                                                                   FILED
                            FOR PUBLICATION                          AUG 29 2013

                                                                MOLLY C. DWYER, CLERK
                  UNITED STATES COURT OF APPEALS                 U.S. COURT OF APPEALS



                         FOR THE NINTH CIRCUIT

In the Matter of: CESAR IVAN FLORES;        No. 11-55452
ANA MARIA FLORES,
                                            D.C. No. 6:10-29956-MJ
            Debtors.

ROD DANIELSON,                              OPINION

            Trustee - Appellant,

    v.

CESAR IVAN FLORES; ANA MARIA
FLORES,

            Debtors - Appellees.


               Appeal from the United States Bankruptcy Court
                    for the Central District of California
               Meredith A. Jury, Bankruptcy Judge, Presiding

               Argued and Submitted En Banc March 19, 2013
                         San Francisco, California

Before: KOZINSKI, Chief Judge, and PREGERSON, O’SCANNLAIN,
THOMAS, SILVERMAN, GRABER, WARDLAW, PAEZ, MURGUIA,
CHRISTEN, and NGUYEN, Circuit Judges.

                           Opinion by Judge Graber

GRABER, Circuit Judge:
         In Maney v. Kagenveama (In re Kagenveama), 541 F.3d 868, 875 (9th Cir.

2008), we held that 11 U.S.C. § 1325(b)(1)(B) does not impose a minimum

duration for a Chapter 13 bankruptcy plan if the debtor has no "projected

disposable income," as defined in the statute. Today, sitting en banc, we overrule

that aspect of Kagenveama and hold that the statute permits confirmation only if

the length of the proposed plan is at least equal to the applicable commitment

period under § 1325(b)(4). Accordingly, we affirm the judgment of the bankruptcy

court.

                                     I. Background

         Debtors Cesar and Ana Flores filed a petition for relief under Chapter 13 of

the Bankruptcy Code. They have unsecured debts. They proposed a plan of

reorganization under which they would pay $122 per month (1%) of allowed,

unsecured, nonpriority claims for three years. Chapter 13 Trustee Rod Danielson

objected to the plan, arguing, as now relevant, that § 1325(b) requires a minimum

duration of five years for persons in Debtors’ circumstances.1

         The bankruptcy court sustained the Trustee’s objection, holding that Debtors

were not entitled to a shorter plan duration because the Supreme Court’s decision


         1
        The Trustee has never questioned Debtors’ good faith in proposing the
plan. See 11 U.S.C. § 1325(a)(3) (setting forth requirement of the debtors’ good
faith).
                                            2
in Hamilton v. Lanning, 130 S. Ct. 2464 (2010), is clearly irreconcilable with

Kagenveama.2 The bankruptcy court confirmed a plan of five years’ duration,

which provided for monthly payments of $148 to unsecured creditors.3

      Debtors timely appealed to the Bankruptcy Appellate Panel. The bankruptcy

court then certified the plan-duration issue for direct appeal to this court pursuant

to 28 U.S.C. § 158(d)(2). A divided panel of this court reversed, reasoning that

Lanning is not clearly irreconcilable with Kagenveama and that, under

Kagenveama, § 1325(b) allows a shorter plan duration for Debtors. Danielson v.

Flores (In re Flores), 692 F.3d 1021, 1038 (9th Cir. 2012). We then voted to rehear

the case en banc. Danielson v. Flores (In re Flores), 704 F.3d 1067 (9th Cir.

2012).4

                                     II. Analysis




      2
        See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc)
(holding that a three-judge panel is not bound by prior circuit precedent if an
intervening decision of a higher authority "undercut[s] the theory or reasoning
underlying the prior circuit precedent in such a way that the cases are clearly
irreconcilable").
      3
          Debtors do not dispute the increase from $122 to $148 per month.
      4
        We review de novo issues of statutory construction, including a bankruptcy
court’s interpretation of the Bankruptcy Code. Samson v. W. Capital Partners,
LLC (In re Blixseth), 684 F.3d 865, 869 (9th Cir. 2012) (per curiam).
                                           3
      Chapter 13 is a mechanism available to "individual[s] with regular income"

whose debts are within statutory limits. 11 U.S.C. §§ 101(30), 109(e). Unlike

Chapter 7, which requires debtors to liquidate nonexempt assets to pay creditors,

Chapter 13 permits debtors to keep those assets if they "agree to a court-approved

plan under which they pay creditors out of their future income." Lanning, 130 S.

