§ 112.3 — How to Calculate the Length of the Plan

Revised: June 7, 2004

[1]

The Code does not tell us exactly how to count the length of a Chapter 13 plan. Section 1322(d) speaks of a period that is “not . . . longer than three years” unless the court for cause approves a plan that is “not longer than five years.”1 The Code does not tell us from what date to count.

[2]

The three-year period for the projected disposable income test in § 1325(b) is somewhat more specifically described: the plan must provide that all of the debtor’s projected disposable income “to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.”2

[3]

When a Chapter 13 plan is modified after confirmation, 11 U.S.C. § 1329(c) requires that the modified plan “may not provide for payments over a period that expires after three years after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time.”3

[4]

Section 1326(a)(1) requires, unless the court orders otherwise, that the debtor commence making the payments proposed by a plan “within 30 days after the plan is filed.”4

[5]

There are several possible dates to begin counting the three-year or five-year periods in § 1322(d). The court might count from the date of the filing of the case, from the date of confirmation, from the date the first payment was due under § 1326, from the date of entry of the order to commence payments or from the date that the debtor actually made the first payment under the plan.

[6]

For purposes of the more specific disposable income test in § 1325(b)(1)(B), the first payment would be due under the debtor’s plan within 30 days after the plan is filed under § 1326(a)(1).5 Section 1329(c) also references “the first payment,” and the time period probably should be counted from the same date used for purposes of § 1325(b)(1)(B), but the reported decisions are not in agreement.6 It would be logical to count the three- and five-year periods in § 1322(d) from the same beginning date as the related time periods in §§ 1325(b) and 1329(c). Reading §§ 1322(d), 1325(b)(1)(B), 1326(a)(1) and 1329(c) all together, the three- and five-year periods would be counted from the date that the first payment was due from the debtor, which would ordinarily be within 30 days after the plan is filed, absent court order to the contrary.

[7]

A majority of courts have determined that the three-year period in § 1322(d) should be linked to the commencement of payments under § 1326(a)(1), but there is less agreement how to account for the linkage. Reasoning that a Chapter 13 debtor is required to file a plan within 15 days of the petition under Bankruptcy Rule 3015,7 and that the debtor must commence payments within 30 days of filing the plan under § 1326(a)(1),8 some bankruptcy courts hold that the length of a Chapter 13 plan is counted from 45 days after filing the petition.9 When the court granted an extension of time within which to file the Chapter 13 plan, the court held that the length of the plan should be calculated from 30 days after the extended deadline for filing the plan.10 One court concluded that § 1322(d) speaks in terms of a period of time rather than a number of payments; thus, a three-year plan was completed three years after the first payment was due under § 1326(a)(1) even though the debtor was unable to make all the payments required by the plan.11 Another court agreed that the five-year time period in § 1322(d) is calculated with reference to § 1326(a)(1), but fixed the reference point as the date of entry of an order to commence payments under § 1326(a)(1).12 A third court followed similar logic to a completely different point, counting the five-year maximum duration of a Chapter 13 plan from the date the first payment was actually made by the debtor, notwithstanding that the payment was made a week before it was due.13 The Bankruptcy Appellate Panel for the Ninth Circuit stated that the 60-month limit in § 1322(d) “begins to run from the date the first payment becomes due after confirmation.”14

[8]

In contrast, at least one court has measured the length of a Chapter 13 plan from the date of confirmation, rather than from the date payments commenced, or should have commenced. In In re Endicott,15 the plan called for payments to begin on March 1, 1992, with the 61st and last payment, a balloon payment, due on March 1, 1997. The plan was confirmed on August 25, 1992, but there was an earlier court order that required payments to commence in April of 1992. The court held that the proposed period of repayment fell “well within the five year limit” because payments should be completed several months before August of 1997.16

[9]

On compelling facts, a few courts have held that the duration of a Chapter 13 plan should be counted from the commencement of a prior Chapter 13 case. In In re Thomas,17 the debtor filed a second Chapter 13 case one month after dismissal of a prior Chapter 13 case. The bankruptcy court refused to confirm a five-year plan in the second case because, when combined with the plan in the preceding case, the total plan payment period would exceed five years: “To rule otherwise would allow this Debtor to gain from his prior default.”18 Citing Thomas, the court in In re Huerta19 refused confirmation of a second five-year plan filed after completion of a prior five-year plan, holding that when a Chapter 13 debtor serially files cases, the length of the plans should be added together to calculate the duration of the last plan. A third court applied similar logic to add the duration of the plan before conversion from Chapter 13 to Chapter 7 to the proposed duration of the plan after “reconversion” to Chapter 13.20

