Lerin Brown v. Linda B. Gore
742 F.3d 1309
| 11th Cir. | 2014Background
- Debtor Lerin Brown filed Chapter 13 bankruptcy with monthly income $1,364 (Social Security $1,134 + rental $230) and monthly expenses $1,214, leaving $150 discretionary income; he reported no nonexempt assets.
- Brown scheduled $16,203 in unsecured debt to ten creditors and proposed a 36‑month Chapter 13 plan paying $150/month (total $5,400).
- Under the plan Brown prioritized paying $2,000 in attorney’s fees and administrative costs before distributions to creditors; creditors would receive only small payments (estimated 17% of scheduled debts, but only three creditors timely filed claims totaling $1,355.08).
- The Chapter 13 trustee objected, arguing Brown should be in Chapter 7 and the plan was not proposed in good faith and was unlikely to be completed.
- At confirmation hearing Brown’s counsel admitted the primary reason for filing Chapter 13 was to finance attorney fees in installments rather than prepaying for a Chapter 7; the bankruptcy court denied confirmation for lack of good faith and gave Brown 14 days to convert to Chapter 7; the district court affirmed and this appeal followed.
Issues
| Issue | Plaintiff's Argument (Brown) | Defendant's Argument (Gore) | Held |
|---|---|---|---|
| Whether the Chapter 13 plan was proposed in good faith under 11 U.S.C. § 1325(a)(3) | Plan is permissible; paying attorney fees through Chapter 13 is common and allowed | Plan was attorney‑fee‑centric and not a legitimate debt‑adjustment plan; filed to finance lawyer | Court held plan was not proposed in good faith — bankruptcy court’s factual findings not clearly erroneous |
| Whether the Chapter 13 petition was filed in good faith under § 1325(a)(7) | Debtor lawfully chose Chapter 13; no per se rule should block fee‑financing | Petition filed solely to finance attorney fees instead of Chapter 7; not in debtor’s best interest | Court held petition not filed in good faith — bankruptcy court’s findings upheld |
| Whether Chapter 7 would have been more appropriate (best‑interest test) | Chapter 13 acceptable; debtor has a choice of chapter | Debtor had no nonexempt assets and would obtain quicker, cheaper discharge in Chapter 7; only attorney benefited from Chapter 13 | Court agreed debtor was a “quintessential” Chapter 7 candidate and Chapter 13 was not in his best interest |
| Whether attorney‑fee‑centric plans are per se forbidden | Brown argued installment payment of attorneys in Chapter 13 is ordinary and allowed | Trustee argued this instance abused Chapter 13 because the plan’s overriding purpose was to pay counsel | Court rejected a categorical rule; but under the totality of circumstances this fee‑centric plan lacked good faith |
Key Cases Cited
- In re Kitchens, 702 F.2d 885 (11th Cir. 1983) (sets non‑exhaustive factors for evaluating Chapter 13 good faith)
- Lamie v. U.S. Trustee, 540 U.S. 526 (2004) (attorney compensation from Chapter 7 estate is generally unauthorized absent trustee/employment)
- Jim Walter Homes, Inc. v. Saylors, 869 F.2d 1434 (11th Cir. 1989) (good‑faith determination is factual and reviewed for clear error)
- Educ. Credit Mgmt. Corp. v. Mosley, 494 F.3d 1320 (11th Cir. 2007) (appellate standard when district court affirms bankruptcy court)
- Torrens v. Hood (In re Hood), 727 F.3d 1360 (11th Cir. 2013) (appellate review framework for bankruptcy appeals)