In Re Welsh
440 B.R. 836
Bankr. D. Mont.2010Background
- Debtors filed voluntary Chapter 13 on May 27, 2010 and proposed a Plan (Dkt. 2) that the Trustee objected to on grounds of lack of good faith under §1325(a)(3) and disposable income under §1325(b).
- Debtors' Schedule A valued the residence at $400,000 with a $330,593.66 secured claim to Bank of America; Schedule D lists several secured claims on vehicles, an Airstream trailer, and the Subaru; Schedule F lists unsecured debts totaling about $180,504.
- Form B22C shows current monthly income of $8,116.31 with disposable income of $218.12 after deductions, resulting in a five-year plan proposal of $125/month for 30 months then $500/month for 30 months.
- Debtors testified they are current on secured obligations listed in Form B22C and plan to continue paying on those secured claims while paying unsecured creditors a total of $14,700, which the Trustee argued indicated bad faith.
- Trustee argued SSI should be included in disposable income under pre-BAPCPA practice, while Debtors argued §101(10A)(B) excludes SSI from CMI; the Court ultimately held SSI is excluded from disposable income under the statute.
- The Court confirmed Debtors' Plan, finding the plan feasible and proposed in good faith, and overruled the Trustee's objections.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Disposable income calculation under §1325(b) | Trustee: include SSI; mechanical means test yields lower plan feasibility. | Welsh: SSI excluded by §101(10A)(B); forward-looking approach not requiring SSI. | SSI excluded; disposable income satisfied. |
| Good faith under §1325(a)(3) | Trustee: plan pays little to unsecured and funds secured items, signaling bad faith. | Welsh: no egregious conduct; plan feasible and within totality of circumstances. | Debtors proposed plan in good faith. |
| Impact of Lanning on projection of disposable income | Trustee: apply forward-looking adjustments including SSI to avoid ‘senseless results’. | Welsh: Lanning supports excluding SSI in CMI; forward-looking adjustments not warranted here. | Court follows Lanning to exclude SSI; not unusual case to adjust for known changes. |
| Statutory treatment of SSI in CMI | Trustee relies on Cranmer to require SSI inclusion in DI. | Welsh: §407(a) protection and §101(10A)(B) exclusion prohibit inclusion of SSI; §407 has express protective effect. | SSI excluded from CMI and disposable income; §407(a) applies; Cranmer rejected. |
Key Cases Cited
- Hamilton v. Lanning, 130 S. Ct. 2464 (2010) (forward-looking disposable income approach; start with CMI)
- In re Cranmer, 433 B.R. 391 (Bankr. D. Utah 2010) (SSI inclusion contested under pre- vs post-BAPCPA; relied on Lanning)
- In re Bartelini, 434 B.R. 285 (Bankr. N.D.N.Y. 2010) (discusses DISPOSABLE INCOME/CMI framework post-BAPCPA)
- In re Devilliers, 358 B.R. 849 (Bankr. E.D. La. 2007) (SSI exclusion under §101(10A)(B) and DI calculation)
- In re Leavitt, 171 F.3d 1219 (9th Cir. 1999) (good faith factors in confirming a Chapter 13 plan)