Ct. at 2468–69 (citing 11 U.S.C. §§ 1306(b), 1321, 1322(a)(1), 1328(a)). A

bankruptcy trustee oversees the filing and execution of the plan. 11 U.S.C.

§ 1322(a)(1); see also 28 U.S.C. § 586(a)(3).

      Section 1325 of the Bankruptcy Code sets forth the circumstances in which

the bankruptcy court "shall" confirm a debtor’s proposed repayment plan and those

in which it "may not" do so. Under subsection 1325(b)(1), if the trustee or an

unsecured creditor objects to a debtor’s proposed plan, the court may not approve

the plan unless at least one of two conditions is met. As relevant here, the second

of those conditions is that "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." 11 U.S.C. § 1325(b)(1)(B)

(emphasis added). The statute further provides that the "applicable commitment

period" of a plan "shall be" either


                                           4
             (A) subject to subparagraph (B), . . .

                    (i) 3 years; or

                     (ii) not less than 5 years, if the [debtor’s] current
             monthly income . . ., when multiplied by 12, is not less
             than [the median annual family income in the applicable
             state]; and

              (B) may be less than 3 or 5 years, whichever is applicable under
      subparagraph (A), but only if the plan provides for payment in full of
      all allowed unsecured claims over a shorter period.

Id. § 1325(b)(4). The debtor’s "current monthly income" and "disposable income"

are calculated according to statutorily defined formulae. See id. § 101(10A)

(defining "current monthly income"); id. § 1325(b)(2) (defining "disposable

income"); see also Lanning, 130 S. Ct. at 2469, 2471–74, 2478 (holding that courts

must calculate "projected disposable income," which is not statutorily defined,

using a "forward-looking" approach (emphasis added)).

      It is undisputed that Debtors’ current monthly income is above-median and

that subsection 1325(b)(4)(B)’s exception to the five-year applicable commitment

period set forth in § 1325(b)(4)(A)(ii) does not apply. Debtors nonetheless

contend that their proposed three-year plan was permissible because

§ 1325(b)(1)(B) does not set forth a minimum plan duration for debtors who, like

them, have no projected disposable income.



                                            5
      Courts have interpreted § 1325(b)(1)(B)’s condition for plan confirmation in

three distinct ways. See Baud v. Carroll, 634 F.3d 327, 336–38 (6th Cir. 2011)

(describing split of decisions and collecting cases), cert. denied, 132 S. Ct. 997

(2012). First, a minority of bankruptcy courts view the "applicable commitment

period" solely as a monetary "multiplier"; under that "monetary" approach, the

number of months in the applicable commitment period is multiplied by the

debtor’s projected disposable monthly income to determine the total payments that

a debtor must make, but the period has no temporal significance. Id. at 336–38 &

n.7. Second, other bankruptcy courts, as well as this court in Kagenveama, have

held that, although the statute does set forth a temporal requirement, that temporal

requirement does not apply to debtors whose projected disposable income is less

than or equal to $0. Baud, 634 F.3d at 337. Third and finally, a majority of courts

have held that a plan cannot be confirmed unless its length is at least as long as the

applicable commitment period, without regard to "whether the debtor has positive,

zero[,] or negative projected disposable income." Id. at 336–37. We therefore

must consider two issues: (1) whether, under § 1325(b)(1)(B), the applicable

commitment period acts as a temporal requirement that defines a plan’s minimum

duration; and (2) if it does, whether that requirement applies to debtors who have

no projected disposable income.


                                           6
      With respect to the first issue, we hold that the statute defines a temporal, as

distinct from a monetary, requirement for confirmation under § 1325(b)(1)(B).

Most importantly, the statute defines the applicable commitment period as having a

duration: "3 years," "not less than 5 years," or "less than 3 or 5 years," depending

on the debtor’s current monthly income and the plan’s provisions for payments to

unsecured creditors. 11 U.S.C. § 1325(b)(4). Furthermore, the requirement of

§ 1325(b)(1)(B) that the plan provide for payment of the debtor’s disposable

income "to be received in the applicable commitment period" suggests an ongoing

series of payments for the future duration of that period. A plan cannot provide for

the payment of income to be received during a defined period unless it remains in

