United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                  ___________

                                  No. 08-2017
                                  ___________

In re: Anne B. Lasowski,               *
                                       *
          Debtor.                      *
____________________                   * Appeal from the United States
                                       * Bankruptcy Appellate Panel
Mark T. McCarty,                       * for the Eighth Circuit.
                                       *
            Appellee,1                 *
                                       *
      v.                               *
                                       *
Anne B. Lasowski,                      *
                                       *
            Appellant.                 *
                                  ___________

                            Submitted: January 16, 2009
                               Filed: August 12, 2009
                                ___________

Before BYE, COLLOTON, and GRUENDER, Circuit Judges.
                           ___________

COLLOTON, Circuit Judge.

     Anne B. Lasowski, a Chapter 13 debtor, appeals a decision of the Bankruptcy
Appellate Panel (“BAP”) reversing the bankruptcy court’s confirmation of her


      1
      McCarty, a Chapter 13 bankruptcy trustee, is substituted for his predecessor,
David D. Coop. See Fed. R. App. P. 43(b).
proposed Chapter 13 plan. The BAP held that the plan should not have been
confirmed over the objection of the Chapter 13 trustee, David D. Coop.2 The BAP
reasoned that Lasowski improperly deducted from her disposable income an amount
that was larger than necessary to repay loans she had taken from her 401(k) retirement
account. Accordingly, the BAP concluded that the plan failed to apply all of
Lasowski’s projected disposable income toward making payments to her unsecured
creditors, and that it should not have been approved. Although our reasoning differs
from that of the BAP, we affirm the BAP and reverse the decision of the bankruptcy
court.

                                          I.

       On March 29, 2007, Lasowski filed a petition for relief under Chapter 13 and
a proposed five-year plan in the United States Bankruptcy Court for the Eastern
District of Arkansas. Lasowski’s current monthly income was $3820.05, [JA 50],
qualifying her as a so-called “above-median debtor” whose reasonable monthly
expenses were required to be determined in accordance with 11 U.S.C. § 707(b)(2).
See 11 U.S.C. § 1325(b)(3). The amount of her monthly expenses as determined
under § 707(b)(2) was $3467.66. In addition, she had two 401(k) loans. As of the
date of the petition, the first loan had a balance of $289.99, which Lasowski was
required to repay with interest over six months in twelve semimonthly installments of
$25.00. The second loan had a balance of $1192.24, which Lasowski was obligated
to repay with interest over thirteen months in twenty-six semimonthly installments of
$50.00. Thus, at the time of filing her petition, Lasowski was making a total of
$150.00 per month in 401(k) loan payments. Her employer was withholding an
additional $245.96 per month for her regular contribution to her 401(k) plan.


      2
       Following the BAP’s decision, Coop was replaced as Chapter 13 trustee by
Mark T. McCarty, who is the appellee in this case. We refer to McCarty and Coop as
“the Trustee.”

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        A Chapter 13 plan must provide that all of the debtor’s “projected disposable
income . . . will be applied to make payments to unsecured creditors under the plan.”

In connection with her bankruptcy petition, Lasowski calculated that
she had a negative disposable income. From her current monthly income of $3820.05,
she deducted her allowed monthly expenses of $3467.66, as well as the $395.96 total
of her monthly 401(k) loan payments ($150.00) and contributions ($245.96). This
resulted in a monthly disposable income of negative $43.57. Accordingly, she
proposed a plan that provided only minimal payments to her nonpriority unsecured
creditors.

       The Trustee objected to confirmation of the plan, arguing that the plan failed
to apply all of Lasowski’s projected disposable income to the payment of unsecured
creditors. According to the Trustee, because Lasowski’s 401(k) loan payments would
not continue throughout the entire five years of the plan, and would actually reduce
after six months and cease after thirteen months, Lasowski had understated her
disposable income. The Trustee contended that Lasowski instead should have
deducted a prorated amount of her total 401(k) loan obligation, namely, $24.70 (the
remaining $1482.23 owed, divided by sixty months), rather than $150.00. This
calculation would have resulted in a monthly disposable income of $81.73 – or
$4903.80 over the course of the five-year plan.

