Ana Flores, et al v. Rod Danielson

Filing

FILED OPINION (HARRY PREGERSON, SUSAN P. GRABER and EDWARD M. CHEN) REVERSED AND REMANDED. Judge: SPG Dissenting, Judge: EMC Authoring. FILED AND ENTERED JUDGMENT. [8307102]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: CESAR IVAN FLORES; ANA
MARIA FLORES,
Debtors.
ROD DANIELSON,

CESAR IVAN
FLORES,

Trustee-Appellant,
v.
FLORES; ANA MARIA
Debtors-Appellees.




No. 11-55452
D.C. No.
6:10-29956-MJ
OPINION



Appeal from the United States Bankruptcy Court
for the Central District of California
Meredith A. Jury, Bankruptcy Judge, Presiding
Argued and Submitted
May 11, 2012—Pasadena, California
Filed August 31, 2012
Before: Harry Pregerson and Susan P. Graber,
Circuit Judges, and Edward M. Chen,* District Judge.
Opinion by Judge Chen;
Dissent by Judge Graber

*The Honorable Edward M. Chen, United States District Judge for the
Northern District of California, sitting by designation.

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IN RE FLORES

COUNSEL
Elizabeth A. Schneider, Office of Rod Danielson, Chapter 13
Trustee, Riverside, California, for the trustee-appellant.
Nancy B. Clark, M. Erik Clark, and Shannon A. Doyle,
Borowitz & Clark, LLP, West Covina, California, for the
debtor-appellee.

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OPINION
CHEN, District Judge:
I.

INTRODUCTION

This bankruptcy appeal concerns confirmation of a Chapter
13 plan of reorganization. The debtors, Cesar and Ana Flores,
proposed a three-year plan. Rod Danielson, the Chapter 13
Trustee (“Trustee”), objected and argued that a five-year plan
was required. The relevant legal question is whether, under 11
U.S.C. § 1325(b), a debtor with no “projected disposable
income” may confirm a plan that is shorter in duration than
the “applicable commitment period” found in § 1325(b).
Current Ninth Circuit precedent plainly allows debtors to
confirm a shorter plan (e.g., a three-year plan) under the facts
of this case. See Maney v. Kagenveama (In re Kagenveama),
541 F.3d 868, 872 (9th Cir. 2008). However, Trustee argued,
and the bankruptcy judge agreed, that the Supreme Court’s
intervening decision in Hamilton v. Lanning, 130 S. Ct. 2464
(2010), is irreconcilable with and thus implicitly overruled
Kagenveama’s construction of “applicable commitment period,” which permits shorter Chapter 13 plans. The question
before this court is whether the bankruptcy judge erred when
it declined to follow this court’s otherwise controlling holding
in Kagenveama because the bankruptcy judge deemed Kagenveama irreconcilable with Lanning. We disagree and hold that
Lanning is not clearly irreconcilable with Kagenveama’s construction of “applicable commitment period.” Accordingly,
we reverse and remand to the bankruptcy court for further
proceedings consistent with this opinion.
II.

FACTUAL AND PROCEDURAL BACKGROUND

Cesar and Ana Flores (“Debtors”) filed a petition for relief
under Chapter 13 of the Bankruptcy Code. Debtors proposed
a plan of reorganization with a duration of 36 months, calling

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for a monthly payment of $122. Trustee objected to the plan,
arguing that the Bankruptcy Code requires a minimum plan
duration of 60 months and that Ninth Circuit precedent to the
contrary had been implicitly overruled by an intervening
Supreme Court decision. The Bankruptcy Court sustained the
objection and confirmed a 60-month plan calling for a
monthly payment of $148.1
Debtors timely appealed to the Bankruptcy Appellate Panel
(“BAP”). The bankruptcy court then certified the plan duration issue for direct appeal to this court, pursuant to 28 U.S.C.
§ 158(d)(2).2
The relevant facts are not disputed: Debtors’ “current
monthly income,” as that term is defined in the Bankruptcy
Code, is above the median income for their locality. Debtors’
monthly “disposable income,” as that term is defined in the
Bankruptcy Code, is negative. Debtors have unsecured debts.
Debtors’ proposed plan would pay 1% of allowed, unsecured,
non-priority claims.
III.

STANDARD OF REVIEW

Questions of “statutory interpretation and Ninth Circuit
precedent” are questions of law, which this court reviews de
novo. Lyon v. Chase Bank USA, N.A., 656 F.3d 877, 883 (9th
Cir. 2011); see also Baker v. Delta Air Lines, Inc., 6 F.3d 632,
637 (9th Cir. 1993) (“Whether stare decisis applies . . . [is an]
issue[ ] of law, reviewable de novo.”).
1
As the parties confirmed at oral argument, there is no dispute on appeal
over the increase from a $122 monthly payment to unsecured creditors,
proposed by Debtors, and a $148 monthly payment to unsecured creditors,
confirmed by the bankruptcy court. Rather, the only dispute is over the
duration of these monthly payments. There is no dispute that the plan was
proposed in good faith.
2
Because Trustee filed the motion to certify for direct appeal, he was
listed as Appellant in this appeal, even though he prevailed at the bankruptcy court.

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IV.

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DISCUSSION

We begin with a review of the statutory framework at issue
in this case, as well as a discussion of this court’s prior ruling
in Kagenveama and the Supreme Court’s intervening decision
in Lanning.
A.

Statutory Framework

[1] The Bankruptcy Code imposes a number of conditions
on confirmability of a plan of reorganization under Chapter
13. Among those conditions is the requirement that debtors
pay any “projected disposable income” to unsecured creditors.
See 11 U.S.C. § 1325(b)(1)(B). The statute establishing such
a requirement reads in relevant part as follows:
If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan,
then the court may not approve the plan unless, as of
the effective date of the plan—
(A) the value of the property to be distributed under the plan on account of such
claim is not less than the amount of such
claim; or
(B) the plan provides that all of the debtor’s projected disposable income to be
received in the applicable commitment
period beginning on the date that the first
payment is due under the plan will be
applied to make payments to unsecured
creditors under the plan.
Id. § 1325(b)(1) (emphasis added). Thus, for a given debtor,
this subsection involves two threshold determinations: (1) the
debtor’s “projected disposable income,” and (2) the debtor’s
“applicable commitment period.”

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In order to apply the above requirements, a court must first
classify the debtor as either “above-median” or “belowmedian.” See, e.g., In re Mattson, 456 B.R. 75, 82 (Bankr.
W.D. Wash. 2011) (using the quoted terminology for the purposes of determining the “applicable commitment period”); In
re Diaz, 459 B.R. 86, 91 & n.6 (Bankr. C.D. Cal. 2011) (using
the quoted terminology for the purposes of “projected disposable income”). As discussed in more detail below, the calculation of “disposable income” depends on whether a debtor has
above-median or below-median income. § 1325(b)(3).3 The
“applicable commitment periods” in which a debtor must pay
her “projected disposable income” also differ for abovemedian versus below-median debtors. § 1325(b)(4). In this
case, Debtors are above-median. We therefore focus on the
requirements for above-median debtors.
1.

Disposable Income and Projected Disposable Income

“The [Bankruptcy] Code [does] not define the term ‘projected disposable income . . . .’ ” Lanning, 130 S. Ct. at 2469.
However, the Code does define “disposable income.” Section
1325(b)(2) provides, in relevant part:
For purposes of this subsection, the term “disposable income” means current monthly income
received by the debtor . . . less amounts reasonably
necessary to be expended (A)(i) for the maintenance
or support of the debtor or a dependent of the debtor
....
3
An above-median debtor is simply one whose annualized “current
monthly income” is greater than the applicable median family income; all
other debtors are below-median. See 11 U.S.C. § 1325(b)(3), (b)(4) (setting forth this dichotomy without using the quoted terminology). “Current
monthly income” is defined to mean, in essence, the average of the debtor’s monthly income in the six months before the filing of his or her petition. Id. § 101(10A).

