662 B.R. 223
Bankr. E.D.N.C.2024Background
- Bobby Eugene Goddard, Jr. (Debtor) filed for Chapter 13 bankruptcy, proposing a plan to retain three financed vehicles (Chevrolet Corvette, GMC Sierra, Genesis G70) and pay secured creditors over 60 months, while providing a low dividend to unsecured creditors.
- The Debtor earned substantial income from his government job, retirement, and VA disability; his spouse also had income, and they jointly owned the vehicles, with another vehicle owned outright by the spouse.
- The Chapter 13 trustee objected to confirmation, arguing the Plan was not proposed in good faith, as the Debtor was retaining multiple vehicles not necessary for his employment or household needs, at the expense of unsecured creditors.
- The Debtor's means test calculation showed negative disposable income, largely due to deductions for the vehicle payments; thus, under the Code's formula, he was not required to pay more to unsecured creditors.
- The court previously denied a similar plan and considered whether compliance with the means test alone sufficed to establish the plan was proposed in good faith under 11 U.S.C. § 1325(a)(3).
Issues
| Issue | Goddard's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Does technical compliance with the means test guarantee good faith under § 1325(a)(3)? | Means test compliance suffices; good faith not a separate bar | Good faith is distinct; luxury retention can show bad faith | Means test compliance alone does not ensure good faith |
| Can retention of multiple vehicles with substantial secured debt suggest lack of good faith? | Retention justified by personal/household needs and mental health | Retention is unnecessary and harms unsecured creditors | Unjustified vehicle retention shows bad faith |
| Should § 1325(a)(3) analysis consider retention of luxury items? | No, if expenses are allowed in means test | Yes, totality of circumstances includes asset retention | Luxury retention can defeat good faith confirmation |
| Is plan that leaves debtor with unencumbered cars and discharged debt at creditor expense confirmable? | Yes, if Code's requirements are met | No, this outcome violates good faith and bankruptcy purpose | Plan denied; not proposed in good faith |
Key Cases Cited
- Deans v. O’Donnell, 692 F.2d 968 (4th Cir. 1982) (established good faith inquiry for bankruptcy plan confirmation involves weighing totality of circumstances)
- Neufeld v. Freeman, 794 F.2d 149 (4th Cir. 1986) (provided factors for evaluating good faith in Chapter 13 cases)
- Bledsoe v. Cook, 70 F.4th 746 (4th Cir. 2023) (means test permits deduction of actual costs but does not resolve separate good faith inquiry)
- In re Welsh, 711 F.3d 1120 (9th Cir. 2013) (held that means test compliance precludes good faith inquiry into secured payments—rejected by this court)