Opinion
NOT FOR PUBLICATION
MEMORANDUM DECISION
MARGARET M. MANN, JUDGE United States Bankruptcy Court
BACKGROUND
The Debtor Andres Portillo filed a Chapter 13 bankruptcy petition on October 2, 2009. His Chapter 13 Plan ("Plan") was filed the same day. It was subsequently amended on March 24, 2010 and May 11, 2005. Plan confirmation objections were filed by the Chapter 13 Trustee David Skelton ("Trustee"), BAC Home Loans Servicing, LP and AmeriCredit Financial Services, Inc. By the time of the continued confirmation hearing on May 5, 2010, all confirmation objections had been resolved with exception of whether the Plan was proposed in good faith in accordance with 11 U.S.C. section 1325(a)(3).
The Plan provides no payment to unsecured creditors even though the Debtor has annual income above the median. Nevertheless, due to significant tax and health care insurance expenses, as well as car and mortgage payments, the Debtor's Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income B22 form reflects no disposable income. In fact, the B22 form reflects negative income by over $1000.
The Trustee contends the Debtor" s Plan was proposed in bad faith because the Debtor purchased a 2006 Toyota Corolla shortly before he filed his bankruptcy case, when he already had a 2002 Acura to drive. The Debtor also purchased $2800 in furniture and a new home in the year before he filed bankruptcy. As a result, the Trustee contends the Debtor incurred this debt in contemplation of bankruptcy and should be required, as a condition to Plan confirmation, to reject the Corolla and use the $350 monthly car payments to pay the unsecured creditors. There are no claims the Debtor has engaged in serial bankruptcy filings or has been dishonest.
In turn, the Debtor contends the car and home debts were not incurred in contemplation of bankruptcy. He contends the purchase of the Corolla was necessary to meet the transportation needs of his family, which includes two teenage children who are new drivers. Of the family members, the Debtor primarily drives the Corolla, which is in good condition with mileage of 46, 000. The Debtor values the Corolla in his Schedule of Assets and Liabilities at $10,015. The Corolla secures a purchase money debt of $18,138. The Debtor's other car is an 8 year old Acura in poor mechanical condition with mileage of 120, 000. Per the Debtor's Schedule of Assets and Liabilities, the Acura has an estimated value of $5,790 and secures a $9,046 debt.
At the continued Plan confirmation hearing held on May 5, 2010, the Court took under submission the issue of whether the purchase of the second car and furniture was in bad faith such that confirmation of the Plan should be denied and the Debtor's Chapter 13 case dismissed.
ANALYSIS
A Chapter 13 Plan must be proposed in good faith and not by any means forbidden by law. 11 U.S.C. section 1325(a)(3). Generally this requires the debtor to have acted equitably and to have proposed a plan consistent with the spirit and purposes of Chapter 13. In re: Goeb, 675 F.2d 1386, 1390 (9 Cir. 1982); In re: Chinichian, 784 F.2d 1440, 1444 (9 Cir. 1986). Repeated bankruptcy filings or dishonesty can preclude a finding of good faith. In re: Nash, 765 F.2d 1410, 1415 (9
Cir. 1985): In re: Huerta, 137 B.R. 356, 367 (Bankr. CD CA 1992). These circumstances are not present here, however.
Cir. 2008), the Ninth Circuit, citing In re Anderson, 21 F.3d 355, 358 (9th Cir. 1994) confirmed that:
The Trustee's objection to confirmation of the Plan asserts the Debtor in bad faith incurred the Corolla and furniture debt in anticipation of bankruptcy, and that the Debtor could pay more to unsecured creditors. As to the first issue, the only evidence before the Court to support this position is that the furniture and Corolla debts were incurred by the Debtor the year his bankruptcy was filed. The timing of the incurrence of these debts is not linked by the Trustee to any bankruptcy related purpose, by evidence or argument. The timing of these debts could just as well be explained by the Debtor's establishment of a new household after separation from his wife, which had occurred before the bankruptcy was filed. The Trustee's claim that the incurrence of this debt constitutes bad faith is thus merely insinuation. In re Richmond, 338 Fed.Appx. 197, 200 (3d Cir. N.J. 2009) (insinuations alone do not support a finding that a Chapter 13 plan was proposed in bad faith.)
The Debtor has countered the Trustee's bad faith insinuation relating to the Corolla with a declaration. He explains the Corolla was purchased to meet his needs for reliable transportation for the three drivers in his family since the Acura is in poor mechanical condition and will need to be replaced before the Plan payments are completed. By this point in time, the Acura will be 13 years old. The $350 payment on the Corolla is not excessively high, $2800 in furniture is not exorbitant, and neither of the vehicles can be considered luxury items. On the record before it, the Court cannot find the challenged debts were incurred in anticipation of bankruptcy.
The Trustee's second claim of bad faith, that the Debtor could pay more to unsecured creditors under the Plan if he were to reject the Corolla is inconsistent with recent authority from the Ninth Circuit as well as the record before the Court. In Maney v. Kagenveama (In re: Kagenveama), 541 F.3d 868, 875 (9
"§ 1325(b)(1)(B) requires provision for 'payment of all projected disposable income' as calculated at the time of confirmation, and we reject the Trustee's attempt to impose a different, more burdensome requirement on the debtors' plan as a prerequisite to confirmation."
The Trustee's claim the unsecured creditors would receive some payment if the Corolla were to be rejected, is also not supported by the record. Even without the $350 payment on the Corolla, the Debtor's disposable income calculated in accordance with Kagenveama, 541 F.3d at 875, would still be negative by approximately $700. The Court thus overrules the Trustee's objection that the Debtor should be required to reject the Corolla to generate payments to unsecured creditors.
CONCLUSION
For the reasons set forth above, the Court overrules the Trustee's bad faith objections to confirmation of the Debtor's Chapter 13 Plan. The Debtor may submit a confirmation order to be entered by the Court within ten days of entry of this Memorandum Decision.