Chapter 13 Debtor with income from retirement, Veterans’ Affairs benefits and Social Security filed a Chapter 13 petition. On her Schedule J, she deducted $920/month for “savings for unforeseen expenses.” Her Chapter 13 plan provided for a secured claim against her homestead and $800/month for her unsecured creditors, which was about 20% of her total unsecured claims balance. The Trustee objected to the plan since the Debtor was not committing all disposable income to the plan.
The Chapter 13 Trustee filed an objection to the plan, claiming that the Debtor did not file the plan in “good faith” under Section 1325(a)(3) of the Bankruptcy Code. Since the Code does not define “good faith,” the Court used the the Eleventh Circuit’s “totality of the circumstances” standard of review.
In his brief, the Trustee identifies three facts that he believes indicate a lack of good faith in this case: (1) the Debtor has failed to fully disclose how she intends to use the $920 in Social Security income she is holding back every month; (2) the Debtor proposes to “save” $920 every month while only paying unsecured creditors $8,000 pro rata; and (3) the Debtor proposes to pay a home-improvement loan in full while only paying unsecured creditors $8,000 pro rata