In re Prigge

• Decision Date: 04 March 2010
• Docket Number: No. 09-61545-13,09-61545-13
• Citation: 441 B.R. 667
• Parties: In re Todd W. PRIGGE, Debtor.
• Court: U.S. Bankruptcy Court — District of Montana

441 B.R. 667

In re Todd W. PRIGGE, Debtor.

No. 09-61545-13.

United States Bankruptcy Court, D. Montana.

March 4, 2010.

Gary S. Deschenes, Great Falls, MT, for Debtor.

MEMORANDUM OF DECISION

RALPH B. KIRSCHER, Bankruptcy Judge.

Pending in this Chapter 13 case is confirmation of the Debtor's amended Plan and objections thereto filed by Chapter 13 Trustee and by Gregg and Malinda Pike ("Pikes") on the ground the Plan is not filed in good faith as required by 11 U.S.C. § 1325(a)(3). The hearing on confirmation was held at Great Falls on December 18, 2010. Debtor Todd W. Prigge ("Prigge" or "Debtor") filed an amended Plan and amended Schedules I and J on December 17, 2009 (Docket No. 62) and appeared and testified at the hearing represented by attorney Gary S. Deschenes of Great Falls. The Standing Chapter 13 Trustee Robert G. Drummond appeared in opposition. Pikes were represented by attorney John P. Paul of Great Falls. Debtor's Exhibits ("Ex.") A and B, and the Trustee's Ex. 1, 2, 3, 4, and 7, were admitted into evidence without objection. At the conclusion of the hearing the Court granted the parties time to file stipulated facts relating to the Trustee's objection no. 6 ¹, and briefs, after which the matter would be deemed submitted and taken under advisement. The Court extended briefing by agreement of the parties through the end of January 2010. The stipulated facts and briefs have been filed and reviewed by the Court together with the record and applicable law. The matter is ready for decision. For the reasons set forth below the Trustee's "disposable income" objection to confirmation is sustained in part and confirmation of Debtor's amended Plan will be denied because of Prigge's voluntary contributions to his 401(k) plan, but the Debtor will be granted a final opportunity to file a confirmable Plan.

This Court has jurisdiction in this Chapter 13 case under 28 U.S.C. § 1334(a). Confirmation of Debtor's Plan is a core proceeding under 28 U.S.C. § 157(b)(2)(L). This Memorandum includes the Court's findings of fact and conclusions of law.

FACTS

The Trustee and Debtor set forth the following agreed facts in the Stipulated Facts (Docket No. 67):

1. The Debtor filed his Chapter 13 bankruptcy petition in the United StatesBankruptcy Court for the District of Montana on August 5, 2009.

2. When he filed his bankruptcy petition, the Debtor simultaneously filed his Schedules and Form 22C.

3. On his completed Form 22C, the Debtor calculated on Line 15, Annualized current monthly income for § 1325(b)(4), the total amount of $89,739.96. On Line 17, the Debtor checked the box indicating the applicable commitment period is five years.

4. On Line 25B of Form 22C, the Debtor correctly listed the IRS Housing and Utilities Standards for Cascade County in the amount of $775.00. From this amount, the Debtor deducted $1,517.00. The Debtor entered "0.00" in the calculation on Line 25B for the total amount deducted from current monthly income.

5. On Line 28, the Debtor deducted Local Standards for transportation ownership/lease expense. The Debtor calculated the IRS Transportation Standards, Ownership Costs in the amount of $489.00. From this, the Debtor deducted $500.00 for Average Monthly Payment for debts secured by Vehicle 1. The Debtor entered "0.00" as a deduction on Line 28 as the amount deducted from current monthly income.

6. On Line 47 of Form 22C, the Debtor deducted $1,517.00 as his home mortgage payment and $500.00 as his automobile loan payment for a total of $2,017.00 deducted from current monthly income.

7. The Debtor scheduled monthly disposable income in the amount of $1,063.69 on Line 59 of Form 22C. From this amount, however, the Debtor also deducted additional expense claims of $1,181.08. The Debtor describes this expenditure as "401 (K)."

In addition to the Stipulated Facts, other facts are established from Prigge's testimony and the exhibits admitted at the hearing.

Prigge testified that he is involved in the 401(k) plan at his employer FedEx, where he has worked as an aircraft mechanic, since 1988. Ex. 7 shows his 401(k) account balance is $4,677.08 as of 6/30/2009 ². He testified that he earned bonuses in his early years with the company, but not for the past 8 years.

Prigge testified that he went through a divorce prior to his bankruptcy case. Ex. 4 is the divorce decree in Case No. DDR-07-467, Montana Eighth Judicial District Court, Cascade County, dated July 28, 2008. As a result of his divorce he is allowed to take his son as a tax deduction only in alternate years, and that this year he will not have a tax refund like in prior years.

