553 B.R. 412
Bankr. W.D. Wash.2016Background
- Debtors Patricia Shay and Keith Paulus filed a Chapter 13 petition and proposed an amended plan that changes Paragraph VIII of the court’s Form Plan to state post‑petition property "vests in the Debtor(s)" rather than being estate property under the Trustee.
- The local Form Plan by rule contains default vesting language that declares post‑petition property to be property of the estate (vested with the Trustee) but allows modifications in Paragraph XII if identified.
- Trustee Michael Malaier objected, arguing the amendment conflicts with 11 U.S.C. § 1306(a) and the Code’s procedure for plan modification; he also raised good‑faith concerns.
- Central legal question: whether the local rule/Form Plan and the amended vesting language are valid and consistent with Sections 1306, 1322(b)(9), and 1327(b), and whether a debtor may preemptively vest unknown future post‑petition property in the debtor.
- The Court held the local rule and Form Plan are valid exercises of rulemaking but denied confirmation because the proposed blanket vesting of all post‑petition property in the debtors conflicts with § 1306(a) and related Code provisions; debtors were given 14 days to file a compliant plan.
Issues
| Issue | Debtors' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Validity of Local Rule / Form Plan | Local rule exceeds rulemaking authority by forcing Trustee vesting language; overrides §1322(b)(9) option | Form and rule are procedural, permit modifications in Paragraph XII, and are consistent with the Code | Form Plan and Local Rule 3015‑1 are a proper exercise of rulemaking authority |
| Vesting of post‑petition property (compliance with Code) | §1322(b)(9) permits vesting estate property in debtor; plan language may place post‑petition property with debtor | §1306(a) makes post‑petition acquisitions estate property; plan cannot preempt that result | Blanket vesting of unknown future post‑petition property in debtor conflicts with §1306(a); amendment denied |
| Scope of §1322(b)(9) (preemptive vesting) | §1322(b)(9) allows a plan to provide for vesting at confirmation or later in debtor; supports debtor option | Allowing preemptive vesting would erase §1306 and prevent trustee/creditors from seeking plan modification under §1329 | §1322(b)(9) cannot be used to vest unknown/unanticipated future property in debtor to defeat §1306 and §1329 rights |
| Good‑faith challenge to amendment | Amendment assertedly protects debtor income and autonomy | Trustee alleges amendment is not in good faith (attempt to shield future income) | Court declined to decide good faith on current record (would require evidentiary hearing); unnecessary after statutory ruling |
Key Cases Cited
- Anderson v. Satterlee, 21 F.3d 355 (9th Cir. 1994) (trustee cannot force debtor to commit actual disposable income to plan without court order)
- Healthcentral.com v. Sigma Micro Corp. (In re Healthcentral.com), 504 F.3d 775 (9th Cir. 2007) (standard for reviewing local rules under Fed. R. Bankr. P. 9029)
- Calif. Franchise Tax Bd. v. Kendall (In re Jones), 657 F.3d 921 (9th Cir. 2011) (discusses interplay of §§ 1306 and 1327 and varieties of approaches to vesting at confirmation)
- Waldron v. Brown (In re Waldron), 536 F.3d 1239 (11th Cir. 2008) (post‑petition acquisitions during chapter 13 are estate property under §1306)