       The bankruptcy court overruled the Trustee’s objection and confirmed
Lasowski’s plan. In re Lasowski, 

, 531 (Bankr. E.D. Ark. 2007). The
court concluded that the Bankruptcy Code did not provide authority for the Trustee’s
proration approach and that Lasowski was thus allowed to deduct her current loan
payment amounts when calculating disposable income. 

The Trustee
appealed to the BAP, which reversed the bankruptcy court. Coop v. Lasowski (In re
Lasowski), 

, 213 (8th Cir. BAP 2008). The BAP reasoned that
Lasowski’s “projected disposable income” was merely a mechanical computation of
her monthly “disposable income” extrapolated over the length of the plan, and held

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that the Bankruptcy Code allowed Lasowski to deduct from her disposable income
only the total of the 401(k) payments that she would actually make. On that basis, the
BAP ruled that Lasowski had understated her disposable income and failed to propose
sufficient payments to unsecured creditors. Lasowski appeals.

                                          II.

       On appeal from a decision of the BAP, we act as a second reviewing court of
the bankruptcy court’s decision, independently applying the same standard of review
as the BAP. Eilbert v. Pelican (In re Eilbert), 

, 525 (8th Cir. 1998). The
relevant facts in this case are undisputed, and we review the bankruptcy court’s
conclusions of law de novo. Benn v. Cole (In re Benn), 

, 813 (8th Cir.
2007).

       Where, as here, the trustee objects to confirmation of a debtor’s Chapter 13
plan, “the court may not approve the plan unless . . . the plan provides that all of the
debtor’s projected disposable income to be received in the applicable commitment
period . . . will be applied to make payments to unsecured creditors under the plan.”
11 U.S.C. § 1325(b)(1) (emphasis added). Thus, in order to confirm a plan over the
trustee’s objection, the bankruptcy court must calculate the debtor’s projected
disposable income and ensure that the plan applies the entire amount to make
payments to unsecured creditors.

       The Code does not define the term “projected disposable income,” but it does
define “disposable income,” in relevant part, as “current monthly income received by
the debtor . . . less amounts reasonably necessary to be expended . . . for the
maintenance or support of the debtor.” 

Congress elaborated on this
definition in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(“BAPCPA”), providing that the “reasonably necessary” expenses of an above-median
debtor like Lasowski must be determined in accordance with § 707(b)(2), another

                                          -4-
provision added by BAPCPA. 

Section 707(b)(2), commonly known
as the “means test,” sets out a structured method of calculating reasonably necessary
expenses that is designed to reduce the discretion of bankruptcy courts and to ensure
that debtors pay more to their unsecured creditors. Coop v. Frederickson (In re
Frederickson), 

, 658 (8th Cir. 2008). BAPCPA also added provisions
excluding from disposable income any amounts withheld or received by employers
for contributions to 401(k) and other qualified retirement plans, see 11 U.S.C.
§ 541(b)(7), and “any amounts required to repay” loans from 401(k) and other
specified plans. 

The calculation of disposable income is implemented
through Official Form 22C, the Chapter 13 Statement of Current Monthly Income and
Calculation of Commitment Period and Disposable Income, which every Chapter 13
debtor must complete.

       Before the bankruptcy court and the BAP, and in their briefs on appeal to this
court, the Trustee and Lasowski focused their arguments on the amount that the
Bankruptcy Code permits Lasowski to exclude from her “disposable income” for her
401(k) contributions and her 401(k) loan repayments. This focus on the calculation
of “disposable income,” rather than “projected disposable income,” was
understandable given the BAP’s prior holding in Coop v. Frederickson (In re
Frederickson), 

(8th Cir. BAP 2007). The BAP in that case concluded
that projected disposable income is simply annualized disposable income over the
length of the plan. 

