[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JULY 16, 2010
No. 09-14628 JOHN LEY
________________________ CLERK
D. C. Docket No. 08-03428-CV-RWS-1
BKCY No. 07-78937-BKC-CR
IN RE: TERRY ALAN TENNYSON, Debtor.
________________________________________
NANCY J. WHALEY, Trustee,
Plaintiff-Appellant,
versus
TERRY ALAN TENNYSON,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(July 16, 2010)
Before TJOFLAT, WILSON and EBEL,* Circuit Judges.
*
Honorable David M. Ebel, United States Circuit Judge for the Tenth Circuit, sitting by
designation.
WILSON, Circuit Judge:
This appeal presents us with a question arising from amendments to Chapter
13 of the United States Bankruptcy Code by the Bankruptcy Abuse Prevention
Consumer Protection Act of 2005 (“BAPCPA”). Pub.L. No. 109-8, 119 Stat. 23.
Specifically, we are asked to determine whether an above median income debtor,
with negative disposable income, may obtain confirmation of a Chapter 13
bankruptcy plan to last for less than five years when the debtor’s unsecured
creditors have not been paid in full. The answer to this question rests on our
interpretation of the term “applicable commitment period.” We find that a plain
reading of 11 U.S.C. § 1325, a recent United States Supreme Court ruling, and the
Congressional intent behind BAPCPA mandate that an above median income
debtor remain in bankruptcy for a minimum of five years, unless all unsecured
creditor’s claims are paid in full.
I. BACKGROUND
Terry Alan Tennyson, the debtor, filed for Chapter 13 bankruptcy on
November 10, 2007. Nancy Whaley, the Trustee, was assigned as the standing
Chapter 13 Trustee. Section 1325 of Title 11 of the United States Code details the
requirements for confirmation of a Chapter 13 bankruptcy. The debtor is required
by 11 U.S.C. § 1325(b)(2) to calculate his disposable income according to the
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formula on Form 22C. Tennyson’s current monthly income was $3,229.37 and his
annual income was $38,752.44, which was above the median family income for a
household of one in his home state of Georgia. Thus, according to 11 U.S.C. §
1325(b)(4)(A)(ii)(I), Tennyson was an above median income debtor.1 Since
Tennyson was an above median income debtor, 11 U.S.C. § 1325(b)(3)(A) requires
that a predetermined set of expenses, listed in 11 U.S.C. § 707(b)(2)(A) & (B), be
subtracted from his current monthly income. This yields the disposable income for
an above median income debtor, which in Tennyson’s case was negative $349.30.
Tennyson proposed a plan to last for three years, without providing for full
repayment of his unsecured creditors. Whaley objected on the basis that 11 U.S.C.
§ 1325(b)(4) requires above median income debtors to remain in bankruptcy for at
least five years, unless unsecured claims are paid in full. The bankruptcy court
confirmed Tennyson’s three year plan and the district court affirmed.
II. JURISDICTION
The bankruptcy court’s confirmation of Tennyson’s Chapter 13 plan is a
final order. See Catlin v. United States, 324 U.S. 229, 234, 65 S. Ct. 631, 633
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The primary change to Chapter 13 bankruptcy created by BAPCPA was the creation of
two classifications of debtors, above median income debtors and below median income debtors.
BAPCPA then distinguished above and below median income debtors on the basis of: the length
of their “applicable commitment periods,” 11 U.S.C. § 1325(b)(4); the calculation of disposable
income, 11 U.S.C. § 1325(b)(3); and the determination of the maximum bankruptcy period, 11
U.S.C. § 1322(d).
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(1945) (“A ‘final decision’ generally is one which ends the litigation on the merits
and leaves nothing for the court to do but execute the judgment.” (citation
omitted)). The district court has jurisdiction to hear appeals from all final orders of
the bankruptcy court. 28 U.S.C. § 158(a)(1). This Court has jurisdiction over final
orders from the district court when acting in an appellate capacity over a
bankruptcy court’s order. 28 U.S.C. § 158(d)(1).
III. STANDARD OF REVIEW
Conclusions of law reached by a “bankruptcy court or by the district court
are reviewed de novo.” In re Bateman, 331 F.3d 821, 825 (11th Cir. 2003)
(alteration omitted) (quotation omitted).
