In re Beaver, Bankruptcy No. 79-03046-KZ.
| Decision Date | 30 January 1980 |
| Docket Number | Bankruptcy No. 79-03046-KZ. |
| Citation | 2 BR 337 |
| Court | U.S. Bankruptcy Court — Southern District of California |
| Parties | In re Linda BEAVER, Debtor. |
George Ritner, San Diego, Cal., for bankrupt.
Harry Heid, San Diego, Cal., Chapter XIII trustee.
On November 6, 1979, Ms. Linda Beaver filed her petition seeking protection under Chapter 13 of the United States Bankruptcy Code, and paid the required $60 filing fee. A first meeting of creditors was held on December 12, 1979. Subsequently, on December 26, 1979, a hearing was held before this Court to determine if the plan should be confirmed. This Court determined that the plan should not be confirmed and this opinion is issued to explain that decision.
The debtor is an unemployed cashier, who was last employed in April of 1979, when she resided in Illinois. Although she is actively looking for employment, she supports herself and her two small children on $580 a month unemployment compensation, which is scheduled to cease in May of 1980.
The debtor's Chapter 13 statement reflects $955 in personal assets, all of which she would claim as exempt property, and total debts of $3,206, all due to unsecured creditors. Her attorney has previously received a $200 retainer and requests that he be awarded a total fee of $400 to handle this case, the remaining $200 to be paid under the plan as a cost of administration.
Under the plan, creditors would receive one percent of the outstanding indebtedness resulting in the following dividends:
Under 11 U.S.C. § 1302(e)(1)(B) the Chapter 13 trustee in this district has been directed to levy a 10% charge on all funds he handles to cover his compensation and the other actual expenses of his office. Thus, under the plan Ms. Beaver must pay over to the trustee a grand total of $255.27, of which $200 will be paid to her attorney, $23.21 will be retained by the Chapter 13 trustee and $32.06 will be paid as dividends to creditors. The debtor proposes to pay $50 each month, so that she will be required to make just over five monthly payments to the trustee.
To summarize, in order to accomplish her goals under the plan, the debtor will make over $515 in payments, as follows:
Costs of Administration
Filing fee $ 60.00 ( 11.7%)
Fees paid to counsel 400.00 ( 77.6%)
Retention by trustee 23.21 ( 4.5%)
_______ ________
$483.21 ( 93.8%)
Dividends to Creditors 32.06 ( 6.2%)
_______ ________
Total Payments Required $515.27 (100.0%)
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III
In making the determination as to whether a particular Chapter 13 plan should be confirmed, the Court must consider 11 U.S.C. § 1325(a), which directs that a plan be confirmed if the Court is satisfied that:
Of these six general requirements it appears that all are fulfilled except the third and sixth. With regard to the latter it does not appear that this debtor can reasonably be expected to support herself, her two small children, and make even the minimal payments offered here on the meager $580 she is collecting monthly from unemployment insurance. A close review of the budget submitted by the debtor leads this Court to conclude that it is not realistic and the debtor will not be able to make the payments required without depriving herself or her children of the necessities of life.
As to the third requirement of Section 1325(a), that the plan be proposed in good faith, this too concerns the Court for it is doubtful that such a minimal composition plan as proposed here can satisfy this condition. Not surprisingly, given the recent enactment of the Code, there are no reported decisions construing the phrase "good faith" as it is found in Section 1325, nor could the Court find any reported decisions considering the similar wording of the predecessor sections found in the Bankruptcy Act ("Act"). See Bankruptcy Act §§ 651, 656. See also 5 Collier on Bankruptcy, ¶ 1325.012C (15th ed.). The legislative history makes no attempt to discuss the contours of the phrase. See H.R. Rep.No. 595, 95th Cong., 1st Sess. 412, 430 (1977) U.S.Code Cong. & Admin.News 1978, p. 5963; S.Rep.No. 989, 95th Cong. 1st Sess. 126, 142 (1978), U.S.Code Cong. & Admin. News 1978, p. 5787.
Nonetheless, the treatment of related sections under the Bankruptcy Act does provide some guidance. Under similar wording found in Section 366 of former Chapter XI, the phrase in question is said to encompass an inquiry into "whether or not under the circumstances of the case there has been an abuse of the provisions, purpose or spirit of the chapter. . . ." 9 Collier on Bankruptcy ¶ 9.20 at p. 318 (14th ed.). See also 10 Collier, ¶ 29.066 (14th ed.) (similar discussion of identical wording in the Ch. XIII context); 9 Collier ¶ 9.076 at p. 1144 (14th ed.) (similar discussion of identical wording found in Ch. XII).
Thus, the standard in like instances under former practice was not reduced to a simple or mechanical formula. It allowed a broad inquiry into the facts of the case and demanded both a flexible and sensitive approach to protecting the interests at stake and the larger goals of the statute. This view also conforms with well settled principles of statutory construction. In this we must always be mindful that the interpretation of a statute should not hinge on an isolated clause or phrase in a particular section, but should consider the whole statute as well as the objects and policy behind its enactment. Kokoszka v. Belford, 417 U.S. 642, 650, 94 S.Ct. 2431, 41 L.Ed.2d 374 (1973). The purpose of Chapter 13 is clear. It is designed to facilitate the adjustment of debts through extension and composition plans proposed by individuals with regular income. See 5 Collier, ¶ 1300.02 (15th ed.). Most consumer debtors, Congress found, desire to repay their debts rather than liquidate their assets in a straight bankruptcy proceeding. See House Report, at p. 117; Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc.No. 93-137, 93d Cong., 1st Sess. 157 (1973).
The benefits to the consumer debtor from an orderly repayment of his obligations are manifold. The debtor can retain his property by agreeing to repay his creditors. This protects his credit rating and avoids the stigma unfortunately associated with liquidations. Additionally, as Congress pointed out, Chapter 13 debtors are thereby allowed to retain the pride associated with being able to meet one's obligations in a timely manner. See House Report, at p. 118.
It is important to note, however, that the unsecured creditor and his interests were not left unconsidered by Congress. Losses to creditors otherwise accruing in a liquidation were seen as being significantly reduced in a Chapter 13 setting. See House Report, at p. 118. In this regard, the legislative history makes it quite clear that while 100% composition plans are not mandatory under Chapter 13, "marginal" plans are discouraged. As the Senate Report states:
As in current law, 100 percent payment plans will be encouraged by the limitation on availability of a subsequent discharge in section 727(a)(8). This kind of plan has provided great self-satisfaction and pride to those debtors who complete them and at the same time effect a maximum return to creditors. . . . It is also necessary to prevent chapter 13 plans from turning into mere offers of composition plans under which payments would equal only the non-exempt assets of the debtor.
Senate Report, at p. 13, U.S. Code Cong. & Admin.News, 1978 p. 5799.1
As the Senate Report points out, Congress saw fit to discourage the use of marginal...
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In re Manzo, 16 C 7218
...court?(5) Do the proposed payments indicate "a fundamental fairness in dealing with one's creditors," [I ]n re Beaver , 2 B.R. 337, 340 (Bkrtcy. S.D. Cal. 1980) ? Kenneth W. Smith , 848 F.2d at 817 (citing Rimgale , 669 F.2d at 432–33 ). Additionally, courts may consider factors such as "wh......