Bankruptcy Judge Mark A. Randon of Detroit ruled in substance that his district’s model chapter 13 plan violates the “plain language” of Section 1322(d)(1) by requiring payments for more than five years.

Taking sides with the majority of courts, Judge Randon held that a chapter 13 debtor’s five-year commitment period begins to run from the first payment, not from confirmation.

The couple were debtors with income above the median, giving them a five-year commitment period. Their chapter 13 plan was scheduled for confirmation about 14 months after filing. As required, the couple had begun making payments within a month of filing.

The debtors proposed to modify the district’s model plan by providing that the 60-month commitment would begin to run with their first payment, not on confirmation. The chapter 13 trustee objected, arguing that the debtors could not modify the duration provision in the district’s model plan.

The difference was significant. If the commitment period began on confirmation, they would be making payments for 74 months, not 60.

In his September 11 opinion, Judge Randon said that the district’s model plan had been adopted after receiving comments from the public and chapter 13 trustees, informed by “the Court’s historical experience with previous model plans.”

The trustee contended that the effective date of the plan dictates when the applicable commitment period begins. However, Judge Randon said that “effective date” and “commitment period” are “separate concepts  ̶  neither of which controls the other.”

For debtors with income above the median, Section 1322(d)(1) provides that “the plan may not provide for payments over a period that is longer than 5 years,” and Section 1326(a)(1) makes the first payment due within 30 days of the order for relief or the filing of the plan, “whichever is earlier.”

Judge Randon cited bankruptcy judges from around the country holding that the commitment period begins with the first payment, not on confirmation. He recognized that some courts make the commitment period begin on confirmation, but he said he “disagrees.”

Based on the “plain language of the statute,” Judge Randon held that the debtors must contribute all of their disposable income “into the plan for five years beginning 30 days after the petition date.”

Judge Randon said he did not have authority to “vacate . . . the language of the model plan.” Nonetheless, he overruled the trustee’s objection by following the “plain language of the statute and start[ing] the commitment period 30 days after the petition date when the first plan payment was due under Section 1326(a)(1).”

Observation

Debtors in Detroit with confirmed plans should be entitled to modify their plans under Section 1329(a)(2) by reducing their payments to 60 months, if the other five judges in the district agree with Judge Randon. Stay tuned!