449 B.R. 536
Bankr. E.D. Ark.2011Background
- Debtor Lori Bacon filed a Chapter 13 petition March 25, 2010 with an initial plan and schedules showing $110,514 unsecured debt and above‑median income.
- Trustee objected to the initial plan’s disposable income calculation; debtor amended Schedules I and J, filed an Amended Statement and a First Modification proposing payments of $1,745/mo and step increases thereafter; first modification became the operative plan on June 21, 2010.
- Plan was confirmed on June 21, 2010 as the operative plan.
- November 24, 2010 debtor filed a Second Modification proposing reduced payments (ultimately <100% to unsecured creditors, ~70%), prompting another trustee objection.
- The Second Modification was prompted by debtor’s husband purchasing a 2010 Cadillac CTS three months after confirmation, increasing insurance and adding a monthly car payment; the husband’s post‑confirmation finances and expenses influenced the plan’s feasibility.
- The court held a hearing and subsequently sustained the trustee’s objection to the Second Modification, concluding the increased expenditures were voluntary and not an unanticipated change in circumstances.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a post‑confirmation plan modification under §1329(a)(1) is allowed. | Trustee argues modification permitted for unanticipated changes. | Bacon argues for change in payments due to changed circumstances. | Modification sustained? No; trustee’s objection sustained; modification not approved. |
| Whether the post‑confirmation expenses from the husband’s Cadillac purchase constitute an unanticipated change. | Trustee contends expenses arose from unanticipated change in circumstances. | Debtor contends change is necessary due to lifestyle; not explicitly anticipated. | Not unanticipated; expenses result from voluntary conduct. |
| Whether post‑confirmation expenditures by the non‑debtor spouse justify reducing plan payments. | Trustee asserts expenses erode anticipated 100% distribution. | Debtor argues plan can accommodate necessary expenses. | Not permitted; expenditures deemed inconsistent with plan and not unanticipated. |
| Whether the debtor could have anticipated a need for a new vehicle and addressed it in the plan. | Plan should have contemplated potential needs; cavalier post‑confirmation purchases improper. |
Key Cases Cited
- In re Ireland, 366 B.R. 27 (Bankr. W.D. Ark. 2007) (modification based on substantial, unanticipated reduction in income)
- In re Nelson, 189 B.R. 748 (Bankr. D. Minn. 1995) (burden to show changed circumstances and unanticipated events; post‑confirmation conduct considered)
- Educ. Assistance Corp. v. Zellner, 827 F.2d 1222 (8th Cir. 1987) (unanticipated change in ability to pay; res judicata considerations)
- In re Savage, 426 B.R. 320 (Bankr. D. Minn. 2010) (recognizes need to show cause for modification; 1329 context)
- In re Trimarchi, 421 B.R. 914 (Bankr. N.D. Ill. 2010) (family indebtedness; lifestyle considerations)