466 B.R. 891
Bankr. W.D. Tex.2011Background
- Debtors filed Chapter 7 on May 17, 2007, which was converted to Chapter 13 on December 19, 2007.
- Chapter 13 plan confirmed July 7, 2008 provided 60 monthly payments of $530 and a plan base of $31,800, with unsecureds to receive about 17%.
- Post-confirmation, Debtors pursued a DTPA claim; settlement proceeds of $12,633 were obtained after fees and costs.
- Trustee objected to treating settlement as estate asset to be added to plan base; court orally granted settlement authorization in 2011, order not yet filed.
- October 26, 2011 Debtors moved to modify plan, proposing a $2,367 lump-sum payment from the settlement proceeds while continuing original payments.
- Trustee urged that the $12,633 be treated as disposable income and added to plan; court denied modification, requiring proceeds be committed to the plan base.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether settlement proceeds are disposable income for modification. | Nowlin-based view: include proceeds in projected disposable income. | Braune/North Texas view: modify only via liquidation analysis; proceeds not disposable income. | Settlement proceeds must be included in projected disposable income and added to plan base. |
| Whether liquidation analysis governs post-confirmation modification. | Liquidation analysis required for modification. | Modification governed by 1329, but liquidation analysis still applicable. | Yes; liquidation analysis applies to post-confirmation modification. |
| Whether the disposable income test applies to plan modifications. | Disposal test not required for modification. | Disposible income test applies to modification as interpreted by Nowlin. | Disposable income test applies to plan modifications. |
| Whether the lump-sum settlement can be used to pay unsecureds with no base increase. | Proceeds cover shortfall; no base increase needed. | Proceeds are disposable income that must be added to base. | Proceeds must be committed to the base to repay unsecured creditors. |
Key Cases Cited
- In re Nowlin, 576 F.3d 258 (5th Cir. 2009) (defines projected disposable income and allows forward-looking evidence to alter plan.)
- In re Braune, 385 B.R. 167 (Bankr.N.D.Tex. 2008) (supports disposable income test for modifications.)
- In re Stinson, 302 B.R. 828 (Bankr.D.Md. 2003) (recognizes liquidation analysis for modification timing.)
- In re Cortez, 457 F.3d 448 (5th Cir. 2006) (context on projected disposable income and plan modification.)
- In re Gonzalez, 388 B.R. 292 (Bankr.S.D.Tex. 2008) (modification considerations without relying on 1325(b).)