IN RE McDONALD

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e/in-re-okoreeh-baah#p1033836 F.2d 1030, 1033 (6th Cir. 1988). In Caldwell II, the Sixth Circuit set forth a twelve-part test to determine whether a debtor's Chapter 13 plan was proposed in good faith:

(1) the amount of the proposed payments and the amount of the debtor's surplus;

(2) the debtor's employment history, ability to earn and likelihood of future increase in income;

(3) the probable or expected duration of the plan;

(4) the accuracy of the plan's statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court;

(5) the extent of preferential treatment within classes of creditors;

(6) the extent to which secured claims are modified;

(7) the type of debt sought to be discharged and whether any such debt is nondischargeable in Chapter 7;

(8) the existence of special circumstances such as inordinate medical expenses;

(9) the frequency with which the debtor has sought relief under the Bankruptcy Reform Act;

(10) the motivation and sincerity of the debtor in seeking Chapter 13 relief;

(11) the burden which the plan's administration would place upon the trustee; and,

(12) whether the debtor is attempting to abuse the spirit of the Bankruptcy Code.

Caldwell II, 895 F.2d at 1126-27. The Caldwell II factors merely serve as guidelines for determining good faith. In re Sharon, 200 B.R. 181, 196 (Bankr. S.D. Ohio 1996). A good faith determination is not simply a matter of counting the factors favoring good faith and numerically weighing them against those factors indicating a lack of good faith. In re Gelvin, 1994 Bankr. LEXIS 1978 (Bankr. S.D. Ohio Nov. 23, 1994). "[C]lose proximity in time between a debtor's purchase of collateral and the filing of a Chapter 13 may evidence a lack of good faith." Henry, 328 B.R. at 539 (internal citations omitted). Moreover, good faith does not necessarily require a substantial payment to unsecured creditors. Francis, 273 B.R. at 92. In summarizing the § 1325(a)(3) good faith analysis, the Sixth Circuit stated that:

Good faith is an amorphous notion, largely defined by factual inquiry. In a good faith analysis, the infinite variety of factors facing any particular debtor must be weighed carefully. We cannot here promulgate any precise formulae or measurements to be deployed in a mechanical good faith equation. The bankruptcy court must ultimately determine whether the debtor's plan, given his or her individual circumstances, satisfies the purposes undergirding Chapter 13: a sincerely-intended repayment of pre-petition debt consistent with the debtor's available resources. The decision should be left simply to the bankruptcy court's common sense and judgment.

Okoreeh-Baah, 836 F.2d at 1033.

The totality of the circumstances test set forth in Caldwell II and expounded upon in Okoreeh-Baah, Francis and their progeny requires analysis of both the subjective good faith and the objective good faith of debtors. Thus, factors 4, 7, 9, 10 and 12 have at least some element of scienter relating to assessing a debtor's motive, intent, and conduct in pursuing a Chapter 13 plan. The other factors are more focused on an objective analysis of the plan that is, the fundamental fairness of the plan, whether it achieves the purposes of the Code and particularly Chapter 13, and the probability that the plan will be successful.

In several different decisions, the Northern District of Illinois has recognized the distinction between "subjective" and "objective" good faith relating to Chapter 11 and Chapter 13 cases. Thus, in In re Mandalay Shores Coop. Hous. Assoc., Inc., 63 B.R. 842, 847-48 (N.D. Ill. 1986), United States District Judge Milton I. Shadur stated:

Of course the term "good faith" can be defined in several ways, and its legal significance depends on its legal context. Frequently a distinction is made between "subjective" and "objective" good faith, the former indicating an individual's actual state of mind and the latter a reasonable person's hypothetical state of mind in given circumstances. Subjective good faith without its objective counterpart is often called the "pure heart — empty head" phenomenon [citation omitted].

Perhaps one reason Congress took the term "good faith" out of Section 1112(b) was to avoid the confusion created by intertwining subjective and objective inquiries. It may easily happen a corporation will argue it filed a petition with a pure heart, but the creditors will argue the petition was filed with an empty head. . . .

