Meyer v. Lepe (In Re Lepe)
470 B.R. 851
9th Cir. BAP2012Background
- Lepe filed a Chapter 13 petition on September 2, 2010 with assets $363,900 and liabilities $581,380 (unsecured debts $549).
- Original plan proposed paying first mortgage, stripping the second mortgage as unsecured, and paying Trustee $150/mo for 36 months (17.25% estimated dividend to unsecured creditors).
- Trustee objected to confirmation, arguing lack of good faith and improper use of Chapter 13 to strip the lien given solvency; Lepe disputed these assertions.
- Lepe filed a First Amended Plan on February 24, 2011 increasing Trustee payments to $275/mo and amended schedules to disclose additional assets.
- Bankruptcy court held at the June 2, 2011 hearing that the plan was proposed in good faith, confirmed the amended plan, and Trustee timely appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was Lepe's First Amended Plan proposed in good faith? | Trustee contends plan lacks good faith due to lien strip while solvent. | Lepe contends totality of circumstances supports good faith. | Yes; plan found to be proposed in good faith. |
| Should Lepe's First Amended Plan have been confirmed? | Trustee asserts plan abuses the Code by favoring lien strip. | Lepe argues plan complies with 11 Warren/Estus factors and totality of circumstances. | Yes; bankruptcy court did not abuse discretion in confirming. |
Key Cases Cited
- Goeb v. Heid, 675 F.2d 1386 (9th Cir. 1982) (brandishes totality-of-circumstances approach to 1325(a)(3) good faith)
- In re Metz, 67 B.R. 462 (9th Cir. BAP 1986) (totality-of-circumstances framework for chapter 13 good faith in 'chapter 20' context)
- In re Leavitt, 171 F.3d 1219 (9th Cir. 1999) (Leavitt factors guiding good faith analysis in 13 cases)
- In re Warren, 89 B.R. 87 (9th Cir. BAP 1987) (eleven Warren/Estus factors for good faith inquiry)
- In re Puffer, 674 F.3d 78 (1st Cir. 2012) (rejects per se bad-faith rule; endorses totality-of-circumstances in attorney-fee contexts)
- In re Tran, 431 B.R. 230 (Bankr. N.D. Cal. 2010) (lien avoidance case; discusses insolvency and good faith in chapter 13/20 context)
- Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220 (9th Cir. 2002) (recognizes lien-stripping mechanics in determining 'secured claim' vs unsecured)