effect during that period.5

      Three of our sister courts—the Sixth, Eighth, and Eleventh Circuits—are

among the courts that have rejected the view that the applicable commitment


      5
         Our interpretation of § 1325(b)(1)(B) does not render that provision
redundant with § 1322(d), which sets forth the maximum periods of time for a
Chapter 13 bankruptcy, because § 1325(b)(1)(B) concerns the plan’s minimum
duration. Although both the maximum and the minimum will be five years for
many debtors whose income, like that of the debtors in this case, is above-median,
11 U.S.C. §§ 1322(d)(1), 1325(b)(4)(A)(ii), a range of permissible plan durations
remain possible if a proposed plan to repay all allowed unsecured creditors’ claims
in full warrants a shorter applicable commitment period under § 1325(b)(4)(B).
Furthermore, § 1325(b) is triggered only if the trustee or a creditor objects,
whereas § 1322(d) applies in all cases, a distinction that suggests that Congress
intended the two sections to serve different functions.
                                          7
period is merely a monetary multiplier for determining the amount that the debtor

must pay to unsecured creditors. Baud, 634 F.3d at 344; Whaley v. Tennyson (In

re Tennyson), 611 F.3d 873, 880 (11th Cir. 2010); Coop v. Frederickson (In re

Frederickson), 545 F.3d 652, 660 (8th Cir. 2008). We join those courts and hold

that the applicable commitment period determines the minimum duration that a

plan must have to be confirmable under § 1325(b)(1)(B). In doing so, we reaffirm

one aspect of the decision in Kagenveama, in which the panel reasoned that, in

general, the applicable commitment period imposes a temporal requirement

because the "plain meaning of the word ‘period’ indicates a period of time." 541

F.3d at 876.

      With respect to the second issue, we must decide whether a court may

confirm a plan that is shorter than the applicable commitment period defined by

§ 1325(b)(4) if the debtor has no projected disposable income. In light of the

statute’s text, purpose, and legislative history, we now hold that the temporal

requirement of § 1325(b) applies regardless of the debtor’s projected disposable

income.

      In Kagenveama, we held that the § 1325(b)(1)(B) temporal requirement

contains an implicit exception because the "‘applicable commitment period’ is

exclusively linked to § 1325(b)(1)(B) and the ‘projected disposable income’


                                          8
calculation." 541 F.3d at 876. Noting that "[n]othing in the Bankruptcy Code

states that the ‘applicable commitment period’ applies to all Chapter 13 plans," the

panel concluded that "[w]hen there is no ‘projected disposable income,’ there is no

‘applicable commitment period.’" Id. at 876, 877. The Sixth and Eleventh Circuits

have disagreed and have held that § 1325(b) contains no such exception for debtors

with no projected disposable income. See Baud, 634 F.3d at 351 ("[T]he temporal

requirement of the applicable commitment period applies to debtors facing a

confirmation objection even if they have zero or negative projected disposable

income."); Tennyson, 611 F.3d at 880 ("[T]he ‘applicable commitment period’ is a

temporal term that prescribes the minimum [plan] duration . . . . The only

exception to this minimum period, if unsecured claims are fully repaid, is provided

in § 1325(b)(4)(B).").6 We now agree with the other circuits’ interpretation.

      Our analysis begins with the statute’s text. Miranda v. Anchondo, 684 F.3d

844, 849 (9th Cir.), cert. denied, 133 S. Ct. 256 (2012). Although § 1325(b) is

somewhat ambiguous, see Baud, 634 F.3d at 351 (noting that "the plain-language

arguments" for and against an exception to § 1325(b)’s temporal requirement "are

nearly in equipoise"), that subsection is best read to impose its temporal


      6
        In Frederickson, the Eighth Circuit expressly declined to decide whether
such an exception to § 1325(b)’s temporal requirement exists when a debtor’s
projected disposable income is either zero or negative. 545 F.3d at 660 n.6.
                                          9
requirement regardless of the debtor’s projected disposable income. Most

significantly, the statute makes neither § 1325(b)(4)’s calculation of the applicable

commitment period nor § 1325(b)(1)(B)’s requirement that a plan provide for

payments over that period explicitly contingent on a particular level of projected

disposable income. Thus, even though a debtor’s payments to unsecured creditors

will, at least initially, amount to $0 if the debtor has no projected disposable

income, the statute requires the debtor to commit to the plan for the duration of the

applicable commitment period.

      Furthermore, "the words of a statute must be read in their context and with a

view to their place in the overall statutory scheme." Gale v. First Franklin Loan

Servs., 701 F.3d 1240, 1244 (9th Cir. 2012) (internal quotation marks omitted).