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But mere obedience to court orders — important though that is — cannot salvage a meritless action. And what goes under the name of an "objective good faith" inquiry under Chapter 11 really amounts to analysis of the merits of the debtor's claim of entitlement to reorganization. Most of Chapter 11 deals with the mechanics of a reorganization, assuming that form of relief is appropriate. Section 1112(b) and its associated "good faith" doctrine are primarily concerned with the underlying question whether reorganization is the proper course of action in a particular debtor's case. On that score dismissal of a Chapter 11 petition — like dismissal of any lawsuit — is not imposed principally as a sanction for bad intentions or obstreperous behavior. Instead, dismissal flows from the legal determination the debtor is not entitled to the remedy it seeks.

Further refining this distinction, the court in In re McCormick Road Assocs., 127 B.R. 410, 415 (N.D. Ill. 1991), stated:

As the court in California Sound Systems [ 69 Bankr. 893, 901 (Bankr. S.D. Cal. 1987)] observed, "the appellation `bad faith filing' is perhaps a misnomer in that it implies the existence of ill will or malicious conduct on the part of debtor prior to filing for relief." 69 Bankr. at 901 n. 2. In the Northern District of Illinois the determination of whether a bankruptcy petition is filed in good faith is made by an analysis of objective standards geared toward evaluating "whether reorganization is the proper course of action in a particular debtor's case." In re Mandalay Shores Cooperative Housing Assoc., Inc., 63 Bankr. 842, (N.D. Ill. 1986). A dismissal under this criterion is by no means synonymous with a finding that a case was filed with intent to harass a creditor.

See also Elmwood Dev't Co. v. General Elec. Pension Trust (In re Elmwood Dev't Co.), 964 F.2d 508, 512 (5th Cir. 1992) ("Because the good faith standard is an objective one, the court was not constrained to entertain and give dispositive weight to testimony of the subjective state of mind of Elmwood's manager.") and In re Tillotson, 266 B.R. 565, 571-72 (Bankr. W.D.N.Y. 2001) (Second Chapter 11 case was an "impermissible effort to modify the prior plan . . . and without `objective' good faith in the form of `fundamental fairness.'"). In McCullough v. Brown, 162 B.R. 506, 510 (N.D. Ill. 1993), an appeal involving treatment of unsecured student loan obligations in Chapter 13 plans, Judge Shadur referenced the "objective good faith" and fundamental fairness concepts involved in assessing Chapter 13 plans.

The concept of a Chapter 13 case and a Chapter 13 plan being filed in "objective good faith" has been more recently discussed in the context of motions to extend the automatic stay under § 362(c)(3)(B) and to impose a stay under § 362(c)(4). In In re Ferguson, 376 B.R. 109, 122-23 (Bankr. E.D. Pa. 2007), the court addressed the good faith issue under § 362(c)(3) and (4) and after surveying cases from other jurisdictions, concluded that "the courts have devised various `checklists' of good faith factors" and then listed 14 such factors. Those 14 factors are essentially the Caldwell II factors with two additional ones. The court then noted that a couple of the factors relate to the debtor's subjective good faith, but that most of them relate to the debtor's objective good faith. Id. at 124, n. 27. See also In re Thornes, 386 B.R. 903, 910-11 (Bankr. S.D. Ga. 2007) ("Having a case dismissed and then re-filed due to attorney error certainly supports the notion that Debtor has no subjective bad faith or malice, but even assuming that Debtor has good faith motives and a sincere intent to repay his creditors, he must first prove that [his third case] meets the objective good faith standard in order to gain the benefit of the automatic stay.").

Section 362(c)(3), in pertinent part, states:

(3) if a single or joint case is filed by or against debtor who is an individual in a case under chapter 7, 11, or 13 . . . and if a single or joint case of the debtor was pending within the preceding 1-year period but was dismissed, other than a case refiled under a chapter other than chapter 7 after dismissal under section 707(b) [ 11 USCS § 707(b)] —

(A) the stay under subsection (a) with respect to any action taken with respect to a debt or property securing such debt or with respect to any lease shall terminate with respect to the debtor on the 30th day after the filing of the later case;

(B) on the motion of a party in interest for continuation of the automatic stay and upon notice and a hearing, the court may extend the stay in particular cases as to any or all creditors (subject to such conditions or limitations as the court may then impose) after notice and a hearing completed before the expiration of the 30-day period only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed . . .

