Summary
This Fifth Circuit opinion addresses whether Chapter 13 debtors must pay off all allowed unsecured claims, including student loans, within the life of their repayment plan when a trustee objects under 11 U.S.C. § 1325(b)(1). The court holds that the phrase "under the plan" requires full payment by the end of the applicable commitment period, rejecting the debtors' argument that payments could extend beyond the plan term under § 1322(b)(5). Consequently, the court vacates the lower courts' confirmations of the plans and remands for further proceedings.
Topics
Practice areas
Questions Presented
- Whether the phrase ‘under the plan’ in 11 U.S.C. §1325(b)(1)(A) requires payment of allowed unsecured claims, including student loans, to be completed within the plan’s duration
Holdings
- §1325(b)(1)(A) requires that the debtor pay in full all allowed unsecured claims, including student‑loan obligations, within the life of the Chapter 13 plan.
Key quotations
“The phrase “under the plan” is undefined, so “we give the term its ordinary meaning.”” (at 12)
“Statutes are contextual as well as textual. The word ‘under’ is a ‘chameleon’ that must draw its meaning from its context.” (at 14)
Factual background
Debtor Victoria Florita Durand-Day and debtor Lavonda Latrece Evans each filed Chapter 13 cases in 2022. Both had above‑median disposable incomes and proposed five‑year plans that listed student‑loan obligations but did not commit to paying those loans in full within the plan term. The bankruptcy trustee objected under §1325(b)(1)(A); the bankruptcy court rejected the objection and confirmed the plans; the district court affirmed.
Procedural history
The bankruptcy court confirmed the Chapter 13 plans despite a trustee objection under 11 U.S.C. §1325(b)(1). The district court affirmed that decision. The Fifth Circuit reviewed de novo the legal conclusions and for clear error the factual findings, vacated the confirmation, and remanded for new plans.
Remand instructions
Allow the debtors to file new Chapter 13 plans that satisfy §1325(b)(1)(A) by paying all allowed unsecured claims, including student‑loan obligations, in full within the plan term.