The divorce court awarded Prigge's spouse Lori half of Prigge's 401(k) retirement account. Ex. 4, p. 2. Ex. A shows that Prigge made a withdrawal from his 401(k) account in the amount of $10,000 as of 12/1/2008 ³. That withdrawal resulted in a suspension of voluntary contributions, Ex. B, which was to end on 5/30/2009. He testified that he made continual contributions to his 401(k) plan since 1988 except during 2 suspensions, and testified that his employer requires a contribution to his 401(k) plan of at least 3% of his earnings.

Ex. 3 includes some of Prigge's paystubs and show that his 401(k) pretax deduction resumed on the payment advice dated 6/12/2009 in the amount of $343.09. Hetestified that when he resumed making voluntary contributions in 2009, he did not know that he was going to file for bankruptcy relief, even though he admitted that he met with a bankruptcy attorney at that time. He testified that he now contributes $1,100 per month, but does not know if that reflects the maximum allowable 401(k) contribution, which is 25%. His employer matches his 401(k) contribution to a maximum of $500 per year.

Prigge testified that he began leasing a pickup from his father, which he had used without charge since 2003, in September of 2008 when he began paying his father $500 per month. In 2009 they converted the transaction to a purchase because, he testified, he wanted it in his name.

The Pikes purchased a residence from Prigge in 2004. They commenced a civil action against him in the Montana Eighth Judicial District Court, Cascade County, Case No. DDV-07-1220 for misrepresentation, fraud, and deceptive practices regarding flooding, drainage or grading problems. Ex. 2. Prigge testified that he filed his Chapter 13 petition because he could not pay his attorney to fight the state court case, and was told by his attorney to file bankruptcy "right now" and that the Pikes' case could be litigated faster in bankruptcy court than in state court. He testified that he discussed the relative lengths of time to litigate the Pikes' case in state court versus bankruptcy court, and the possible garnishment of his earnings. He testified that he filed his Chapter 13 hoping to resolve his financial issues in one place.

Prigge listed Pikes on Schedule F as creditors holding unsecured claims, but in "Unknown" amount. He did not mark Pikes' claim as contingent, unliquidated, or disputed on Schedule F. In the divorce decree, Ex. 4, p. 3, the court ordered Prigge to pay 70% of the contingent liability to the Pikes.

Ex. 1 states that Prigge's home mortgage payment as of July 2009 was $1,345.07, while on Line 47 of Form 22C the average mortgage payment is stated as $1,517.00. Prigge testified that his mortgage payment is about $1,500, and did not explain why his testimony differed from the payment shown on Ex. 1. He testified that Wells Fargo allowed him to make weekly payments on his mortgage which are automatically deducted from his account.

Debtor's original Plan, Dkt. 3, proposed $100 monthly payments for 60 months, and the liquidation analysis stated $0.00 would be distributed to unsecured claims. The Trustee and Pikes filed objections to confirmation, including that the Plan was not filed in good faith as required by § 1325(a)(3), as shown by the small amount proposed to be paid to Pikes on their unknown claim. The Trustee also objected on the grounds of lack of feasibility based on Schedules I and J, and that the Debtor failed to satisfy the disposable income test of § 1325(b).

Debtor amended his Schedules I and J to show a monthly net income of $307.00. Prigge testified that he reduced his 401(k) contribution to $900 on Schedule I, although he has not yet told the plan administrator to reduce his contribution amount. He filed his amended Plan, Dkt. 62, proposing monthly payments in the sum of $100 for 4 months and then $300 per month for 56 months. He admitted that the amended Plan does not pay all unsecured creditors in full, and that he raised his payment by reducing his 401(k) contribution.

DISCUSSION

It is well established law in this Circuit that for a bankruptcy court to confirma plan, "each of the requirements of section 1325 must be present and the debtor has the burden of proving that each element has been met." In re Barnes, 32 F.3d 405, 407 (9th Cir.1994); In re Andrews, 49 F.3d 1404, 1408 (9th Cir.1995); In re McSparran, 410 B.R. 664, 668 (Bankr.D.Mont.2009); In re Tuss, 360 B.R. 684, 690 (Bankr.D.Mont.2007); In re Tranmer, 355 B.R. 234, 241 (Bankr.D.Mont.2006). Section 1325(a)(1) requires confirmation of a plan if "the plan complies with the provisions of this chapter and with the other applicable provisions of this title." Therefore, the Debtor has the burden of proof on all elements of confirmation. Meyer v. Hill (In re Hill), 268 B.R. 548, 552 (9th Cir. BAP 2001).

The Trustee and Pikes both object to confirmation contending that the Debtor's amended Plan is not proposed in good faith under § 1325(a)(3). The Trustee contends that Prigge approached his duty to file accurate schedules in a cavalier fashion as shown by his amendments to his Schedules and Statement of Financial Affairs disclosing numerous transactions with his father, and his last minute filings requiring two confirmation hearings. The Trustee contends that Form 22C is incorrect at line 50 ("administrative...