by In a published opinion, the Fourth Circuit affirmed the denial of confirmation of an above-median Chapter 13 debtor’s plan that proposed to pay off three recently purchased vehicles while paying unsecured creditors less than eight cents on the dollar. In Goddard v. Burnett, No. 25-1303 (4th Cir. Apr. 28, 2026), the court held that technical compliance with the disposable-income test under Section 1325(b) does not insulate a plan from the separate good-faith requirement of Section 1325(a)(3) which allows the court to examine the timing and classification of debt incurred pre-petition.
The court affirmed the district court’s judgment, which had affirmed the bankruptcy court’s order denying confirmation. Judge Niemeyer wrote the unanimous published opinion, joined by Judges Thacker and Berner.
NACBA and NCBRC appeared as amici in support of the debtor-appellant. This brief was written by NACBA member Richard Cook of Richard P. Cook PLLC, Inc. in Wilmington, North Carolina. Mr. Cook was also given time to argue at the oral argument.
Facts
Bobby Goddard, Jr. filed a Chapter 13 case in September 2023. He was an above-median debtor with substantial monthly income from employment with the Department of Labor, Army retirement income, and veterans’ disability benefits. His non-filing spouse also earned income.
At the time of filing, Goddard owned three vehicles purchased within the prior 32 months: a 2015 Chevrolet Corvette, a 2021 GMC Sierra 1500, and a 2022 Genesis G70. The total monthly payments on the vehicles were approximately $3,060. He also had approximately $84,700 in general unsecured debt, including more than $35,000 in personal loans taken out during the same period in which he purchased the vehicles.
Because Goddard was an above-median debtor, he calculated disposable income using the means test. After deducting allowable expenses, including secured-debt payments on the vehicles, his Form 122C-2 showed negative disposable income.
Goddard’s proposed Chapter 13 plan would have paid the trustee approximately $3,700 per month after an initial period. The trustee would then pay nearly $3,000 per month toward the three vehicle loans, along with other priority and secured claims. General unsecured creditors, whose allowed claims totaled about $84,700, would receive approximately $6,500 over the life of the plan—about 7.7% of their claims. At the end of the plan, Goddard would own the three vehicles free and clear while discharging more than $78,000 in unsecured debt.
The Chapter 13 trustee objected, arguing that the plan was not proposed in good faith because it allowed Goddard to retain three luxury vehicles at the expense of unsecured creditors. Goddard responded that because his plan complied with the disposable-income requirement of Section 1325(b), the court could not use Section 1325(a)(3)’s good-faith requirement to second-guess his retention of assets whose secured payments were deductible under the means test.
The bankruptcy court rejected that argument and denied confirmation. The district court affirmed, and Goddard appealed.
The Fourth Circuit’s Analysis
The Fourth Circuit affirmed. The court held that compliance with the means test and disposable-income requirement of Section 1325(b) does not preclude a bankruptcy court from considering whether the plan was proposed in good faith under Section 1325(a)(3).
The court explained that the good-faith requirement is broader than technical compliance with the Code. Under Fourth Circuit precedent, the good-faith inquiry asks whether, under the circumstances of the case, the plan abuses the provisions, purpose, or spirit of Chapter 13. A debtor must therefore do more than satisfy a mechanical disposable-income calculation; the debtor must propose a plan consistent with the equitable purposes of bankruptcy.
The court rejected Goddard’s argument that BAPCPA’s adoption of the means test eliminated judicial discretion to consider a debtor’s retention of expensive collateral when assessing good faith. While BAPCPA restricted discretion in calculating disposable income for above-median debtors, Congress left Section 1325(a)(3)’s good-faith requirement intact. The court reasoned that the means test governs disposable income “for purposes of” Section 1325(b). Still, it does not displace the separate confirmation requirements in Section 1325(a), including the good-faith requirement.
The Fourth Circuit also emphasized that Section 1325(a)(1) requires compliance with Chapter 13 as a whole, not merely Section 1325(b). In addition, the court noted that the Chapter 7 means-test framework in Section 707(b)—from which Section 1325(b) borrows—works alongside separate bad-faith and totality-of-the-circumstances inquiries. That structure supported treating the Chapter 13 means test and good-faith review as complementary, not mutually exclusive.
The debtor relied on the Ninth Circuit’s decision in Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013). The Fourth Circuit acknowledged that Welsh may support some aspects of the debtor’s position, but declined to follow any suggestion that a debtor’s retention of luxury items while paying little to unsecured creditors is irrelevant to good faith. The court also distinguished Bledsoe v. Cook, 70 F.4th 746 (4th Cir. 2023), explaining that Bledsoe addressed the means-test calculation and did not decide the scope of Section 1325(a)(3).
Application to Goddard’s Plan
Having held that good-faith review remained available, the Fourth Circuit concluded that the bankruptcy court did not clearly err in finding that Goddard’s plan was not proposed in good faith.
The court pointed to the timing and circumstances of the vehicle purchases and personal loans. The bankruptcy court had found that Goddard purchased the vehicles over a short period and that the timing suggested he may have used unsecured personal loans to service vehicle-related debts that he then sought to discharge.
The court also emphasized that Goddard did not establish a practical need to retain all three vehicles. Under the plan, trustee disbursements would pay off the vehicle loans while unsecured creditors received only a small dividend. The debtor would emerge from bankruptcy with three unencumbered vehicles and a discharge of more than $78,000 in unsecured debt.
On that record, the Fourth Circuit held that the bankruptcy court permissibly found the plan to be an effort to improve the debtor’s financial condition at the expense of unsecured creditors, rather than an honest effort to repay debts consistent with Chapter 13.
Result
The Fourth Circuit affirmed the district court’s March 13, 2025 judgment, which affirmed the bankruptcy court’s denial of confirmation. The court held that Section 1325(b) means-test compliance does not immunize a Chapter 13 plan from good-faith review under Section 1325(a)(3), and that the bankruptcy court did not clearly err in finding a lack of good faith on the facts presented.
The opinion was issued on April 28, 2026.
Opinion and Briefs
Goddard v. Burnett – Fourth Circuit Published Opinion
NACBA/NCBRC Amici Brief in Support of the Debtor
Debtor/Appellant’s Brief
Trustee/Appellee’s Brief