11 U.S.C. § 362(c)(3) (emphasis added). Section 362(c)(4), in pertinent part, states:

(4) (A) (i) if a single or joint case is filed by or against a debtor who is an individual under this title, and if 2 or more single or joint cases of the debtor were pending within the previous year but were dismissed, other than a case refiled under section 707(b) [ 11 USCS § 707(b)], the stay under subsection (a) shall not go into effect upon the filing of the later case; and

(ii) on request of a party in interest, the court shall promptly enter an order confirming that no stay is in effect;

(B) if, within 30 days after the filing of the later case, a party in interest requests the court may order the stay to take effect in the case as to any or all creditors (subject to such conditions or limitations as the court may impose), after notice and a hearing, only if the party in interest demonstrates that the filing of the later case is in good faith as to the creditors to be stayed . . .

11 U.S.C. § 362(c)(4) (emphasis added).

Accordingly, determination of the Debtors' good faith in proposing the Plan as required under § 1325(a)(3) entails an analysis of the totality of the circumstances of the Plan, with particular attention paid to the factors set forth in Caldwell II. Further, while the Plan may have been filed with all of the right motives and intent — that is in subjective good faith, it still may not pass muster under Caldwell II, Okoreeh-Baah, and Francis if it can not survive scrutiny under the objective good faith factors set forth in those cases, paying particular attention to whether it is fundamentally fair, achieves the purposes of the Code and particularly Chapter 13, and will likely be successful.

b. Analysis of the Good Faith Factors and Issues

The Trustee admits that the Debtors and the Debtors' Plan satisfy many of the Caldwell II factors. See Trustee's Brief, pp. 7, 10, and 11. The Debtors are dedicating all of their disposable income as reflected by Schedules I and J to the Plan; the commitment period of the Plan is 60 months, and therefore, cannot be longer; there is no suggestion that the Debtors have not been honest in representing their financial circumstances; the secured claims are not modified except for Fifth Third's second mortgage loan by agreement; the Debtors have not filed for bankruptcy protection previously; and, the administration of the Plan will not impose any unusual burden on the Trustee.

The Debtors are above-median income debtors for the State of Ohio. No issue has been raised as to the Debtors not committing all of their projected disposable income to make payments to unsecured creditors as is required under § 1325(b)(1)(B) when a confirmation objection is filed by the Chapter 13 Trustee or the holder of an allowed unsecured claim. Both the Trustee and the Debtors relied on the Debtors' actual income and expenses at confirmation as reflected by Schedules I and J to determine disposable income and projected disposable income, which varied greatly from those set forth on the Debtors' Official Form 22C (Chapter 13 Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income). The court is not opining on whether such complete reliance on Schedules I and J to determine a debtor's disposable income and projected disposable income is appropriate. See Hamilton v. Lanning, ___ U.S. ___, 130 S.Ct. 2464, 2478 (2010) ("[W]e hold that when a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation.").

The Trustee focuses his good faith argument on the Debtors' budget. Simply put, the Trustee argues that the Debtors' residence and vehicles are too expensive and the Debtors' failure to shed those items and replace them with less expensive ones establishes their lack of good faith in proposing the Plan. Thus, the Trustee concludes that the Debtors have failed to engage in sufficient belt-tightening so as to free up more money for unsecured creditors, choosing instead to continue a better lifestyle than appropriate under their current circumstances at the expense of their unsecured creditors.

A substantial body of case law exists to support the Trustee's argument, including within this district. As noted by the Trustee, Judge Preston in the Reid decision found a Chapter 13 plan was not proposed in good faith when the two debtors owned a house valued at $470,000 and owed of $147,479 in taxes and only proposed to pay 3% to their nonpriority unsecured creditors. In re Reid, 2007 Bankr. LEXIS 4724 (Bankr. S.D. Ohio March 9, 2007). In Henry, Judge Hoffman remarked that the "Debtor's monthly Plan payment of $560 could be raised significantly if he reduced his monthly housing cost ($1,063) and his food budget ($430), both of which seem excessive for a single person with no dependents living in Grove City, Ohio." Henry, 328 B.R. at 543. Judge Aug has issued a series of decisions granting the United States Trustee's motions to dismiss or convert Chapter 7 bankruptcy cases under circumstances in which he found that the debtors were living too lavishly to justify a discharge of all of their nonpriority unsecured creditors. See In re dePellegrini, 365 B.R. 830 (Bankr. S.D. Ohio 2007) (debtor wished to give his two adult sons the same lifestyle they had before debtor's divorce); In re Robert, 384 B.R. 777, 780 (Bankr. S.D. Ohio 2008) (abuse found where debtors chose to earn less than full earning capacity and keep expensive home); and In re Dupuy, 2010 Bankr. LEXIS 2579 (Bankr. S.D. Ohio July 14, 2010)

(court found that the debtor and his non-debtor wife should not retain a $400,000 house at a monthly cost of $2,500 at the expense of the debtor's unsecured creditors).

