Bankruptcy: Chapter 13 Plan Confirmation - Good Faith

     Two cases decided by Judge Tice of the United States Bankruptcy Court, Eastern District of Virginia, demonstrate a lack of good faith in the debtors' proposed Chapter 13 bankruptcy plans.

     In the case of In Re Oliver, Judge Tice denied plan confirmation for several reasons: the low percentage of the repayment of debt (about ten percent to unsecureds), the length of the plan (only three years), the "peculiar nature" of the unsecured claims, and the fact that the petition was filed after another court concluded that a major debt listed in this plan was nondischargeable under the debtors' prior Chapter 7 petition. Each of these reasons went against a finding that the plan was "proposed in good faith" under Bankruptcy Code §1325(a)(3). The matter was brought before Judge Tice upon an objection by a bank, whose claim comprised 80% of the total unsecured debt.
     In the case of In Re Kasun, Judge Tice denied plan confirmation for two reasons: a lack of good faith (since the plan discriminated against the debtors' unsecured creditors) and the payment of a nonessential luxury item. The debtors, proceeding in bankruptcy without an attorney, purposed that they retain a sailboat, on which a secured creditor had a $32,000.00 lien, with a $600.00 per month payment, and for which the debtors paid a boat-slip charge of $172.00 per month, while the plan proposed paying unsecured creditors only 34.9% of their claims. The Bankruptcy Trustee filed the objection.
     The lesson of Oliver and Kasun - read Chapter 13 plans carefully, do not take proposals for granted and seek competent legal advice when necessary.