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Research Memorandum

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A bankruptcy court may confirm a debtor’s chapter 13 plan of reorganization if the requirements of section 1325(a) of the Bankruptcy Code are satisfied. If the chapter 13 trustee or an unsecured creditor objects to the confirmation of the plan, however, the bankruptcy court may only confirm the plan if it either provides for the repayment in full of claims or that the debtor must devote all of his projected disposable income towards payments of his unsecured creditors during the plan’s “applicable commitment period.” The debtor’s applicable commitment period is five years if the debtor’s current monthly income exceeds the state median family income for the debtor’s state and household size. Alternatively, a debtor’s commitment period will be three years if the debtor’s current monthly income is below the state median family income for the debtor’s state and household size. Accordingly, all chapter 13 debtors must calculate their current monthly income.

While such calculation is relatively straight forward for most chapter 13 debtors, self-employed debtors face some uncertainty when calculating their current monthly income because of a conflict between section 101(10A) of the Bankruptcy Code and Official Form 22C. Under section 101(10A), a self-employed debtor is directed to include all sources of income when calculating his current monthly income, including gross business receipts. Section 101(10A), however, does not provide that a self-employed debtor may deduct his ordinary and necessary business expenses when performing such calculation. Like all chapter 13 debtors, self-employed chapter 13 debtors will complete Official Form 22C, which is used to calculate the debtor’s current monthly income and the plan’s applicable commitment period.


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