Cases outside this district finding Chapter 13 plans could not be confirmed because of too much secured debt include: In re Loper, 367 B.R. 660 (Bankr. D. Colo. 2007) (plan not proposed in good faith when it proposes to commit two-thirds of the debtors' income ($5,690 monthly) to keep a 3,000 square foot home valued at $670,000 in which they will have little or no equity); In re Leone, 292 B.R. 243 (Bankr. W.D. Pa. 2003) (plan not proposed in good faith when nonpriority unsecured creditors would only receive an 11% dividend and the debtors proposed paying more than $205,000, at a monthly cost of $2,347.88, for a house valued at $138,000); In re Namie, 395 B.R. 594 (Bankr. D.S.C. 2008) (plan not proposed in good faith when it proposed to pay nonpriority unsecured creditors a 1% dividend over 57 months and devote nearly 75% ($5,376.54 monthly) of his household income to maintaining and curing his mortgage payment on a home valued at approximately $500,000); and In re Stitt, 403 B.R. 694 (Bankr. D. Idaho 2008) (plan not proposed in good faith when debtor sought to retain his house and acreage valued at $305,000 with monthly expenses in excess of $2,300, which would require him to pay more than four times the IRS allowable housing expense for a single person in the county).

The court finds that the Trustee and KHN met their burden of producing evidence in support of their objection that the Plan was not proposed in good faith. The undisputed evidence reflects that the Debtors own a $365,000 house with about $358,000 in secured debt attached to it, two vehicles with secured debt totaling $53-54,000 and, in addition own a Harley Davidson motorcycle free and clear of liens that has not been sold, have a combined monthly gross income of approximately $19,000, and are proposing to pay either a 0% dividend or a minimal dividend to nonpriority unsecured creditors. The Debtors' testimony and the court's taking judicial notice of the Debtors' Schedules (A-J) and Statement of Financial Affairs (Doc. 1) support the Trustee's Objection and constitute sufficient evidence to raise a good faith issue under § 1325(a)(3). Accordingly, the Debtors bore the ultimate burden of proving their good faith. Caldwell II, 895 F.2d at 1126; Francis, 273 B.R. at 91.

The Debtors did not sustain their burden of proving that their Plan was proposed in good faith. Specifically, the court finds that if the Plan is confirmed, "the purposes undergirding Chapter 13: a sincerely-intended repayment of pre-petition debt consistent with the debtor's available resources" will not be satisfied. Okoreeh-Baah, 836 F.2d at 1033. The primary area of dispute over confirmation does not concern the Debtors' subjective good faith, but rather, the objective good faith of the Plan. An analysis of the economic impact the of the Plan — payment of the secured debt on the home and cars and the priority taxes, while discharging the nonpriority unsecured debt — reveals that the Debtors' Plan is truly a "veiled" Chapter 7 plan. "Courts should not approve Chapter 13 plans which are nothing more than `veiled' Chapter 7 plans." Caldwell II, 895 F.2d at 1126, citing In re Girdaukas, 92 B.R. 373, 377 (Bankr. E.D. Wisc. 1988). In essence, the Plan reaffirms the secured debt on the Debtors' high-end home and cars and the tax liability for which Mr. McDonald is personally obligated, at the expense of the Debtors' nonpriority unsecured creditors who receive nothing. As noted above, a small dividend does not mandate the conclusion that a plan was filed in bad faith. Francis, 273 B.R. at 91. Zero or small dividend Chapter 13 cases are frequently filed and confirmed by this and other courts. However, in this case, the Debtors receive a monthly gross income of approximately $19,000. The Chapter 13 cases with confirmed plans involving zero or minimal dividends to nonpriority unsecured creditors involve homes worth significantly less than $365,000, secured debt on

