End-of-Plan Completion Requirement for Unsecured Claims under 11 U.S.C. § 1325(b)(1)(A)

Introduction

In Bassel v. Durand-Day, two above-median-income Chapter 13 debtors—Victoria Florita Durand-Day and Lavonda Latrece Evans—proposed repayment plans treating sizeable streams of student-loan debt as paused (in deferment or forbearance) and payable directly to the lenders outside the five-year plan term. The Chapter 13 trustee objected under 11 U.S.C. § 1325(b)(1), arguing that “under the plan” requires full payment of all allowed, unsecured claims within the plan’s five-year commitment period. Both the bankruptcy court and the district court overruled that objection and confirmed the plans. On appeal, the Fifth Circuit vacated and remanded, holding that § 1325(b)(1)(A) demands that the “value of the property to be distributed under the plan on account of” allowed, unsecured claims—including paused student loans—be fully paid by the end of the plan.

Summary of the Judgment

• Debtors’ Plans treated certain student loans as ongoing outside the trustee’s oversight under § 1322(b)(5), without committing to pay them in full during the five-year plan term.

• The trustee objected under § 1325(b)(1), which requires that, if an unsecured creditor or trustee objects, the plan must either pay all allowed, unsecured claims in full “under the plan” or apply 100% of disposable income to those claims over the commitment period.

• The bankruptcy court and district court concluded that paused student-loan payments, though extending beyond the plan, nonetheless counted as payment “under the plan.” The Fifth Circuit disagreed.

• Relying on the plain text, statutory context, and related provisions (e.g., § 1325(a)(5)(B)(ii)), the Court held that “under the plan” unambiguously means payment within the plan term. It vacated confirmation and remanded for plans that either (a) finish paying all unsecured claims by plan end or (b) devote all projected disposable income to those claims.

Analysis

Precedents Cited

In re Rash, 520 U.S. 953 (1997) and Till v. SCS Credit Corp., 541 U.S. 465 (2004): These cases interpret “under the plan” in § 1325(a)(5)(B)(ii) (the “cram down” provision for secured claims) as requiring completion of payments over the life of the plan.
Barragan-Flores v. Evolve Fed. Credit Union, 984 F.3d 471 (5th Cir. 2021): Confirms the “over the life of the plan” interpretation for cram-down payments, emphasizing uniform meaning of “under the plan” across Chapter 13.
In re Brown, 960 F.3d 711 (5th Cir. 2020): Holds § 1328 discharge is available only after a debtor completes “all payments under a plan,” reinforcing that “under the plan” ends with the plan.
Kinney v. HSBC Bank USA, 5 F.4th 1136 (10th Cir. 2021): Notes that plan expiration ends “under the plan” obligations, making § 1322(b)(5) inapplicable beyond five years absent 100% income commitment under § 1325(b)(1)(B).

Legal Reasoning

1. Plain Meaning and Context
The phrase “under the plan” is undefined, so the Court gives it its ordinary meaning: “subject or pursuant to the authority of the plan.” When § 1325(b)(1)(A) conditions confirmation on the value “to be distributed under the plan” equaling allowed claims, it necessarily refers to payments made during the plan’s term. A consistent interpretation arises by reading “under the plan” in § 1325(b)(1)(A) just as in § 1325(a)(5)(B)(ii).

2. Statutory Scheme
Chapter 13’s structure repeatedly uses “under the plan” to signal the plan’s temporal contours. Section 1322(d) caps plan length at five years for above-median-income debtors; § 1328(a) grants discharge upon completion of payments “under the plan” (excluding § 1322(b)(5) claims). Holding “under the plan” open-ended would nullify these limits and render discharge provisions nugatory.

3. BAPCPA’s Purpose
Congress intended BAPCPA to ensure debtors repay the maximum they can afford within a set commitment period, the “quid pro quo” for Chapter 13’s benefits. Allowing extended, post-plan payment of unsecured claims would undermine that policy.

4. Interaction with § 1322(b)(5)
Section 1322(b)(5) permits a plan to “provide for” curing defaults and maintaining payments on claims due after plan end—but it is permissive (“may”), not mandatory, and cannot override the mandatory confirmation rule in § 1325(b)(1)(A) when an objection is lodged.

Impact

Chapter 13 debtors must include in-plan payment commitments for all allowed, unsecured claims—including paused student loans—if a trustee or creditor objects under § 1325(b)(1).
Debtors may avoid acceleration only by contributing 100% of projected disposable income during the plan term to unsecured claims under § 1325(b)(1)(B).
Bankruptcy courts must ensure plan language reflects full repayment of unsecured claims within the plan period or full income dedication.
Creditors holding long-term, non-dischargeable debt (e.g., student loans, home mortgages) will have leverage to object to plans that defer final payment beyond plan end without income-commitment.

Complex Concepts Simplified

Disposable Income (11 U.S.C. § 1325(b)(2)): The debtor’s monthly income minus necessary living expenses, used to determine how much must go to unsecured creditors.
Applicable Commitment Period (§ 1325(b)(4)): Three or five years, depending on whether the debtor’s income is below or above the median for their state.
Cram Down (11 U.S.C. § 1325(a)(5)(B)(ii)): Option allowing debtors to keep secured collateral by paying its present value “under the plan” over the plan term.
Deferment vs. Forbearance: Technical distinctions in student-loan status; both simply pause payments but do not change dischargeability or plan-term requirements.

Conclusion

Bassel v. Durand-Day crystallizes the rule that, when faced with an objection under 11 U.S.C. § 1325(b)(1), a Chapter 13 plan must pay all allowed, unsecured claims in full by the end of its term—or else dedicate 100% of projected disposable income to those claims. This decision upholds statutory text, harmonizes Chapter 13’s temporal limits, and advances BAPCPA’s goal of compelling debtors to repay the maximum they can afford within a set period. Going forward, debtors and practitioners must draft Chapter 13 plans with clear in-plan repayment commitments for every unsecured claim or face plan denial or remand for compliance.