509 B.R. 22
Bankr. E.D. Va.2014Background
- Debtors filed Chapter 13 on Nov 13, 2009; initial plan confirmed Feb 2, 2010.
- Trustee sought modification due to an unanticipated substantial change in debtors’ finances.
- Debtors’ Amended Schedule I shows gross income rising from ~$6,712.65 to ~$9,938.68 (≈50% increase) and household size increasing from 3 to 4.
- Amended Schedule J reflects higher expenses, notably childcare and transportation, offsetting some income gain.
- Trustee proposed a Revised Form 22C with disposable income of $2,298.26 and a modified plan to increase payments to unsecured creditors; Debtors proposed alternative modification amounts.
- Court grants modification of the plan to increase payments, effective Oct 1, 2013, with a schedule of three $3,274 payments followed by eleven $3,058 payments; §1325(b) applicability contested and ultimately rejected.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1325(b) applies to plan modifications under §1329. | Trustee: §1325(b) applies to modifications. | Debtors: §1325(b) does not apply to §1329 modifications. | §1325(b) does not apply to §1329 modifications. |
| Whether modification is warranted due to substantial, unanticipated change in finances. | Trustee: modification justified by substantial change. | Debtors: modification warranted under §1329(a) for increased income. | Modification granted based on substantial, unanticipated change. |
| How to determine the modified payment amount (Form 22C vs feasibility/good faith). | Trustee seeks calculation via Revised Form 22C (MDI). | Court should not apply §1325(b) formulas; assess good faith and feasibility. | Court did not require §1325(b) calculations; relied on §1325(a) feasibility and good faith. |
| Whether the modification complies with good faith, best interests of creditors, and feasibility. | N/A beyond §1325(b) contention. | N/A beyond modified plan details. | Modification meets good faith, best interests of creditors, and feasibility. |
Key Cases Cited
- Murphy v. O’Donnell (In re Murphy), 474 F.3d 143 (4th Cir. 2007) (recognizes substantial change and balance between debtors and creditors in modifications)
- Arnold v. Weast (In re Arnold), 869 F.2d 240 (4th Cir. 1989) (balances debtors and creditors in modification; long-term modification possible)
- In re Davis, 439 B.R. 863 (Bankr.N.D. Ill. 2010) (holds §1325(b) not applicable to plan modification; focuses on good faith feasibility)
- In re Heideker, 455 B.R. 263 (Bankr.M.D. Fla. 2011) (applies §1325(b) to modification context in certain circuits; emphasizes commitment period issue)
- Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (9th Cir. BAP 2005) (§1325(b) not applicable to modifications; pre-BAPCPA authority)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (establishes flexible approach to projected disposable income; not rigidly mechanical)