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In re Thompson

September 16, 2010

IN RE: EDDIE NELSON THOMPSON; JANICE JUANITA THOMPSON, DEBTORS.
RICHARD V. FINK, TRUSTEE - APPELLANT,
v.
EDDIE NELSON THOMPSON; JANICE JUANITA THOMPSON, DEBTORS - APPELLEES.



Appeal from the United States Bankruptcy Court for the Western District of Missouri.

The opinion of the court was delivered by: Schermer, Bankruptcy Judge

Submitted: August 24, 2010

Before KRESSEL, Chief Judge, SCHERMER and MAHONEY, Bankruptcy Judges.

Richard V. Fink, Chapter 13 trustee (the "Trustee") for the bankruptcy estate of Eddie Nelson Thompson and Janice Juanita Thompson (the "Debtors"), appeals from an order confirming the Debtors' Chapter 13 plan.*fn1 The Trustee claims that the Debtors' plan should not have been confirmed because it did not meet the good faith standard under section 1325(a)(3) of Title 11 of the United States Code (the "Bankruptcy Code") since it did not provide for payment of the Debtors' entire Social Security income to their unsecured creditors. We have jurisdiction over this appeal from the final order of the bankruptcy court. See 28 U.S.C. § 158(b). For the reasons set forth below, we affirm.

ISSUE

The issue on appeal is whether the Debtors' plan failed to meet the good faith standard under section 1325(a)(3) and consequently, the bankruptcy court erred in confirming the Debtors' Chapter 13 plan, based solely only on the fact that the Debtors did not devote all of their Social Security income to their creditors. We conclude that the bankruptcy court properly confirmed the Debtors' plan.

BACKGROUND

The facts are not disputed. On October 22, 2009, the Debtors filed their petition for relief under Chapter 13 of the Bankruptcy Code. The Debtors' Form 22C (Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income), which excludes Social Security income, shows that their annualized current monthly income is $67,438.92, an amount that is above the median family income in the State of Missouri. In addition, the Form 22C shows that the Debtors' monthly disposable income is negative $1,245.83.

The Debtors' Schedule I shows a net monthly income of $7,471.42. Included on the Debtors' Schedule I is a combined total of $2,565 per month of Social Security income ($1,754 per month for Mr. Thompson and $811 per month for Mrs. Thompson). The Debtors' Schedule J shows monthly out of pocket expenses totaling $4,910.80. According to the Debtors' Schedules I and J, each month they have a $2,560.62 of income that is not needed to pay their expenses. However, if their Social Security income was excluded from this calculation, their monthly expenses would exceed their net monthly income.

In their Chapter 13 plan, the Debtors proposed that they would make a monthly payment totaling $1,155. The Debtors' monthly payments were to pay administrative costs and secured creditors, with the remaining money, if any, to go to unsecured creditors on a pro rata basis. In his brief, the Trustee estimated that the Debtors' plan would pay approximately 10.97% to unsecured non-priority creditors. The Debtors have not disputed the Trustee's statements that: their Statement of Financial Affairs and Mr. Thompson's statements at the meeting of creditors suggest that his employment was likely to continue; the Debtors were 70 and 71 years old at the time of their meeting of creditors; neither Debtor had significant health issues; and the receipt of military pension payments was likely to continue.

On March 4, 2010, the Trustee filed a motion seeking denial of confirmation of the Debtors' first amended Chapter 13 plan that was filed on March 2, 2010. His objection was premised on the Debtors' failure to meet the good faith requirement of section 1325(a)(3). The bankruptcy court denied the Trustee's motion to deny confirmation "for the reasons previously stated by the Court in In re Green, Case No. 09-44481."*fn2 In Green, the bankruptcy court concluded that the debtors' failure to devote all of their Social Security income to their plan, without other evidence of bad faith, did not establish lack of good faith under section 1325(a)(3). In re Green, No. 09-44481-13 (Bankr. W.D. Mo. filed February 1, 2010).

STANDARD OF REVIEW

We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1349 (8th Cir. 1990)(en banc). A chapter 13 plan issue that involves interpretation of a statute is reviewed de novo. Forbes v. Forbes (In re Forbes), 215 B.R. 183, 188 (B.A.P. 8th Cir. 1997). "The determination of good faith in proposing a Chapter 13 plan is a factual finding reviewed under the clearly erroneous standard." ...


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