There is significant evidence supporting a finding that the Debtors filed their case and proposed their Plan in subjective good faith: a) there was no evidence of deceit, manipulation, or other bad acts which tainted their case or Plan; b) the Debtors refinanced the second mortgage to lower the payments on that loan during the life of the Plan; c) the Debtors traded in two motor vehicles for one, resulting in a net lower vehicle expense d) the cause of the bankruptcy was not inordinate spending on credit cards or other unsecured debt; and e) Mr. McDonald acquired and owned the house that serves as their residence some time before all of these problems arose and, thus, the Debtors need to file a Chapter 13 was not due to acquiring a house that was unaffordable at the time it was purchased.

vehicles less than $53,000, and monthly incomes far lesser than $19,000. Not only are the Debtors proposing to retain their house and cars, but they also intend to keep Ms. McDonald's Harley Davidson motorcycle. "A Chapter 13 debtor who is not able to pay [his or her] creditors in full is generally expected to demonstrate a degree of belt tightening and this may require some sacrifices." In re Jones, 119 B.R. 996, 1000 (Bankr. N.D. Ind. 1990) (citation omitted); In re Gibson, 142 B.R. 879, 882 (Bankr. E.D. Mo. 1992). While most of the evidence reflects positively on the Debtors' subjective good faith, the unfairness of the Plan as relates to the assets that the Debtors are retaining and the treatment of the nonpriority unsecured creditors, not only evidences a lack of objective good faith, but also raises some issue as to their subjective good faith.

While the Debtors offered some justification for retention of their residence, they failed to introduce any evidence as to the reasonableness of their housing costs. The Debtors seem to recognize the importance of such evidence on page 2 of their brief where they state:

The evidence establishes that the Debtors have four minor children. With respect to retention of the house, the Debtors' Brief states: "There is absolutely no evidence in this case that the Debtors could even find another property to rent in the children's current school district, so if the Trustee's demands are followed, we have no idea what the consequences will be for this family. They certainly will not be good. Under the totality of the circumstances of this case the Debtors should be permitted to keep their home for the benefit of their children. To do otherwise would be to punish the children for the mistakes of the parents." Debtors' Brief, p. 3. However, no evidence of special circumstances necessitating the Debtors' retention of this particular house was introduced, such as there being a handicapped individual in the family and the home being specially constructed to provide access for such individual.

Frankly, the Trustee's characterization of the Debtors' budget as slightly higher than normal is in the opinion of counsel incorrect. The Debtors' actual living budget by counsel's calculations is $3,196.00 per month for a family of six. Even by the Trustee's own chart he would allow $3,200.00 per month. However the Trustee's chart for families of this size appears to be inaccurate. If the [I]nternal Revenue Service standards were followed by counsel's calculations the Debtors would be permitted a living budget of $3,716.00 per month. The Debtors would therefore respectfully submit that they are actually living on a budget that is less than the standard.

The Debtors' reference to the Internal Revenue Service standards is to the National Standards and Local Standards issued by the Internal Revenue Service for the area in which the debtor resides. See 11 U.S.C. § 707(b)(2)(A); Voelkel v. Naylor (In re Voelkel), 322 B.R. 138, 147-48 (B.A.P. 9th Cir. 2005); In re Wadsworth, 383 B.R. 330, 335 (Bankr. N.D. Ohio 2007); In re Littman, 370 B.R. 820, 827 (Bankr. D. Idaho 2007); and In re Ruel, 418 B.R. 389, 392 (Bankr. D.N.M. 2009). However, the Debtors did not introduce any such evidence. Rather than producing such evidence, the Debtors sought to shift their burden to show good faith to the Trustee, stating: "[t]here is absolutely no evidence in this case that the Debtors could even find another property to rent in the children's current school district. . . ." Debtors' Brief, p. 3. After coming forward with some evidence to support his objection to the Debtors' retention of their house, it was not the Trustee's ultimate burden to show lack of good faith, it was the Debtors' burden to establish subjective and objective good faith.

In Voelkel v. Naylor (In re Voelkel), 322 B.R. 138, 147-48 (B.A.P. 9th Cir. 2005) the court explained that it is appropriate for a court to rely on its own value judgments to determine the reasonableness of a debtor's expenses when the court is sua sponte moving to dismiss a debtor's Chapter 7 case for abuse because the court has no way of gathering or admitting evidence, provided that the court "set forth all issues to be considered at the section 707(b) hearing" so that the debtor has an opportunity to contradict the court's findings with evidence. In this case, the court is not the moving nor objecting party and, therefore, it need not solely rely on its own value judgments, but may instead appropriately rely on the evidence presented by the parties and the respective burdens of the parties.

