Freddie Brown v. Mary Viegelahn, 960 F.3d 711

Background

Freddie Lee Brown filed Chapter 13 in Oct. 2017 and proposed a five‑year plan with $1,080 monthly payments and an "approximately 100%" dividend to unsecured creditors (total unsecured claims ~$7,728).
Trustee objected based on overstated income on Schedule I (later amended), missed post‑petition mortgage payments (feasibility), and initial omission of VA benefits.
After amendment, Brown’s Schedule J showed $2,191 disposable monthly income, leaving $1,111 excess after plan payments.
At confirmation hearings the bankruptcy court said it would confirm only if Brown accepted one of two non‑statutory conditions: (1) divert all disposable income for seven months, or (2) adopt the "Molina" language restricting future plan modifications and conditioning discharge on payment in full; Brown accepted the Molina language.
The bankruptcy court entered the confirmation order adding the Molina language but made no findings on §1325(a) issues; Brown appealed, the district court certified the appeal to the Fifth Circuit, and the Fifth Circuit accepted jurisdiction.

Issues

Issue	Brown's Argument	Trustee's Argument	Held
May a bankruptcy court impose non‑statutory conditions on a plan that satisfies §1325?	Court may not add conditions beyond Code criteria; §1325’s "shall" is mandatory.	Court can use §105/equity to impose conditions to protect creditors.	Court declined broad rule; noted §105 cannot override Code and the Molina condition was not shown necessary/appropriate under any identified Code provision. Vacated and remanded.
Did Brown’s plan comply with §1325(a) (good faith, feasibility, compliance with other Code provisions)?	Plan complied with §1325(a); excess disposable income is permitted and not per se bad faith.	Plan failed §1325(a)(1),(3),(6),(7) because of nondisclosure, excess income retained, and feasibility concerns.	Bankruptcy court made no findings; appellate court rejected trustee’s legal arguments that excess disposable income equaled bad faith and found plan satisfied §1325(a) on the record before it.
Did Brown’s plan satisfy §1325(b)(1) after trustee’s objection? (pay in full or commit disposable income)	Plan paid "approximately 100%" to unsecured claims, satisfying §1325(b)(1)(A).	BAPCPA/median‑income rules require above‑median debtors to commit all disposable income under §1325(b)(1)(B).	Court held §1325(b)(1) is disjunctive — (A) or (B) — and Brown’s plan met (A).
Does the Molina language violate §1329 by restricting a debtor’s ability to modify a confirmed plan (and §1328 discharge)?	Molina unlawfully restricts statutory right to seek modification under §1329 and may bar discharge contrary to §1328.	Molina preserves modification but conditions discharge; it does not entirely prohibit §1329 relief.	Court adopted Martinez reasoning: conditions that prohibit certain modifications violate §1329 (and, as read by trustee, could conflict with §1328). Vacated confirmation and remanded.

Key Cases Cited

Ransom v. FIA Card Servs., N.A., 562 U.S. 61 (2011) (describes Chapter 13 discharge mechanics)
United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (effect of confirmation and discharge in Chapter 13)
Law v. Siegel, 571 U.S. 415 (2014) (§105 cannot override explicit Code mandates)
BedRoc Ltd., LLC v. United States, 541 U.S. 176 (2004) (textualism: start and end with plain text)
Foster v. Heitkamp (In re Foster), 670 F.2d 478 (5th Cir. 1982) (confirmation mandatory for compliant plans; feasibility standard)
Kennard v. MBank Waco, N.A., 970 F.2d 1455 (5th Cir. 1992) (standard of review for bankruptcy findings)
Bass v. Denney, 171 F.3d 1016 (5th Cir. 1999) (mixed question review)
Beaulieu v. Ragos, 700 F.3d 220 (5th Cir. 2012) (debtors not in bad faith for doing what the Code permits)
Petro v. Mishler, 276 F.3d 375 (7th Cir. 2002) (contrasting view that courts cannot add requirements to compliant plans)
United States v. Sutton, 786 F.2d 1305 (5th Cir. 1986) (limits on equitable powers under §105)
Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012) (standard for reviewing good‑faith findings)
In re Elmwood Development Co., 964 F.2d 508 (5th Cir. 1992) (de novo review when good‑faith findings rest on legal error)