599 B.R. 786
Bankr. M.D. Penn.2019Background
- Debtor J. Michael Plevyak filed Chapter 13 on Jan. 18, 2016; multiple amended plans were filed; this is his Fifth Amended Plan.
- The Standing Chapter 13 Trustee and creditor Solar Innovations, Inc. objected to confirmation; Solar holds a timely, large proof of claim.
- Trustee successfully objected to a claimed $8,000 exemption for certain music and recording equipment ("Musical Items"); court treated those items as non‑exempt estate property.
- Expert testimony (dealer witness) established a minimum liquidation value of $8,000 for the Musical Items; Debtor’s plan lists $19,325 non‑exempt equity in real estate.
- The Plan’s attachment indicated payment of $19,325 into the plan but did not specify an effective/funding date or provide for the Musical Items’ non‑exempt value; court found the plan ambiguous as to timing.
- Court concluded hypothetical Chapter 7 liquidation value = $27,325 less $5,000 admin expenses = $22,325 available for unsecured creditors; Debtor did not show plan pays at least that amount.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plan satisfies §1325(a)(4) (best interests of creditors) | Trustee/Solar: Plan does not provide unsecured creditors the Chapter 7 liquidation equivalent (omits Musical Items value). | Debtor: Plan funds $19,325 (real estate non‑exempt equity) and otherwise complies (implicit: plan suffices). | Court: Sustained objections — plan fails §1325(a)(4); must account for $8,000 Musical Items, so plan not confirmable. |
| Whether Court may take judicial notice of docket and prior hearings | Trustee/Solar: Court may rely on docket and prior expert testimony to determine liquidation value. | Debtor: (No successful dispute) | Court: Took judicial notice of docket and prior testimony; used expert’s testimony to fix $8,000 liquidation value. |
| Whether ambiguity in plan’s funding/effective date should be construed against debtor | Trustee/Solar: Ambiguity prevents determining effective date and compliance; should be construed against debtor. | Debtor: Plan attachment indicates funding but fails to specify timing (no persuasive contrary). | Court: Ambiguity construed against debtor; plan ineffective to show compliance with §1325(a)(4). |
| Whether debtor should get another chance to amend plan | Trustee/Solar: Delay and lack of distributions weigh toward dismissal or denial without further amendments. | Debtor: Entitled to opportunity to propose reorganizing plan. | Court: Allowed one final 60‑day opportunity to file amended plan and updated Schedules I and J; warned of dismissal if unsuccessful. |
Key Cases Cited
- In re McKinney, 507 B.R. 534 (Bankr. W.D. Pa.) (burden shifting on objections to plan confirmation)
- In re Wile, 310 B.R. 514 (Bankr. E.D. Pa.) (debtor's ultimate burden to prove plan compliance)
- In re W.R. Grace & Co., 475 B.R. 34 (D. Del.) (estimating liquidation value in hypothetical Chapter 7)
- In re Cumba, 505 B.R. 110 (Bankr. D.P.R.) (best interests of creditors test requires at least Chapter 7 payout)
- Hackerman v. Demeza, 576 B.R. 472 (M.D. Pa.) (discussion of best interests test in Chapter 13 context)
- In re Davis, 392 B.R. 132 (Bankr. E.D. Pa.) (conventional Chapter 13 funding and commitment periods)
- In re Turek, 346 B.R. 350 (Bankr. M.D. Pa.) (ambiguities in plan construed against debtor)
- In re Brawders, 325 B.R. 405 (9th Cir. B.A.P.) (plan ambiguities interpreted against debtor)
- In re Nolen Tool Co., 50 B.R. 488 (Bankr. W.D. Ark.) (present value of distributions)
- In re Orawsky, 387 B.R. 128 (Bankr. E.D. Pa.) (cases permitting dismissal where further amendments would be futile)