Chapter 13 and the Means Test

In re Kagenveama, was a 9th Circuit case where there was an appeal of an order confirming the debtor’s plan of reorganization, the parties disputed the meaning of two phrases contained in section 1325 of the Bankruptcy Code:  “projected disposable income” and “applicable commitment period.”  The Ninth Circuit held that the Means Test determines “projected disposable income.”

Specifically, “projected disposable income” is determined by multiplying “disposable income” by the “applicable commitment period.”  The five-year “applicable commitment period” is inapplicable when above-median income debtors have a negative amount of disposable income. If the debtor has no projected disposable income, the court can confirm a plan lasting three years.

If the debtor has disposable income, then the Chapter 13 plan must survive for five years.