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(Emphases added.) For an above-median debtor such as the
Debtors in this case, § 1325(b)(3) provides:
Amounts reasonably necessary to be expended
under paragraph (2) . . . shall be determined in accordance with subparagraphs (A) and (B) of section
707(b)(2) . . . .
Section 707(b)(2), in turn, sets forth a “formula . . . known as
the ‘means test’ and is reflected in a schedule (Form 22C) that
a Chapter 13 debtor must file.” Lanning, 130 S. Ct. at 2470
n.2. Thus, the statute prescribes a formula to calculate an
above-median debtor’s disposable income. From that formula,
a debtor’s “projected disposable income” is then projected
into the future to determine what monthly payment the debtor
owes to unsecured creditors. § 1325(b)(1)(B). As we discuss
infra, the exact method by which one calculates “projected
disposable income” — a term undefined in the statute — from
“disposable income” has been a topic of vigorous debate
among courts until the Supreme Court’s recent decision in
Lanning.
Because the “means test” imposed by the Bankruptcy
Abuse Prevention and Consumer Protection Act (“BAPCPA”)
of 2005, Pub. L. No. 109-8, 119 Stat. 23, calculates expenses
using formulaic categories keyed to local data rather than the
actual expenses of an individual debtor, sometimes, as in this
case, an above-median debtor who is capable of pledging a
monthly sum to repayment for the benefit of creditors has
negative disposable income. See 8 Collier on Bankruptcy ¶
1325.11[4][c][I] (Alan N. Resnick & Henry J. Sommer eds.,
16th ed. 2010); cf. In re Alexander, 344 B.R. 742, 750 (Bankr.
E.D.N.C. 2006) (“Because the pre-BAPCPA definition of
‘disposable income’ calculated a real number rather than a
statutory artifact, . . . a debtor with no positive number simply
had no means to fund the added costs of a Chapter 13 plan.”).
Negative disposable income under BAPCPA can in turn result
in a negative “projected disposable income,” under the statute.

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In the instant case, it is undisputed that Debtors have negative
projected disposable income.
2.

Applicable Commitment Period

Unlike “projected disposable income,” for which the meaning must be deduced from “disposable income,” the Bankruptcy Code provides a precise definition for “applicable
commitment period.” Section 1325(b)(4) provides in relevant
part:
For purposes of this subsection, the “applicable
commitment period” . . . shall be—
(i) 3 years; or
(ii) not less than 5 years, if [the debtor is above
median]; and . . . may be less than 3 or 5 years,
whichever is applicable . . . , but only if the plan provides for payment in full of all allowed unsecured
claims over a shorter period.
(Emphasis added.)
Because the Debtors will not make payment in full to unsecured creditors and they are above-median, “the applicable
commitment period” under § 1325(b)(4) is five years. While
the applicable commitment period is clear, its role in defining
the duration of the Debtor plan of reorganization is not.
B.

Pre-Lanning Interpretations of 11 U.S.C. § 1325(b)

Prior to the Supreme Court’s decision in Lanning, courts
diverged in their interpretation of the elements of § 1325. We
summarize these disagreements below by way of background
to this Circuit’s law and Lanning’s potential impact on this
case.

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1.

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Projected Disposable Income

First, pre-Lanning, courts differed as to how they interpreted the undefined term “projected disposable income” in
relation to the defined term “disposable income.” Two competing interpretations have been termed the “mechanical”
approach and the “forward-looking” approach. See Lanning,
130 S. Ct. at 2471; Kagenveama, 541 F.3d at 871-72; Nowlin
v. Peake (In re Nowlin), 576 F.3d 258, 262-63 (5th Cir. 2009).
[2] Under the mechanical approach, “ ‘projected disposable income’ means ‘disposable income,’ as defined by
§ 1325(b)(2), projected over the ‘applicable commitment period’ ” by means of simple, or mechanical, multiplication.
Kagenveama, 541 F.3d at 871-72; see also Lanning, 130 S.
Ct. at 2471. For example, if a debtor’s disposable income,
according to the statutory formula, is $100 per month, and if
the debtor’s applicable commitment period is five years (or 60
months), the debtor’s total projected disposable income is
$6,000.
The forward-looking approach, by contrast, uses the “disposable income” calculation only as a “starting point,”
Kagenveama, 541 F.3d at 872, “determinative in most cases,”
Lanning, 130 S. Ct. at 2471, but subject to modification upon
a demonstration of “substantial changes to the debtor’s
income or expenses that have occurred before confirmation or
will occur within the plan’s period,” Nowlin, 576 F.3d at 263.
Thus, if the debtor’s income during the six months prior to filing her bankruptcy petition — the baseline used to calculate
disposable income — is somehow demonstrably different
from the debtor’s current or future income, such changed circumstances could factor into the “projected disposable
income” calculation under the forward-looking approach. For
example, a debtor who lost her job after filing the petition
could have a much lower monthly “projected disposable
income” than her “disposable income,” which was based on
her previous job’s paycheck. See id. at 263-64 (describing

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potential changes such as “a promotion at work, the loss of a
job, the acquiring of a second job, or increased medical
expenses” (internal quotation mark omitted)).
As discussed further below, this debate was settled by the
Supreme Court in Lanning, in favor of the forward-looking
approach.
2.

Applicable Commitment Period

A second debate among courts concerns whether
§ 1325(b)’s “applicable commitment period” sets forth a
“temporal” requirement or a “monetary” requirement. The latter approach is also sometimes referred to as the “multiplier”
approach. Baud v. Carroll, 634 F.3d 327, 336-37 & n.7 (6th
Cir. 2011), cert. denied, 132 S. Ct. 997 (2012). Under the
temporal approach, the “applicable commitment period”
establishes the minimum duration of the plan.4 Id. at 336-37
(collecting cases); see, e.g., Whaley v. Tennyson (In re Tennyson), 611 F.3d 873, 877-78 (11th Cir. 2010) (“The plain reading of § 1325(b)(4) indicates that an above median income
debtor, such as Tennyson, is obligated to form a bankruptcy
plan with an ‘applicable commitment period’ of no less than
five years, unless his unsecured debts are paid in full.”).
By contrast, under the monetary approach, the “applicable
commitment period” is used to define not the duration of the
plan but the total sum to be paid by the debtor under the plan.
It is used as a multiplier in calculating the total “projected disposable income” to be paid to unsecured creditors over the
life of the plan. As the court in Baud explained, the monetary
approach
4

This approach, and all others discussed in this opinion, assumes the
satisfaction of § 1325(b)’s two predicate conditions: (1) an objection by
the trustee or by an unsecured creditor and (2) payments under the plan
provide less than full recovery by unsecured creditors. As discussed
above, those conditions are satisfied here.