IV. DISCUSSION
“Applicable commitment period” is a term that appears in § 1325 of the
Chapter 13 bankruptcy code. The definition of “applicable commitment period” is
found in § 1325(b)(4):
(4)For purposes of this subsection, the “applicable commitment
period”--
(A) subject to subparagraph (B), shall be--
(i) 3 years; or
(ii) not less than 5 years, if the current monthly income of
the debtor and the debtor’s spouse combined, when
multiplied by 12, is not less than--
(I) in the case of a debtor in a household of 1
person, the median family income of the applicable
State for 1 earner;
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....
(B) may be less than 3 or 5 years, whichever is applicable under
subparagraph (A), but only if the plan provides for payment in full of
all allowed unsecured claims over a shorter period.
Whaley objected to Tennyson’s plan because she interpreted the “applicable
commitment period” to be the minimum required duration of a debtor’s Chapter 13
bankruptcy plan. However, the district court adopted the bankruptcy court’s ruling
that the “applicable commitment period” “does not stand alone and provide for a
strict five year minimum plan duration for all above-median income debtors.”
Doc. 24 at 6. Rather, the “applicable commitment period” is a multiplier in the §
1325(b)(1)(B) formula, whereby projected disposable income equals disposable
income times the “applicable commitment period.”
The bankruptcy court pointed to the opening clause of § 1325(b)(4), “For the
purposes of this subsection . . . ,” for support of this argument. If “applicable
commitment period” exists only for the purposes of the subsection, then, the
bankruptcy court argued, we must look to see where the term “applicable
commitment period” is used in § 1325 and constrain its application to the purposes
of that subpart. The only other place that “applicable commitment period” appears
is in § 1325(b)(1)(B). Section 1325(b)(1) reads:
(b)(1) If the trustee or the holder of an allowed unsecured claim
objects to the confirmation of the plan, then the court may not approve
the plan unless, as of the effective date of the plan--
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(A) the value of the property to be distributed under the plan on
account of such claim is not less than the amount of such claim; or
(B) the plan provides that all of the debtor’s projected
disposable income to be received in the applicable commitment period
beginning on the date that the first payment is due under the plan will
be applied to make payments to unsecured creditors under the plan.
According to this interpretation of “applicable commitment period,” it exists
solely for its function within the confines of § 1325(b)(1)(B). See In re
Kagenveama, 541 F.3d 868, 876 (9th Cir. 2008) (“Subsections (b)(2) (‘disposable
income’) and (b)(3) (‘amounts reasonably necessary to be expended’) exist only to
define terms relevant to the subsection (b)(1)(B) calculation. Subsection (b)(4),
which defines ‘applicable commitment period,’ is no different.”). Thus, when
disposable income is negative, projected disposable income will always be
negative, regardless of the length of the “applicable commitment period,” and
unsecured creditors will not recover any of their unsecured claims. Therefore, if
disposable income is negative the “applicable commitment period” is
inconsequential. As a result, Tennyson was free to enter a bankruptcy plan of less
than five years even though his unsecured debts had not been paid in full.
Whaley argues that “applicable commitment period” is a fixed five year
term, for above median income debtors, that can only be shortened if all unsecured
debts are paid in full in the shorter time period.
A. A Plain Reading of Section 1325(b) Requires a Finding That “Applicable
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Commitment Period” is a Temporal Term
This case is one of statutory interpretation. Specifically, we are asked to
define the term “applicable commitment period.” To do so, we are guided by the
traditional standards of statutory construction:
The starting point for all statutory interpretation is the language of the
statute itself. We assume that Congress used the words in a statute as
they are commonly and ordinarily understood, and we read the statute
to give full effect to each of its provisions. We do not look at one
word or term in isolation, but instead we look to the entire statutory
context. We will only look beyond the plain language of a statute at
extrinsic materials to determine the congressional intent if: (1) the
statute’s language is ambiguous; (2) applying it according to its plain
meaning would lead to an absurd result; or (3) there is clear evidence
of contrary legislative intent.
United States v. DBB, Inc., 180 F.3d 1277, 1281 (11th Cir. 1999) (internal citations
omitted).
Applying these principles, we first look at the term “applicable commitment
period” and note that “applicable” and “commitment” are modifiers of the noun,
the core substance of the term, “period.” The plain meaning of “period” denotes a
period of time or duration. Merriam Webster’s Collegiate Dictionary 864 (10th ed.
