Bankr. W.D.N.C.: In re Winn- Chapter 13 Plan Modification

Summary:

The Debtors moved to modify their Chapter 13 plan, surrendering two pieces of real property and seeking to reduce their plan payment to the lowest amount possible to pay a 100% dividend to unsecured creditors over a total period of 60 months. The Chapter 13 Trustee objected, seeking a higher monthly payment, which would have repaid the debts over a shorter period of time, on the basis that the Winns could afford the higher monthly payment. This higher payment would have been feasible except for the proposed housing rent and the retention of a piece of real property in South Carolina.

The Bankruptcy Court agreed, finding that the proposed housing expense was excessive and that the real property in South Carolina neither had any equity to protect nor served as a residence.

Those unnecessary expenses aside, however, the Bankruptcy Court held that 11 U.S.C. § 1329 requires compliance with, among other sections, either of the two prongs § 1325(b)(1), viz. either that the claims are paid in full or that the projected disposable income during the applicable commitment period is paid. As the Winns were proposing to pay all claims in full, the requirements of § 1325(b)(1)(A) was satisfied and there was not requirement to pay disposable income under § 1325(b)(1)(B). Accordingly, the modification with the lower payment was approved.

Commentary:

While the Bankruptcy Court would be correct most of the time in its statement that “it may make sense for the Debtors to pay off their plan as early as possible”, this is not necessarily the case. For example, if the Debtors’ income were to subsequently decrease, then they would have received the benefit of the lower payment under § 1325(b)(1)(A) until the loss of income, followed by an even lower payment under § 1325(b)(1)(A).

For a copy of the opinion, please see:

Winn- Chapter 13 Modification.pdf

 

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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