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does not require the debtor to propose a plan that
lasts for the entire length of the applicable commitment period; rather, as long as the plan provides for
the payment of the monetary amount of disposable
income projected to be received over that period, the
court may confirm a plan that lasts for a shorter time.
634 F.3d at 337 (collecting cases adopting this approach).
Once calculated, the debtor can pay that total sum over a
shorter period of time. See, e.g., In re Swan, 368 B.R. 12, 26
(Bankr. N.D. Cal. 2007) (“ ‘[W]here the debtor’s projected
disposable income is consistent with the calculations on Form
B22C, it makes little sense to hold the debtor hostage for 60
months where the debtor can satisfy the requirements of
§ 1325(b)(1)(B) in a shorter period.’ ” (quoting In re Fuger,
347 B.R. 94, 101 (Bankr. D. Utah 2006))).
[3] Other courts, including this court in Kagenveama, have
adopted a hybrid5 variation in which the “applicable commitment period” sets the minimum temporal duration of a plan,
but it is “inapplicable to a plan submitted . . . by a debtor with
no ‘projected disposable income.’ ” Kagenveama, 541 F.3d at
875; see, e.g., Alexander, 344 B.R. at 751 (“Because applicable commitment period is a term the statute makes relevant
only with regard to the required payment of projected disposable income to unsecured creditors and not to any other plan
payments or requirements, it simply does not come into play
where no projected disposable income must be taken into
account.”). See generally Baud, 634 F.3d at 337 (collecting
additional cases).
In addition to the split among the lower courts, leading
5

Because this approach somewhat overlaps in effect and reasoning with
both the temporal approach and the monetary/multiplier approach, different courts have placed it in different categories. See, e.g., Baud, 634 F.3d
at 337 (categorizing as variant on temporal approach); Tennyson, 611 F.3d
at 876 (categorizing as multiplier approach).

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commentators are divided on its answer. Id. at 338 (citing 8
Collier on Bankruptcy ¶ 1325.08[4][d]; and 6 Keith M.
Lundin, Chapter 13 Bankruptcy, § 500.1 (3d ed. 2000 &
Supp. 2006)). The proper interpretation of the meaning and
function of the “applicable commitment period” has not been
directly addressed by the Supreme Court.
C.

Kagenveama

[4] In 2008, this court addressed both of the questions outlined above, deciding in favor of the mechanical approach in
defining “projected disposable income” and the hybrid
approach in interpreting the “applicable commitment period.”
Kagenveama, 541 F.3d 868.
In support of the mechanical approach to determining “projected disposable income,” Kagenveama first relied on textual
analysis:
The substitution of any data not covered by the
§ 1325(b)(2) definition [of disposable income] in the
“projected disposable income” calculation would
render as surplusage the definition of “disposable
income” found in . . . . The plain meaning of the
word “projected,” in and of itself, does not provide
a basis for including other data in the calculation
because “projected” is simply a modifier of the
defined term “disposable income.”
Id. at 872-73. Kagenveama also relied on pre-BAPCPA practice, which it read to support the mechanical approach. Id. at
873-74 & n.2. It rejected the forward-looking approach, stating that nothing in the Bankruptcy Code supports the reading
of “disposable income” as merely a presumptive starting
point, subject to modification. Id. at 874-75. Finally, the court
rejected the contention that the mechanical approach led to
absurd results. Id. at 875.

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In adopting the hybrid approach to the “applicable commitment period,” Kagenveama stated:
The Trustee argues that “applicable commitment
period” mandates a temporal measurement, i.e., it
denotes the time by which a debtor is obligated to
pay unsecured creditors, while Kagenveama argues
that it mandates a monetary multiplier, i.e., it is
merely useful in calculating the total amount to be
repaid by a debtor. Based on the plain language of
the statute, we conclude that the Trustee’s interpretation is correct, but that the “applicable commitment period” requirement is inapplicable to a plan
submitted voluntarily by a debtor with no “projected
disposable income.”
Id. (emphasis added). The court reasoned that any payments
made by such a debtor must derive from sources other than
“projected disposable income,” and so the “applicable commitment period,” which is tied to that term, would be irrelevant. Id. at 876. The court’s analysis relied on the text of the
statute, and explicitly rejected policy arguments to the contrary:
[O]nly “projected disposable income” is subject to
the “applicable commitment period” requirement.
Any money other than “projected disposable
income” that the debtor proposes to pay does not
have to be paid out over the “applicable commitment
period.”
There is no language in the Bankruptcy Code that
requires all plans to be held open for the “applicable
commitment period.” Section 1325(b)(4) does not
contain a freestanding plan length requirement;
rather, its exclusive purpose is to define “applicable
commitment period” for purposes of the
§ 1325(b)(1)(B) calculation. Subsection (b)(4) states

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“For purposes of this subsection, the ‘applicable
commitment period’ . . . shall be . . . not less than 5
years” for above-median debtors. Subsection
(b)(1)(B) states that “the debtor’s ‘projected disposable income’ to be received in the ‘applicable commitment period’ . . . will be applied to make
payments under the plan.” When read together, only
“projected disposable income” has to be paid out
over the “applicable commitment period.” When
there is no “projected disposable income,” there is
no “applicable commitment period.”
Subsections (b)(2) (“disposable income”) and
(b)(3) (“amounts reasonably necessary to be expended”) exist only to define terms relevant to the subsection (b)(1)(B) calculation. Subsection (b)(4),
which defines “applicable commitment period,” is
no different. . . . . Thus, the “applicable commitment
period” applies only to plans that feature “projected
disposable income.” Here there is none.
A recent decision by the Eighth Circuit Bankruptcy Appellate Panel (“BAP”) supports limiting
the application of the “applicable commitment period” to plans that have “projected disposable
income.” In re Frederickson, 375 B.R. 829, 835
(2007). In Frederickson, the BAP held that “applicable commitment period” does not refer to a minimum plan duration, but rather it refers to the time in
which the debtor must pay “projected disposable
income” to the trustee. Id. Another statutory provision, § 1322(d),[6] governs plan duration for above
median income debtors. Id. The BAP concluded that
6

Section 1322(d) provides in relevant part that “[i]f the current monthly
income of the debtor and the debtor’s spouse combined, [is above median]
. . . the plan may not provide for payments over a period that is longer than
5 years.” 11 U.S.C. § 1322(d).

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“[§ ] 1322(d) would be superfluous if § 1325(b)(4)
set the length of the plan.” Id. We find this reasoning
persuasive.
. . . We must enforce the plain language of the
Bankruptcy Code as written. We may not make
changes to the plain language of the Bankruptcy
Code based on policy concerns because that is the
job of Congress.
Id. at 876-77 (citations and footnote omitted) (4th ellipsis
added).
[5] The court also noted that its interpretation was not
inconsistent with pre-BAPCPA practice, which similarly provided for a temporal period (in that case, a period of “three
years”). However, the court found that when a debtor had no
disposable (or projected disposable) income, there was no
“applicable commitment period” to apply. Id. at 875-76. Such
a scenario — a debtor with no projected disposable income
who could nonetheless make payments to unsecured creditors
— did not exist pre-BAPCPA because BAPCPA replaced a
debtor’s actual ability to pay (based on real numbers) with a
formula for calculating disposable income. See Alexander,
344 B.R. at 750. Thus, there was no applicable pre-BAPCPA
practice with respect to debtors with no disposable income, as
such debtors could not propose confirmable plans prior to the
Act. See id. (“[A] debtor under the new ‘disposable income’
test may show a zero or negative number, yet may be able to
make the required showing that she actually has enough
income to fund a confirmable plan.”).
D.

