In re Enabnit
490 B.R. 404
Bankr. N.D. Cal.2013Background
- American Express objected to confirmation of Debtors' Second Amended Chapter 13 Plan on disposable income and good faith grounds, tied to the Timeshare expenses.
- Debtors filed under Chapter 13 on June 29, 2012; they own a Diamond Resorts timeshare with monthly payments of $1,084 and maintenance of $841.
- Schedule B lists the timeshare as personal property; Schedule G identifies Diamond Resorts as holding a $44,729 secured claim; real property is not listed in Schedule A.
- Form 22C shows monthly income of $15,375.08 and disposable income of $2,238.60, suggesting $134,316 could be paid to unsecured creditors over 60 months.
- Second Amended Plan (filed Oct 31, 2012) requires $1,025 per month for six months and $1,500 thereafter, plus $1,084/month paid outside the plan to Diamond Resorts.
- Diamond Resorts did not file a proof of claim; the record is unclear whether the timeshare debt is secured.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan meets the disposable income test under §1325(b). | American Express contends the plan underfunds unsecured creditors given $1,924.66 monthly timeshare expense. | Debtors argue the timeshare and its payments are properly deducted as secured debt under §707(b)(2). | Sustained objection on disposable income grounds; plan not confirmed. |
| Whether timeshare payments are deductible as secured debt under §707(b)(2)(A)(iii). | American Express argues the timeshare is not properly secured or not properly characterized, so deduction is improper. | Debtors maintain the timeshare payments are secured debt and deductible in calculating disposable income. | Court cannot determine securitization; timeshare treatment not adequately supported; deduction disallowed for plan purposes. |
| Whether timeshare maintenance fees are permissible Other Necessary Expenses under §707(b)(2)(A)(ii)(I). | Maintenance fees are not within IRS-listed categories and not shown as necessary for health/welfare. | Timeshare maintenance could be an Other Necessary Expense if health/welfare or income production justification shown. | Maintenance fees not proven permissible; not an Other Necessary Expense. |
| Whether the plan was proposed in good faith under §1325(a)(3). | Paying nearly $2,000 monthly for the timeshare while underfunding unsecureds suggests bad faith. | If §707(b) standards are met, good faith follows from compliance; disputed but not conclusive. | Record insufficient to find good faith; plan not confirmed. |
Key Cases Cited
- In re Davis, 239 B.R. 573 (10th Cir. BAP 1999) (burden on debtor to prove plan complies with confirmation standards)
- In re Padilla, 213 B.R. 349 (9th Cir. BAP 1997) (confirmation standards and disposable income considerations)
- In re Welsh, 465 B.R. 843 (9th Cir. BAP 2012) (secured debt deductions can meet §707(b) but do not alone establish good faith)
- In re Goeb, 675 F.2d 1386 (9th Cir. 1982) (focus on equitable treatment of creditors in good faith inquiry)
- In re Vandenberg, 2012 WL 1854298 (Bankr. D. Ariz. 2012) (case cited regarding good faith and totality of circumstances)
- In re Egebjerg, 574 F.3d 1045 (9th Cir. 2009) (necessary expenses and IRM guidance for §707(b)(2))