1996). “Applicable commitment period” at its simplest is a term that relates to a
certain duration, and based on its presence in § 1325, it is a duration relevant to
Chapter 13 bankruptcy. The modifier “commitment” then reveals that “applicable
commitment period” is a duration to which the debtor is obligated to serve. See
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Merriam Webster’s Collegiate Dictionary 231 (10th ed. 1996). Finally, the
meaning of “applicable” reflects the fact that there are alternate “commitment
periods” depending on the debtor’s classification as an above median income
debtor or a below median income debtor.
Section 1325(b)(4) clearly says that the “applicable commitment period”
shall be five years for an above median income debtor, such as Tennyson. “The
word ‘shall’ is ordinarily the language of command.” Alabama v. Bozeman, 533
U.S. 146, 153, 121 S. Ct. 2079, 2085 (2001) (quotation omitted). The use of the
word “shall” “normally creates an obligation impervious to judicial discretion.”
Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35, 118 S.
Ct. 956, 962 (1998) (citation omitted). The plain reading of § 1325(b)(4) indicates
that an above median income debtor, such as Tennyson, is obligated to form a
bankruptcy plan with an “applicable commitment period” of no less than five
years, unless his unsecured debts are paid in full.
When the plain reading of a statute produces an unambiguous and
reasonable definition of a term, we will not look past that plain reading and read
into the text of the statute an unstated purpose. See Arthur Andersen LLP v.
Carlisle, 556 U.S. __, 129 S. Ct. 1896, 1902 n.6 (2009) (“It is not our role to
conform an unambiguous statute to what we think Congress probably intended.”
8
(internal quotation omitted)). The text of § 1325(b)(4) is clear, unambiguous, and
does not result in any absurd consequences. The “applicable commitment period”
shall be five years. The subsection does not state that the “applicable commitment
period” exists solely for the § 1325(b)(1)(B) calculation and it certainly does not
state that the “applicable commitment period” becomes inconsequential if
disposable income is negative. See Atlantic Sounding Co. v. Townsend, 557 U.S.
__, 129 S. Ct. 2561, 2575 (2009) (“[W]e will not attribute words to Congress that it
has not written.”).
Further, treating “applicable commitment period” as a temporal term rather
than a multiplier would not render 11 U.S.C. § 1322(d) superfluous. Section
1322(d) delineates the maximum periods of time for a Chapter 13 bankruptcy
while § 1325(b)(4) sets out the minimum periods of time for Chapter 13
bankruptcy, with both the minimums and maximums contingent upon the debtor’s
classification as an above median or below median income debtor. At first glance,
it may seem as though § 1322(d) is superfluous since both the minimum and
maximum plan duration for an above median income debtor is five years.
However, § 1325(b)(4) sets the minimum period for Chapter 13 bankruptcy for an
above median debtor at five years with the caveat that the plan may be shorter if all
allowed unsecured claims are paid. Section 1322(d), however, sets the absolute
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maximum time period of a Chapter 13 bankruptcy plan for an above median
income debtor at five years, no exceptions. Thus, it is clear that both § 1322(d)
and § 1325(b)(4) are necessary to determine the proper time period that an above
median income debtor must stay in Chapter 13 bankruptcy.
However, if we were to interpret “applicable commitment period” as
Tennyson advocates, as a multiplier that exists only for § 1325(b)(1), then §
1325(b)(4)(B) would be rendered meaningless and superfluous. Section
1325(b)(1)(A) already provides that the neither the trustee nor the unsecured
creditors may object to the bankruptcy plan if unsecured claims are paid in full.
Thus, § 1325(b)(4)(B)’s explicit allowance for a shorter “applicable commitment
period,” when unsecured claims are paid in full, is only necessary if the “applicable
commitment period” has a function independent of § 1325(b)(1). This explicit
exception is further evidence that Congress intended the “applicable commitment
period” to be a temporal requirement independent of § 1325(b)(1). See Conn. Nat.
Bank v. Germain, 503 U.S. 249, 253–54, 112 S. Ct. 1146, 1149 (1992) (“We have
stated time and again that courts must presume that a legislature says in a statute
what it means and means in a statute what it says there.”). We find that the plain
reading of § 1325(b)(4) defines “applicable commitment period” as a temporal
requirement independent of the § 1325(b)(1)(B) calculation.