The Supreme Court’s Decision in Lanning

[6] Lanning involved a debtor whose “current monthly
income” — the pre-petition baseline from which one calculates “disposable income” under § 1325(b)(2) — was inflated
well beyond her actual post-petition income because of a one-

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time aberration. 130 S. Ct. at 2470 (explaining that the debtor
had received a one-time buyout from her former employer
prior to filing for bankruptcy, and that these one-time payments had “greatly inflated” her disposable income). In such
a scenario, applying the mechanical approach to calculating
her “projected disposable income” would have resulted in
monetary payments that would substantially exceed her ability to pay. Id. The Supreme Court rejected the mechanical
approach and adopted the forward-looking approach, overruling the portion of Kagenveama that addressed “projected disposable income.” Id. at 2469.
In so doing, the Lanning Court relied primarily on a textual
analysis that distinguished “projected disposable income”
from “disposable income.” The Court reasoned that “the ordinary meaning of the term ‘projected’ . . . . takes past events
into account, [but allows] adjustments . . . based on other factors that may affect the final outcome.” Id. at 2471-72; see
also id. at 2471 (“[I]n ordinary usage future occurrences are
not ‘projected’ based on the assumption that the past will necessarily repeat itself.”). It rejected Kagenveama’s argument
that the forward-looking approach renders the definition of
“disposable income” superfluous:
This argument overlooks the important role that the
statutory formula for calculating “disposable
income” plays under the forward-looking approach.
As the Tenth Circuit recognized in this case, a court
taking the forward-looking approach should begin by
calculating disposable income, and in most cases,
nothing more is required. It is only in unusual cases
that a court may go further and take into account
other known or virtually certain information about
the debtor’s future income or expenses.
Id. at 2475. The Court also looked to the meaning of “projected” in other federal statutes, which used “projected” to mean

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not just “simple multiplication,” but estimates adjusted for
changed conditions and trends. Id. at 2472.
The Court further supported its conclusion by reference to
pre-BAPCPA practices, which it evaluated differently than
did the Ninth Circuit. See id. at 2472-74. Specifically, the
Court noted that pre-BAPCPA courts used the mechanical
approach as a starting point, but “also had discretion to
account for known or virtually certain changes in the debtors’
income.” Id. at 2473-74. The Court concluded that “[i]n light
of this historical practice,” and because “Congress did not
amend the term ‘projected disposable income’ in 2005,” “we
would expect that, had Congress intended for ‘projected’ to
carry a specialized — and indeed, unusual — meaning in
Chapter 13, Congress would have said so expressly.” Id.
Finally, the Court considered the senseless consequences
that could result from the mechanical approach:
In cases in which a debtor’s disposable income
during the 6-month look-back period is either substantially lower or higher than the debtor’s disposable income during the plan period, the mechanical
approach would produce senseless results that we do
not think Congress intended. In cases in which the
debtor’s disposable income is higher during the plan
period, the mechanical approach would deny creditors payments that the debtor could easily make. And
where, as in the present case, the debtor’s disposable
income during the plan period is substantially lower,
the mechanical approach would deny the protection
of Chapter 13 to debtors who meet the chapter’s
main eligibility requirements.
Id. at 2475-76.
[7] Lanning did not address the meaning of “applicable
commitment period.” Its holding only concerned the interpretation of “projected disposable income.”

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Lanning’s Impact on Kagenveama and This Case

[8] In the instant case, we confront the question of Kagenveama’s continued vitality in light of Lanning. Lanning necessarily overruled the first part of Kagenveama. See In re
Henderson, 455 B.R. 203, 208 (Bankr. D. Idaho 2011)
(“Because the Supreme Court adopted the forward-looking
approach, as opposed to the Kagenveama-favored mechanical
approach, Kagenveama’s instructions to bankruptcy courts for
calculating debtors’ projected disposable income were effectively overruled.”). What remains unsettled is whether Lanning’s reasoning, which did not address the “applicable
commitment period” question, is clearly irreconcilable with
and thus effectively overruled Kagenveama’s second holding
interpreting “applicable commitment period.”
In Miller v. Gammie, we explained that “issues decided by
the higher court need not be identical in order to be controlling. Rather, the relevant court of last resort must have undercut the theory or reasoning underlying the prior circuit
precedent in such a way that the cases are clearly irreconcilable.” 335 F.3d 889, 900 (9th Cir. 2003) (en banc) (emphasis
added)).
Importantly, this inquiry does not ask how the panel would
interpret the “applicable commitment period” provision if we
were to consider the issue as a matter of first impression.
Rather, we are bound by our prior precedent if it can be reasonably harmonized with the intervening authority. See, e.g.,
Avagyan v. Holder, 646 F.3d 672, 677 (9th Cir. 2011) (“A
three-judge panel cannot reconsider or overrule circuit precedent unless an intervening Supreme Court decision undermines an existing precedent of the Ninth Circuit, and both
cases are closely on point.” (internal citations and quotation
marks omitted)).
In this case, we find that the Supreme Court’s decision in
Lanning is not “clearly irreconcilable” with Kagenveama’s

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interpretation of “applicable commitment period.” We so conclude for two reasons. First, the overall analytical framework
of Lanning, which (1) employed a textual analysis of statutory
language at issue, (2) reviewed pre-BAPCPA practice, and (3)
examined policy consequences of a contrary interpretation, is
consistent with our overall analytical approach in Kagenveama. Second, the application of Lanning’s three-factor
analysis in construing “projected disposable income” does not
mandate any particular interpretation of the different term
“applicable commitment period.”
1.

Analytical Framework

[9] The overarching analytical framework employed by the
Supreme Court in Lanning is similar to and consistent with
the analytical framework used by this court in Kagenveama.
Lanning analyzed three factors. First, Lanning employed a
textual analysis to determine the meaning of “projected disposable income” used in § 1325(b)(1) as it relates to “disposable income” defined in (b)(2) and (b)(3). Second, Lanning
examined pre-BAPCPA practice, adopting the pre-BAPCPA
approach to determining “projected disposable income” in the
absence of any indication that Congress, in enacting BAPCPA, intended to change that practice. Third, it tested for possible senseless results that could arise under alternative
interpretations of “projected disposable income.”
Kagenveama employed the same general framework in its
interpretation of “applicable commitment period.” Like Lanning, the court considered the text and structure of § 1325(b)
(as well as the relationship to § 1322(d)) to determine the
meaning of “applicable commitment period” as it is defined
in (b)(4) and used in (b)(1). Kagenveama also briefly considered pre-BAPCPA practice as it relates to the meaning of “period,” although the precise scenario the court addressed did
not have a pre-BAPCPA analog. Finally, it considered possible senseless results according to the statute’s purpose, and
concluded that nothing in BAPCPA’s text or purpose man-

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dated a minimum term length or “applicable commitment
period” for debtors who had no “projected disposable
income.”
2.

Application of the Three-Factor Framework

[10] In addition to the fact that both Kagenveama and Lanning employed the same general analytical framework, there
is nothing in Lanning’s specific application of the three-factor
framework in interpreting “projected disposable income”
(“PDI”) that is clearly inconsistent with Kagenveama’s application of that similar framework in interpreting “applicable
commitment period” (“ACP”).
a.

Text and Structure of § 1325(b)

First, Lanning’s textual analysis of “projected disposable
income” is sui generis to the issue at hand therein. “Lanning
[did not] directly address[ ] the applicable commitment period
concept at issue in Kagenveama.” Henderson, 455 B.R. at
209; see also In re Reed, 454 B.R. 790, 801 (Bankr. D. Or.
2011) (noting that the Supreme Court has not “dealt with the
interpretation of the applicable commitment period for abovemedian debtors who have no projected disposable income”).
In Lanning, the Court was singularly focused on the term
“projected” as that term modified “disposable income.”7 “At
7

To place the holdings in Lanning and Kagenveama in context, we set
forth the relevant provisions of § 1325:
(b)(1) If the trustee or the holder of an allowed unsecured claim
objects to the confirmation of the plan, then the court may not
approve the plan unless, as of the effective date of the plan—
....
(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period
beginning on the date that the first payment is due under the plan
will be applied to make payments to unsecured creditors under
the plan.

