In re harrel, 10–77244–WLH.

• Decision Date: 25 January 2011
• Docket Number: No. 10–77244–WLH.,10–77244–WLH.
• Citation: 443 B.R. 219
• Parties: In re Brenda Kate STEWART–HARREL, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Georgia

443 B.R. 219

In re Brenda Kate STEWART–HARREL, Debtor.

No. 10–77244–WLH.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

Jan. 25, 2011.

[443 B.R. 220]

ORDER ON TRUSTEE'S OBJECTION TO CONFIRMATION OF CHAPTER 13 PLAN

WENDY L. HAGENAU, Bankruptcy Judge.

This matter comes before the Court on the Chapter 13 Trustee's Objection to Confirmation of the above-referenced Debtor's Chapter 13 plan [Docket No. 16]. The Chapter 13 Trustee succinctly states the question presented as follows:

Does a Chapter 13 extension plan meet the requirements of

[443 B.R. 221]

11 U.S.C. § 1325(a)(3) and 11 U.S.C. § 1325(b)(1) if the Debtor does not propose to pay all available net monthly income to creditors?

The Trustee urges further that such a plan could only satisfy 11 U.S.C. § 1325(b)(1)(A) if interest were paid on all unsecured claims. The Court concludes that a plan which proposes to pay unsecured creditors in full, but without interest, satisfies the requirements of 11 U.S.C. § 1325(b)(1)(A), and, therefore, the Debtor is not required to pay all of her available net monthly income into a plan to satisfy a trustee's objection under Section 1325(b)(1). The Court holds further, however, that factual issues remain as to the Debtor's good faith under 11 U.S.C. § 1325(a)(3). Jurisdiction is appropriate in this case pursuant to 28 U.S.C. § 1334, and 28 U.S.C. § 151. This is a core proceeding as defined in 28 U.S.C. § 157(b)(2)(L). The following constitutes the Court's findings of fact and conclusions of law under Fed. R. Bankr.P. 7052.

FINDINGS OF FACT

The Debtor filed her voluntary petition under Chapter 13 of the United States Bankruptcy Code on June 11, 2010. The amended Chapter 13 plan filed on August 24, 2010 provides for a monthly plan payment of $1,157.00 and a 100% dividend to unsecured creditors to be paid after all other classes have been paid in full. The Debtor is an above-median income debtor, and the applicable commitment period for this Debtor is five (5) years. The Trustee estimates that, as proposed, the Chapter 13 plan will last approximately 51 months in total. The plan proposes to fund attorney's fees, priority taxes, a secured car claim, and general unsecured creditors scheduled at $27,648.22. The parties acknowledge that the Debtor's available net monthly income (as calculated by Schedules I and J) is in excess of the plan payment, although there is some dispute as to exactly how much more in net monthly income the Debtor could contribute to fund a Chapter 13 plan. The plan payment is in excess of the projected disposable income calculated on Official Form 22C ¹ which is $821.04. The Trustee filed an Objection to Confirmation of Plan [Docket No. 16] on August 2, 2010, and the matter came before the Court for a confirmation hearing on September 1, 2010. At the hearing, the parties asked to brief the legal issue addressed herein, which briefing has now been completed.

CONCLUSIONS OF LAW

The Chapter 13 Trustee objects to the plan because the Debtor does not propose to pay 100% of her available net monthly income under the plan. As a result, it will take the Debtor almost 30 months longer to pay her unsecured creditors in full than if she paid 100% of her available net monthly income. The Trustee argues that under 11 U.S.C. § 1325(b)(1), since she has objected to confirmation of the plan, the Court may not approve the plan unless:

as of the effective date of the plan—(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or (B) the plan provides that all of the debtor's projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments

[443 B.R. 222]

to unsecured creditors under the plan.

The Trustee argues the Debtor has not satisfied subsection (B) because the Debtor is not proposing to pay all of her projected disposable income during the applicable commitment period to unsecured creditors beginning on the date the first payment is due under the plan. The Trustee urges further that, in order to satisfy (A) of this section, the Debtor must include interest on the claims such that the present value of the payments equals the amount of the allowed claims. The Debtor, on the other hand, argues that she has satisfied prong (A) of Section 1325(b)(1) because she has proposed a 100% distribution to unsecured creditors.

The Trustee's and Debtor's arguments turn on the interpretation of the phrase, “as of the effective date of the plan” which precedes subsections 1325(b)(1)(A) and (B). The Trustee argues that (A) should be read “unless the value, [as of the effective date of the plan,] of the property to be distributed under the plan on account of such claim is not less than the amount of such claim”. The Trustee argues this is the same language as in Section 1325(a)(5)(B)(ii), which requires, “the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim” be not less than the allowed amount of such claim. At first blush, the Trustee's argument is logical since the words “as of the effective date of the plan” are the same but are only placed in a different order. However, upon further reflection and review of the case law, the Court believes the better interpretation is that the phrase, “as of the effective date of the plan” in Section 1325(b)(1) refers to the date as of which the court is to make the determination of either (A) (payment in full) or (B) (payment of all projected disposable income).

The phrase “value as of the effective date of the plan” has been construed consistently by the...