Matter of Foster, Bankruptcy No. 85-10626.

• Decision Date: 29 May 1986
• Docket Number: Bankruptcy No. 85-10626.
• Citation: 61 BR 492
• Parties: In the Matter of David Eugene FOSTER and Victoria Jean Foster, Debtors.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

61 B.R. 492 (1986)

In the Matter of David Eugene FOSTER and Victoria Jean Foster, Debtors.

Bankruptcy No. 85-10626.

United States Bankruptcy Court, N.D. Indiana, Fort Wayne Division.

May 29, 1986.

Grant F. Shipley, Fort Wayne, Ind., for debtors.

Robert E. Grant, Fort Wayne, Ind., for claimant.

ORDER

ROBERT K. RODIBAUGH, Chief Judge.

David Eugene Foster and Victoria Jean Foster filed their joint chapter 13 petition on July 31, 1985 in response to a mortgage foreclosure action initiated by the Federal Land Bank of Louisville on June 18, 1985. Their chapter 13 plan provides essentially that the secured creditors will receive the value of their collateral, while the unsecured claims share in $3,600, to be paid through the chapter 13 trustee. Land Bank objected to the Fosters' Plan and requested an evidentiary hearing. The contested confirmation hearing was held, and the parties were granted an opportunity to submit briefs before this matter was taken under advisement on April 22, 1986.

David and Vicki Foster own a 162-acre farm in Steuben County, Indiana. David works full time in a nearby factory and also as a farm hand for a neighbor. Vicki has an accounting degree and until recently was employed as the computer supervisor for a local bank. She is now babysitting in her home for several children so that she can personally care for one of her three children who suffers from spina bifida. Although the Fosters have farmed, the tillable land and hog barns are now rented to local farmers on a cash or share crop basis.

Land Bank has raised several objections to the Fosters' Plan, which can be restated as contentions that:

1. Factually, the Fosters' income either is insufficient to feasibly cover both their living expenses and the payments required under the plan or excessive such that they are failing to commit all their disposable income for at least three years, or

2. Legally, 11 U.S.C. § 1322(b)(2) and 11 U.S.C. § 1325(c) protect Land Bank from the modification of its rights contemplated by the plan.

The parties stipulated to several facts and amendments to the plan at the beginning of the trial.¹ They agreed that Land Bank's claim on the date of the petition totaled $141,623.59 and is secured by a first mortgage on 162 acres of Steuben County real estate valued at $104,650 and a first lien on the Fosters' Land Bank stock, which has a par value of $7,900. The Fosters are current on monthly payments of $1,218.63. Land Bank accelerated the mortgage debt on May 1, 1985. The stipulated amendment would provide for Land Bank to be `crammed down' to the $109,880 value of the proposed retained collateral, with that sum to be paid over the original contract term at the Land Bank's variable market interest rate, which is currently 12¾%. The final payment would not be due until January 1, 2011.

Land Bank's first major argument is primarily factual. It contends that the Fosters' plan is not, as a practical matter, feasible, since the Foster's income is insufficient to fund the plan, and Mr. Foster can not work the long hours required to generate the required income for the years necessary to retire the debt. The Fosters' projected after tax income is approximately $31,842 per year. This figure assumes that Mr. Foster will work 40 hours per week in the factory and an additional 36-38 hours per week as a farm hand. His hourly rate in the factory is significantly higher than as a farm hand, to the extent he works overtime in the factory he will be able to work correspondingly less on the farm and maintain the same income. Mrs. Foster is earning about $100 per month babysitting. She is well qualified and may find it necessary to return to the regular work force. They also anticipate a return from the tillable acreage and hog houses of about $6,475 per year; however, this is a variable figure subject to weather and market forces beyond their control. The debtors' living expenses have been estimated at $13,584 per year, which when added to the Land Bank's payment of $14,623.56 and the trustee's $1,200.00 payment, yields a minimum cash flow requirement of $29,407.56. Based on the Fosters' hypothetical income and the cash flow requirements required by the proposed plan, Land Bank contends that either the income figures are not sustainable for an extended term, or else the Fosters are withholding a portion of their disposable income in contravention of 11 U.S.C. § 1325(b)(1)(B). The court does not agree. The projected disposable income of a family like the Fosters can not be estimated with the degree of certainty it could be for a family with a fixed income. The return on the farm is subject to many variables. The total income projected by the Fosters is optimistic unless Mrs. Foster returns to the regular work force. The hours contemplated by Mr. Foster are long, but not so long they can not be sustained. The living expenses of the Fosters are probably going to exceed their very conservative estimate. A food estimate of $175 per month for a family of five is not realistic. Increasing the food budget reduces the Fosters' retained disposable income to nothing.

Land Bank's second argument is primarily legal, contending that 11 U.S.C. § 1322(b)(2) and § 1325(c) protect it from the modification sought. The court agrees in part. A chapter 13 plan can only provide for payments beyond the term of the plan where the contractual payments on a long-term debt are to be maintained. In re Hildebran, 54 B.R. 585 (Bkrtcy.D.Or.1985). The plan at bar proposes to amortize the `crammed down' debt over the original contractual term under the terms of the original contract....