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its base, Kagenveama relied on the plain meaning of the statutory terms and their context and relationship to each other.
The Supreme Court neither rejected that approach nor the
conclusion that the circuit reached with regard to ‘applicable
commitment period.’ ” Reed, 454 B.R. at 803; see Henderson,
455 B.R. at 209 (“An extended discussion of Kagenveama’s
analysis of the Code’s text and context in light of Lanning . . .
would serve little purpose because [both] decisions focused
on different portions of the Code”).
Second, Lanning acknowledged the necessary relationship
between the term “disposable income” defined in
....
(2) For purposes of this subsection, the term “disposable income”
means current monthly income received by the debtor . . . less
amounts reasonably necessary to be expended[.]
....
(3) Amounts reasonably necessary to be expended under paragraph (2), other than subparagraph (A)(ii) of paragraph (2), shall
be determined in accordance with subparagraphs (A) and (B) of
section 707(b)(2), if the debtor has current monthly income
[above the applicable median income.]
....
(4) For purposes of this subsection, the “applicable commitment
period”—
(A) subject to subparagraph (B), shall be—
(i) 3 years; or
(ii) not less than 5 years, if the current monthly income of
the debtor and the debtor’s spouse combined, . . . is [above
the applicable median income.]
....
(B) may be less than 3 or 5 years, whichever is applicable
under subparagraph (A), but only if the plan provides for
payment in full of all allowed unsecured claims over a
shorter period.

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§ 1325(b)(2) and (b)(3) and the undefined term “projected
disposable income” used in (b)(1); the calculation of disposable income under (b)(2) and (b)(3) obviously informs the
determination of projected disposable income. In contrast, the
relationship between the term “applicable commitment period” as it is defined in (b)(4) and its use in (b)(1) is not so
plain. Nothing in Lanning addresses how the ACP defined in
(b)(4) should be applied to (b)(1).
[11] Third, the definition of “projected” as used in defining
“projected disposable income” is functionally independent of
the determination of how the applicable commitment period
affects the debtor’s obligation under § 1325(b)(1). The terms
“projected” and “applicable commitment period” are independent variables. The only things Lanning changed were the
potential “inputs” for determining a debtor’s projected disposable income. Kagenveama’s essential conclusion remains
untouched; namely, one who has no projected disposable
income, however calculated under Lanning, is not subject to
an applicable commitment period. Kagenveama, 541 F.3d at
877; Reed, 454 B.R. at 802.
We recognize that the Eleventh Circuit, considering the
meaning of “applicable commitment period” as a matter of
first impression, has held that “applicable commitment period” is a “temporal term that prescribes the minimum duration
of a debtor’s Chapter 13 bankruptcy plan” and in so holding,
cited Lanning as supporting its conclusion:
Lanning opens the door for the possibility that the
final projected disposable income accepted by the
bankruptcy court may not be the result of a strict
§ 1325(b)(1)(B) calculation. The “applicable commitment period” must have an existence independent
of the § 1325(b)(1)(B) calculation. If “applicable
commitment period” were left dependent upon projected disposable income . . . , then it would necessarily be dependent on the multitude of

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indeterminate factors that Lanning has allowed to be
used in the determination of projected disposable
income. This in turn would leave “applicable commitment period” an indeterminate term. In order for
“applicable commitment period” to have any definite
meaning, its definition must be that of a temporal
term derived from § 1325(b)(4) and independent of
§ 1325(b)(1).
Tennyson, 611 F.3d at 878-79.
While we need not determine whether we would reach the
same conclusion were the question a matter of first impression, Tennyson does not demonstrate that our decision in
Kagenveama is clearly irreconcilable with Lanning. Lanning
does not, as Tennyson suggests, render “applicable commitment period” an “indeterminate term.” Rather, under Kagenveama, once PDI has been calculated according to Lanning,
“applicable commitment period” remains a fixed term of
either three years or five years under (b)(4); it simply does not
go into effect for debtors who have no projected disposable
income.
Indeed, in Baud, the Sixth Circuit considered the opinions
in both Kagenveama and Tennyson and acknowledged that
“the plain-language arguments supporting each approach are
nearly in equipoise.” 634 F.3d at 351. Considering as a matter
of first impression whether the applicable commitment period
applies when a debtor has no projected disposable income,
Baud simply found “the interpretation of § 1325(b) that
applies the applicable commitment period to debtors with zero
or negative projected disposable income to be more persuasive than the competing interpretation.” Id. Significantly,
Baud did not even cite to Lanning in the portion of its opinion
that considered the textual meaning of “applicable commitment period.” Id. at 350-51. Instead, because its textual analysis was inconclusive, “[f]or assistance in interpreting the
statute, . . . [it] turn[ed] . . . to the guideposts provided by the

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Supreme Court in Lanning and Ransom.” Id. at 351. In that
regard, Baud recognized the limited utility of Lanning as two
of Lanning’s interpretive guideposts — the lack of explicit
multiplier language and pre-BAPCPA practice — were inapposite with respect to the meaning of “applicable commitment
period” for debtors with no projected disposable income. Id.
The only Lanning “guidepost” Baud found useful was its
mandate to avoid “senseless results.” Id. at 352. On this question, Baud “conclude[d] that applying the applicable commitment period to debtors with zero or negative projected
disposable income would best serve BAPCPA’s goal of
ensuring that debtors repay creditors the maximum amount
they can afford.” Id. at 356-57. However, even on this point,
Baud acknowledged a substantial difference of opinion
among courts as to which interpretation was preferable. See
id. at 354-56. While the court concluded that its interpretation
best comported with Lanning’s instruction to interpret BAPCPA so as to “maximiz[e] creditor recoveries,” it did not hold
that its was the only reasonable interpretation of the statute,
nor did it hold that Lanning explicitly mandated a certain construction. Id. at 340. In short, Baud does not suggest that Lanning precludes a different conclusion, such as that reached in
Kagenveama.8
8

The dissent overlooks the textual analysis of “applicable commitment
period” as interpreted by Kagenveama and focuses solely on the policy
and purposive interpretations of BAPCPA purportedly mandated by Lanning. However, such an approach sidesteps the central role of textual analysis in both Kagenveama and Lanning, as well as Kagenveama’s explicit
reasoning that we cannot ignore the statute’s plain meaning in the name
of upholding its purpose:
The Trustee suggests that we should require a five-year plan
for confirmation under § 1325 to allow an extended period for
unsecured creditors to seek modification under § 1329. If a
debtor proposes a three-year plan, receives a discharge, and experiences an increase in income in year four, then the debtor
receives a windfall at the expense of creditors. While this
approach would promote the sound policy of requiring debtors to
repay more of their debts, there is nothing in the Bankruptcy

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Pre-Bankruptcy Abuse Prevention and Consumer
Protection Act (“BAPCPA”) Practice

Second, Kagenveama does not run afoul of Lanning’s reliance upon pre-BAPCPA practice, Lanning, 130 S. Ct. at
2467, because as the Sixth Circuit observed in Baud, the question presented had never arisen pre-BAPCPA, 634 F.3d at
351. The precise scenario Kagenveama faced — the meaning
of ACP for a debtor with no PDI — is one with no preBAPCPA analog. Such a scenario was a new question courts
faced after BAPCPA, because the concept of a debtor with
negative PDI did not previously exist. As one bankruptcy
court has explained, “the pre-BAPCPA definition of ‘disposable income’ calculated a real number rather than a statutory”
formula; therefore, “a debtor with no positive number simply
had no means to fund the added costs of a Chapter 13 plan.”
Alexander, 344 B.R. at 750; see also Baud, 634 F.3d at
351-52 (“[P]re-BAPCPA practice sheds no light here because
‘[t]o veterans of Chapter 13 practice, it runs afoul of basic
principles to suggest that a debtor with no disposable income
can nonetheless propose a confirmable plan[,] [y]et BAPCPA
permits precisely that.’ ” (alterations in original) (quoting
Alexander, 344 B.R. at 750)). BAPCPA’s standardized formula created a new scenario in which “a debtor under the new
‘disposable income’ test may show a zero or negative number,
yet may be able to make the required showing that she actuCode that requires a debtor with no “projected disposable
income” to propose a five-year plan. We must enforce the plain
language of the Bankruptcy Code as written. We may not make
changes to the plain language of the Bankruptcy Code based on
policy concerns because that is the job of Congress. Nothing in
the Bankruptcy Code states that the “applicable commitment
period” applies to all Chapter 13 plans.
Kagenveama, 541 F.3d at 877 (emphasis added). The plain meaning of the
applicable commitment period, as interpreted by Kagenveama, drove its
analysis. As explained above, nothing about Lanning’s textual analysis
overrules that interpretation.

