519 B.R. 908
Bankr. M.D.N.C.2014Background
- Creditor Steven Diaz objected to confirmation of the Debtors’ second Chapter 13 plan before Bankruptcy Judge Catharine R. Aron (Aug. 20, 2014).
- Debtors filed Chapter 13 after a series of state-court contempt and attorney-fee orders aimed at Mrs. Page for willful violations of a separation order and related appellate fees.
- Debtors’ finances showed no current income and a negative monthly net income (assisted by food stamps and family contributions); plan proposals prioritized only minimal payments to unsecured creditors.
- The first plan (Nov. 27, 2013) proposed $150/month with 0% to general unsecureds; Diaz filed two priority claims for attorney fees tied to the state-court contempt orders.
- The court denied confirmation in Feb. 2014 for underfunding priority claims and failure to show current post-petition support obligations; a second plan (May 22, 2014) continued low payments and relied on uncertain future income.
- The court dismissed the case under § 1307(c) for bad-faith filing, analyzing the totality of circumstances and declining to decide whether the plan met § 1325(a)(7).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether petition was filed in good faith under §1325(a)(7) and §1307(c). | Diaz contends lack of good faith. | Debtors contend they acted in good faith. | Court found bad faith under §1307(c); dismissal affirmed without resolving §1325(a)(7) issue. |
| Whether the Debtors’ prepetition conduct constitutes bad faith sufficient to warrant dismissal. | Diaz asserts intentional abuse and evasion of state court orders. | Debtors argue no improper motive. | Court held bad faith proven under totality of circumstances; dismissal appropriate. |
Key Cases Cited
- Marrama v. Citizens Bank of Mass., 549 U.S. 365 (2007) (prepetition bad-faith conduct may justify dismissal of a Chapter 13 case)
- Deans v. O’Donnell, 692 F.2d 968 (4th Cir. 1982) (factors for determining good faith; includes conduct and integrity considerations)
- In re Bateman, 515 F.3d 272 (4th Cir. 2008) (totality-of-circumstances approach to bad faith in Chapter 13 cases)
- In re Kestell, 99 F.3d 146 (4th Cir. 1996) (bad-faith as a ground for dismissal under §1307(c))
- In re Smith, 234 B.R. 852 (Bankr.M.D. Ga. 1999) (eligibility to file under §109(e) and regular income concept)