Steven Richard Carlson

In re
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
STEVEN RICHARD CARLSON,
Debtor
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Case No. 	10-20408
Chapter 13
OPINION ON CONFIRMATION OF THE DEBTOR'S
THIRD MODIFIED CHAPTER 13 PLAN DATED NOVEMBER 8, 2010
On February 9, 2011 this matter came before the court for an evidentiary hearing
for Confirmation of the Third Modified Chapter 13 Plan dated November 8, 2010 filed by
Steven Carlson ("Debtor") and the Trustee's objection. The parties were represented as
stated on the record. The court having reviewed the record, and for the reasons stated
below, finds that confirmation of the Third Modified Chapter 13 plan shall be approved.
Facts
1. 	The Debtor and his estranged spouse, Mrs. Carlson, originally filed their
joint Chapter 13 bankruptcy petition on December 28, 2005 ("Case No. 05-23252"). The
plan was confirmed on October 6, 2006. The plan called for a payment period of 60
months with a total amount payments of"not less than $41,800.00." Class 7 non-priority
unsecured creditors were to be paid pro rata from the sum of$34,100.00 or a distribution
of approximately 88.4%.
2. 	The Debtor and Mrs. Carlson had marital problems and separated,
bifurcating the case by the court's order entered on April19, 2010. Mrs. Carlson's case
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was converted to a chapter 7 bankruptcy case; she received her discharge and that case
was closed on October 6, 2010.
3. 	The total receipts received in the bankruptcy case of Case No. 05-23252
were in the amount of$35,918.56. 	Ofthat amount, the bankruptcy estate received
$3,508.56 from the Debtor's and Mrs. Carlson's Federal tax refunds. 1 The balance of
$32,410.00 was received through monthly plan payments. It appears from Trustee's
Exhibit 1, that the Debtor and Mrs. Carlson paid the plan payments consistently each
month through December 23,2009.
4. 	From December 23, 2009 and until August 13, 2010, neither the Debtor nor
Mrs. Carlson made a plan payment in either bankruptcy case. The Debtor testified that
this was due to the disarray of the parties' family life at that time and trying to determine
what to do regarding the bankruptcy.
5. 	The Debtor did not file a motion to modifY the plan until August 10, 2010.
The Trustee objected. The Debtor filed a Second Modified Plan on September 15, 2010.
Again, the Trustee filed an objection. The Debtor filed the Third Modified Plan on
November 8, 2010. The Trustee's objection was filed and this Third Modified Plan is
before the court.
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6. 	The Debtor's Third Modified Plan proposes the following plan payments:
"One Monthly payment for $238, on[e] monthly payment for $288
and 45 monthly payments $765.00 then one payment of$456 and then
payments two $1632.00 payments totaling $3,264.00 prior to December 28,
1 2006 refund: $1,171.00; 2007 refund: $2,100.00; and 2009 refund: $237.56.
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2010 for a total of not less than $38,671.00. The debtor has made 45
payments of$765.00, one payment of$238, and one payment of$288 at
prior docket #05-23252 in a chapter 13 with his wife."
Additionally, the plan proposes to pay Class 7 non-priority unsecured creditors the
amount of$29,580.00, which is a proposed distribution of approximately 45%.
7. 	The court's review of the docket shows that a Certificate of Service was
filed with the court indicating that the Modified Chapter 13 Plan and Motion were served
on the Office of the U.S. Trustee, Mark R. Stewart, Esq., Steven Carlson, and "All on
attached Matrix." A copy of the creditors mailing matrix was attached to the Certificate
of Service. The Trustee's objection was the only one filed.
8. 	The testimony and evidence indicates that the Debtor paid a total amount of
$5,124.00 into the bankruptcy estate ofthis case from August 13, 2010 through
November 18, 2010.
Discussion
After confirmation, but before the completion of payments, the debtor may request
a modification of the plan, to increase or reduce payments under the plan for a particular
class.Z The provisions governing the plan and preconfirmation modification apply to
postconfirmation modification. 3
The Trustee objects to confirmation of the Third Modified Plan on the grounds: (1)
that the Debtor does not propose to apply all of his projected disposable income into the
2 11 U.S.C. §1329(a)(1).
3 11 U.S.C. §1329(b).
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plan to pay his non-priority, unsecured creditors; (2) the plan is not feasible as it contains
a mathematical error; and, (3) the Debtor's delay in proposing a confirmable plan is
unreasonable and prejudicial to his creditors.
A court cannot confirm a Chapter 13 plan, or in this case a modified plan, over an
objection by the Trustee unless the plan proposes to pay the unsecured claims in full or
the plan provides that all 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. 4
For the purpose of this plan, 5 the applicable commitment period for an above-
median debtor "shall be ... not less than 5 years" and may be less, "but only if the plan
provides for payment in full of all allowed unsecured claims over a shorter period." 6
(1) 	Payment of projected disposable income into the plan and applicable commitment
period.