[10]

This last situation arguably is distinguishable from Thomas and Huerta. Reconversion involves the duration of plans within the same case—not the “tacking” together of durations from one Chapter 13 case to another case involving the same debtor.21

[11]

The tacking together of the durations of serial Chapter 13 cases to calculate the length of the last plan is not supported by any provision of the Bankruptcy Code. The Bankruptcy Appellate Panel for the Ninth Circuit rejected a “bright line rule that the cumulative time frame of multiple Chapter 13 filings cannot exceed five years.”22 Instead, the BAP observed that serial filing of Chapter 13 cases is properly controlled by denying confirmation for lack of good faith under § 1325(a)(3).23 The Bankruptcy Court for the Eastern District of Pennsylvania held that it is inappropriate to tack together the plan durations in a debtor’s four prior Chapter 13 cases to determine the length of the fifth plan under § 1322(d): “[Section] 1322[(d)] refers to ‘[t]he plan’ proposed in a particular case, and not a series of plans proposed in a number of cases. There is nothing in the language of § 1322[(d)] or § 109(g), or elsewhere in the Code, to suggest that several filings should be combined in a § 1322[(d)] analysis.”24

[12]

Given that income deduction orders under § 1325(c) are entered in some jurisdictions before confirmation and in other jurisdictions at or after confirmation,25 and not all courts enter separate orders implementing the requirement in § 1326(a)(1) that the debtor commence payments within 30 days after the plan is filed,26 greater consistency would be realized from a rule that the three-year and five-year periods in § 1322(d) are counted from the date that the first payment was due from the debtor under § 1326(a)(1) without regard to whether the debtor actually made that payment, and without regard to whether income deduction orders were entered. This approach puts a premium on prompt commencement of payments by the debtor, consistent with § 1326(a)(1), and burdens the debtor to stay current in payments, through any delay in reaching confirmation.

[13]

It is difficult to calculate the precise duration of the Chapter 13 plan at any particular point in time. In jurisdictions that confirm plans before the claims bar date,27 the actual amount of allowed claims will not be known at confirmation, and the projected length of the plan will be based on the debtor’s estimate of claims.28 Once the claims bar date has passed and the allowed amount of all claims is known, calculation of the duration of the plan becomes more precise: the trustee’s computer should be able to produce the actual number of months remaining to completion of the plan. Any calculation of plan duration assumes timely payments by the debtor and no postpetition claims. If the debtor misses a payment or if the timing of receipt by the trustee misses a distribution, the duration calculation will change—more interest will be payable to secured claim holders and more money will be needed to complete payments.


 

1  11 U.S.C. § 1322(d).

 

2  11 U.S.C. § 1325(b)(1)(B). See § 166.1 [ Counting the Three-Year Period ] § 91.5  Counting the Three-Year Period.

 

3  11 U.S.C. § 1329(c). See § 256.1 [ Duration of Modified Plan ] § 126.4  Duration of Modified Plan.

 

4  See §§ 43.1 [ First Test of Debtor’s Good Intentions ] § 44.1  First Test of Debtor’s Good Intentions and 43.2 [ Timing and Form of Payment ] § 44.2  Timing and Form of Payment.

 

5  See § 166.1 [ Counting the Three-Year Period ] § 91.5  Counting the Three-Year Period.

 

6  See § 256.1 [ Duration of Modified Plan ] § 126.4  Duration of Modified Plan.

 

7  See §§ 38.2 [ Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents ] § 37.4  Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents and 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan.

 

8  See § 43.2 [ Timing and Form of Payment ] § 44.2  Timing and Form of Payment.

 

