In re Golek

• Decision Date: 15 April 2004
• Docket Number: No. 00 B 37527.,00 B 37527.
• Citation: 308 B.R. 332
• Parties: In re Robert GOLEK, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

308 B.R. 332

In re Robert GOLEK, Debtor.

No. 00 B 37527.

United States District Court, N.D. Illinois, Eastern Division.

April 15, 2004.

COPYRIGHT MATERIAL OMITTED

Jeffrey P. White, Kelleher & Buckley LLC, Barrington, IL, for Debtor.

Memorandum Opinion

BRUCE W. BLACK, Bankruptcy Judge.

This matter is before me on debtor Robert Golek's ("debtor") "Motion for entry of an order of discharge and refund of overpayment." The Standing Chapter 13 Trustee has opposed debtor's motion. Jurisdiction in this court is proper under 28 U.S.C. § 1334, 28 U.S.C. § 157(a), and Internal Operating Procedure 15(a) of the District Court. Venue is proper under 28 U.S.C. § 1409. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A).

Facts

Debtor filed his chapter 13 petition in this case on December 26, 2000. This court approved debtor's plan on March 20, 2001. The confirmation order obligated the debtor to pay the trustee 36 monthly payments of $576. The order also stated:

it is estimated that general unsecured claimants will receive 10% of the amount of their claims. In the event general unsecured creditors receive less than 10% within 36 months, debtor shall continue making plan payments for an additional 24 months, or until the trustee has received sufficient funds to pay 10% to allowed unsecured claimants, whichever occurs first.

On November 26, 2002, this court heard and granted debtor's motion to sell real estate, whereby debtor was authorized to sell his residence. The order further directed debtor to deposit with the trustee $17,397.17 from the sale proceeds, which debtor thought was the pay-off amount of his chapter 13 plan. The order finally allowed debtor to retain the remaining proceeds from the sale.

On August 8, 2003, debtor filed the current motion titled "Motion for entry of an order of discharge and refund of overpayment." In his motion, debtor alleges the $17,397.17 figure was quoted to him by the trustee as the pay off amount for his chapter 13 plan. Debtor further alleges that he has paid that sum to the trustee. Debtor finally alleges that after paying the trustee, the Illinois Department of Revenue withdrew two of its claims and as a result he need only pay $2,299.51 in order to pay off his plan as confirmed. The debtor seeks an order directing the trustee to pay his remaining creditors $2,299.51, to refund the remaining balance of $15,097.66 to debtor, and to discharge debtor from his chapter 13 case.

On September 9, 2003, the trustee filed her objection to debtor's motion. The trustee argues that debtor's motion, although titled otherwise, should be treated as a motion to amend his plan because the debtor proposes to terminate his plan before its 36 month term expires, thereby reducing the total pot available for general unsecured creditors. By terminating the plan in less than 36 months while continuing to pay his general unsecured creditors only 10% of their claims, the trustee argues debtor's proposed modification violates section 1329 of the Bankruptcy Code¹, which governs post-confirmation plan modifications. Under the trustee's interpretation of section 1329(b), the disposable income test, found in section 1325(b), applies to post-confirmation plan modifications. The trustee argues that the court cannot approve a post-confirmation modification over her objection unless objecting general unsecured creditors are paid in full, or the debtor devotes all of his or her disposable income into the plan for a minimum of 36 months. The trustee asserts that the proceeds from the sale of debtor's real estate are disposable income, that the debtor must pay the entire $17,397.17 into the plan and continue making plan payments for 36 months if he is to be allowed to pay his general unsecured creditors less than 100% of their claims.

This matter has been fully briefed and argued, and I will discuss four issues: (1) whether debtor's plan is a pot plan or a percentage plan; (2) whether debtor's motion, despite its title, should be treated as a motion to amend his chapter 13 plan; (3) if debtor's motion is treated as a motion to amend the plan, whether the disposable income test under section 1325(b) applies to post-confirmation modifications; and (4) if the disposable income test does apply to post-confirmation modifications, whether proceeds from sale of debtor's real estate should be treated as disposable income that debtor must pay to the trustee. I will address each issue in turn.

Discussion

I. Pot Plan v. Percentage Plan

A percentage plan designates what percentage of its claim each general unsecured creditor will receive without stating an exact dollar amount the debtor must pay into the plan until all claims are approved. In re Witkowski, 16 F.3d 739, 741 (7th Cir.1994). A pot plan, on the other hand, fixes the amount the debtor must pay into the plan, leaving in question the percentage each general unsecured creditor will receive in payment of its claim until all claims are approved. Id. I conclude that debtor's plan in this case is a pot plan, with an additional condition of a minimum percentage.