For Chapter 13 cases applying these standards in this district see In re Kolb, 366 B.R. 802, 811-12 (Bankr. S.D. Ohio 2007) and In re Anderson, 383 B.R. 699, 708-09 (Bankr. S.D. Ohio 2008). Of course, the approach followed in Kolb and Anderson of multiplying the disposable income determined using the means test embodied in Form 22C by the months in the applicable commitment period to calculate projected disposable income has been changed by Lanning. See Hamilton v. Lanning, 130 S.Ct. 2464, 2478 (2010) ("We hold that when a bankruptcy court calculates a debtor's projected disposable income, the court may account for changes in the debtor's income or expenses that are known or virtually certain at the time of confirmation."). Nevertheless, in cases such as this one in which the reasonableness of the Debtors' expenses are contested, the citations to Kolb, Anderson and other similar cases are a reminder that objective criteria, such as the IRS expense guidelines or other admissible objective evidence would provide a basis to evaluate the objective good faith of a Chapter 13 plan other than through the court's own personal experiences and knowledge.

Similarly, while the Debtors introduced evidence to justify the acquisition and retention of their vehicles, they did not introduce evidence as to the reasonableness of their vehicle expenses. The Debtors admit that their secured debt increased by $12,000 with the purchase of the Denali "only a few months before filing" and that they owed $38,000 on this $32,000 vehicle at the time the petition was filed. Debtors' Brief, p. 4 and Schedules D and F (Doc. 1). The "close proximity in time between a debtor's purchase of collateral and the filing of a chapter 13 petition may evidence lack of good faith" in a good faith analysis under § 1325(a)(3). Henry, 328 B.R. at 539, citing Sharon, 200 B.R. at 196. See also Okoreeh-Baah, 836 F.2d at 1033. While the Denali was purchased to replace two vehicles and the payments on the Denali are less than the total of the payments on the two traded vehicles, the fact that this transaction resulted in an increase of $12,000 on the Debtors' secured debt is troubling. The Denali had 37,000 miles on it when it was purchased while the mini van had between 60,000 and 70,000 miles on it when it was traded in. Facing bankruptcy, retention of the mini van, even if "worn," and use of it as the family vehicle and for Mr. McDonald's limited business use, with the surrender of the third vehicle, while perhaps not the most enviable alternative, would have been the alternative resulting in a greater likelihood that nonpriority unsecured creditors would be paid some type of return. Accordingly, the court

Mr. McDonald testified that they purchased the Denali because it was large enough to accommodate both the needs of his large family and his business needs and dependable enough to last a long time. Both Debtors testified that they need this vehicle for family transportation, such as to transport the children to and from their various after-school activities and church.

finds that this transaction does not support the Debtors' efforts to establish their good faith in proposing the Plan.

The cause of the Debtors' financial trouble as it affects the Plan provisions and impacts nonpriority unsecured creditors also negatively reflects on the objective good faith of the Plan. At first blush the Debtors may not appear to have been living beyond their means but simply to have gotten caught in the accidental failure of Mr. McDonald's businesses to pay sales taxes. However, a more thorough examination of the situation casts doubt on that simple conclusion. While sales taxes were not being paid to the State of Ohio, Mr. McDonald took $68,382 in dividends from his company ($5,698.50 monthly). Debtors' Brief, p. 5. The Debtors' Statement of Financial Affairs reflects income to Mr. McDonald of $55,000 for 2009 from Security Group of North America, Inc. and $93,783 in 2008 from that company and Special Investigations, Inc. Had Mr. McDonald's companies paid the sales taxes and other applicable taxes during that time period, the dividends to Mr. McDonald would have been lower and, as a result, the Debtors' total income would also have been lower. See Debtors' Brief, pp. 4-5. Therefore, the Debtors may have been unknowingly living beyond their means. Mr. McDonald's failure to pay taxes combined with his drawing income and dividends from his companies impact the Debtors' unsecured creditors as reflected in the Plan.