9  Cobb v. Mortgage Default Servs. (In re Cobb), 122 B.R. 22 (Bankr. E.D. Pa. 1990) (Sixty-month maximum duration of a Chapter 13 plan is not extended by the debtor’s failure to comply with Bankruptcy Rule 3015, which requires debtor to file a plan within 15 days of filing of the petition. The months of delay between the filing of the petition and the filing of a plan will be deducted from the maximum 60-month period. The five-year period in § 1322(c) [redesignated as § 1322(d) by Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)] runs from the date that payments are due. Considering the cumulative effect of Bankruptcy Rule 3015 and 11 U.S.C. § 1326(a)(1), the five-year period begins 45 days after the petition. To count the five-year period from confirmation would allow delays by debtor or debtor’s counsel to manipulate the mandatory time period in § 1322(c) [redesignated as § 1322(d) by Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)].). Accord In re Collier, 193 B.R. 1, 2 (Bankr. D. Ariz. 1996) (For purposes of both §§ 1322(c) [redesignated as § 1322(d) by Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)] and 1329(c), the three-year and five-year time periods start no later than 45 days after commencement of the case. Resolving conflict between In re Nicholes, 184 B.R. 82 (B.A.P. 9th Cir. 1995) (Duration runs from the date debtor first obligated to begin making payments—within 45 days after the petition.), and In re Martin, 156 B.R. 47 (B.A.P. 9th Cir. 1993) (Sixty-month time period is counted from the first payment due after confirmation.), the “better reasoned view” is “to start the clock running with the first payment to the trustee, which is due 30 days after the plan is filed.”); Baxter v. Evans (In re Evans), 183 B.R. 331, 332–34 (Bankr. S.D. Ga. 1995) (Five-year maximum duration of a Chapter 13 plan is counted from the date the first payment is due under § 1326(a)(1)—typically no later than 45 days after the filing of the petition. “Under the mandate of 11 U.S.C. § 1326(a)(1), . . . payments under the plan must commence no later than 45 days after filing the Chapter 13 petition. . . . [T]he point to begin measuring the five-year repayment period is the date the first payment is due. The appropriate time from which to calculate the length of the Chapter 13 plan is the date at which the debtor is first obligated to begin making payments. . . . To allow the payment limitation period to begin at confirmation would allow for intentional delays in achieving confirmation to manipulate the mandatory time periods set forth in § 1322(c) [redesignated as § 1322(d) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)]. . . . [C]ommencing the time length of the payment period from confirmation would impose an additional burden on the debtors, not authorized by the Code, requiring the making of prepetition payments due pursuant to § 1326(a)(1), but not counting those payments under the term set forth in the plan. The five-year maximum repayment period imposed by § 1322(c) [redesignated as § 1322(d) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)] and § 1329(c) would be impermissibly extended by the amount of time passing between filing and confirmation. . . . [T]he most logical point from which to begin counting the repayment period is at the time the debtor is first required to make payments under § 1326(a)(1). . . . In this case the plan was filed May 28, 1991, thus the first payment thereunder was due June 28, 1991. . . . [T]he plan payments must be concluded by June 28, 1996, five years after the date the first payment was due under the confirmed plan.”); In re Neill, 158 B.R. 93 (Bankr. N.D. Ohio 1993) (Three-year time period is counted from the date at which the debtor was first obligated to begin making payments. Bankruptcy Rule 3015 and 11 U.S.C. § 1326(a)(1) work together to require that the duration of the plan begin 45 days after filing the Chapter 13 case.).

 

10  In re Duckett, 139 B.R. 6, 8 (Bankr. E.D. Tex. 1992) (“[T]he appropriate time from which to begin calculating the length of a Chapter 13 plan is the date at which the debtor is first obligated to begin making payments to the Chapter 13 trustee. Although debtors filed for relief on January 11, 1991, due to the extension granted by the court, the debtors were not required to file a plan until February 8, 1991. Since § 1326(a)(1) requires payments to the Chapter 13 trustee to begin within 30 days after this date, the first date that the debtors were obligated to begin making payments to the Chapter 13 is March 8, 1991.”).

 

11  In re Howell, 76 B.R. 793 (Bankr. D. Or. 1987).

 

12  In re Woodall, 81 B.R. 17 (Bankr. E.D. Ark. 1987).

 

13  In re Jackson, 189 B.R. 213, 214 (Bankr. M.D. Ala. 1995) (Five-year maximum duration runs from commencement of payments. “Payments under a Chapter 13 Plan must begin within 30 days of the commencement of the case. . . . The maximum duration of any Chapter 13 plan under § 1322(d) will expire five years after the date of the initial payment under the plan. In this case, the first payment to the Trustee was made on March 2, 1990. Therefore, the five year period terminated on March 2, 1995.” Initial payment under the plan was due on March 9, 1990, but was actually made on March 2, 1990. Five years begins when first payment is made, not when it is due.).