The structure of Chapter 13 confirms that § 1325(b)(1)(B) establishes a minimum

plan duration even if the debtor has no projected disposable income. A debtor’s

applicable commitment period is not, as the panel reasoned in Kagenveama,

"exclusively linked to § 1325(b)(1)(B) and the ‘projected disposable income’

calculation." 541 F.3d at 876. Rather, the applicable commitment period is

expressly incorporated as a temporal limit for purposes of plan modification under

§ 1329.




                                           10
      Under § 1329(a), a bankruptcy court may modify a plan at any time after

plan confirmation, so long as the modification occurs before the completion of

payments under the plan. But a modified plan "may not provide for payments over

a period that expires after the applicable commitment period under section

1325(b)(1)(B) after the time that the first payment under the original confirmed

plan was due." 11 U.S.C. § 1329(c) (emphasis added). Thus, the statute defines

the temporal window within which modified payments under § 1329 may be made

by reference to the applicable commitment period. Indeed, the quoted text would

make no sense unless the applicable commitment period describes a length of time

that can expire or be altered. With respect to plan modification, then, the

applicable commitment period serves as a measure of plan duration that is wholly

unrelated to the amount of the debtor’s disposable income.

      A minimum duration for Chapter 13 plans is crucial to an important purpose

of § 1329’s modification process: to ensure that unsecured creditors have a

mechanism for seeking increased (that is, non-zero) payments if a debtor’s

financial circumstances improve unexpectedly. See Fridley v. Forsythe (In re

Fridley), 380 B.R. 538, 543 (B.A.P. 9th Cir. 2007) ("Subsequent increases in [a

debtor’s] actual income can be captured for creditors by way of a § 1329 plan

modification . . . ."). The bankruptcy court may modify a plan to "increase . . . the


                                          11
amount of payments on claims of a particular class." 11 U.S.C. § 1329(a)(1). In

other words, even if a debtor has no projected disposable income at the time of

plan confirmation, and his or her statutorily required payments under

§ 1325(b)(1)(B) are therefore $0, unsecured creditors may request a later

modification of the plan to increase the debtor’s payments if the debtor acquires

disposable income during the pendency of the applicable commitment period.

Creditors’ opportunity to seek increased payments that correspond to changed

circumstances would be undermined by an interpretation of § 1325(b)(1)(B) that

relieves debtors from a minimum plan duration merely because they have no

projected disposable income at the time of plan confirmation.7

      Interpreting § 1325(b)(1)(B) to impose a minimum plan duration is also

consistent with the prevailing interpretation in our circuit of §§ 1328(a) and

1329(a). Much as § 1329(a) permits modification until "completion of payments

under [the] plan," § 1328(a) entitles the debtor to discharge "after completion by



      7
         This conclusion is bolstered by the sections of the Code that allow creditors
to monitor a debtor’s financial situation during the bankruptcy. For instance,
Chapter 13 debtors, upon request, must provide post-petition reports of the amount
and sources of their income, see 11 U.S.C. § 521(f)–(g), and the "obvious purpose
of this self-reporting obligation is to provide information needed by a [creditor] to
decide whether to propose hostile § 1329 plan modifications," Fridley, 380 B.R. at
544. The purpose of these monitoring provisions would be undermined if each
plan did not have a minimum duration.
                                          12
the debtor of all payments under the plan." In Fridley, the Ninth Circuit

Bankruptcy Appellate Panel ("BAP") considered when a plan is "completed" for

purposes of § 1329(a) and § 1328(a). The debtors in that case had not paid all

allowed unsecured claims in full, but sought discharge after prepaying the

payments that they were required to make under their confirmed plan. Fridley, 380

B.R. at 540. The BAP ruled that the debtors were not entitled to discharge because

"prepayment does not ‘complete’ [a] plan for purposes of §§ 1328(a) or 1329." Id.

at 545. Rather, it held, "[t]he ‘applicable commitment period’ in § 1325(b) is a

temporal requirement . . . [and] the statutory concept of ‘completion’ of payments

includes the completion of the requisite period of time." Id. at 546. The BAP

reached that conclusion even though that case, like this one, involved debtors who

had no projected disposable income and for whom § 1325(b)(1)(B) accordingly

would permit monthly payments of $0 to unsecured creditors. Id. at 540.

