In Subchapter V of title 11, a debtor can seek consensual plan confirmation under 11 U.S.C. § 1191(a) by meeting the confirmation requirements for a “regular” chapter 11, found in 11 U.S.C. § 1129, other than section 1129(a)(15).  A debtor can also seek confirmation of its plan on a non-consensual basis under 11 U.S.C. § 1191(b), provided the plan is “fair and equitable” and doesn’t discriminate unfairly, thus avoiding the “regular” chapter 11 requirements for class acceptance under section 1129(a)(8) and the requirement that if a class is impaired under the plan, at least one impaired class votes to accept the plan, under section 1129(a)(10).

“Fair and equitable” under section 1191(b) (non-consensual confirmation) is defined in 11 U.S.C. § 1191(c), and includes alternative requirements under section 1191(c)(2).  The first alternative requires the plan to provide that “all of the projected disposable income[1] of the debtor to be received in the 3-year period, or such longer period not to exceed 5 years as the court may fix … will be applied to make payments under the plan[.]”  11 U.S.C. § 1191(c)(2)(A).  The second alternative requires that “the value of the property to be distributed under the plan … is not less than the projected disposable income of the debtor.”  11 U.S.C. § 1191(c)(2)(B).

So, is “projected disposable income” fixed as of the effective date of the plan, or it subject to modification based on actual disposable income?

Case law is not yet definitive.  In Legal Serv. Bureau, Inc. v. Orange Cnty. Bail Bonds, Inc. (In re Orange Cnty. Bail Bonds, Inc.), 638 B.R. 137, 2022 Bankr. LEXIS 1185, 71 Bankr. Ct. Dec. 713, 2022 WL 1284683 (9th Cir. BAP, 2022), the court held that a plan based on proposed payments that could be reduced, based on “actual” disposable income as opposed to “projected” disposable income, could not be confirmed under 11 U.S.C § 1191(c)(2)(A), though it upheld confirmation under section 1191(c)(2)(B).  But in Staples v. Wood-Staples (In re Staples), 2023 U.S. Dist. LEXIS 2684, 2023 WL 119431 (U.S. Dist. Court for Middle District of Florida, 2023), the District Court rejected the Debtor’s appeal of a corrective order issued by the bankruptcy court which required modification of monthly plan payments based on debtor’s actual disposable income per periodic reports filed by the debtor, citing to the All Writs Act.

At this point, the issue of whether “projected disposable income” is subject to an “actual income” test under 11 U.S.C. § 1191(c)(2)(A) awaits development of further case law.


[1] Disposable income is defined in 11 U.S.C. § 1191(d).