 

14  United Cal. Sav. Bank v. Martin (In re Martin), 156 B.R. 47 (B.A.P. 9th Cir. 1993). Accord In re Serna, 193 B.R. 537, 538–40 (Bankr. D. Ariz. 1996) (Sixty-month period is counted from the date the first payment is due after confirmation. Case filed on March 8, 1994, and confirmed on October 19, 1994. Original plan called for 56 monthly payments beginning on April 15, 1994, and ending in October of 1998. In October of 1995, debtor filed modified plan. “The Modified Plan provides that payments will continue more than sixty (60) months after the date the first payment was due under the original plan (which in this case is the same date as the first interim payment made after commencement of the case). However, all payments will be completed within sixty months of the date the first payment was due after confirmation of the original plan. . . . Two Ninth Circuit BAP opinions are relevant . . . . In re Martin, 156 B.R. 47 (9th Cir. BAP 1993) . . . . ‘The 60 month time period begins to run from the date the first payment becomes due after confirmation of the debtor’s Chapter 13 plan’. . . . In re Nicholes, 184 B.R. 82 (9th Cir. BAP 1995) . . . . ‘This time period begins running from the date at which the Chapter 13 debtor is first obligated to begin making payments to the trustee under the unconfirmed plan.’ . . . [T]his Court will follow Martin rather than Nicholes. The only Court of Appeals to address this has held that the 60 month period begins to run from the first payment due after confirmation of the plan. See West v. Costen, 826 F.2d 1376 (4th Cir. 1987). . . . [T]here is no discernable policy reason why Congress would have intended a restrictive interpretation of statutes whose purpose is to facilitate the rehabilitation of debtors and the repayment of creditors.”). Compare In re Nicholes, 184 B.R. 82 (B.A.P. 9th Cir. 1995) (Duration of Chapter 13 plan runs from the date the debtor was first obligated to begin making payments before confirmation—typically within 45 days after the filing of a Chapter 13 petition.).

 

15  157 B.R. 255 (W.D. Va. 1993).

 

16  157 B.R. at 263.

 

17  123 B.R. 552 (Bankr. W.D. Tex. 1991).

 

18  123 B.R. at 554.

 

19  137 B.R. 356 (Bankr. C.D. Cal. 1992).

 

20  In re Green, 169 B.R. 480, 483 (Bankr. S.D. Ga. 1994) (Upon reconversion from Chapter 7 to Chapter 13, it is inappropriate to confirm a plan that will exceed the 60-month time period in § 1322(c) [redesignated as § 1322(d) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)] calculated by adding the duration of the plan upon reconversion to the duration of the plan prior to conversion. “The statutorily proscribed [sic] time limit for payments under a plan is sixty (60) months. In this case, Debtor paid under the original plan for forty-five (45) months, counting from the time payments were commenced in November 1989, to the time the case was converted to Chapter 7 in August 1993. A time period longer than fifteen (15) months, i.e., the time remaining under the original sixty (60) month time limit, could be considered unreasonable delay and evidence of bad faith. Unreasonable delay as grounds for dismissal in tandem with the good faith requirement for confirmation forbids Debtor from circumventing the rules of the Bankruptcy Code and receiving a fresh sixty (60) months each time a case is reconverted to Chapter 13, especially considering the time interval during which the case was pending in Chapter 7 status.”).

 

21  Some courts have held that reconversion from Chapter 7 to Chapter 13 after conversion from Chapter 13 to Chapter 7 is prohibited by 11 U.S.C. § 706(a). See § 328.1 [ Reconversion from Chapter 7 or Chapter 11 to Chapter 13 ] § 150.1  Reconversion from Chapter 7 or Chapter 11 to Chapter 13.

 

22  United Cal. Sav. Bank v. Martin (In re Martin), 156 B.R. 47 (B.A.P. 9th Cir. 1993).

 

23  156 B.R. at 51. Accord Davis v. Dovenmuehle Mortgage, Inc. (In re Davis), No. 93-C7074, 1994 WL 700248, at *14 (N.D. Ill. Dec. 8, 1994) (Section 1322(c) [redesignated as § 1322(d) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994)] does not bar successive filings notwithstanding that the result is a stay that exceeds 60 months. “The language of [§ 1322(c), redesignated as § 1322(d) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 301, 108 Stat. 4106 (1994),] and its legislative history do not require that the statute act as a strict bar to successive filings that cumulatively stay a creditor for more than sixty months. . . . [T]hat the absence of such a rule leaves open the possibility of abuse through multiple filings, we may not remedy that problem by reading into the statute a limitation it does not contain. A debtor’s abuse of Chapter 13’s protection can be better addressed by other means, such as a finding of a lack of good faith.”).

 

24  In re Oglesby, 161 B.R. 917, 924 (Bankr. E.D. Pa. 1993).

 

25  See discussion of income deduction orders beginning at § 125.1  Order to Debtor’s Employer.

 

26  See discussion beginning at § 44.1  First Test of Debtor’s Good Intentions.

 

27  See § 216.1 [ Timing of Hearing on Confirmation ] § 115.1  Timing of Hearing on Confirmation before BAPCPA.

 

28  See also § 166.1 [ Counting the Three-Year Period ] § 91.5  Counting the Three-Year Period.