      Because the text of § 1325(b) is ambiguous, we also look to legislative

history in construing its temporal requirement. See Wilson v. Comm’r, 705 F.3d

980, 987–88 (9th Cir. 2013) (holding that we may consult legislative history as an

aid to the interpretation of ambiguous text). Congress amended § 1325(b), adding

the statutory text concerning the "applicable commitment period" that is at issue

here, in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005


                                         13
("BAPCPA"), Pub. L. No. 109-8, § 318, 119 Stat. 23. The legislative history of

BAPCPA supports our interpretation of § 1325(b)(1)(B) as requiring a minimum

plan duration:

             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 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 (boldface type added). Although the quoted section of the House Report is

confusingly worded, its 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.

      Finally, our interpretation of § 1325(b)(1)(B) is consistent with the policies

that underlie the Bankruptcy Code and the BAPCPA amendments. "The principal

purpose of the Bankruptcy Code is to grant a ‘fresh start’ to the ‘honest but

unfortunate debtor.’" Marrama v. Citizens Bank, 549 U.S. 365, 367 (2007)


                                          14
(quoting Grogan v. Garner, 498 U.S. 279, 286, 287 (1991)). But that generality is

not the end of the story. We have recognized that bankruptcy also serves the

"often conflicting" policy of promoting creditors’ interest in repayment. Dumont

v. Ford Motor Credit Co. (In re Dumont), 581 F.3d 1104, 1111 (9th Cir. 2009); 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"). The imposition of a minimum duration is

consistent with both of those policies: By ensuring the availability of plan

modification over the applicable commitment period, even when the debtor cannot

make any payments at the outset, our reading permits Chapter 13 to operate as a

mechanism for repayment over time by wage earners, in accordance with their

actual ability to pay. See generally 8 Collier on Bankruptcy ¶ 1300.02 (Alan N.

Resnick & Henry J. Sommer eds., 16th ed. 2012).

      In Lanning, the Supreme Court relied in part on similar considerations in

rejecting an interpretation of § 1325(b) that would require courts to calculate

projected disposable income using a "mechanical approach" that depends only on a

debtor’s current monthly income during the six-month period preceding the

bankruptcy filing date. 130 S. Ct. at 2469–70. The Court favored a "forward-

looking" approach that takes into account known or nearly certain information


                                          15
about changes in a debtor’s earning power during the plan period. Id. at 2475. The

policy justification for looking to future earnings is that a failure to do so "would

deny creditors payments that the debtor could easily make." Id. at 2476. In other

words, the statute is meant to allow creditors to receive increased payments from

debtors whose earnings happen to increase. 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 the same logic persuades us that Congress

intended § 1325(b)(1)(B) to ensure a plan duration that gives meaning to § 1329’s

modification procedure as a mechanism for post-confirmation adjustments for

unforeseen increases in a debtor’s income. That mechanism will achieve its

purpose most effectively if the Chapter 13 plan has a minimum duration within

which modification is possible. Accordingly, the policy that underlies Lanning

also supports our reading of § 1325(b)(1)(B).

                                   III. Conclusion

      In summary, we hold that a bankruptcy court may confirm a Chapter 13 plan

under 11 U.S.C. § 1325(b)(1)(B) only if the plan’s duration is at least as long as the

applicable commitment period provided by § 1325(b)(4). Accordingly, we

overrule Kagenveama’s holding regarding the meaning of "applicable commitment

period" and affirm the bankruptcy court’s ruling.

      The mandate shall issue forthwith.

                                           16
AFFIRMED.




            17
                                   COUNSEL

      Elizabeth A. Schneider, Office of Rod Danielson, Chapter 13 Trustee, for
Trustee-Appellant.

      Robert J. Pfister (argued), Klee, Tuchin, Bogdanoff & Stern LLP, Los
Angeles, California, and Nancy B. Clark, Borowitz & Clark, LLP, West Covina,
California, for Debtors-Appellees.

      William Andrew McNeal (argued) and Gilbert B. Weisman, Becket & Lee
LLP, Malvern, Pennsylvania, for Amici Curiae American Express Travel Related
Services Co., Inc., American Express Bank, FSB, and American Express Centurion
Bank; and Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose,
California, for Amicus Curiae National Association of Consumer Bankruptcy
Attorneys.




