Cite as: Keith M. Lundin, Lundin On Chapter 13, § 113.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
BAPCPA added this new confirmation requirement to § 1325(a)(8):
the debtor has paid all amounts that are required to be paid under a domestic support obligation and that first become payable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute, to pay such domestic support obligation.1
Domestic support obligation (DSO) is a term of art new to the Bankruptcy Code with BAPCPA. DSO is defined by § 101(14A) to include all alimony, maintenance or support that “accrues before, on or after the date of the order for relief . . . including interest that accrues on that debt as provided under applicable nonbankruptcy law.”2
To confirm a Chapter 13 plan, the debtor must be current with respect to a DSO that first “become[s] payable” after the petition. “Accrue” should mean something different than “become payable.” New § 1325(a)(8) only requires that the debtor be current at confirmation with respect to amounts that “first become payable” after the petition. Perhaps there will be DSOs that “accrue” after the petition but become payable at some other time. A DSO that became payable before the petition would not qualify. Support “arrearages” at the petition would be priority claims that must be paid in full through the plan3 but would not have to be paid as of confirmation.
Under § 101(14A)(C), a DSO can be established by a separation agreement, a divorce decree, a property settlement agreement, an order of a court of record or a determination in accordance with applicable nonbankruptcy law by a governmental unit.4 Under new § 1325(a)(8), the debtor is required to be current under a DSO that first becomes payable after the petition if payment is required by a “judicial or administrative order, or by statute.” What is a DSO “required by . . . statute”? Section 101(14A) does not include in its comprehensive definition of DSO an obligation that arises only by statute. How would an obligation in the nature of alimony, maintenance or support arise only by statute and still be a DSO under the definition in § 101(14A)? How would anyone know whether the debtor has satisfied every statute with respect to DSOs?
New § 1325(a)(8) raises the possibility that confirmation of a Chapter 13 plan will have preclusive effects with respect to DSOs. Confirmation would be a binding determination that all DSOs that first become payable after the petition have been paid by the debtor. The holder of a DSO would have to object to confirmation if there is any doubt about satisfaction of new § 1325(a)(8).
Chapter 13 debtors may have to allege or prove at confirmation that all DSOs that first became payable after the petition have been paid for purposes of new § 1325(a)(8). To provide notice to all holders of DSOs, debtors should include a provision in the plan that the debtor is current in all payments of DSOs that first became payable after the petition. Including such a provision in the plan and giving notice of the plan to the holders of all DSOs maximizes the likelihood that confirmation will preclude claims for postpetition, preconfirmation DSO payments.
New § 1325(a)(8) does not change the requirement for confirmation in § 1322(a)(2) that all claims entitled to priority must be paid in full through the plan unless the claim holder consents to different treatment. BAPCPA amended § 507 to provide a first priority for all DSOs.5 The Chapter 13 plan must pay all DSOs in full to accomplish confirmation—without regard to when the DSO becomes payable. New § 1325(a)(8) only adds that the debtor must be current in payment of DSOs that first become payable after the petition as a condition for confirmation.
By negative implication, a DSO that first becomes payable after the petition that is not contained in a judicial or administrative order or statute need not be current to accomplish confirmation of a plan. Separation agreements, for example, are not always embodied in a judicial or administrative order. Support obligations that become payable by agreement or otherwise than pursuant to a judicial or administrative order or statute need not be current at confirmation to satisfy § 1325(a)(8).
Increasingly, Chapter 13 practitioners are finding that paying DSOs by income deduction order through the Chapter 13 trustee increases the stability and likelihood of success in Chapter 13 cases. When ongoing support is provided for through the plan, it may be necessary to get a preconfirmation order authorizing the trustee to make preconfirmation DSO payments so that there will be no § 1325(a)(8) problems at confirmation.
1 11 U.S.C. § 1325(a)(8).
2 11 U.S.C. § 101(14A), discussed in §§ 440.1 [ New and Changed Priority Claims ] § 73.3 Priority Claims Added or Changed by BAPCPA, 519.1 [ Domestic Support Obligations ] § 136.21 Domestic Support Obligations after BAPCPA and 552.1 [ Domestic Support Obligations: § 523(a)(5) ] § 159.5 Domestic Support Obligations: § 523(a)(5).
3 See 11 U.S.C. § 1322(a)(2), discussed in § 519.1 [ Domestic Support Obligations ] § 136.21 Domestic Support Obligations after BAPCPA.
4 11 U.S.C. § 101(14A)(C).
5 See 11 U.S.C. § 507(a)(1), discussed in § 440.1 [ New and Changed Priority Claims ] § 73.3 Priority Claims Added or Changed by BAPCPA.