Renee A Quintyne
Before the Court is the request of Renee A. Quintyne (the “Debtor“), the above-captioned debtor, for a hardship discharge pursuant to Section § 1328(b) of the Bankruptcy Code. See Cross-Motion for a Hardship Discharge [ECF No. 32] (the “Debtor‘s Hardship Motion“). The Chapter 13 Trustee (the “Trustee“) opposes the request. See Affirmation in Opposition to Motion for Hardship Discharge [ECF No. 35] (the “Trustee‘s Opposition“). For the reasons set forth herein, the Court denies the Debtor‘s request for a hardship discharge.
The Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code on April 2, 2015. See Voluntary Chapter 13 Petition [ECF No. 1]. Several months later, on July 14, 2015, the Debtor successfully confirmed a Chapter 13 plan which provided for monthly payments in thе amount of $214.94 per month for 60 months. See Order Confirming Chapter 13 Plan [ECF No. 21].
Subsequent to confirmation, the Court entered an order on August 24, 2018 granting the Debtor‘s uncontested Motion for Authority to Obtain Credit for Debtor to Enter Into a Financing Agreement for a New Automobile [ECF No. 24] (the “Debtor‘s Credit Motion“). See Order Approving Debtor‘s Application to Enter into a Financing Agreement for a New Vehicle [ECF No. 26] (the “Credit Order“). That order approved the Debtor‘s entry into a financing agreement for a new Toyota vehicle after the Debtor‘s 2006 Toyota Corolla broke down. Id. In support of the Debtor‘s Credit Motion, the Debtor stated that her 2006 Toyota Corolla could not be repaired for less than the value of the vehicle and that the use of alternative transportation options, including public transportation, would cause hardship to the Debtor. See Debtor‘s Credit Motion ¶¶ 4, 6. Under the terms of the aрproved financing agreement, the new vehicle‘s purchase price in the amount of $18,460.40 would be financed over a period of 60 months resulting in monthly payments in the amount of $471.95 per month. See Credit Order at 1. The new car payments were partially offset by changes in the Debtor‘s finances, including that the Debtor‘s two children no longer needed her financial support; all these events ultimately resulted in reduced monthly plan рayments in the amount of $94.39 per month. See Affidavit of Debtor, Renee A. Quintyne, in Support of Her Motion, Pursuant to FRBP § 4001(c), for an Order Authorizing Financing of a New Motor Vehicle ¶¶ 4–5 [ECF No. 24-2] (the “Debtor‘s Credit Motion
To date, the Debtor has not filed an amended plan but did amend Schedules I and J to account for the new monthly car payments. See Amended Schedules I and J [ECF No. 25] (the “Debtor‘s Credit Motion Schedules“) (filed in conjunction with the Debtor‘s Credit Motion). In connection with the Debtor‘s Hardship Motion, the Debtor once again filed Amended Schedules I and J. See Amended Schedules I and J [ECF No. 31] (the “Debtor‘s Hardship Motion Schedules“). But the Debtor‘s most recently amended Schedule J reports a monthly net income of $8.39, considerably less than the $94.39 monthly net income she had reported for her Credit Motion. See Schedule J, Debtor‘s Hardship Motion Schedules.
The trigger for the present dispute is the Debtor‘s default in plan payments. On June 20, 2019, the Trustee filed a motion seeking entry of an ordеr to dismiss these proceedings on grounds that the Debtor was in “material default” under the terms of the confirmed plan. See Motion to Dismiss ¶ 5 [ECF No. 30] (the “Trustee‘s Motion to Dismiss“). Specifically, the Trustee stated that, as of June 20, 2019, the Debtor was $875.06 in arrears on plan payments.1 Id. ¶ 2. In sum, the Debtor has paid 53 of the 60 total plan payments in the total amount of $11,391.82 as of September 13, 2019. See Trustee‘s Opposition ¶ 2; Reply Declaration of Derek
In response to the Trustee‘s Motion to Dismiss, the Debtor opposed the dismissal of her case and filed this cross-motion seeking a hardship discharge. The Debtor asserts that she is entitled to a hardship discharge pursuant to Section 1328(b) of the Bankruptcy Code because (1) the arrearages stem from the “unexpected loss of the use of [the Debtor‘s] car аnd [the Debtor‘s] need to finance a new car—a circumstance for which [the Debtor] should not . . . be held accountable“; (2) any distributions to unsecured creditors would not be less than what would have been paid on such claims in a Chapter 7 liquidation proceeding; and (3) modification of the Debtor‘s plan is impracticable as the Debtor‘s disposable income is less than $10.00. See Debtor‘s Hardship Motion ¶ 5.
