581 B.R. 583
Bankr. S.D. Ill.2018Background
- Debtors Michael and Alicia Eubanks filed Chapter 13 (Case No. 17-40227) with above-median income and a stipulated projected disposable income of $1,443.71/month.
- Debtors proposed a 60-month plan paying $1,220/month and providing 100% payment to general unsecured creditors.
- Chapter 13 Trustee objected, arguing plan payments omit disposable income and proposed conditions: (1) Debtors must pledge any excess disposable income to future plan modifications that pay less than 100%; (2) if Debtors refuse, monthly payments must equal full disposable income; (3) unsecured creditors are entitled to interest for delayed payment.
- Debtors argued the Trustee sought to add confirmation requirements not in the Code and that compliance with §1325(b)(1)(A) (payment in full) suffices for confirmation; they also disputed entitlement to interest.
- The court held a confirmation hearing and examined (a) good-faith requirement under §1325(a)(3), (b) whether §105(a) permits conditioning confirmation on pledges of future disposable income, and (c) whether §1325(b)(1)(A) requires interest on delayed unsecured payments.
Issues
| Issue | Trustee's Argument | Debtors' Argument | Held |
|---|---|---|---|
| Whether plan violates §1325(a)(3) good-faith requirement because payments omit disposable income and Debtors refuse to pledge excess for future mods | Refusal to pledge excess disposable income or to increase payments shows lack of good faith and unfairness to creditors | Compliance with §1325(b)(1)(A) (100% payment) satisfies good-faith inquiry; plan need not include all disposable income | Court applied an "intermediate" approach: compliance with §1325(b) generally satisfies good faith absent other misconduct; here no bad faith found (confirmation allowed) |
| Whether court may, under §105(a), condition confirmation on Debtors pledging excess disposable income to future plan modifications | Court may condition confirmation (per In re Crawford) to require future full payment pools; equitable authority supports such conditions | Using §105(a) to impose new confirmation requirements would improperly modify §1325 and conflict with Law v. Siegel; no statutory basis to force pledge now | Court refused to impose a pledge under §105(a); imposing such a condition would add requirements to §1325 and run afoul of Law v. Siegel; future modifications will be judged then |
| Whether §1325(b)(1)(A) requires payment of interest to unsecured creditors when payment is deferred over plan term | The phrase "as of the effective date of the plan" implies a present-value requirement and thus interest to compensate delay | Placement of phrase differs from other present-value provisions; §1325(b)(1)(A) requires only payment in full, not present-value/interest | Court held §1325(b)(1)(A) does not require interest; the statutory wording indicates no present-value interest obligation for delayed unsecured payments |
Key Cases Cited
- Hamilton v. Lanning, 560 U.S. 505 (2010) (discusses projected disposable income analysis under §1325(b))
- Matter of Smith, 848 F.2d 813 (7th Cir. 1988) (Seventh Circuit endorsing totality-of-circumstances good-faith test and noting §1325(b) limits inquiry into payment amount)
- In re Smith, 286 F.3d 461 (7th Cir. 2002) (Seventh Circuit enumerating factors for good-faith inquiry under totality of circumstances)
- In re Rimgale, 669 F.2d 426 (7th Cir. 1982) (original Seventh Circuit totality-of-circumstances good-faith test)
- Law v. Siegel, 134 S. Ct. 1188 (2014) (Supreme Court limits §105 equitable powers where they conflict with express Code provisions)