Opinion
Case No. 10-03092-MM13
01-22-2013
In re VILMA NIOKO Debtor.
WRITTEN DECISION - NOT FOR PUBLICATION
ORDER ON CHAPTER 13 TRUSTEE'S
OBJECTION TO CONFIRMATION
This is a Chapter 2 0 case, on which the Court invited supplemental briefing after this Court filed its decision in In re Victorio, 454 B.R. 759 (2011). Earlier in the case, the senior lienholder on the property had not filed a proof of claim, so debtor's proposed plan would require about eight months to complete, with nothing going to unsecured creditors, including the junior lienholder whose lien was proposed to be stripped off and treated as an unsecured creditor. This Court elaborated in its prior order:
As the Court explained in Victorio, a debtor does not have to be eligible for a Chapter 13 discharge in order to seek the benefit of lien avoidance under 11 U.S.C. § 506(a) and § 1322 (b)(2). The issue, instead, is whether the plan is proposed in good faith. In re Burnett, 427 B.R. 517Both sides have filed supplemental pleadings, and appear to recognize that "good faith" is a requirement in proposing a Chapter 13 plan, and in seeking its confirmation under 11 U.S.C. § 1325 (a)(3).
(Bankr. S.D. CA 2010). Since the matter was briefed by the parties and thereafter was taken under submission, it appears the senior lienholder filed a proof of claim, asserting arrears of $8,299.30. The parties have not addressed what impact, if any, that proof of claim might have on the confirmability of debtor's proposed plan.
At the conclusion of any good faith analysis, in a Chapter 2 0 case, the question which remains is what happens to the stripped off junior debt. As this Court set out in arduous detail in In re Victorio, 454 B.R. 759 (2011), because of enactment of § 1328(f) combined with applicable prior law, debt avoided under 11 U.S.C. §506(d) is not discharged. While payment on it may be deferred over the life of a good faith plan, the debt only goes away permanently if it is paid off in full or if it is discharged. In re Leavitt, 171 F.3d 1219 (9th Cir. 1999). Since it cannot be discharged because of § 1328(f), it continues to exist, to be paid at some future date. Arguments such as debtor here advances about her liability on the debt having been discharged in her prior Chapter 7, are unavailing, as set out in the discussion of Johnson v. Home State Bank, 501 U.S. 78 (1991), in Victorio. While this matter has been under submission, Victorio has been affirmed. 470 B.R. 545 (S.D. CA 2012).
Which returns us to the good faith issue. When debtor filed her case, and later filed the balance of her Schedules and her Chapter 13 plan, she proposed to pay nothing to unsecureds, to pay $3 62 per month to the trustee, and to strip off the second lien on her residence. Because the senior lender had not filed a proof of claim for any arrears, the trustee calculated that the plan would be completed in about 8 months. Debtor filed Schedules I and J, showing income of $4,572.50 and expenses of $4,210.50, with a net disposable income of $3 62. Debtor did disclose on her Schedule I that she received $900 per month in rental income. However, she did not include that information on her calculation of her Current Monthly Income. Because that was omitted, her form B22C showed that she was below median income, and therefore had an applicable commitment period (ACP) of 3 years.
The Chapter 13 trustee objected to omission of the rental income, and requested an amended B22C. Debtor prepared and filed one, showing that inclusion of the rental income made debtor an Above Median Income debtor, which in turn called for a 5 year applicable commitment period. However, completion of the full B22C also showed that debtor had a negative projected disposable income. Under the rulings of the Ninth Circuit in In re Kagenveama, 541 F.3d 868 (2008), and In re Flores, 692 F.3d 1021 (2012), where a debtor has no projected disposable income, the applicable commitment period calculated under B22C is not controlling. The Ninth Circuit has agreed to hear that matter en banc in an order entered December 19, 2012. That order also provided: "The three-judge panel opinion shall not be cited as precedent by or to any court of the Ninth Circuit."
Regardless of how the Ninth Circuit answers the question in Flores, the trustee points out that debtor's amended B22C is incorrect because it claims an expense allowance of $496 per month for vehicle ownership while debtor has no such expense because she owns the vehicle free and clear. See In re Ransom, 131 S.Ct. 716 (2011). Adding that $496 back in to debtor's former negative projected income of $-401.14 yields a positive projected disposable income of $94.86, which then means debtor has a required applicable commitment period of 5 years, and the approximate 37 months debtor proposes is not legally sufficient.
As noted, the cental question posited by this Chapter 2 0 case is whether debtor's plan is proposed in good faith. This Court finds and concludes that it is not, when debtor's plan will take approximately 3 7 months to complete paying nothing to unsecured creditors. Because debtor is an above-median income debtor, with a positive projected disposable income, debtor's applicable commitment period is 60 months. Proposal of a plan for a substantially shorter period of time without paying anything to unsecured creditors (when there is an unsecured creditor), is not a plan proposed in good faith.
Accordingly, the trustee's objection to confirmation is sustained and confirmation of the proposed plan is denied. Debtor shall have twenty-eight (28) days from the date of entry of this Order within which to file and serve an amended plan. If debtor fails to timely do so, on or after the 31st day from date of entry of this Order the trustee may lodge for consideration a proposed order dismissing this case. IT IS SO ORDERED.
_______________________
PETER W. BOWIE, Judge
United States Bankruptcy Court
CERTIFICATE OF MAILING
The undersigned, a regularly appointed and qualified clerk in the office of the United States Bankruptcy Court for the Southern District of California, at San Diego, hereby certifies that a true copy of the attached document, to wit:
Order on Chapter 13 Trustee's Objection to Confirmation
was enclosed in a sealed envelope bearing the lawful frank of the bankruptcy judges and mailed to each of the parties at their respective addresses listed below: Rebecca Pennington
Office of the Chapter 13 Trustee
525 B Street, Suite 1430
San Diego, CA 92101
Daniel J. Winfree
1010 2nd Avenue, #1015
San Diego, CA 92101
Said enveiope(s) containing such document was deposited by me in a regular United States Mail Box in the City of San Diego, in said District on January 22, 2013.
____________________
Molly Dishman
Judicial Assistant to the Honorable Peter W. Bowie