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ally has enough income to fund a confirmable plan.” Alexander, 344 B.R. at 750. Thus, as Baud acknowledged, preBAPCPA practices offer no clear guidance as to whether any
minimum plan length applies to debtors with negative projected disposable income.9
c.

Avoiding Absurd or Senseless Results

[12] Finally, under the third factor of Lanning’s analytical
framework, Lanning noted that the purpose of BAPCPA was
to ensure that plans did not “deny creditors payments that the
debtor could easily make.” Lanning, 130 S. Ct. at 2476; see
also Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 729
(2011) (describing “BAPCPA’s core purpose [as] ensuring
that debtors devote their full disposable income to repaying
creditors”); Baud, 634 F.3d at 356 (Lanning requires courts to
“apply the interpretation that has the best chance of fulfilling
BAPCPA’s purpose of maximizing creditor recoveries”);
H.R. Rep. No. 109-31(I), at 2 (2005), reprinted in 2005
U.S.C.C.A.N. 88, 89 (describing “[t]he heart of the bill’s consumer bankruptcy reforms” as designed to “ensure that debtors repay creditors the maximum they can afford”).10
9
Indeed, even as to the broader interpretive question of whether “applicable commitment period” imposes a temporal requirement or merely a
multiplier (including for debtors with positive projected disposable
income), pre-BAPCPA practice offers no clear answer. Pre-BAPCPA,
§ 1325(b)(1)(B) mandated that debtors pay “all of the debtor’s projected
disposable income to be received in the three-year period beginning on
the date that the first payment is due under the plan.” Anderson v. Satterlee (In re Anderson), 21 F.3d 355, 357 (9th Cir. 1994) (emphasis omitted)
(emphasis added) (quoting § 1325(b)(1)(B)). The pre-BAPCPA practice
with respect to the meaning and application of this three-year period was
not uniform. Compare, e.g., In re Slusher, 359 B.R. 290, 302-03 (Bankr.
D. Nev. 2007) (stating that “most [pre-BAPCPA] courts construed the
Section 1325(b)(1)(B) ‘three-year period’ as a temporal minimum during
plan confirmation.”) (collecting cases), with, e.g., In re Swan, 368 B.R. 12,
26 (Bankr. N.D. Cal. 2007) (“Several pre-BAPCPA cases permitted debtors to payoff the plan balance and exit [C]hapter 13 in less than 36 months
without paying unsecured creditors in full.”) (collecting cases).
10
The dissent points to a passage in this legislative history as supporting
the notion that above-median debtors are to be held to a five-year plan

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Construction of the statute should not yield senseless results
as measured against BAPCPA’s purpose.
[13] The bankruptcy court concluded that Kagenveama
created absurd results that diverged from this purpose, as
debtors could propose short plans that would deprive creditors
of the opportunity to receive further payments if the debtors’
financial circumstances improved within the five years after
confirmation. However, Kagenveama’s construction of “applicable commitment period” does not necessarily lead to
senseless results in contravention of Congress’s purpose. As
Kagenveama found, the only circumstance in which a debtor
can avoid the applicable commitment period is if she has no
projected disposable income. At that point, the court has
already determined that there are no such “payments that the
debtor could easily make” as defined by the Bankruptcy
Code. Lanning, 130 S. Ct. at 2476. As the bankruptcy court
in Henderson explained, “the majority in Kagenveama noted
that requiring a plan to remain open for a specific duration
where there is no projected disposable income would do nothduration (unless they pay their unsecured claims in a shorter period)
because it contains the title: “Chapter 13 Plans to Have a 5-Year Duration
in Certain Cases.” However, we can discern no such meaning from that
passage. The House Report language is ambiguous, as it states that “a
chapter 13 plan may not provide for payments over a period that is not less
than five years if the current monthly income of the debtor and the debtor’s spouse combined exceeds certain monetary thresholds.” H.R. Rep.
No. 109-31(I), § 318, at 79 (2005), reprinted in 2005 U.S.C.C.A.N. 88,
146 (emphases added). The above sentence does not mandate a five-year
plan for debtors; its wording suggests five years is a maximum, a statement consistent with its citation, inter alia, to 11 U.S.C. § 1322(d) (setting
a maximum plan duration of five years for above-median debtors). In addition, the House Report also refers to the bankruptcy court’s ability to
approve plans up to five years in length for below-median debtors, upon
a showing of cause. Thus, the title’s reference to “certain cases” is elastic
enough to encompass a variety of situations. Accordingly, we cannot read
the legislative history as providing any clear indication as to the meaning
of “applicable commitment period” or its application to the instant case.

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ing to further § 1325(b)(1)’s stated purpose of verifying that
debtors’ ‘disposable income will be paid to unsecured creditors’ because, under the workings of the Code, those debtors
have no disposable income with which to make such payments.” Henderson, 455 B.R. at 211 (quoting Kagenveama,
541 F.3d at 876).
Indeed, the fact that “projected disposable income” is to be
determined under the more flexible forward-looking approach
under Lanning adds assurance that able debtors will not
escape their obligations even under Kagenveama’s definition
of “applicable commitment period.” See Lanning, 130 S. Ct.
at 2476 (highlighting the need to ensure that projected disposable income calculations give creditors all “payments that the
debtor could easily make,” but not to require more than they
are capable of paying so as to “deny the protection of Chapter
13 to debtors who meet the chapter’s main eligibility requirements”).
The dissent highlights one potential gap in the statute’s protections for creditors — certain future increases in a debtor’s
income may not be sufficiently “certain” to be included in the
debtor’s projected disposable income under Lanning. However, this risk is minimal and mitigated by the fact that the
applicable commitment period is not the only weapon in creditors’ arsenal to ensure that Chapter 13 plans provide for the
maximum payments debtors can afford. For example, debtors
are required to propose plans in good faith according to
§ 1325(a)(3), which, although subject to some dispute postBAPCPA, has generally been applied using a totality of the
circumstances test to determine if debtors have “ ‘unfairly
manipulated the Bankruptcy Code, or otherwise proposed
their [C]hapter 13 plan in an inequitable manner.’ ” In re Briscoe, 374 B.R. 1, 22 (Bankr. D.D.C. 2007) (brackets removed)
(quoting Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1390 (9th
Cir. 1982)); see In re Marti, 393 B.R. 697, 700 (Bankr. D.
Neb. 2008) (finding lack of good faith under § 1325(a)(3) and
(a)(7) where the debtor “went from no income prior to filing

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to substantial income immediately after filing” and could
therefore afford to pay his creditors despite his lack of disposable income according to the statutory test).11 “Other confirmation requirements would include the best-interests test set
forth in § 1325(a)(4).” Baud, 634 F.3d at 352 n.19 (citing 11
U.S.C. § 1325(a)(4) (providing that, in order for a Chapter 13
plan to be confirmable, “the value, as of the effective date of
the plan, of property to be distributed under the plan on
account of each allowed unsecured claim is not less than the
amount that would be paid on such claim if the estate of the
debtor were liquidated under [C]hapter 7 of this title on such
date”)).
In addition, courts have used the “absurd results” rationale
to justify conclusions on both sides of this debate. See, e.g.,
In re Williams, 394 B.R. 550, 570 (Bankr. D. Colo. 2008)
(adopting a monetary approach to the applicable commitment
period because it “allows the possibility that a debtor will pay
11

