In re Flores

In a Chapter 13 plan, the reorganization period for an above-median-income debtor may be less than five years when projected disposable income is zero or negative. The Supreme Court's decision in Lanning did not overrule Ninth Circuit precedent in Kagenveama as it pertains to determining the applicable commitment period in Chapter 13 plans.

Debtors filed for relief under Chapter 13 and proposed a reorganization period of 36 months. Debtors’ median income exceeded that for their locality, and their projected disposable income was zero. Section 1325(b) requires an applicable commitment period of not less than five years when a debtor’s median income exceeds local median income. The Trustee objected to the three-year plan on the grounds that the Supreme Court’s decision in Lanning overruled Ninth Circuit precedent. The Supreme Court in Lanning determined that debtors should calculate projected disposable income using a flexible test, which overruled Ninth Circuit precedent set forth in Kagenveama that mandated a mechanical test. Along with requiring a mechanical test, the Court in Kagenveama determined that the applicable commitment period does not apply when projected disposable income is zero or negative, because a debtor has no disposable income to pay unsecured creditors. The Court found that Lanning only changed Ninth Circuit precedent as it pertains to calculation of projected disposable income, not determination of the applicable commitment period when debtors have no projected disposable income. Because Debtors did not have projected disposable income, the applicable commitment period did not apply and the 36-month plan may be confirmed. REVERSED and REMANDED.