The debtor was not permitted to convert from chapter 7 to chapter 13 post-discharge but prior to administrative closure of his case where the court found the attempted conversion to be an abuse of process and his conduct in his chapter 7 case to indicate bad faith. In re Chamoun, No. 20-5069 (C.D. Cal. Dec. 2, 2020). Read More
Tag Archive: good faith
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Debtor’s Post-Discharge Pre-Closure Motion to Convert Denied
Posted by NCBRC - December 16th, 2020
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Social Security Benefits May Be Considered for Abuse under 707 and Good Faith under 1325
Posted by NCBRC - August 26th, 2020
A debtor’s social security income is a proper factor to consider in an abuse analysis under section 707(b)(3)(B) and in a good faith analysis under section 1325(a)(3). Meehean v. Vara (In re Meehean), No. 20-10380 (E.D. Mich. Aug. 18, 2020).
When they filed their chapter 7 petition, debtors listed $5,842 in monthly income ($4,007 in Social Security benefits and $1,835 in pension income) and $4,446 in monthly expenses. They had $142,871 in secured mortgage debt and $43,100 in unsecured non-priority debt. The trustee moved to dismiss the petition as an abuse of bankruptcy, arguing that, if the debtors committed their social security income to a chapter 13 plan, they could pay off their unsecured debt over five years. The bankruptcy court agreed and granted the trustee’s motion. In re Meehean, 611 B.R. 574 (Bankr. E.D. Mich. 2020).
The debtors appealed to the district court arguing that the bankruptcy court erred by considering social security income as a factor in a totality of circumstances test for abuse of bankruptcy under section 707(b)(3)(B). Read More
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No Bad Faith in Filing Second Chapter 13 Petition while First Still Pending
Posted by NCBRC - April 16th, 2020
The bankruptcy court declined to attribute bad faith to the debtors when they voluntarily dismissed one chapter 13 case after a motion for relief from stay had been filed by the mortgage creditor, and filed a second chapter 13 petition while the first was still pending. 21st Mortgage Corp. v. Wilkinson, No. 19-3021 (Bankr. M.D. Pa. Nov. 26, 2019).
The debtors’ first chapter 13 was filed by counsel, and when the debtors failed to respond to the mortgage creditor’s motion for relief from stay, the court granted default judgment in the creditor’s favor. Five months later, through new counsel, the debtors filed another chapter 13 petition. The following day, they voluntarily dismissed their prior case. Relying on section 109(g)(2), the mortgage creditor filed a motion to dismiss the second petition as being filed in bad faith to avoid the consequences of its motion for relief from stay. Read More
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Court May Not Deny Amendment to Exemptions Based on Bad Faith
Posted by NCBRC - December 6th, 2019
Based on Law v. Siegel the bankruptcy court properly overruled the trustee’s objection to the debtor’s amendment to his exemptions without regard to whether the debtor concealed assets in bad faith. Rucker v. Belew (In re Belew), No. 18-3045 (8th Cir. Nov. 26, 2019).
In his bankruptcy schedules, the debtor initially failed to disclose that he had $30,000 in cash in a home safe. When the trustee learned of the cash, the debtor sought to amend his exemptions to exempt the money. The trustee objected on the grounds that the debtor had intentionally concealed the asset and was therefore precluded from amending on the basis of bad faith. The bankruptcy court overruled the objection and the BAP affirmed. Read More
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Bankruptcy Court Abused Discretion in Failing to Confirm Plan
Posted by NCBRC - February 26th, 2019
In a terse opinion, the Fifth Circuit balanced the evidence relied on by the bankruptcy court against various additional factors and concluded that the bankruptcy court abused its discretion when it denied the debtors’ chapter 13 plan for lack of good faith under section 1325(a)(3). Booker v. Johns (In re Booker), No. 18-30526 (5th Cir. Feb. 11, 2019) (unpublished).
In holding that the debtors’ plan was proposed in bad faith, the bankruptcy court relied on the fact that the debtors proposed to pay unsecured creditors at 4% while retaining their 1998 fishing boat, motor and trailer. The debtors proposed a new plan that was less favorable to them which the bankruptcy court confirmed. The debtors appealed, and the district court affirmed. Read More
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Debtors Entitled to Discharge Despite Bad Faith Conduct
Posted by NCBRC - November 9th, 2018
The debtors were entitled to discharge once they completed their payments under the plan notwithstanding the fact that they “gamed the system” and conducted their bankruptcy in bad faith. Davis v. Holman (In re Holman), No. 17-1118 (D. Kans. Oct. 31, 2018).