Subsequently, the Trustee filed the Trustee‘s Opposition in support of dismissal and asserted that the Debtor was not entitled to a hardship discharge. See generally Trustee‘s Opposition ¶ 3–7. Specifically, the Trustee argued that the Debtor had not provided a “compelling narrative that the circumstances surrounding her inability to complete the confirmed plan payments were beyond her control.” Id. ¶ 7. Instead, the Trustee stated that a hardship discharge should only be granted in the “most compelling of circumstances” and highlighted that the Debtor had not made any effort to gain additional income. Id. While conceding that creditors would likely not face financial prejudice under either a dismissal or a hardship discharge,2 the Trustee urged the Court to reject the Debtor‘s request in order to maintain the “intent and spirit of the ‘hardship discharge.‘” Id. ¶ 3.
DISCUSSION
A central purpose of the Bankruptcy Code is to offer a pathway for insolvent debtors to navigate their way towards a “fresh start,” including a discharge of their financial obligations. See Harris v. Viegelahn, 135 S. Ct. 1829, 1835 (2015); Grogan v. Garner, 498 U.S. 279, 286 (1991). Generally, a Chapter 13 debtor may receive a discharge upon completion of his or her Chapter 13 plan pursuant to Section 1328(a) of the Bankruptcy Code. See generally
[T]he court may grant a discharge to a debtor that has not completed plan payments under the plan only if:
(1) the debtor‘s failurе to complete such payments is due to circumstances for which the debtor should not justly be held accountable;
(2) the value, as of the effective date of the plan, of the property actually distributed under the plan on account of each allowed unsecured claim is not less than the amount that would have been
paid on such claim if the estate of the debtor has been liquidated under chapter 7 of this title on such date; and (3) modification of the plan under section 1329 of this title is not practicable.
Generally, “[u]nsubstantiated and conclusory statements are insufficient” for a debtor to satisfy its burden of persuasion. Id. at 903 (citing In re Dark, 87 B.R. 497, 498 (Bankr. N.D. Ohio 1988)). However, even if all three requirements are satisfied, it remains within the discretion of the court to grant or deny a debtor‘s request for a hardship discharge. See In re Lizzi, 2015 WL 1576513, at *3 (Bankr. N.D.N.Y. Apr. 3, 2015) (concluding that the use of the word “may” in Section 1328(b) “indicates [that] the granting of a hardship disсharge is within the discretion of the court“) (citing In re Bandilli, 231 B.R. at 836).
As noted above, the parties are in agreement that the granting of a hardship discharge would not prejudice the Debtor‘s remaining creditors and thus, do not dispute that the Debtor likely
I. Section 1328(b)(1)
Section 1328(b)(1) provides that a debtor is entitled to a hardship discharge where а “debtor‘s failure to complete [plan] payments is due to circumstances for which the debtor should not justly be held accountable.”
In contrast, a second grouр of courts has adopted a “necessarily fact-driven” approach to the analysis “with [an] emphasis properly focused on the nature and quality of the intervening event or events upon which the debtor relies.” In re Bandilli, 231 B.R. at 840; see also In re Grice, 319 B.R. 141, 146 (Bankr. E.D. Mich. 2004) (finding that the statute “does not require death, catastrophe, or maximum misery or suffering . . . [but] [i]nstead . . . focuses on accountability“); In re Dior, 2017 WL 1379351, at *2 (Bankr. S.D. Ind. Apr. 14, 2017) (indicating that “[t]here is no express requirement in § 1328(b) that a debtor prove catastrophic circumstances and the word ‘accountable’ does not equate to ‘catastrophic‘“). In evaluating a debtor‘s accountability, the Bandilli court held that a court‘s hardship analysis should include the following considerations:
(a) [W]hether the debtor has presented substantial evidence that he or she had the ability and intention to perform under the plan at the time of confirmation;
(b) whether the dеbtor did materially perform under the plan from the date of confirmation until the date of the intervening event or events;
(c) whether the intervening event or events were reasonably foreseeable at the time of confirmation of the Chapter 13 plan;
(d) whether the intervening event or events are expected to continue in the reasonably foreseeable future;
(e) whether the debtor had contrоl, direct or indirect, of the intervening events or events; and
(f) whether the intervening event or events constituted a sufficient and proximate cause for the failure to make the required payments.
