In Re Mains
451 B.R. 428
Bankr. W.D. Mich.2011Background
- Debtors Ronald and Sandra Mains filed bankruptcy and originally sought Chapter 7 relief but were found abusive under §707(b)(3) and converted to Chapter 13.
- The court denied confirmation of Debtors' Chapter 13 plan after a contested hearing and adjourned to allow amendments addressing good-faith concerns.
- Debtors' amended schedules show substantial monthly income from Social Security and pensions, with expenses around $4,983 and a proposed plan payment of $324 per month.
- The Chapter 13 Trustee objected that the proposed plan would yield a dividend to unsecured creditors of less than 5%, while the Trustee believed a full payment could be made in about 30 months if excess income were applied.
- Debtors contend their Social Security benefits should be excluded from the good-faith calculation under §1325(a)(3) because they were not required to include them for §1325(b)'s disposable income test.
- The court ultimately denied both Debtors' motion for leave to appeal and their request for a stay pending appeal, and ordered dismissal of the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Debtors may appeal the denial of confirmation | Mains argue for leave to appeal the denial of confirmation. | Court finds no need for appeal; plan denial becomes final and no stay should be granted. | Denied; leave to appeal not necessary as dismissal will follow. |
| Whether a stay pending appeal is appropriate | Debtors seek a stay to preserve case status during appeal. | Stay would harm creditors; likelihood of success on appeal is low. | Denied; balance of harms weighs against Debtors. |
| Whether Social Security benefits may be ignored in good-faith analysis under §1325(a)(3) | Debtors claim SS benefits should not be considered in good-faith computation. | The court may consider all circumstances, including SS benefits, under totality of the circumstances. | Debtors' consideration of all income is appropriate; SS benefits may be excluded from §1325(b) but are relevant to §1325(a)(3) good faith. |
| Whether the plan was proposed in good faith given income and expenses | Plan fails to meet good-faith requirements due to low payout to unsecureds. | Plan reflects Debtors' circumstances; attempting to pay more would be impractical given expenses. | Plan denied for lack of good faith; dismissal appropriate. |
| Whether dismissal should be entered given lack of amendment to plan | Bankruptcy should continue to allow amendments; dismissal premature. | Debtors chose not to amend; dismissal warranted. | Dismissal appropriate; no further delay. |
Key Cases Cited
- Baud v. Carroll, 634 F.3d 327 (6th Cir.2011) (discusses whether SS benefits are included in good-faith analysis under §1325(a)(3))
- Okoreeh-Baah, 836 F.2d 1030 (6th Cir.1988) (emphasizes totality-of-the-circumstances in good-faith inquiry)
- Caldwell I, 851 F.2d 852 (6th Cir.1988) (lists factors for §1325(a)(3) good faith with ability-to-pay components)
- Caldwell II, 895 F.2d 1123 (6th Cir.1990) (expands good-faith factors; discusses ability-to-pay context)
- Estus (In re Estus), 695 F.2d 311 (8th Cir.1982) (original framework for weighing ability-to-pay factors in good-faith analysis)
- Educ. Assistance Corp. v. Zellner, 827 F.2d 1222 (8th Cir.1987) (relevant discussion on Estus and ability-to-pay emphasis)
- In re Barfknecht, 378 B.R. 154 (Bankr. W.D. Tex.2007) (supports safe-harbor approach to 1325(b) while acknowledging broader factors)
- In re Thompson (Fink v. Thompson), 439 B.R. 140 (8th Cir. BAP 2010) (illustrates split on inclusion of ability-to-pay in good-faith analysis)
- In re Upton, 363 B.R. 528 (Bankr.S.D.Ohio 2007) (illustrates ability-to-pay considered in good-faith analysis)
- In re Smith, 848 F.2d 813 (7th Cir.1988) (cited for related discussion on reasonable plan expectations)