We do not address in this opinion the full scope of the good faith
requirement in § 1325(a)(3) and how it interacts with § 1325(b) and other
requirements of the Bankruptcy Code. However, we note that, although
the dissent points to (In re Lepe) in support of its contention that compliance with Kagenveama could foreclose a bad faith argument based on,
e.g., a short payment plan of only a few months, Lepe specifically lists
“[t]he probable or expected duration of the plan,” as well as “[t]he debtors’ employment history, ability to earn, and likelihood of future increases
in income” as factors the bankruptcy court may consider in assessing the
good faith requirement. See Meyer v. Lepe (In re Lepe), 470 B.R. 851, 857
(B.A.P. 9th Cir. 2012) (internal quotation marks omitted). Indeed, Lepe
made clear that bankruptcy courts must reject any per se applications of
the good faith requirement based on any one factor, and must instead
engage in a detailed, case-by-case determination of good faith based on
the totality of the circumstances, including plan duration. See id. at 85658; see also id. at 862 (quoting, e.g., Drummond v. Welsh (In re Welsh),
465 B.R. 843, 854 (B.A.P. 9th Cir. 2012) (“ ‘[A] debtor’s lack of good
faith cannot be found based solely on the fact that the debtor is doing what
the Code allows.’ ”) (emphasis added). Thus, even if a short payment plan
is not sufficient to constitute the sole basis for a bad faith finding, Lepe
does not foreclose a bankruptcy court from considering it as one among
many factors.

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off his unsecured creditors more quickly,” increases the present value of the payments, and “reduces the chances of a
default on plan payments”). Some courts have rejected a strict
temporal approach to the applicable commitment period for
debtors without projected disposable income, reasoning that
such debtors
are not required to pay anything to unsecured creditors because of the mandatory calculation of income
and expenses under §§ 1325(b)(2) and (b)(3). The
trustee would require debtors who can pay arrearages on secured debt during the initial months of the
plan to keep their cases open for 60 months with
plan payments of $0 and a payout to unsecured creditors of $0. Debtors would be kept in a pointless
bankruptcy “limbo” in which no payments are owed
but no discharge is granted. As the court noted in In
re Fuger, 347 B.R. 94, 101 (Bankr. D. Utah 2006),
“[I]t makes little sense to hold the debtor hostage for
60 months where the debtor can satisfy the requirements of § 1325(b)(1)(B) in a shorter period.”
In re Mathis, 367 B.R. 629, 634 (Bankr. N.D. Ill. 2007).
Arguably, there are potentially perverse results for creditors
when debtors who have no obligation to propose any payments to unsecured creditors because they have no projected
disposable income, are nonetheless forced to propose only 60month plans in which to pay priority and administrative
claims. As the bankruptcy court in In re Burrell explained:
Here, Debtors are proposing to pay the IRS, their
attorney, and the Trustee as required. There is no
dispute that their monthly projected disposable
income is a negative number. Thus, there is also no
dispute that they are not required to propose to pay
any amount to unsecured creditors in order to obtain
confirmation of their Plan. The amount that they are

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proposing to pay unsecured creditors is completely
gratuitous. The Debtors have established the feasibility of their Plan by filing a Schedule J showing that
they intend to live on a budget which includes less
for living expenses than they would be allowed to
spend as reasonable and necessary expenses per the
required statutory calculation of their disposable
income. See 11 U.S.C. § 1325(b)(3).
If required to amend their Plan to provide for a
five year duration, Debtors could reduce their
monthly payment amounts to the Trustee so that the
same aggregate amount would be paid over the longer duration. This would mean that the IRS and
Debtors’ attorney would get smaller distributions
each month than now proposed and would bear the
loss of the time value of money by reason of the
deferral of the payments to them. But, the Code does
not require the Debtors to stretch out payments to the
IRS and their attorney for five years. The applicable
commitment period, under any interpretation, applies
only to the treatment of general unsecured creditors.
See 11 U.S.C. § 1325(b)(1). There is, therefore, simply no basis to deny confirmation of a Chapter 13
plan which proposes to pay priority and administrative claims sooner rather than later. The Code does
not require the IRS to be paid at a slower pace than
Debtors are willing and able to pay simply to ensure
that the case stays open for five years on the chance
that Debtors will have a significant increase in
income and can then be required to modify their Plan
to pay more to unsecured creditors.
In re Burrell, No. 08-71716, 2009 WL 1851104, at *4-5
(Bankr. C.D. Ill. June 29, 2009).
[14] In sum, there is no singular view as to which interpretation of the ACP would best fulfill BAPCPA’s purpose. We

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cannot say that Kagenveama’s interpretation of the ACP and
its effect under § 1325(b)(1) will lead to senseless results in
contravention of Congress’s purpose in enacting the BAPCPA. In this regard, Kagenveama is not inconsistent with
Lanning.
V.

CONCLUSION

[15] As one court has noted, “many jurists and commentators have written . . . ably on this issue” and “cogent arguments, both of statutory construction and of bankruptcy
policy, have certainly been made” on all sides. In re Moose,
419 B.R. 632, 635 (Bankr. E.D. Va. 2009). Were we writing
on a clean slate, the contrary conclusion reached by the Sixth
and Eleventh Circuits on this question would deserve consideration. The Trustee raises legitimate policy considerations as
to why a mandated plan length might be desirable even when
debtors have no projected disposable income. The dissent
highlights some of these legitimate policy concerns. However,
we do not write on a clean slate. Instead, our analysis is constrained by our own prior authority, which we are bound to
follow unless it is clearly irreconcilable with Lanning. We are
not convinced that Lanning has “undercut the theory or reasoning underlying [Kagenveama] in such a way that the cases
are clearly irreconcilable.” Gammie, 335 F.3d at 900 (emphasis added). Thus, only the Supreme Court or an en banc panel
of this court may revisit Kagenveama’s holding regarding the
applicable commitment period.
[16] Accordingly, we conclude that the bankruptcy court
erred in disregarding Kagenveama.
REVERSED AND REMANDED.

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GRABER, Circuit Judge, dissenting:
I respectfully dissent. In my view, we are not compelled to
follow Maney v. Kagenveama (In re Kagenveama), 541 F.3d
868 (9th Cir. 2008), because it is “clearly irreconcilable” with
Hamilton v. Lanning, 130 S. Ct. 2464 (2010). See Miller v.
Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc) (stating
principle that a three-judge panel is not bound by a prior circuit precedent in this circumstance).
Kagenveama created a rule under which our circuit set no
minimum duration on plans confirmable by certain debtors,
such as the ones in this case. See 541 F.3d at 877 (holding
that, when a debtor’s projected disposable income was negative, the applicable commitment period “did not apply” and
offering no substitute durational requirement).1 That aspect of
Kagenveama is clearly irreconcilable with Lanning, which
interprets 11 U.S.C. § 1325(b) (the “disposable income test”)
as a vehicle for achieving the congressional intent of making
debtors pay as much as they can, but no more, over a fixed
period, while allowing discretion to adjust the payout up or
down as required by the debtor’s evolving financial situation.
In Lanning, the Court rejected the practical consequences
resulting from a “mechanical” calculation of projected disposable income, reasoning:
In cases in which a debtor’s disposable income
during the 6-month look-back period is either substantially lower or higher than the debtor’s disposable income during the plan period, the mechanical
approach would produce senseless results that we do
not think Congress intended. In cases in which the
debtor’s disposable income is higher during the plan
period, the mechanical approach would deny creditors payments that the debtor could easily make.
1

Indeed, Trustee represents that, in the wake of Kagenveama, some
debtors have proposed plans as short as six months.