        After the parties submitted their briefs, however, this court reversed the BAP’s
decision in Frederickson, and held that the calculation of a debtor’s disposable income
is just “a starting point for determining the debtor’s ‘projected disposable income.’”

(quoting 11 U.S.C. § 1325(b)(1)). The bankruptcy
court’s determination of projected disposable income also can take into account the
reality of how much the debtor can afford to pay to her creditors over the length of the
plan. 

that the court can consider other facts that demonstrate that

                                          -5-
the disposable income calculation on Form 22C does not accurately reflect a debtor’s
projected ability to pay creditors in the future, such as changed personal circumstances
or variances between the debtor’s actual expenses and the regional averages used in
the calculation. 

Thus, we held that when a debtor’s statements of actual
income and expenditures show a net monthly income, the debtor has a projected
disposable income that must be distributed to unsecured creditors over the applicable
length of the plan, even if the debtor calculates a negative disposable income on Form
22C. 

       It follows from Frederickson that the bankruptcy court’s calculation of a
debtor’s projected disposable income can take into account changes in the debtor’s
financial circumstances that are reasonably certain to occur during the term of the
debtor’s proposed plan. Failure to consider such circumstances would be inconsistent
with the admonition in Frederickson that “the object is not to select the right form, but
to reach a reality-based determination of a debtor’s capabilities to repay creditors.”

v. Sumski (In re Kibbe), 

, 315 (1st Cir. BAP 2007)).
The Fifth Circuit recently agreed, holding in Nowlin v. Peake (In re Nowlin), No. 08-
20066, 

(5th Cir. July 17, 2009), that a bankruptcy court can
consider “reasonably certain future events” when calculating a debtor’s projected
disposable income. 

The court in Nowlin thus affirmed a bankruptcy court’s
denial of confirmation when a debtor’s plan failed to take into account the reasonably
certain future termination of the debtor’s 401(k) loan repayments during the term of
the debtor’s proposed plan. Similarly here, even if Lasowski is correct that it is
appropriate for her to exclude the entire $150 she is currently repaying on her 401(k)
loans from her disposable income on Form 22C, the bankruptcy court could not
ignore, when calculating projected disposable income, that these payments would
reduce to $100 per month after six months and end completely after thirteen months.
Only by taking into account this fact could the bankruptcy court’s determination of
projected disposable income accurately reflect Lasowski’s ability to pay her unsecured
creditors over the course of her plan.

                                          -6-
       The bankruptcy court apparently believed that it could not consider that
Lasowski’s 401(k) loan payments would cease during the term of her plan, because
to do so would conflict with § 1322(f), which provides that “[a] plan may not
materially alter the terms of a loan” from a 401(k) or other specified retirement plan.
See 

; see also In re Haley, 

, 344 (Bankr.
D.N.H. 2006); In re Wiggs, No. 06-70203, 

, at *3 (Bankr. N.D. Ill.
Aug. 4, 2006) (unpublished). We disagree with this conclusion, because the
calculations of disposable income and projected disposable income do not alter the
terms of the 401(k) loan. See Spalding v. Truman, No. 08-064, 

,
at *3 (N.D. Tex. Oct. 14, 2008); In re Novak, 

, 911 (Bankr. D. Neb.
2007); see also 6 Keith M. Lundin, Chapter 13 Bankruptcy § 491.1, at 491-4 (3d ed.
2000 & Supp. 2006). These calculations simply determine the total amount that
Lasowski must distribute to her unsecured creditors over the course of her plan. See

. Interpreting “projected disposable income” to recognize the
reasonably certain future termination of loan repayments does not require Lasowski
to propose a plan that changes the terms of her 401(k) loans. Nor does it deprive her
of sufficient funds to repay the loans, for she is free to propose a tiered plan that
increases payments to unsecured creditors after the 401(k) payments have ceased.

      For these reasons, we hold that the bankruptcy court erred in confirming
Lasowski’s plan, because the court did not accurately determine Lasowski’s projected
disposable income. Accordingly, we reverse the decision of the bankruptcy court, and
remand for further proceedings.
                       ______________________________




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