Federal courts in the United States do not always agree on the correct interpretation of bankruptcy law. As a result, it is sometimes necessary to bring a case to the U.S. Supreme Court, this country's highest court, in order to resolve a question of law.

This is the recent case before the Supreme Court involving a Chapter 13 bankruptcy. At issue is whether a Chapter 13 repayment plan must cover a minimum number of years.

Chapter 13 bankruptcy provides for some debt relief under a repayment plan in which the debtor will repay his or her creditors. Some of the circuits hold that the payment plan must cover a five year period, if a debtor has above-median income and unsecured creditors will be receiving less than the full amount owed on their claims.

However, there are other federal courts which will allow less than a 60-month repayment plan, allowing debtors to exit from Chapter 13 in as little as three years.

It is also unclear as to the outcome if the debtors have negative or zero disposable income. Some of the courts have held that the minimum duration of a payment plan is only required for debtors with positive projected disposable income.

The debtors in this case argue that bankruptcy law does not provide a minimum plan length. They further argue that even if the court finds that there is a minimum plan length, it should not apply to debtors with no projected disposable income.

The U.S. Supreme Court will decide the issue once and for all. Because of the increase of the number of Chapter 13 filings, in California and nationwide, this will offer much needed resolution for trustees and debtors in bankruptcy.

As this case shows, bankruptcy law can be very complex and not all of the bankruptcy courts always agree on how to correctly interpret the intent of the law.

Source: Thomson Reuters, "Trustee asks Supreme Court to resolve payment-plan dispute," Dec. 5, 2011