                                       18
                                                                            FILED
Danielson v. Flores (In re Flores), No. 11-55452                            AUG 29 2013

                                                                         MOLLY C. DWYER, CLERK
PREGERSON, Circuit Judge, dissenting, with whom KOZINSKI, Chief Judge, OF APPEALS
                                                              U.S. COURT



joins:

         The majority overrules our holding in Maney v. Kagenveama that the

Chapter 13 “applicable commitment period” does not mandate a five-year plan

length for above median debtors with no projected disposable income. 541 F.3d

868, 876 (9th Cir. 2008). The majority’s interpretation of 11 U.S.C. §

1325(b)(1)(B) promotes goals that are at odds with Congress’s purpose when it

enacted Chapter 13 to “provide the debtor with a fresh start.” H.R. REP. NO. 95-

595, at 117 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6079. The majority also

reads language into Chapter 13 bankruptcy law that is not present in the plain text

of § 1325(b)(1)(B).

I. Bankruptcy’s Purpose is to Provide Debtors with a Fresh Start

         Congress enacted the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598,

92 Stat. 2549 to make “bankruptcy a more effective remedy for the unfortunate

consumer debtor.” H.R. REP. NO. 95-595, at 4 (1977). At the time, Congress

lamented that “[e]xtensions on plans, new cases, and newly incurred debts put

some debtors under court supervised repayment plans for seven to ten years.” Id.

at 117. Congress went on to say that such lengthy repayment plans were “the

closest thing there is to indentured servitude.” Id. Congress stated that
“bankruptcy relief should be effective, and should provide the debtor with a fresh

start.” Id. (emphasis added). Chapter 13 bankruptcy was intended to be helpful to

debtors and creditors. Debtors are able to preserve existing assets if they complete

a repayment plan under the supervision of a Chapter 13 trustee. SCOTT ET AL., 8

COLLIER ON BANKRUPTCY 1300-12 (Lawrence P. King et al. eds., 15th ed. rev.

2007). Creditor interests are promoted through recoveries from future income that

are not available in Chapter 7 liquidation. Id.

      Congress updated the bankruptcy laws for the first time since 1978 with the

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No.

109-8, 119 Stat. 23 (2005). At the law’s signing, President George W. Bush

reiterated many of the purposes expressed by Congress in 1978:

      Our bankruptcy laws are an important part of the safety net of
      America. They give those who cannot pay their debts a fresh start. . .
      . Under the new law, Americans who have the ability to pay will be
      required to pay back at least a portion of their debts. Those who fall
      behind their state’s median income will not be required to pay back
      their debts. . . . The act of Congress I sign today will protect those
      who legitimately need help, stop those who try to commit fraud, and
      bring greater stability and fairness to our financial system.

Press Release, White House Press Office, President Signs Bankruptcy Abuse

Prevention, Consumer Protection Act (Apr. 20, 2005), reprinted in 2005

U.S.C.C.A.N. S7, 2005 (emphasis added).



                                          2
II. The Applicable Commitment Period does not Mandate a Five-Year
Chapter 13 Plan for Debtors with no Projected Disposable Income

      Unlike the majority, I interpret § 1325 to mean that the applicable

commitment period in which debtors are required to distribute projected disposable

income to unsecured creditors applies only to debtors with projected disposable

income.

      Chapter 13 bankruptcy, as enacted in the Bankruptcy Reform Act of 1978,

allows a debtor to use future income to pay off debt, while allowing her to keep her

assets. See H.R. REP. NO. 95-595 at 118 (1977); see also 8 SCOTT ET AL., supra, at

1300-12. A Chapter 13 debtor is designated “above median” when her annualized

“current monthly income,” 11 U.S.C. § 101(10A), is greater than the yearly

“median family income” in her state. 11 U.S.C. § 1325(b)(2)-(3); 11 U.S.C.

101(10A). The Floreses are above median debtors. When an above median

Chapter 13 debtor’s monthly expenses are greater than her monthly income as

calculated under 11 U.S.C. § 707(b)(2)(A)-(B), she is deemed to have no projected

disposable income. See 11 U.S.C. § 1325(b)(3). Here, it is undisputed that the

Floreses’ expenses are greater than their income and that they have no projected

disposable income.

      A Chapter 13 debtor is solely responsible for filing a proposed payment

                                         3
plan. 11 U.S.C. § 1321. Among the requirements for Chapter 13 plans are: that

the plan is proposed and the petition is filed in good faith; that the holders of

secured claims approve of the plan; that the debtor will be able to make all

payments under and comply with the plan; and that the total payments to be made

under the plan are not less than the amount that would be paid if the estate of the

debtor were liquidated under Chapter 7. 11 U.S.C. § 1325(a)(3)-(7). Above

median debtors are instructed that “the [Chapter 13] plan [they propose] may not

provide for payments over a period that is longer than five years.” 11 U.S.C. §

1322(d)(1).