Paragraph 2 of the confirmation order directs debtor to make 36 monthly plan payments of $576, thereby creating a fixed pot of $20,736 for the trustee to distribute to debtor's creditors.² The order then states:

[i]t is estimated that general unsecured claimants will receive 10% of the amount of their claims. In the event general unsecured creditors receive less than 10% within 36 months, debtor shall continue making plan payments for an additional 24 months, or until the Trustee has received sufficient funds to pay 10% to allowed unsecured claimants, whichever occurs first. (Emphasis added)

By its terms, the plan's payment schedule creating the $20,736 pot is not subject to reduction post-confirmation. An order granting a motion to modify the terms of the plan could, of course, achieve such a reduction. Conversely, the trustee may, without authority from the court, increase the percentage paid to general unsecured creditors after confirmation if there are fewer allowed claims than initially anticipated. Thus, while the order makes reference to an estimated minimum percentage of general unsecured claims debtor must pay and allows the trustee to increase that percentage, the order does not allow the trustee or debtor to reduce the fixed pot of money debtor must pay into the plan. I reject the notion that debtor would satisfy his obligations under the plan by simply paying general unsecured creditors 10% of their claims without paying the total pot required under the plan. See In re Martin, 232 B.R. 29, 34 (Bankr.D.Mass.1999)(finding similar plan was a pot plan); In re Barbosa, 236 B.R. 540, 549 (Bankr.D.Mass.1999)(finding a 60 month term plan with $1,486 monthly payments was a pot plan despite a term requiring 10% dividend to general unsecured creditors).³ Therefore, I conclude that debtor's plan in this case is a pot plan, requiring debtor to pay a minimum sum of $20,736 into the plan over a 36 month term.

II. Treatment of Debtor's Motion

The second issue is whether debtor's motion, although not titled as such, should be treated as a post-confirmation motion to modify his chapter 13 plan pursuant to section 1329 of the Code. I conclude that it should. Debtor's motion, titled "Motion for entry of an order of discharge and refund of overpayment," proposes to shorten the term of the plan, thereby reducing the pot of funds available to his creditors. Because debtor was obligated to pay a fixed sum into his plan over a fixed term of months, his motion clearly seeks to modify the terms of the confirmed plan and should be treated as such. Therefore, for purposes of this opinion, I will treat debtor's motion as a motion to modify his plan post-confirmation.

III. Application of the Disposable Income Test

Having determined that debtor's motion is a post-confirmation motion to modify his chapter 13 plan, the next issue is whether the disposable income test applies to such motions. I find that it does not.

Analysis of this issue involves an interplay between several sections of the Bankruptcy Code. Section 1325(a) lists the requirements for confirming a chapter 13 plan. As long as the debtor's plan satisfies these requirements, the court must confirm the plan, subject to the limitations of section 1325(b). Section 1325(b), which contains the disposable income test, prohibits confirmation of a plan over an objection by the trustee or a general unsecured creditor unless (1) the objecting creditor is paid in full, or (2) the debtor pays all of his or her disposable income⁴ into the plan for a term of 3 years. After confirmation, section 1329(a) authorizes the debtor, the trustee, or general unsecured creditors to move to modify the confirmed plan. Section 1329(b)(1), however, lists a handful of restrictions on post-confirmation modifications. Among these restrictions is that the post-confirmation modification must satisfy the same requirements listed in section 1325(a) for initially confirming a plan.⁵ Section 1325(b)'s disposable income test, however, is not among the restrictions listed in section 1329(b)(1).

The trustee would have the Court read the disposable income test into section 1329(b)(1). She argues that section 1325(b) is incorporated by reference into section 1325(a).⁶ The trustee asserts, therefore, that section 1325(a) and section 1325(b) both serve as restrictions on post-confirmation plan modifications.

I cannot adopt the trustee's interpretation of section 1329(b)(1). When Congress wants to say something, it knows how to say it, and in this instance, Congress did not say it. Indeed, section 1329(b)(1) goes out of its way to include both sections 1322(a) and 1322(b) in its list of restrictions. While section 1325(a) is expressly listed, however, section 1325(b) is not. It is unclear why Congress would expressly include both subsections of section 1322, but simply state section...