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2103

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

BARRY E. BRYSON,

DEBTOR

CASE NO. 94-41289-13

MEMORANDUM OF DECISION

This case is before the Court for decision following an evidentiary hearing on December 8, 1994, about confirmation of the debtor's proposed chapter 13 plan. Creditor Norwest Financial Kansas, Inc. (Norwest Financial), objected to the plan, contending it was not proposed in good faith as required by 11 U.S.C.A. §1325(a)(3). The debtor appeared by counsel Joseph I. Wittman. Norwest Financial appeared by counsel Justice B. King. The Court has considered the evidence and the applicable law in the Tenth Circuit and the District of Kansas, and concludes that the debtor's plan as filed cannot be confirmed.

FINDINGS OF FACT

The debtor obtained the last in a series of loans from Norwest Financial on June 16, 1994, just 57 days before he filed for bankruptcy. In obtaining the loan, the debtor provided information on a "Financial Statement of Income and Debts" and a "Personal Property List," and provided a receipt which showed that, three days earlier, he had paid off a loan from the Super Chief Credit Union, and also contained a hand-written note indicating the loan had been secured by a boat. These documents showed the debtor currently owned an unencumbered boat worth $8,000. In fact, when he presented the document, the debtor had already sold the boat. The debtor also reported on the documents that he had a current salary of $1,500 per month. In reality, he had no job at the time, and was attempting to earn income through self employment. He had been receiving workers' compensation benefits some time before but they had been terminated, and he had not yet begun receiving unemployment compensation payments, though he did receive them some time later. The loan he obtained remains unpaid.

The debtor's schedules are inaccurate in several respects. Though several creditors with "Norwest" in their names are listed, Norwest Financial is not. It learned of the debtor's bankruptcy filing when its representative called him about a delinquent payment sometime before the first meeting of creditors was to be held pursuant to 11 U.S.C.A. §341. At the hearing on December 8, the debtor disclosed that he was pursuing several prepetition actions against his former employer, one of which is for wrongful termination, with the help of an attorney other than his bankruptcy counsel. These possible actions are not listed as assets in the debtor's schedules. The debtor's plan does not provide for any part of possible recoveries in these actions to be distributed to his creditors.

DISCUSSION AND CONCLUSIONS

Based upon the evidence presented, the Court is convinced it is more likely than not that the debtor's obligation to Norwest Financial would be held to be nondischargeable under 11 U.S.C.A. §523(a)(2)(A) or (B) if the debtor had filed a chapter 7 case. This is significant because the fact a debtor owes a debt that would be nondischargeable in a chapter 7 proceeding is one of the factors the Tenth Circuit has directed courts to consider in deciding whether the debtor's chapter 13 plan has been proposed in good faith, as it must be to satisfy §1325(a)(3). See Flygare v. Boulden, 709 F.2d 1344 (10th Cir. 1983); In re Robinson, 987 F.2d 665 (10th Cir. 1993) (per curiam). This factor remains relevant even though 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. 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. 1994). In addition, the fact a debt would be nondischargeable in chapter 7 may constitute "cause" under §1322(c) for extending a plan beyond the usual three-year limit. See In re Atchley, 88-41370-13, Memorandum of Decision (deciding five cases), slip op. at 5-6 (Bankr.D.Kan. June 6, 1989), decision in one case vacated and remanded on other grounds, 109 B.R. 998 (D.Kan. 1990).

Applying the Flygare factors as modified by the enactment of §1325(b) in 1984, the Court concludes a number of factors indicate the debtor has not proposed his plan in good faith. He failed to list Norwest Financial as a creditor, failed to list-- and later to amend his schedules to list--what could be substantial assets, proposed a plan of minimum duration, and seeks to discharge in chapter 13 a debt likely to be nondischargeable in chapter 7. The Court concludes the debtor's present plan cannot be confirmed.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this 16th day of December, 1994.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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