In Re Boyd
- Reporters:
- ,
- Before:
- James
MEMORANDUM AND ORDER
THOMAS W. JAMES, Bankruptcy Judge.Crеditor Illinois Department of Public Aid has objected to confirmation of the chapter 13 plan of this debtor, Linda Boyd, on the ground that her plan has not been proposed in good faith. The court will sustain the objection and deny confirmation. Quite frankly, Miss Boyd is a dishonest debtor who wishes to avoid the repayment of public assistance she received becausе of her fraudulent conduct in deceiving the Department to make the payments by failing to report her employment by the Health and Hospital Commission of Cook County, Illinois. This court may not under the principles set forth in In re Rimgale, 669 F.2d 426 (7th Cir.1982), condone such an abuse of a chapter 13 case by confirming the plan.
On April 30, 1979, the Cook County Grand Jury indicted Miss Boyd for theft in accepting $16,079 from Public Aid [Cirсuit Court of Cook County, Illinois, Cook County Department, Criminal Division, case no. 79-2553]. On April 7, 1980 she pleaded guilty to several of the counts. The county judge placed her on probation and ordered her to pay restitution of $3,148, which she did pay.
Thereafter, the state sued Linda Boyd for damages of $32,158 for her alleged fraudulent conduct in receiving these payments [Circuit Court of Cook County, Mu *411 nicipal Department, First District, case no. 81 MI 350132]. On July 15, 1981 the court entered judgment against her for that amount under Ill.Rev.Stat. ch. 23, § 11-21 (1978), (rеpealed Sept. 14, 1981).
The Department has filed its claim for $32,480.64. Linda Boyd admits this claim arose from her fraudulent conduct in that she knowingly and with intent to deceive the Department failed to report that she was employed by the Health and Hospital Commission of Cook County while receiving public aid.
Congress does not wish the Bankruptcy Code to be a haven for criminal оffenders and has stated that criminal actions and proceedings may proceed under the exception grantеd by § 362(b)(1) to the automatic stay of § 362(a). H.R.Rep. No. 595, 95th Cong., 1st Sess. 342 (1977), reprinted in, 1978 U.S.Code Cong. & Ad.News 5787, 6299. Congress does not wish the Code to be a haven for dishonest debtors and has provided that indebtedness obtained by fraud or larceny is not dischargeable under §§ 523(a)(2) or (4).
Linda Boyd proposes to pay the two unsecured creditors, the Department and American Express, 10% of their allowed claims. American Express has filed a claim for $701.42. The debt owed the Illinois Department of Public Aid represents approximately 97% of her unseсured indebtedness and 80% of all claims.
The purpose of chapter 13 is the rehabilitation of financially distressed debtors thrоugh repayment of debts from wages or other regular income.
In re Kull,
12 B.R. 654, 656 (S.D.Ga.1981). These “wage earner plans” are an alternative to chapter 7 proceedings which usually result in little or no payment to creditors. If the debtor completes payments under the plan, chapter 13 offers a discharge much more liberal than that available under chapter 7. Exсept for the provision regarding alimony, maintenance or support, the exceptions to discharge applicable in chapter 7 do not apply to a chapter 13 case.
To confirm a chapter 13 рlan the court must be satisfied that the plan has been proposed in good faith and not by any means forbidden by law.
Good faith is broad, indefinite and of necessity tied to the facts of a specific case. In re Seely, 6 B.R. 309, 312 (Bankr.E.D.Va.1980). Good faith must be viewed in light of the totality of circumstance surrounding the proposition of a particular chapter 13 plan. Public Finance Corp. v. Freeman, 712 F.2d 219, 221 (5th Cir.1983). As the Seventh Circuit noted in In re Rimgale, 669 F.2d at 431, the inquiry into good faith imposes a considerable responsibility on the bankruptcy judge whо must define good faith on a case by case basis as various problems are encountered in the administration of сhapter 13 cases.
In this case the inquiry is whether Linda Boyd deals fairly with the Department by offering to pay 10% of a debt arising from hеr fraudulent conduct and constituting most of her indebtedness. In re Rimgale, 669 F.2d at 432, 435, citing, In re Beaver, 2 B.R. at 340. This plan abuses the provisions, purpose and spirit of chapter 13 in violation of the Rimgale standards. See In re Rimgale, 669 F.2d at 431, citing, In re Terry, 630 F.2d 634, 635 (8th Cir.1980). Confirmation must be denied.
Linda Boyd admits that her debt owed the Department is the result of her fraudulent conduct. She received рublic assistance to which she was not entitled and was *412 convicted of theft. It may be that this debt would be nondischargeable under §§ 523(a)(2) or (4).
The court recognizes that
Moreover, Linda Boyd proposes to pay only 10% оf a debt incurred because she defrauded the Illinois Department of Public Aid. Given the nature of this debt 10% is simply not enough. Under the circumstances it does not constitute a substantial or meaningful effort to repay an obligation that is dischargeable undеr chapter 13 but possibly nondischargeable under chapter 7. See In re Osborne, 8 B.R. 200, 202 (Bankr.N.D.Ill.1981).
If the court were to confirm this plan it risks allowing chаpter 13 to fullfill its potential as a device for abuse by dishonest debtors. See Matter of Marlow, 3 B.R. at 307. The court concludes that this plan proposing 10% payment to the Department of Public Aid is inconsistent with the spirit and purpose of chapter 13 and has not been proposed in good faith.
It is therefore ordered that the objection of the Illinois Department of Public Aid to confirmation of the plan of the debtor, Linda Boyd, is sustained.
It is further ordered that confirmation of the plan of the debtor, Linda Boyd, is denied.