      The Floreses proposed a three-year plan during which they would make

monthly payments of $122. The trustee objected to the Floreses’ proposed plan on

the ground that the plan should have required payments for five years, rather than

three years. The bankruptcy judge increased the monthly payments to $148 and

the length of the plan to five years; the monetary increase is not contested on

appeal. It is undisputed that the Floreses’ three-year Chapter 13 plan was proposed

in good faith, that the Floreses are able to comply with the plan, and that the

Floreses are paying more than they would be if they liquidated their assets under

Chapter 7. It is also undisputed that the Floreses’ three-year Chapter 13


                                           4
bankruptcy plan was less than five years pursuant to § 1322(d)(1).

      If a trustee or unsecured creditor objects to a debtor’s Chapter 13 plan, the

bankruptcy court may not approve the plan unless “the plan provides that all of the

debtor’s projected disposable income to be received in the applicable commitment

period . . . will be applied to make payments to unsecured creditors under the

plan.” 11 U.S.C. § 1325(b)(1)(B). The applicable commitment period is three

years for debtors with below median income and five years for debtors with above

median income. 11 U.S.C. § 1325(b)(4)(A). Because the Floreses are above

median debtors, their corresponding applicable commitment period is five years.

The Floreses, however, have no projected disposable income. Thus, the Floreses

will contribute no projected disposable income to unsecured creditors over their

five year applicable commitment period.

       Courts have approached the applicable commitment period in several

different ways. Some courts, such as the majority here, endorse what is called the

temporal approach, where the applicable commitment period is treated as a time

requirement for Chapter 13 plan length. This approach has been endorsed by the

Sixth, Eighth, and Eleventh Circuits, and district courts in the Fifth, Seventh, and

Tenth Circuits. See Baud v. Carroll, 634 F.3d 327 (6th Cir. 2011); In re Tennyson,


                                          5
611 F.3d 873 (11th Cir. 2010); In re Frederickson, 545 F.3d 652 (8th Cir. 2008);

In re Martin, 464 B.R. 798 (C.D.Ill. 2012); In re Wing, 45 B.R. 705 (D. Co. 2010);

In re Meadows, 410 B.R. 242 (N.D. Tx. 2009). Other courts have endorsed the

monetary approach, where debtors contribute a set amount of money in a time

period that may be shorter than the applicable commitment period. This approach

has been endorsed by district courts in the Second and Third Circuits. See In re

Green, 378 B.R. 30 (N.D.N.Y. 2007); In re Vidal, 418 B.R. 135 (M.D. Pa. 2009).

I continue to endorse the hybrid approach we endorsed in Kagenveama and in the

original Flores opinion. Under that approach, “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.’” Danielson

v. Flores, 692 F.3d 1021, 1027 (9th Cir. 2012).

      The Chapter 13 “applicable commitment period” does not explicitly apply to

debtors who qualify for Chapter 13 bankruptcy but have no projected disposable

income. The majority concludes, however, that the “applicable commitment

period” should determine the requisite length of a Chapter 13 plan for all debtors,

whether or not they have projected disposable income. The majority disregards the

portion of § 1325(b)(1)(B) that ties the “applicable commitment period” to the


                                          6
period of time when projected disposable income is supposed to be distributed to

unsecured creditors. Under § 1325(b)(1)(B), the bankruptcy court may not

approve the plan unless “the plan provides that all of the debtor’s projected

disposable income to be received in the applicable commitment period . . . will be

applied to make payments to unsecured creditors under the plan.” By doing so, the

majority interprets § 1325(b)(1)(B) to say that when a trustee objects to a Chapter

13 plan, the bankruptcy court may not approve the plan unless “the plan provides

that all of the debtor’s [Chapter 13 payments] to be received in the applicable

commitment period . . . will be applied to make payments to unsecured creditors

under the plan.” § 1325(b)(1)(B).

