465 B.R. 300
Bankr. N.D. Ala.2012Background
- Debtors filed a third amended Chapter 13 plan proposing minimal payments to unsecured creditors.
- Plan prioritizes payment of attorney's fees and filing fees before unsecureds, delaying auto-loan payments for approximately eight months.
- Plan proposes equal monthly payments to secured auto claim of $224.54, but those payments would commence only after administrative expenses are paid.
- Court sua sponte concluded the plan would be confirmed only if modified to pay secured and unsecured claims in a specific order, which the Debtors opposed.
- Court found the plan violated 11 U.S.C. §1325(a)(3) (good faith) and §1325(a)(5)(B)(iii)(I) (equal monthly payments) and denied confirmation, with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan complies with §1325(a)(3) good faith. | Kirk argues plan is proposed in good faith. | Court argues plan lacks bona fides under Kitchens factors. | Plan fails good faith. |
| Whether the plan satisfies §1325(a)(5)(B)(iii)(I) on equal monthly payments. | Kirk contends payments can be staggered to pay admin claims first. | Statute requires equal monthly payments beginning at confirmation. | Plan does not satisfy equal monthly payments. |
| Whether pre-confirmation adequate protection payments under §1326(a)(1)(C) are properly treated. | Kirk asserts adequate protection is provided pre-confirmation. | Adequate protection must be in place post-confirmation as equal payments. | Pre-confirmation protections cannot substitute for equal post-confirmation payments. |
| Whether the plan can be amended to conform with the Code. | Kirk seeks amendment rather than denial. | Court would need conforming plan to meet §1325 requirements. | Separate order denying confirmation but permitting amendments. |
Key Cases Cited
- Kitchens v. Georgia Railroad Bank & Trust Co., 702 F.2d 885 (11th Cir. 1983) (good faith factors in §1325(a)(3))
- In re Williams, 385 B.R. 468 (Bankr.S.D.Ga. 2008) (equal monthly payments and adequate protection timing under BAPCPA)
- In re Denton, 370 B.R. 441 (Bankr.S.D.Ga. 2007) (two-tier post-confirmation payments rejected; periodic payments must be equal)
- In re DeSardi, 340 B.R. 790 (Bankr.S.D.Tex. 2006) (two-tier approach rejected; equal payments begin at confirmation)
- In re Sanchez, 384 B.R. 574 (Bankr.D.Or. 2008) (adequate protection vs. equal payments; post-confirmation timing considerations)