Viegelahn v. Essex

452 B.R. 195 (2011)

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Nature of the Case

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Facts

On January 5, 2010, Ps filed Chapter 13. D filed an Objection claiming in part that the Plan was not filed in good faith according to 11 U.S.C. § 1325(a)(3). Ps then filed an Amended Chapter 13 Plan that included changes necessary for the Plan to meet feasibility requirements but did not address the good faith concerns raised by D, The Plan 'calls for payments of $3,717.00 for a period of sixty months and proposes to pay approximately a 1% dividend to non-priority unsecured creditors with the dollar amount to be paid to non-priority unsecured creditors a total of no less than $1,956.41.' Ps were to retain a homestead with a mortgage of approximately $656,000.00 in which Ps have virtually no equity. Ps would pay $6,770.00 towards the mortgage each month. This is 51% of Ps' monthly income and is over four times the amount of the IRS standard for housing and utilities for a family of five in San Antonio, Texas. Before purchasing the home in 2006, Ps had not paid income taxes for the years of 2003, 2004, or 2005 and continued this trend for 2006 as well. Ps owe the IRS $256,498.97, of which $136,681.46 is an unsecured claim. Under the Plan, the IRS will receive $1,366.82 of the unsecured debt. D objected. The Plan was confirmed under § 109(e) in conjunction with the Chapter 13 purpose of allowing debtors to retain their homes during bankruptcy. Congress, de facto, put an upper limit on what kind of a home you can keep because they put an upper limit of how much secured debt you can take into Chapter 13. D appealed.