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And where, as in the present case, the debtor’s disposable income during the plan period is substantially lower, the mechanical approach would deny
the protection of Chapter 13 to debtors who meet the
chapter’s main eligibility requirements.
130 S. Ct. at 2475-76 (emphases added).
Lanning involved pre-confirmation adjustments to plan
payments, “to account for known or virtually certain changes”
in a debtor’s income. Id. at 2475. But, to avoid “deny[ing]
creditors payments that the debtor could easily make,” Lanning’s logic must also require a mechanism for postconfirmation adjustments for unforeseen increases in a debtor’s income.2 That mechanism is the plan modification proce2
The majority observes that creditors will be able to capture the benefit
of increases to a debtor’s income because of Lanning’s flexible and
forward-looking approach to calculating projected disposable income.
Maj. op. at 10340. But Lanning applies only to known, or “virtually certain,” increases in income. 130 S. Ct. at 2475. Lanning does not allow
courts discretion to consider foreseeable yet uncertain increases to a debtor’s income. Consider, for example, a law student who has secured a
lucrative associate position, contingent on passing a bar examination. For
the purposes of Chapter 13 eligibility, assume further that the law student
is also working part time. See 11 U.S.C. § 109(e) (requiring that an individual have regular income in order to be eligible for relief under Chapter
13). The law student’s income will foreseeably increase in the near future,
but that increase is not “virtually certain,” so Lanning does not allow consideration of the potential increase in calculating projected disposable
income. Thus, under Kagenveama, such a debtor can propose a plan that
terminates before he or she starts the new job, thereby denying creditors
payments that the debtor could easily make in the future.

The majority offers § 1325(a)(3)’s good faith requirement as a solution
to this problem, but compliance with Kagenveama’s reading of the Bankruptcy Code may foreclose any bad faith argument. See Meyer v. Lepe (In
re Lepe), 470 B.R. 851 (B.A.P. 9th Cir. 2012) (concluding that bad faith
cannot rest solely on a plan’s attempt to do that which the Bankruptcy
Code allows).
Finally, none of the majority’s solutions contends with the problem of
unforeseen increases in a debtor’s income.

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dure of 11 U.S.C. § 1329. See Kagenveama, 541 F.3d at 877
(“If [the debtor’s] income changes in the future before completion of the plan, the Trustee or the holder of an unallowed
secured claim may seek modification of the plan under
§ 1329.”). That mechanism would be illusory unless a plan
has some minimum duration.3 See id. at 879 (Bea, J., dissenting in part) (“The five-year requirement of § 1325 . . . is a
necessary component of plan modification. If the plan is not
continued for a five-year period (post-confirmation), an unsecured creditor who discovers the debtor’s finances have dramatically improved will find that there is no extant plan to
modify.”).4 Accordingly, Lanning precludes any reading, such
as Kagenveama’s, that imposes no minimum duration on a
Chapter 13 plan.
The majority suggests that my interpretation ignores the
“ ‘plain language of the Bankruptcy Code’ ” and does so
merely for reasons of policy. Maj. op. at 10337 n.8 (quoting
Kagenveama, 541 F.3d at 877). Not so. My approach is motivated not by policy concerns, but by fidelity to Lanning’s
3

The imposition of a minimum duration is consistent with Chapter 13’s
fundamental nature as a mechanism for voluntary repayment over time by
wage earners, as distinct from lump-sum liquidation under Chapter 7. See
generally 8 Collier on Bankruptcy ¶ 1300.02 (Alan N. Resnick & Henry
J. Sommer eds., 15th ed. rev.).
4
In Baud v. Carroll, 634 F.3d 327, 354-57 (6th Cir. 2011), cert. denied,
132 S. Ct. 997 (2012), the Sixth Circuit presented a more thorough discussion of whether a longer plan period would necessarily provide a longer
time for plan modification, analyzing a separate question regarding the
interpretation of the phrase “completion of payments” for the purposes of
plan modification under § 1329. That court declined to resolve the § 1329
question, concluding that it did not affect the analysis of the issue on
appeal. See id. at 356 (“The meaning of ‘completion of payments’ under
§ 1329(a) is an interesting question that is not before us and therefore must
await another day.”).
The parties here do not raise or discuss the “completion of payments”
question. I agree with the Sixth Circuit that the “applicable commitment
period” question can and should be resolved without delving into the
“completion of payments” question.

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view of congressional intent. See United States v. Ron Pair
Enters., 489 U.S. 235, 242 (1989) (“The plain meaning of legislation should be conclusive, except in the rare cases in
which the literal application of a statute will produce a result
demonstrably at odds with the intentions of its drafters. In
such cases, the intention of the drafters, rather than the strict
language, controls.” (emphasis added) (citation, internal quotation marks, and brackets omitted)).
The need for a minimum plan duration, then, leads to the
conclusion that Kagenveama cannot be reconciled with Lanning and leaves it to this court to decide what that duration
should be in the case of a debtor with negative disposable
income. In my view, we should answer that question by looking to the statutory provision that comes closest to setting a
minimum plan duration—the “applicable commitment period” definition. That is, so long as some minimum duration is
necessary, it makes sense to derive that duration from the definition of “applicable commitment period,” as the Sixth and
Eleventh Circuits have done. Baud, 634 F.3d 327; Whaley v.
Tennyson (In re Tennyson), 611 F.3d 873 (11th Cir. 2010).
Furthermore, the legislative history of the disposable income
test supports that approach:
Chapter 13 Plans To Have a 5-Year Duration in
Certain Cases. Paragraph (1) of section 318 of the
Act amends Bankruptcy Code sections 1322(d) and
1325(b) to specify that a chapter 13 plan may not
provide for payments over a period that is not less
than five years if the current monthly income of the
debtor and the debtor’s spouse combined exceeds
certain monetary thresholds. If the current monthly
income of the debtor and the debtor’s spouse fall
below these thresholds, then the duration of the plan
may not be longer than three years, unless the court,
for cause, approves a longer period up to five years.
The applicable commitment period may be less if the
plan provides for payment in full of all allowed

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unsecured claims over a shorter period. Section
318(2), (3), and (4) make conforming amendments
to sections 1325(b) and 1329(c) of the Bankruptcy
Code.
H.R. Rep. No. 109-31(I), § 318, at 79 (2005), reprinted in
2005 U.S.C.C.A.N. 88, 146 (emphasis added). The quoted
section is confusingly worded, but the title suggests that
above-median debtors are to be held to a five-year minimum
plan duration without regard to their expenses or disposable
income, unless they pay unsecured claims in full over a
shorter period.
The majority admits that, as between the two competing
statutory interpretations at the heart of this case, neither is
necessarily more correct than the other. Maj. op. at 10335-36,
10344. The majority also concedes that, were it “writing on
a clean slate, the contrary conclusion reached by the Sixth and
Eleventh Circuits on this question would deserve consideration.” Id. at 10344. Because our circuit’s rule is clearly irreconcilable with later Supreme Court precedent, we are writing
on a clean slate. In so doing, we should consider most
strongly the intent of Congress (to require debtors to pay creditors what they can readily afford) and the need for national
uniformity in the application of the federal bankruptcy laws.
Those two factors compel the conclusion that Kagenveama no
longer is good law. I would therefore adopt the holdings of
our sister circuits and affirm the bankruptcy court’s decision.