In re Powers, 554 B.R. 41

Debtor Heidi Lea Powers filed Chapter 7 on June 3, 2013, converted to Chapter 13 on March 17, 2014; major unsecured claim by relatives (Creditors) on a 2007 promissory note totaling about $137,388.42.
Debtor is a long‑time teacher whose salary rose post‑petition; she repeatedly amended Schedules I and J to reflect changing income, expenses, and temporary parental support.
Debtor sold her marital residence and moved into a substantially more valuable rental on a month‑to‑month lease; proceeds from the sale ($~5,000) were proposed as plan contribution.
Debtor received large federal and state tax refunds in 2013 and 2014 that she did not timely disclose; she used cash withdrawals post‑petition and there was inconsistent testimony about who paid for children’s orthodontic care.
Creditors objected to confirmation on three grounds: lack of good faith in proposing the plan (§1325(a)(3)), lack of good faith in filing the petition (§1325(a)(7)), and failure to commit all projected disposable income (§1325(b)(1)(B)).
Court denied confirmation: sustained objections under §1325(a)(3) and §1325(b)(1)(B); overruled objection under §1325(a)(7); directed Debtor to file amended schedules and a new plan or face dismissal.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Good faith of proposed plan (§1325(a)(3))	Debtor manipulated schedules to inflate expenses and hide available funds (tax refunds, parental support) so plan understates disposable income and is underfunded.	Debtor proposed long plan, contributed $5,000 of sale proceeds, and acted to obtain reorganization in good faith.	Court: Plan not proposed in good faith; confirmation denied under §1325(a)(3).
Good faith of petition (§1325(a)(7))	Petition was filed to evade creditors and family obligations; lack of candor supports finding petition not filed in good faith and warrants dismissal.	Petition was filed for legitimate rehabilitative purpose (family/divorce debt), Debtor never filed bankruptcy before and sought to address large joint debt.	Court: Petition was filed in good faith under §1325(a)(7); objection overruled. Court declined to sua sponte dismiss under §1307(c).
Projected disposable income (§1325(b)(1)(B))	Debtor’s post‑petition income increases, undisclosed tax refunds, and overstated expenses mean plan fails to commit all projected disposable income; expenses exceed national standards.	Debtor was a below‑median debtor as of the petition date; §707(b)(2) means‑test caps do not apply to below‑median debtors and disposable income is determined case‑by‑case.	Court: Sustained objection under §1325(b)(1)(B); debtor must fully and transparently recast schedules and propose a plan showing best efforts.

In re Wheeler, 511 B.R. 240 (Bankr. N.D.N.Y. 2014) (good‑faith standard for plan proposals; manipulative conduct can be fatal to confirmation)
In re Corino, 191 B.R. 283 (Bankr. N.D.N.Y. 1995) (factors applying the totality‑of‑circumstances good‑faith test for plan confirmation)
Hamilton v. Lanning, 560 U.S. 505 (2010) (permissible to adjust projected disposable income for known or virtually certain post‑petition changes)
In re Kitson, 65 B.R. 615 (Bankr. E.D.N.C. 1986) (debtors should not maintain luxury expenditures while proposing minimal creditor repayment)
In re Loper, 367 B.R. 660 (Bankr. D. Colo. 2007) (plan should not include luxury or excessive expenditures)
In re Johnson, 428 B.R. 22 (Bankr. W.D.N.Y. 2010) (discussing good faith in plan context)
In re McKinney, 507 B.R. 534 (Bankr. W.D. Pa. 2014) (burden‑shifting framework for confirmation objections)