Meet the Roberts. Mr. and Mrs. Robert earned an average of $10,000 monthly in the six month period preceding the filing of their Chapter 13 bankruptcy. The Roberts now earn only $7,500 monthly because Mrs. Robert lost her job and got a new job earning less money. Which income do the Roberts use to calculate the amount that they must repay to their unsecured creditors? Meet the Thomases. Mr. and Mrs. Thomas earned an average of $5,000 monthly in the six-month period preceding the filing of their Chapter 13 bankruptcy. Due to Mr. Thomas securing a higher paying job, now the Thomases earn $8,000 monthly. Which income do the Thomases use to calculate the amount they must repay their unsecured creditors? The answers to these significant questions are not clear or even consistent among courts.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) created a wide split among courts in regards to the method that Chapter 13 debtors must use to calculate the “projected disposable income” that debtors must pay to their unsecured creditors. When Congress enacted BAPCPA, it included a new definition of income arguably for use in the calculation of a debtor’s projected disposable income. The new income definition creates confusion as debtors across the United States experience large discrepancies among courts, not to mention among jurisdictions, in terms of what constitutes projected disposable income under BAPCPA. Courts debate whether projected disposable income requires either an anticipated or historical calculation of income.
When courts apply the use of anticipated income, the results do not align with BAPCPA and produce varying effects on debtors. In Kibbe v. Sumski (In re Kibbe), the court mandated the use of anticipated income for Karen Kibbe because she secured a higher paying job just prior to filing her bankruptcy. Indeed, Ms. Kibbe’s monthly historical income was $1,068.50, while her monthly anticipated income was $5,027, resulting in an increase of $3,958.50 monthly. Thus, the court did not allow Ms. Kibbe to rely upon the explicitly stated definition of income under BAPCPA and forced her to include her anticipated income if she wished for the court to confirm her bankruptcy. In Pak v. eCast Settlement Corp. (In re Pak), the court found that John Pak had to devote his higher anticipated income in order to provide all projected disposable income. Indeed, Mr. Pak’s historical income was $2,666.67, but the court forced him to use the higher $8,666.67 anticipated income figure if he wished for the court to confirm his plan, leaving Mr. Pak unable to rely upon the statutory text of BAPCPA. Thus, both Karen Kibbe and John Pak experienced a detrimental effect from the courts’ interpretations of BAPCPA.
The use of anticipated income does not always, however, result in a detriment to debtors. In In re Jass, the court allowed the debtors, Paul and Wendy Jass, to utilize their anticipated lower income because the Jasses argued that they were unable to pay the higher figure due to Mr. Jass’s serious medical problems. Kibbe, Pak, Jass, and numerous other courts force debtors to calculate projected disposable income using a calculation of income that varies from that required under BAPCPA and, thus, these courts manipulate the statutory text of BAPCPA to achieve the desired result of abandoning BAPCPA to maintain pre-BAPCPA practices.
This Comment examines the split among courts regarding which calculation of income BAPCPA mandates that debtors should use to calculate projected disposable income, including a proposed resolution to the split. Part II of this Comment discusses the split among courts that interpret BAPCPA to require the use of anticipated income and those that interpret the requirement of historical income. Part II.A provides an overview of the statutory text leading to the split, discusses the pre-BAPCPA calculation of projected disposable income, and summarizes the statutory interpretation rules that all courts purport to follow in reaching their conclusions. Part II.B reviews the terms and phrases in the pertinent section of Title 11, as well as other sections and chapters, which the majority courts rely upon to find for the use of anticipated income. Part II.C discusses the minority courts’ interpretation of the explicitly stated definition of income under BAPCPA, as well the minority’s position in refuting the majority’s interpretation. Additionally, this Part reviews the minority courts’ discussion of congressional intent that supports the use of historical income, including a discussion of statutory provisions outside the pertinent section of Title 11 that support this view.
Part III evaluates the arguments for both the use of anticipated income and historical income. Part III.A focuses on the plain meaning of the pertinent statutory text to support the use of historical income and courts’ failure to consider this plain meaning when finding for the use of anticipated income. Part III.A also discusses courts’ manipulation of statutory text to achieve the desired result of employing the pre-BAPCPA method for income calculation. Part III.B discusses the congressional intent for the use of historical income, including a discussion of the legislative history surrounding BAPCPA, as well as provisions outside of the pertinent section, that support a congressional intent to use historical income. Part III.C argues that the use of historical income does not cause absurd results that courts cannot reconcile with the statutory text. In conclusion, this Comment proposes that BAPCPA mandates the use of historical income and does not support the use of anticipated income.