Search by Case Name
Search by Case Number
Search by Keyword

#2289 signed 1-7-97

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS




In re:

WILLIAM EUGENE CROUCHER,

SUSAN ANN CROUCHER,

DEBTOR(S).





CASE NO. 96-41909-13

CHAPTER 13





ORDER DENYING OBJECTION TO DEBTORS' PLAN

This matter is before the Court on the Kansas Department of Social and Rehabilitation Services' objection to the debtors' chapter 13 plan. The debtors appear by counsel Michael F. Brunton. SRS appears by Robert R. Hiller, Jr. The Court has reviewed the pleadings and is now ready to rule.

The parties have agreed on the facts necessary to this decision. SRS has a judgment against the debtors based on their receipt of Aid to Families with Dependent Children and Food Stamps at a time when they were ineligible for such assistance due to the amount of their earned income, which they did not accurately report to the agency. The debtors have three children and currently have gross earnings of $963 per month. These circumstances place them well below a poverty-level existence. They want to retain their automobile by paying for it through a chapter 13 plan. They are trying to pay $80 per month under their plan, and have missed one payment since they filed for bankruptcy about five months ago. Assuming the debtors continue to make their monthly payments, their plan will have to run for the maximum time allowed by §1322(d) to generate enough money to pay for their car and the administrative expenses of the plan.

SRS claims the debtors' chapter 13 plan has not been proposed in good faith because the agency's judgment would be nondischargeable in a chapter 7 liquidation case and the debtors propose to pay nothing to their unsecured creditors. Ordinarily, to have their plan confirmed, chapter 13 debtors are required to devote their net disposable income to the plan for a period of three years, which must pay their unsecured creditors at least as much as they would receive in a chapter 7 case. 11 U.S.C.A. §1325(a)(4) and (b)(1)(B). When they have debts that would be nondischargeable in chapter 7, this Court requires chapter 13 debtors to make a good faith effort to pay such debts by extending their plan to the maximum time allowed by law. Where, as here, the debtors' net disposable income is not sufficient to pay anything on such debts, the Court requires that they have some valid reason other than discharging those debts for filing a chapter 13 case. Trying to pay for a car is such a reason. Other than the likely nondischargeability of SRS's judgment and the debtors' inability to make any payment toward their unsecured debts, the Court finds none of the factors identified in Flygare v. Boulden, 709 F.2d 1344, 1348 (10th Cir. 1983), support a conclusion that the debtors' plan has not been proposed in good faith. See also In re Robinson, 987 F.2d 665, 668 n. 6 (10th Cir. 1993) (per curiam). Considering all the circumstances, the Court finds the debtors' plan was proposed in good faith. Furthermore, this Court remains convinced that the 1984 amendment which added §1325(b)--requiring debtors to pay all their disposable income into their chapter 13 plans if a creditor objects to confirmation--removed from the good faith requirement of §1325(a)(3) many of the factors identified in Flygare, including the amount debtors propose to pay to their unsecured creditors. See In re Stewart, No. 88-40681-13, Memorandum of Decision, slip op. at 15-16 (Bankr.D.Kan. May 4, 1990); 5 Collier on Bankruptcy ¶¶1325.04[3] and 1325.08[1] (15th ed. 1996).

In this case, it appears the debtors are making their best effort and are devoting all their net disposable income to the plan for the maximum time the law allows. As is true for all plans this Court confirms, if during the term of their plan, the debtors receive increases in or additions to their income which are not now expected, or receive any tax refunds, they must report these matters to the trustee and pay that extra money into their plan to the extent it is not necessary to support them and their children.

For these reasons, SRS's objection to confirmation of the debtors' plan is overruled.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of January, 1997.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

Search by Case Name
Search by Case Number
Search by Keyword