In Re Richall
MEMORANDUM OPINION
I. INTRODUCTION
Lаwrence P. Sumski, the chapter 13 trustee (the “Trustee”), filed a motion to dismiss the case (Doc. No. 18) (the “Motion to Dismiss”) on the grounds that, notwithstanding the Debtors’ compliance with 11 U.S.C. § 1325(b), 1 the Debtors’ Chapter 13 Amended Plan dated December 8, 2011 (Doc. No. 24) (the “Plan”) was not filed in good faith under § 1325(a)(3) because it does not provide plan payments as calculated pursuant to § 1325(b)(2). The Debtors counter that their failure to dedicate their entire monthly disposable income to the Plan alone is insufficient to demonstrаte lack of good faith when the Plan proposes to pay creditors in full. After notice and a hearing, the Court took confirmation of the Debtors’ Plan and the Trustee’s Motion to Dismiss under advisement.
This Court has jurisdiction of the subject matter and the pаrties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the “Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire,” dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).
II. FACTS
The parties do not disрute the material facts involved in this case. The Debtors filed for chapter 13 bankruptcy on July 19, 2011. They submitted their Plan on December 30, 2011. The Debtors’ Schedules I and J show a monthly net income of $886.42. Additionally, Form B22C provides that the Debtors are “above median” dеbtors. Accordingly, their disposable income is determined under § 1325(b)(2) and (3). That calculation provides that the
III. DISCUSSION
Section 1325(b)(1) provides that:
[i]f the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—
(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or
(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.
11 U.S.C. § 1325(b)(1). The Trustee objects to confirmation of the Plan and moves to dismiss thе case because he believes the Plan should provide for payment of all of the Debtors’ monthly disposable income, or $1,756.21 per month, until the expected allowed claims are paid in full, which will be sooner than stretching payments ovеr sixty months as proposed in the Debtors’ Plan. The Trustee also argues that the Debtors lack good faith under § 1325(a)(3) because they are failing to use their best efforts and failing to protect creditors against the time value of deferring payment of their claims. The Debtors disagree and contend that the Trustee’s view would require debtors to satisfy both § 1325(b)(1)(A) and (B) thereby rendering § 1325(b)(1)(A) superfluous.
A. BAPCPA and Section 1325(b)
Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPC-PA”), § 1322(d) specified that a “plan mаy not provide for payments over a period that is longer than three years, unless the court, for cause, approves a longer period, but the court may not approve a period that is longer than five years” regardless of whether the debtоr was above or below median. 2 11 U.S.C. § 1322(d) (1994) (emphasis added). Prior to the enactment of BAPCPA, § 1325(b) prohibited approval of a chapter 13 plan over the objection of the trustee or the holder of an allowed claim unless the debtor was pаying all unsecured claims in full, or was paying all of the debtor’s disposable income over the full term of the plan. 11 U.S.C. § 1325(b) (1998). Accordingly, the Court would have no cause to approve a plan term longer than three years for any debtor, regardless of the amount of disposable income, if the debtor could pay unsecured creditors in full within three years.
In the case of above median debtors, § 1322(d)(1) now proscribes that “the plan may not provide for payment over a period that is longer than 5 years.” 11 U.S.C. § 1322(d)(1). In effect, BAPCPA eliminated any minimum term of a plan for above median debtors. All above median debtors are now subject to a uniform term of five years for a chapter 13 plan with only one exception: the term of the plan, or the commitment period, may be less than five years if creditors are paid in full. 11 U.S.C. § 1325(b)(1)(A) and (b)(4). However, BAPCPA did not change the minimum or maximum plan term for below median debtors not paying creditors in full. It remains a minimum of three years, absent cause for a longer term, which cannot exceed five years, unless creditors can be paid in full in a shorter period of time. 11 U.S.C. §§ 1322(d)(2) and 1325(b)(1)(B); see also 11 U.S.C. § 1325(b)(4)(B). Consequently, after BAPCPA, courts may deny confirmation of a chapter 13 plan proposed by a below median debtor, which stretches beyond a three year period and pays creditors in full but does not commit all disposable income, because a court could find that no cause exists to extend the plan longer than three years when a debtor can payoff creditors within the commitment period. See 11 U.S.C. § 1322(d)(2)(C). After BAPCPA, the same is not true for above median debtоrs.
Section 1325(b) was substantially changed by BAPCPA to create a bright line test to determine whether a debtor is committing sufficient income to the plan.
In re Jones,
The Court believes that this result is contrary to the intent of Congress in enacting BAPCPA. The Court also does not understand why a debtor would elect to remain in a chapter 13 proceeding any longer than necessary. However, this result is mandated by the clear and unambiguous language in §§ 1322(d)(1) and 1325(b)(1) of the Bankruptcy Code. If this statutory anomaly does not reflect the intent of Congress, it is the responsibility of Congress, not the courts, to correct the
B. Good Faith under 11 U.S.C. § 1325(a)(3)
The Trustee contends that the Debtors’ Plan was filed in bad faith because the Debtors do not commit all of their disposable income to the Plan. Pursuant to § 1325(a)(3), a chapter 13 plan is entitled to confirmation if “the plan has been proposed in good faith and not by any means forbidden by law.” 11 U.S.C. § 1325(a)(3). The Debtors bear the burden of demonstrating that a plan has been proposed in good faith.
Sullivan v. Solimini (In re Sullivan),
(1) debtor’s accuracy in stating her debts and expenses, (2) debtor’s honesty in the bankruptcy process, including whether she has attempted to mislead the court and whether she has made any misrepresentations, (3) whether the Bankruptcy Code is being unfairly manipulatеd, (4) the type of debt sought to be discharged, (5) whether the debt would be dischargeable in a Chapter 7, and (6) debtor’s motivation and sincerity in seeking Chapter 13 relief.
Sullivan,
The meaning of “good faith” should not be expanded beyond the meaning intended by Congress.
In re Keach,
IV. CONCLUSION
For the reasons set forth above, the Trustee’s Motion to Dismiss shall be denied, and the Court shall confirm the Debtors’ Plan. This opinion constitutes the Court’s findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. The Court will issue a separate order consistent with this opinion.
Notes
. Unless otherwise indicated, in this opinion the terms “Bankruptcy Code,” "section" and “§ " refer to title 11 of the United States Code, 11 U.S.C. §§ 101-1532, as amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), Pub.L. No. 109-8, effective in cases commenced on or after October 17, 2005.
. Prior to the enactment of BAPCPA, the terms "above median" and "below median” were not part of the Bankruptcy Code. All debtors, regardless of the amount of their disposable income, were subject to the same statutory limitations on the minimum and maximum term for a chapter 13 plan.