan modification.").
In re Salter, No. 04-33705-DHW, 2007 WL 1076686, at *2 (Bankr. M.D. Ala. Apr. 6, 2007) (While postpetition lump-sum Social Security benefit is considered under disposable income test for plan modification purposes, "disposable income excludes amounts reasonably necessary to be expended for the maintenance and support of the debtor and dependents." Finding that debtor's income had declined since confirmation, court denies trustee's motion to modify confirmed plan by requiring debtor to pay lump-sum benefits to unsecured creditors.).
In re Vue, 364 B.R. 767 (Bankr. D. Or. Mar. 16, 2007) (Under Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. 2005), debtor's postconfirmation modification to refinance home and pay unsecured creditors early does not implicate disposable income test.).
In re Krapf, 355 B.R. 545 (Bankr. D.S.C. Nov. 20, 2006) (Trustee's motion to modify confirmed plan denied; workers' compensation benefits were not "income" for § 1325(b) disposable income purposes; $22,000 award for future back surgery is not income, and $18,000 for anticipated loss of income during surgery and recovery is not "new unaccounted income"; rather, it replaces income that was considered during confirmation process.).
In re Turek, 346 B.R. 350, 359 (Bankr. M.D. Pa. July 21, 2006) (Acknowledging that courts are divided, "I find that a chapter 13 plan may be modified without meeting the disposable income test.").
In re Brumm, 344 B.R. 795, 798 (July 9, 2006) (On the debtor's motion to refinance residence and pay off confirmed plan, disposable income test does not apply because refinancing does not require modification of plan under § 1329 and neither the trustee nor an unsecured creditor objected to confirmation of the original plan under § 1325(b). "Unless a trustee or unsecured creditor specifically objects to confirmation of a plan under § 1325(b), that subsection is never invoked.").
In re Heck, No. 05-14065-DK, 2006 WL 4711337 (Bankr. D. Md. June 9, 2006) (Without deciding whether disposable income test applied to postconfirmation modifications, trustee's modification to capture 100% of debtors' withdrawal from 401(k) account is denied; withdrawal is exempt under Maryland law.).
In re Forte, 341 B.R. 859 (Bankr. N.D. Ill. Oct. 6, 2005) (In re Golek, 308 B.R. 332 (Bankr. N.D. Ill. 2004), is correct that § 1325(b) does not apply to postconfirmation plan modifications; even if disposable income test is applicable at modification after confirmation, test would not apply in this case because trustee is movant.).
In re Keller, 329 B.R. 697, 702 (Bankr. E.D. Cal. Aug. 29, 2005) (McManus) (Under Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. 2005), disposable income test does not apply to plan modifications, but financial aspects of proposed plan modification may be considered in good-faith analysis. In dicta, critical of Sunahara, "while it is true that section 1329(b) does not mention section 1325(b), it does not 'exclude the provisions of section 1325(b).'").
In re Drew, 325 B.R. 765 (Bankr. N.D. Ill. June 23, 2005) (Disposable income test does not apply to § 1329 modifications, but equity realized from refinancing is subject to postconfirmation modification to increase dividend to unsecured creditors.).
In re Murphy, 327 B.R. 760, 773 & n.11 (Bankr. E.D. Va. Jan. 12, 2005) (Applying Arnold v. Weast (In re Arnold), 869 F.2d 240 (4th Cir. 1989), without regard to whether disposable income test applies, on trustee's motion to modify plan to require debtor to increase dividend to unsecured creditors from proceeds of sale of condominium, because increase in value of condominium was substantial and unanticipated, good faith requires greater dividend. "Nor does the court's holding depend on whether the sales proceeds constituted 'disposable income' . . . . The Fourth Circuit's holding in Arnold is not phrased in terms of changes in the debtor's disposable income, but rather in terms of the debtor's 'financial condition' . . . . The requirement in Arnold that the debtor share any substantial and unanticipated improvement with his or her creditors is not grounded in the disposable income test, but rather in the fundamental requirement of good faith under § 1325(a)(3). . . . [W]hether the proceeds from the sale of the condominium constitute 'disposable income' in a technical sense is not controlling on the good faith analysis." In a footnote, "[t]hat said, it is difficult to see why the proceeds would not constitute 'income,' and 'disposable' income at that. The sale of an appreciated asset generates income for both accounting and income tax purposes. . . . [H]ere the sale resulted in actual cash. . . . However, the court's ruling in this case is not predicated on the status of the proceeds as income.").
In re Carey, No. 02 B 75502, 2004 WL 3623505, at *3 (Bankr. N.D. Ill. Nov. 2, 2004) (unpublished) (Modification to increase payments is granted based on increased income but prospectively only; to increase payments retroactively would be inconsistent with disposable income test analysis. "The fact that the tax returns establish that the Debtors' average monthly income for the year 2003 exceeds the amount indicated on Schedule I does not necessitate a retroactive modification. Allowing such a modification based upon hindsight would alter the requirements of § 1325 that all 'projected' disposable income be devoted to the plan. Just as the Ninth Circuit held in Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 358 (9th Cir. 1994), a requirement to devote actual disposable income at the time of confirmation would impose a more burdensome standard than § 1325 requires. Similarly, allowing a retroactive modification to require debtors to devote all actual disposable income would undo the original confirmed plan and would nullify the requirement to devote projected disposable income.").
In re Campbell, No. 02-02897, 2003 WL 25273833 (Bankr. D. Idaho Oct. 30, 2003) (unpublished) (If § 1325(b) applies at modification, budget shows that all disposable income is committed for 26 additional months remaining under 36-month plan and debtors paid all disposable income into plan for first 10 months.).
In re Defrehn, No. 02-20290, 2003 WL 25273838, at *5 & n.8 (Bankr. D. Idaho June 13, 2003) (unpublished) (Citing Max Recovery, Inc. v. Than (In re Than), 215 B.R. 430 (B.A.P. 9th Cir. 1997), even when § 1325(b) does not apply, the existence of new or additional disposable income can be raised by trustee's motion to modify. "Debtors are correct that § 1329 does not expressly require a disposable income test . . . . In Than, the BAP acknowledged that the disposable income provision found in § 1325(b), or any direct reference thereto, was absent from the modification provision of § 1329. However, the BAP also determined that § 1325(b) may be applicable, through § 1325(a), if a trustee or unsecured creditor objects to the provisions of the plan or the modified plan. . . . Here it is the Trustee who proposes the modification based on disposable income concerns, and the Debtors contend that their objection to the Trustee's motion does not also serve to trigger the § 1325(b) test. . . . Than allows for modification requests to be premised on the existence of additional disposable income even where § 1325(b) is inapplicable. . . . As Than concluded, '[w]hen § 1325(b) is inapplicable, the § 1329 analysis is based entirely on the equities of the situation.' . . . Those equity considerations include income received by debtors during the initial three years of the plan which is not necessary for their maintenance or support." Trustee's motion to modify captures a portion of lump-sum Social Security disability benefits received by the debtors after confirmation.).