As a result of the ODT Objection, substantially all of the Debtors' contributions to the Plan would fund payment of the priority taxes that Mr. McDonald's companies failed to pay while he was receiving significant dividends from those companies. Perhaps to rectify this situation, the Debtors originally proposed payment of those taxes outside the Plan. However, ODT, well within its rights, objected to this treatment and consequently, the Debtors have no choice but to pay these taxes within the Plan. Concretely, this requirement means that the Debtors' unsecured creditors, who receive nothing under the Plan, are in effect subsidizing the payment of Mr. McDonald's taxes. This is another reason why the Plan, as currently formulated and as would be effectuated, is fundamentally unfair to the nonpriority unsecured creditors and does not serve the goals of bankruptcy and particularly Chapter 13 of the Bankruptcy Code.

Finally, the Debtors stress that their decisions to retain their home and vehicles were made to accommodate and preserve the well-being of their family, particularly their four minor children. The court recognizes the importance of family unity and values. However, family bonds, values and education transcend houses, school district lines, and communities. The unfortunate circumstances of debtors usually do impact the family unit as a whole with sacrifices having to be made by all.

As Judge Mullins aptly recognized in In re Johnson, 318 B.R. 907, 919 (Bankr. N.D. Ga. 2005), a court cannot embark upon the path of determining "where a debtor should live . . . the Debtor's ability to obtain other housing, the availability of housing in a particular area, the Debtor's desire to remain in a certain school district, the type of housing available, the safety of the Debtor's neighborhood, the details of the Debtor's commute to work, [or] the Debtor's sentimental ties to the home. . . ." However, the court can make determinations of good faith based upon objective criteria and evidence.

c. Summary of the Court's Findings as to Good Faith

In summary, the court finds that a critical analysis of the evidence viewed through the objective good faith factors outlined in Caldwell II and further discussed in Okoreeh-Baah and Francis and their progeny establishes that the Plan cannot be confirmed. Particularly, the zero or minimal dividend to nonpriority unsecured creditors (percentage of repayment consideration under the fourth Caldwell II factor), the retention of the high-end home and vehicles with their attendant secured claims being paid in full while the nonpriority creditors receive little or nothing (Caldwell factors 5, 6, and 7), and the lack of evidence of any special circumstances such as major medical expenses that could have caused the Debtors' financial misfortune (contrasted with business error leading to the failure to pay taxes in this case) (Caldwell factor 8) convince the court that the Plan is fundamentally unfair and not objectively filed in good faith. Whether or not it is intentionally designed to be, the Plan, proposing to pay in full the Debtors' secured claims and Mr. McDonald's tax liabilities at the expense of the unsecured creditors, resembles a "veiled" Chapter 7 and raises questions as to the Debtors' sincerity and motivation in seeking Chapter 13 relief and as to whether the Debtors are attempting to abuse the spirit of the Bankruptcy Code (Caldwell factors 10 and 12). While the court finds that most of the facts support a finding of subjective good faith, the effect of confirming this Plan would be to abuse the spirit of the Bankruptcy Code and particularly Chapter 13.

The court does not mean to imply that the Debtors can not propose a confirmable plan. The Debtors in their brief allude to their willingness to increase their plan payments by $95.51, the amount saved by their refinancing of their second mortgage and to regularly report Mr. McDonald's income from operation of his business to adjust the Plan payment to reflect their disposable income. In addition, the Debtors originally proposed payment of the sale taxes owed to ODT outside of the Plan. While ODT is within its rights to require

The Debtors assert in their brief that their 2009 income tax returns indicate greater income for Mr. McDonald than that disclosed on their Schedule I. The Debtors estimate that after deduction of appropriate taxes, and assuming Mr. McDonald's income does not change from 2009, "Mr. McDonald probably has approximately $475.00 more income on the average than set forth in the schedules."

payment of any priority taxes owed by either of the Debtors through the plan payments, a structure that would allow Mr. McDonald's business to pay the sales taxes, thus increasing the Debtors' disposable income to fund the nonpriority unsecured claims, would certainly be indicia of fundamental fairness. Liquidation of unnecessary assets for the benefit of nonpriority unsecured creditors could also be indicia of fundamental fairness. Thus, an amended plan could obviously alter the tenor of the Plan, the percentage dividend to nonpriority unsecured creditors and lead to a confirmable plan.

IV. Conclusion

For the reasons set forth above, confirmation of the Plan is denied. The Debtors are granted forty-five (45) days from the date that the order on this decision is entered to file an amended plan. In the event an amended plan is not filed with that forty-five (45) day period, the case will be dismissed.

The court will enter a separate order on this decision denying confirmation with leave to file an amended plan within forty-five (45) days.

IT IS SO ORDERED.