During the course of their chapter 13 bankruptcy, debtors, Shala and Nathan Holman, failed to disclose assets and debts, employment status, post-petition debts, and other relevant information. They modified their chapter 13 plan numerous times and responded to challenges by the trustee based on bad faith. In one challenge, addressing the entirety of their misconduct to date, the court held a hearing and the parties reached a stipulated agreement resolving the issues. In July, 2016, the trustee again sought dismissal of their case based on bad faith. While that litigation was pending, the debtors successfully completed their payments in accordance with their confirmed plan. After trial on the motion, the bankruptcy court found that while the debtors’ conduct indeed constituted bad faith, the court was precluded from dismissing the case because the debtors’ successful completion of their plan payments entitled them to discharge. Read More
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Fee-Only (almost) Plan Not Bad Faith
Posted by NCBRC - July 17th, 2018
“In this Court’s view, attorney fees, which are governed by 11 U.S.C. § 328, should not be intertwined with § 1325(b)(1)’s requirement that debtors pay either 100% of general unsecured claims or all of their disposable income.” In re Jones, No. 17-40497, 2018 Bankr. LEXIS 1244 (Bankr. S.D. Ill. April 26, 2018).
Chapter 13 debtor, Gary Jones, proposed to pay secured creditors directly, and pay into the plan $100.00 per month with that amount going first to pay his attorney’s and the trustee’s fees in full, and then to pay 7.4% to his general unsecured creditors. Despite the fact that the attorney’s fees were below the court-approved no-look fee and that Mr. Jones could not afford to pay more into the plan, the trustee objected to confirmation on the basis that the plan was not filed in good faith.
Applying a totality of the circumstances inquiry into the issue of good faith, the court overruled the trustee’s objection. Read More
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Court Refuses to Discard Totality of Circumstances Test for Good Faith
Posted by NCBRC - May 9th, 2018
A chapter 13 plan must still be proposed in good faith under the totality of circumstances test even if it complies with Code provisions for confirmation. Booker v. Johns (In re Booker), No. 16-1604 (W.D. La. April 17, 2018).
Although the trustee did not challenge Webster and Lillie Bookers’ first chapter 13 plan, which proposed to keep their boat and various other secured items and paid only 4% to unsecured creditors, the bankruptcy court held a hearing and found the plan was not proposed in good faith. After filing a successful plan, the Bookers appealed the denial of confirmation of the first plan to the district court. Read More
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Debtor Correctly Excluded Mother’s Social Security From PDI
Posted by NCBRC - March 6th, 2018
Where the debtor lived with his mother and they shared all income and expenses, he correctly included her expenses and excluded her social security benefits in his projected disposable income calculation. In re Palcher, 2018 WL 481863, No. 7:17-bk-3938 (Bankr. D. S.C. Jan. 16, 2018).
Above-median debtor, Michael Palcher, proposed a chapter 13 plan to pay his mortgage directly and pay approximately 6.7% to unsecured creditors through the plan. The trustee objected to confirmation arguing that, because Mr. Palcher did not include his mother’s social security in his projected disposable income, the plan did not comply with section 1325(b) and was proposed in bad faith. Read More
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Fourth Circuit Looks at Multiple Factors in Bad Faith Analysis
Posted by NCBRC - February 23rd, 2018
Filing bankruptcy for the primary purpose of discharging one debt is not, in itself, bad faith, and the bankruptcy court did not abuse its discretion when weighing several factors in denying the creditor’s motion to dismiss for cause under section 707(a). Janvey v. Romero (In re Romero), No. 17-1197 (4th Cir. Feb. 21, 2018).
Peter Romero was found liable to victims of a Ponzi scheme in which he was involved. Pursuant to that judgment, he owed $1.275 million to Ralph Janvey, the court-appointed Receiver in the Ponzi litigation. Mr. Janvey rejected without counteroffers Mr. Romero’s attempts to settle and Mr. Romero filed for chapter 7 bankruptcy. The bankruptcy court denied Mr. Janvey’s motion to dismiss and granted Mr. Romero’s discharge. In re Romero, 557 B.R. 875 (Bankr. D. Md. 2016). The district court affirmed. Read More
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HAVEN Act Guide
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
This Guide provides an overview of the HAVEN Act identifies benefits that are excluded, and answers frequently asked questions.
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