IN RE CHEVALIER, (Bankr.S.D.Fla. 1981)

BRITTON, Bankruptcy Judge

Bankruptcy Reform Act — Individual Repayment Plans — Confirmation of Plan — Good Faith

A debtor's individual repayment plan which proposes to pay $200 a month toward the purchase of an auto and $100 a month to unsecured creditors is not proposed in good faith. The court found this facet of the plan to be lacking in good faith because, despite the debtor's assertions to the contrary, there were no indications that the auto had any business use. See Sec. 1325(3) at ¶ 13,214.

A debtor's plan which proposed to pay a fraction of a debt to a creditor whose claim whould be nondischargeable in a straight liquidation does not meet the requirement of Section 1325(4) and will not be confirmed. The debtor's former wife had obtained a judgment for unpaid alimony which would be nondischargeable under Chapter 7. In his plan the debtor proposed payments to her which during the 5 years of the plan would not even satisfy the interest accruing on the judgment. Thus, the value of the property to be distributed under the plan is substantially less than the amount of the claim under Chapter 7. See Sec. 1325(4) at ¶ 13,215.

The debtor, a retiree, derives his sole monthly income of $1,400 from his pension. Under his proposed repayment plan, he would pay a total of $500 a month to secured and unsecured creditors. Of this amount, $217 a month would go towards his mortgage, $200 a month towards the purchase of a car, and some $100 a month to unsecured creditors. The $100 a month would be divided between a $40 a month payment to his first wife and $60 a month to the unsecured creditors. In order to be confirmed, a plan must meet the six requirements of Section 1325(a) of the Code. Since this plan failed to meet two of the requirements, it was not confirmed.

The first wife's judgment against the debtor amounts to approximately $70,000 and the remaining unsecured debt is $10,000. The court found his proposal to pay these unsecured creditors $100 a month while paying twice that amount to purchase an auto to be lacking good faith in contravention of Section 1325(a)(3). Although the debtor testified that the car was necessary for his part-time business, the insignificant income from that business failed to justify the expense.

The debtor's plan also failed to meet the requirement that the value paid to each unsecured claim be not less than such claim would have received under a Chapter 7 liquidation. Since the judgment debt owed his wife was nondischargeable in straight bankruptcy and the $40 a month the debtor proposed to pay her would not even cover interest on the judgment, the court found the five year delay which would be caused by the proposed plan was unacceptable.

Because of these shortcomings, the plan was denied confirmation.