      The majority’s reading of § 1325(b)(1)(B) is at odds with the provision’s

plain language. A debtor’s payments under a Chapter 13 bankruptcy plan are

different than the disposable income a debtor is projected to earn over a period of

years. After the Bankruptcy Abuse Prevention and Consumer Protection Act of

2005 (BAPCPA), a debtor does not need to have projected disposable income to

qualify for, and make payments under, a Chapter 13 bankruptcy plan. See Henry

E. Hildebrand II, Impact of the Bankruptcy Abuse Prevention and Consumer

Protection Act of 2005 of Chapter 13 Trustees, 79 AM. BANKR. L.J. 373, 389


                                          7
(2005) (“The formula utilized in the means test [to determine projected disposable

income] has no relation to the proposed plan and bears no relationship to the

amount of money that actually may be available from a debtor for payments to

unsecured creditors if a plan is confirmed.”).

      Nor is there any indication from Congress that the statutory difference

between projected disposable income and Chapter 13 plan payments was an

unintended consequence or oversight. See Susan Jensen, A Legislative History of

the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 79 AM.

BANKR. L.J. 485, 567-68 (2005) (explaining that, like the Bankruptcy Reform Act

of 1978, the BAPCPA of 2005 was adopted in the absence of economic depression

and panic, and is the culmination of nearly ten years of work, involving hundreds

of participants) (citation omitted).

      The majority concludes that the exception permitting a shorter applicable

commitment period under § 1325(b)(4)(B) does not apply to the Floreses. The

majority’s conclusion is correct, but the majority’s reasoning is flawed. The

majority understands shortening the applicable commitment period to be the same

thing as shortening the length of the plan. The exception reads:

      [The applicable commitment period] may be less than 3 or 5 years . . .
      only if the plan provides for payment in full of all allowed unsecured

                                          8
      claims over a shorter period.

Id. The majority reasons that the Floreses may not propose a plan with an

applicable commitment period that is shorter than five years because the Floreses

have not proposed a plan in which their unsecured claims will be paid in full.

Under a reading of the plain text of the statute, however, the exception is

inapplicable to the Floreses. Because the Floreses have no projected disposable

income to distribute to unsecured creditors during the applicable commitment

period, there is no applicable commitment period that applies to them. Thus, the §

1325(b)(4)(B) exception has no bearing on the length of the plan the Floreses may

propose.

      The majority’s concern that only a mandatory minimum plan duration will

“allow creditors to receive increased payments from debtors whose earnings

happen to increase” is unfounded. Maj. 16. As above median debtors with no

projected disposable income, the Floreses are bound by several statutory

requirements that are helpful to creditors: that their plan be proposed in good faith;

that they are able to comply with the plan and make all payments; and that they pay

more in Chapter 13 bankruptcy than they would in Chapter 7 bankruptcy.

Moreover, the Floreses’ plan may be modified after the plan is confirmed, but


                                          9
before payments are completed, by the debtor, trustee, or the holder of an allowed

unsecured claim. 11 U.S.C. § 1329(a). The plan may be modified to:

      (1) increase or reduce the amount of payments on claims of a
      particular class provided for by the plan;
      (2) extend or reduce the time for such payments;
      (3) alter the amount of the distribution to a creditor whose claim is
      provided for by the plan to the extent necessary to take account of any
      payment of such claim other than under the plan; or
      (4) reduce amounts to be paid under the plan by the actual amount
      expended by the debtor to purchase health insurance.

Id. Section 1329(c) reiterates that even though a plan may be extended after it is

confirmed, a “court may not approve a [Chapter 13 plan] period that expires after

five years.”

      There is no statutory language to support the majority’s finding that when

Trustee Danielson objected to the Floreses’ proposed plan length of three years, the

bankruptcy court was statutorily prohibited from approving a plan shorter than five

years in length.

                                  CONCLUSION

      Under the majority’s reading of § 1325(b)(1)(B), above median debtors with

no projected disposable income will be forced to propose five year plans in

contravention of Congress’s purpose when it implemented Chapter 13 to make

“bankruptcy a more effective remedy for the unfortunate consumer debtor.” H.R.

                                         10
REP. NO. 95-595, at 5966 (1977). The majority misreads § 1325(b)(1)(B) to

require that the bankruptcy court approve a Chapter 13 plan only if all of a debtor’s

Chapter 13 payments—rather than projected disposable income—will be received

during the applicable commitment period.

      After Trustee Danielson objected to the Floreses’ proposed plan, the

bankruptcy court was not statutorily precluded from approving the Floreses’ three-

year Chapter 13 repayment plan. Therefore, I respectfully dissent.




                                         11
