Applicable commitment period in Chapter 13
The Bankruptcy Code now specifies the minimum length of a Chapter 13 plan based on the debtor's recent annual income. That period is the "applicable commitment period.
- Debtors whose income is below the median income for households of that size may file plans lasting 3 years.
- Debtors whose income is above the median must file 5 year plan.
Note that plan length says nothing about how much the plan payment must be. Many Chapter 13 plans for debtors over the median income have only nominal payments to unsecured creditors.
One of the most frequent misconceptions about Chapter 13 is the thought that because it is called a "repayment plan" that it requires full payment to creditors. That is a myth.
More on how the amount of the repayment is determined.
What's a household?
One of the "black holes" in the "reformed" bankruptcy code is measuring the debtor's income against "households" in the state of like size.
The Code looks at the income of the debtor and spouse, including amounts that others contribute to their household expenses.
What do we do with roommates? aged parents? exchange students? adult children? any of those who may live with the debtor. The Census Bureau definition of household is all those who sleep in one dwelling. Yet the UST, trustees and some judges want to confine the measure of household to those who are related to the debtor or even to those who are dependents for income tax purposes.
Once again, bad drafting of the law leaves us with many unanswered questions about how this ought to work.