In re Bandilli, 231 B.R. at 840. Even though it did not require a catastrophic circumstance to satisfy Section 1328(b), the Bandilli court was nonetheless “mindful that a request for [a] discharge under § 1328(b) merits special vigilance” and cautioned that a court facing such а
Other courts within this second group have considered the extent of a debtor‘s accountability and degree of control; the substantiality and foreseeability of the changed circumstances at the time of confirmation; and whether the debtor had made significant efforts to overcome the circumstances but ultimately remained unable to successfully complete his or her plan. See e.g., In re Dior, 2017 WL 1379351, at *2 (looking to whether the changed economic circumstances were “beyond the debtor‘s control that did not exist nor were foreseeable at the time of confirmation of the plan, and [whether] the debtor [had] made serious efforts to overcome . . . but [was still] unable to complete . . . plan payments“); In re Wilson, 2016 WL 699553, at *2–3 (considering the accountability of the debtor, the substantiality and foreseeability of the change in circumstances, and whether the debtor still remained unable to make plan payments despite efforts to overcome the circumstances) (citing In re Bacon, 2003 WL 26098322, at *2 (Bankr. S.D. Ga. Aug. 20, 2003)).
There is no binding authority in this Court on the proper standard for Section 1328(b)(1). But this Court finds the approach and rationale of the second group of courts to be far more consistent with the language of the statute. Applying this accountability standard to the record currently before the Court, the Court concludes that the Debtor does not satisfy the requirements of Section 1328(b)(1). The Dеbtor relies upon the breakdown of her 2006 Toyota Corolla—and her need to finance a new vehicle—as the basis for her request for a hardship discharge. See
In addition, these facts do not provide a basis for a hardship discharge because they are not the true cause of the Debtor‘s failure to make plan payments. This is clear from the Debtor‘s own statements. As part of her earlier request for financing, the Debtor represented that she would still be able to make reduced plan payments of $94.39 per month if the Debtor‘s Credit Motion was granted. Her proposed revised monthly plan payment at that time accounted for her new vehicle and other changes to her finances. But a comparison of the Debtor‘s Credit Motion Schedules and the Debtor‘s Hardship Motion Schedules confirms that the decrease in her monthly net income is not the result of the financing of a new vehicle. The Debtor‘s income in the amount of $5,206.26 and car payments in the amount of $471.95 have remained the same since the filing of the Debtor‘s Credit Motion. Compare Schedule J, Debtor‘s Credit Motion Schedules with Schedule J, Debtor‘s Hardship Motion Schedules. Rather, it is the Debtor‘s other expenses that have changed, including a $50.00 increase in clothing, laundry, and dry cleaning expenses; a $100.00 increase in transportation expenses (which excludes car payments); a $60.00 increase in entertainment and periodicals and literary expenses; a $50.00 increase in charitable contributions and religious donations; and a $100.00 increase in “other” expenses relating to “[d]og care.” See Schedule J, Debtor‘s Hardship Motion Schedules.
Neither the Debtor‘s Credit Motion nor the Debtor‘s Reply Declaration provide any information about these additional expenses or why the Debtor stopped making plan payments altogether; they offer nothing more than a general statement that the Debtor could no longer
II. Section 1328(b)(3)
The Court‘s finding that the Debtor fails to meet the requirements of Section 1328(b)(1) is a sufficient basis to deny a hardship discharge and obviates the need for the Court to make a ruling as to whether the Debtor also satisfies the requirements of Sеction 1328(b)(3). See e.g., In re Bandilli, 231 B.R. at 839 (noting that the Debtors’ failure to satisfy a single element of Section 1328(b) is “sufficient to support the denial of the hardship discharge“); In re Cummins, 266 B.R. at 857 (holding that the Court need not address the second and third prongs of Section 1328(b) following a finding that debtors failed to satisfy their burden of establishing the first prong); In re Schleppi, 103 B.R. at 904 (stating that the debtor‘s failure to meet the third prong of Section 1328(b) was alone “fatal” to the motion). But the Court has similar concerns regarding
CONCLUSION
For the reasons set forth above, the Court denies the Debtor‘s Hardship Motion. The Trustee should settle an order on seven days’ notice. The proposed order must be submitted by filing a notice of the proposed order on the Case Management/Electronic Case Filing docket, with a copy of the proposed order attached as an exhibit to the notice. A copy of the notice and proposed order shall also be served upon counsel to the Debtor.
Dated: New York, New York
January 16, 2020
/s/ Sean H. Lane
UNITED STATES BANKRUPTCY JUDGE