The Debtor proposed to modifY and lower the monthly payments, based upon the
facts that the payments made in the joint case would be attributed to the Debtor, and that
his projected disposable income no longer included Mrs. Carlson's income. Therefore,
the overall projected disposable income was less. The Debtor's Third Modified Plan
incorporates the payments made under the previous joint case but between the two plans
4 11 U.S.C. § 1325(b)(1)(B).
5 11 U.S.C. §1325(b).
6 11 U.S.C. §1325(b)(4).
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does not propose a total of 60 monthly payments. However, the Debtor's Third Modified
Plan proposes to make-up the missed seven (7) payments with five payments, two of
which are substantial amounts. The issue presented is whether this court interprets the
phrase "applicable commitment period" under the (1) multiplier formula or (2) as a
temporal requirement.
The United States Bankruptcy Appellate Panel for the Tenth Circuit ("BAP")
recently held that the applicable commitment period was a "temporal concept" requiring
above-median income Chapter 13 debtors to commit plan payments for a five-year period
unless unsecured creditors were paid in fulU The debtors in Timothy, were over-median
income debtors, with one debtor's income derived from Social Security Income, who
proposed a plan for less than five (5) years. The bankruptcy court for the District of Utah
held, and the BAP affirmed, that the debtors could not use the applicable commitment
period as a multiplier to determine the amount to pay into the plan. Appellate courts in
three other jurisdictions have held the same. 8 This court does not disagree overall.
However, the facts in the case before the court show that the Debtor has been in
bankruptcy for five (5) years. During that time he and Mrs. Carlson, through both plans
paid into the bankruptcy estates the total amount of $37,534.00.
It appears that the last two large payments paid by the Debtor were for the purpose
7 In re Timothy, 442 B.R. 28 (lOth Cir. BAP 2010).
8 Baudv. Carroll, No. 09-2164, (2011 U.S. App. LEXIS 2182; 2011 Fed. App. 0033) (6th Cir., Feb. 4,
2011); In re Frederickson, 545 F.3d 652 (8th Cir. 2008); In re Tennyson, 611 F.3d 873, (1 ph Cir., July 16, 2010).
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of"catching up" the missed seven (7) monthly payments for the period of January
through July, 2010. In considering the circumstances, this Debtor appears to be between
a "rock and hard place" as the Bankruptcy Code does not allow a plan to be modified for
a time period beyond 60 months. 9 The Debtor is now beyond sixty months and has paid a
substantial amount of payments into the plan. The Debtor proposed to make up the
missed payments in lump sum payments at the end of the applicable commitment period.
In a rare exception to the general rule and only under the extreme circumstances
as are before the court in this case, the court distinguishes the requirement that 60
individual payments must be made. The Debtor was in bankruptcy for 60 months. The
Debtor and Mrs. Carlson paid $41,042.56 into the plans for distribution to creditors. The
creditors were served notice of the Third Modified Plan and did not object. It does not
appear to the court, that the debtor is attempting to excuse himself for failure to pay the
monthly payments, but attempted to make-up the payments with the two large payments at
the end of the applicable commitment period, in addition to making the monthly payment.
A debtor that misses a payment in a case that is required to make payments for 60 months,
really has no other choice as they cannot move to extend any plan's payments beyond 60
months. The court finds that the debtor has applied all his projected disposable income
into the plan and the Trustee's objection should be overruled.
9 11 u.s.c. § 1329 (c).
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(2) 	The feasibility of the plan/mathematical error.
The Trustee alleges that even as proposed, the plan is "short" by over $1000.00.
The Debtor's counsel conceded that there was a mathematical error, calculated by his
office. Debtor's counsel proposed to the court that he was willing to waive his attorney's
fees to make the plan feasible on behalf of the Debtor. The court will take him up on that
offer and if the funds are necessary to make the Debtor's Third Modified Plan feasible,
and no additional funds are available, the funds will come from Debtor's counsel's fees,
as waived in open court.
(3) 	The Debtor's delay in proposing a confirmable plan.
The Trustee alleged that the Debtor's delay in proposing a confirmable plan was
unreasonable and prejudicial to Debtor's creditors. The court finds that the Third
Modified Plan will be confirmed and the delay, although substantial, will not prejudice
the creditors. Creditors were served with the proposed modified plan and did not object.
Therefore, based upon the above, the court shall overrule the Trustee's objections
and confirm the Debtor's Third Modified Plan. This opinion constitutes the Court's
findings of fact and conclusions of law. A separate order shall be entered pursuant to
Fed. R. Bankr. P. 9021.
DATED this _t;;;_ day of April, 2011.
Service to:
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Ken McCartney
Mark Stewart
ByJhe-f~~Diii:t:~~--~
(2_:·· 	~--
HONO 	---f:::Pl!TER J. MCNIFF
United S~~Bankruptcy Judge
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