Law.com has an article discussing yet another case in which the new BAPCPA laws create an absurd result likely not intended by Congress. See Judge Applies New Bankruptcy Law as Written to Possible Detriment of Creditors. You can also download the opinion (In re Rotunda, 06-60054 (Bankr. N.D.N.Y. September 1, 2006) from a link on that page.
The case deals with the distinction between disposable income for the Means Test and projected disposable income for Chapter 13 plan payments.
Court records show that Elizabeth and Lawrence D. Rotunda had an annual income of about $68,000, well above the median income for a two-person family in New York. Consequently, their capacity to repay was governed by a rigid "means test."
Before the Bankruptcy Abuse Prevention and Consumer Protection Act, the calculus of how much a Chapter 13 debtor had to pay was measured by his or her "projected disposable income." Under the old law this was simply the income the debtor listed on the bankruptcy petition minus the expenses. Whatever was left over went toward debt repayment.
The new law does not define "projected disposable income," but it does redefine "disposable income" as current monthly income less certain expense allowances. And under the new definition, Social Security income, like that received by the Rotundas, is excluded from the definition of current monthly income.
Here, the debtors argued that only their "disposable income" — which excludes their Social Security — should be included in their repayment plan. The Chapter 13 trustee objected to the plan that would allow the Rotundas to initially pay $800 a month rather than about $2,000 per month, arguing that it fails to make all of their "projected disposable income" available to unsecured creditors.
The Judge ruled for the Debtor, even though under the old law the creditors would have received more –
"To allow a debtor with income above the state median to provide for zero payments to unsecured creditors in a chapter 13 plan … when … there remains sufficient funds to pay even a minimal dividend to them is contrary to the approach taken by this Court for over 20 years in considering chapter 13 plans," wrote Gerling of Utica. "Yet … it is not for the Court to second guess Congress despite the fact that the statute, as written, may result in a confirmed plan that is contrary to the view expressed by President Bush."