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B. The Supreme Court’s Ruling in Hamilton v. Lanning Supports a Temporal
Interpretation of “Applicable Commitment Period”
The Supreme Court recently ruled in Hamilton v. Lanning, 560 U.S. __, __
S. Ct. __, No. 08-998, slip op. at 18 (2010), that while the mechanical approach of
calculating projected disposable income directly as a derivative of disposable
income is the proper starting point, bankruptcy courts “may account for changes in
the debtor’s income or expenses that are known or virtually certain at the time of
confirmation.” Lanning does not directly comment on the definition of “applicable
commitment period” but what it does indicate is that § 1325(b) is not a strict
mechanical formula existing in a vacuum.
Lanning opens the door for the possibility that the final projected disposable
income accepted by the bankruptcy court may not be the result of a strict §
1325(b)(1)(B) calculation. The “applicable commitment period” must have an
existence independent of the § 1325(b)(1)(B) calculation. If “applicable
commitment period” were left dependent upon projected disposable income, as
Tennyson recommends, then it would necessarily be dependent on the multitude of
indeterminate factors that Lanning has allowed to be used in the determination of
projected disposable income. This in turn would leave “applicable commitment
period” an indeterminate term. In order for “applicable commitment period” to
have any definite meaning, its definition must be that of a temporal term derived
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from § 1325(b)(4) and independent of § 1325(b)(1).
C. The Congressional Intent Behind the Bankruptcy Abuse Prevention
Consumer Protection Act Supports a Temporal Interpretation of
“Applicable Commitment Period”
While we find that a plain reading of § 1325(b)(4) is more than enough to
support Whaley’s interpretation of “applicable commitment period”, we also note
that the legislative intent behind the BAPCPA amendments compels the finding
that “applicable commitment period” be read as a temporal requirement for the
length of the bankruptcy plan.
“The heart of [BAPCPA’s] consumer bankruptcy reforms . . . is intended to
ensure that debtors repay creditors the maximum they can afford.” H.R. Rep. 109-
31(I), p. 2, 2005 U.S.C.C.A.N. 88, 89. The House Report goes on to discuss the
BAPCPA amendments to 1322(d) and 1325(b):
Sec. 318. Chapter 13 Plans To Have 5-Year Duration in Certain
Cases. Paragraph (1) of section 318 of the Act amends Bankruptcy
Code sections 1322(d) and 1325(b) to specify that a chapter 13 plan
may not provide for payments over a period that is not less than five
years if the current monthly income of the debtor and the debtor’s
spouse combined exceeds certain monetary thresholds. If the current
monthly income of the debtor and the debtor’s spouse fall below these
thresholds, then the duration of the plan may not be longer than three
years, unless the court, for cause, approves a longer period of up to
five years. The applicable commitment period may be less if the plan
provides for payment in full of all allowed unsecured claims over a
shorter period. Section 318(2), (3), and (4) make conforming
amendments to sections 1325(b) and 1329(c) of the Bankruptcy Code.
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H.R. Rep. 109-31(I), p.79, 2005 U.S.C.C.A.N. 88, 146.
The “applicable commitment period” is referenced in the above House notes in a
section that is discussing amendments to the duration of Chapter 13 bankruptcy.
We believe this reflects Congress’ intent that the “applicable commitment period”
be construed as a temporal term, not a multiplier.
Further, allowing Tennyson to confirm a plan for less than five years would
deprive the unsecured creditors of their full opportunity to recover on their claims
from Tennyson by way of post confirmation plan modifications. See 11 U.S.C. §
1329. For example, if Tennyson’s projected disposable income were to increase to
a positive number in years four or five, § 1329 would allow unsecured creditors to
file for a plan modification. However, if Tennyson obtained confirmation of a
three-year plan, unsecured creditors would be deprived of an opportunity to collect
on their unsecured claims since Tennyson’s plan would have terminated prior to
year four. The Congressional intent to make sure that debtors repay creditors up to
their maximum ability would be contravened by permitting confirmation of a
bankruptcy plan for less than five years when unsecured claims have not been paid
in full.
V. CONCLUSION
We find that the “applicable commitment period” is a temporal term that
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prescribes the minimum duration of a debtor’s Chapter 13 bankruptcy plan. The
only exception to this minimum period, if unsecured claims are fully repaid, is
provided in § 1325(b)(4)(B). Tennyson has failed to provide for full repayment of
unsecured claims in his proposed bankruptcy plan. Tennyson, therefore, must
submit to Chapter 13 bankruptcy for a minimum of five years. We reverse the
order of the district court affirming the bankruptcy court’s confirmation of
Tennyson’s three-year bankruptcy plan and remand for proceedings in accord with
our ruling.
REVERSED AND REMANDED.
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