507 B.R. 312
Bankr. E.D. Cal.2014Background
- Debtors Frances and Ricky Pasley are below-median income and filed a Chapter 13 case in January 2011 in the Eastern District of California.
- Their Residence is encumbered by a Wells Fargo mortgage and a junior lien; a separate auto loan with Ally Financial secures a 2007 Nissan.
- The Original Plan confirmed in 2011 proposed a 60-month term and fully funded mortgage and auto loan payments through the Trustee, with no distribution to unsecured creditors.
- In October 2013, Wells Fargo modified the Mortgage, reducing the monthly debt service burden and enabling amended schedules showing greater net monthly income.
- The Debtors now seek to modify the plan to a 44-month term, using mortgage savings to accelerate payoff of the Auto Loan, while continuing to pay unsecured creditors nothing.
- The Trustee objects that shortening the term violates the good-faith requirement of § 1325(a)(3); the matter proceeds to decision on the papers after oral argument.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 44-month modified plan complies with good faith. | Pasley | Meyer | Yes; modification proposed in good faith. |
| Whether the ACP/maximum term under § 1329(c) permits a 44-month term for a below-median debtor. | Pasley | Meyer | Yes; 44 months permissible for cause; 36-month ACP remains applicable. |
| Whether Flores/Mattson create a waiver or anti-modification rigidity that would bar a 44-month term. | Meyer | Pasley | No; Flores does not compel a 60-month term and waiver not supported. |
| Whether the Mortgage Modification constitutes a changed circumstance justifying a shorter term. | Pasley | Meyer | Yes; Mortgage Modification reduces debt service, enabling repayment in 44 months. |
Key Cases Cited
- Flores v. Flores (In re Flores), 735 F.3d 855 (9th Cir. 2013) (minimum duration tied to ACP; Flores governs ACP as temporal requirement at confirmation)
- Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (9th Cir. BAP 2005) (discusses merging projected disposable income with good faith in § 1329)
- Goeb v. Heid (In re Goeb), 675 F.2d 1386 (9th Cir.1982) (good faith determined by totality of circumstances)
- Mattson v. Howe (In re Mattson), 468 B.R. 361 (9th Cir. BAP 2012) (ability-to-pay inquiry; modification must reflect good faith and actual ability)
- Villanueva v. Dowell (In re Villanueva), 274 B.R. 836 (9th Cir. BAP 2002) (36-month plan can be confirmed despite initial longer term; pre-BAPCPA context)
- Law v. Siegel, 134 S. Ct. 1188 (2014) (equitable powers under § 105(a) cannot contravene the Code; no surcharge here)