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UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division

In re:

TABINDA SARFRAZ, Case No. 17-12840-KHK

Debtor. Chapter 13

MEMORANDUM OPINION 

This matter came before the Court on December 13, 2018 for an evidentiary hearing on 

the objection of Iftakhar Khan to the second amended chapter 13 plan filed by Tabinda Sarfraz 

(“Debtor”). (Docket No. 70). At the conclusion of the hearing, the Court took the matter under 

advisement. Having considered the pleadings and heard the evidence and arguments of counsel,

the Court makes the following findings of facts and conclusions of law.

Findings of Facts

On August 23, 2016, Iftakhar Khan filed a complaint in the Circuit Court of Fairfax 

County, Virginia requesting a judgement against Ms. Sarfraz, for amounts due on a promissory 

note. A trial was set for August 22, 2017, but the filing of this bankruptcy stayed the state court 

action. (Adversary Proceeding No. 17-01123, Docket No. 1 at p. 7). The Debtor filed for relief 

under chapter 7 of the Bankruptcy Code on August 19, 2017. (Case No. 17-12840, Docket No. 

1.)

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Ms. Sarfraz has worked in the banking industry for several years.1 She left United Bank 

sometime during the latter half of July 2017 and two weeks after filing this case, she became a

Branch Manager for Lafayette Federal Credit Union making $4,716 per month.

The Debtor lives at 2736 Bulkhead Drive, Woodbridge, Virginia (the “Property”) along 

with her mother, Farzana Kousar, and two sisters, Maryam Sarfraz and Tahira Sarfraz in a 

single-family home. The family operates as a single economic unit, pooling their incomes and 

paying the household expenses from a joint checking account held in the names of Tabinda and 

Maryam Sarfraz. They have been co-mingling their finances for many years. Evidentiary 

Hearing Transcript (“Tr.”) at 17:00, 29:00 and 92:00. 

On February 24, 2017, the Debtor and her sister, Maryam Sarfraz, purchased the 

property. Khan Ex. 1 (“Special Warranty Deed”). On May 17, 2018, the sisters conveyed an 

interest in the property to their mother, Farzana Kousar. The co-owners now hold their interests 

as joint tenants with rights of survivorship according to the General Warranty Deed that was 

recorded in the Prince William County land records on October 3, 2017, two months after this 

case was filed. Khan Ex. 3 (“General Warranty Deed”). 

The Debtor’s Schedule A describes her interest in the property as a 33% interest in 

property valued at $438,000 and her Schedule D discloses a mortgage lien of $430,275.43.

(Docket No. 1) (“Voluntary Petition”). The only other non-exempt asset listed on the original 

Schedule B was a counterclaim for defamation and intentional infliction of emotional distress 

valued at $500,000 against Mr. Khan and others in the state court lawsuit.2 Id.

 

1 She was hired by Capital One Bank in January 2006 and was making $3,333 per month by April 2011. (Proof of 

Claim 4-1 at p. 7.) She was employed by United Bank in April 2014 and was making $5,092 per month by April 

2017. (Proof of Claim 3-1 at p. 7).

2 Iftakhar Khan v. Tabinda Sarfraz, Case No. CL-2017-0006952 (Fairfax County Circuit Court).

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The Debtor’s original Schedule I disclosed a projected monthly take-home pay of 

$1,835.08 and a contribution from her mother and sister of $1,965.23 for payment of their 

portion of the mortgage resulting in total net monthly income of $3,800.31. Her Schedule J 

indicated monthly expenses of $4,297.54, resulting in projected monthly disposable income of 

$497.54. Id.

Mr. Khan filed an adversary proceeding in this case against the Debtor on November 11, 

2017, alleging the Debtor made false representations which induced him to loan her $150,000 to 

finance a new business and asking the Court to find the debt excepted from discharge under 11 

U.S.C. § 523(a)(2)(A) of the Bankruptcy Code. (Docket No. 15). 

On May 8, 2018, the Debtor filed a motion to convert her bankruptcy to a case under 

chapter 13 of the Code. (Docket No. 19). The Court conducted a hearing on the motion on June 

5, 2018, and over the objections of Mr. Khan, granted the motion to convert on June 5, 2018.

(Docket No. 32). 

On June 22, 2018, the Court conducted a hearing on the merits of the adversary 

proceeding. The Debtor testified that she intended to use the funds borrowed from Mr. Khan to 

finance a new business, but that the business never opened. She offered no evidence to explain

why the funds were not returned to Mr. Khan. The Court determined that the Debtor’s testimony

regarding what happened after negotiations for the intended business failed was not credible. 

The exhibits indicated the funds received from Mr. Khan were disbursed to the Debtor and her 

family members. At the end of the hearing, the Court found the debt owed on the promissory 

note was non-dischargeable under 11 U.S.C. § 523(a)(2)(A) and granted judgement in favor Mr.

Khan for the unpaid debt, plus interest and attorney’s fees. (Adversary Proceeding No. 17-

01123, Docket No. 42). 

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The Debtor’s first proposed chapter 13 plan dated June 29, 2018, provided for payments 

of $525 for sixty months for a total of $31,500 and resulted in a dividend of 12% to unsecured 

creditors. (Docket No. 40). Schedule I attached to the plan was amended to disclose net monthly 

take-home pay of $3,552.90 from her new job with Lafayette Federal Credit Union; it also 

included an additional $400.00 in rental income from a new tenant and a decreased family 

contribution of $1,050, resulting in a projected net monthly income of $5,002.90. Id. Schedule J 

showed increases in allowances for food and medical expenses, a new allowance for car 

insurance and eliminated the allowance for entertainment resulting in a projected monthly 

disposable income of $525. Id. at p. 7-10. The first plan and the first amended plan were very 

similar; both were denied confirmation.

The current plan, filed on November 8, 2018, proposes to pay $93,820.20 into the plan 

over five years resulting in a 28% dividend to unsecured creditors. (Docket No. 70). The 

amended Schedule I now includes monthly contributions from family members of $4,733 and 

shows a projected total monthly income of $9,586.86 for the household. The amended Schedule 

J discloses monthly total household expenses of $8,178.83, resulting in a projected monthly 

disposable income of $1,408.03. (Docket No. 70 at p. 7-10).

Mr. Khan filed his objection to the plan and motion to dismiss the case on November 19, 

2018. (Docket No. 73).

Conclusions of Law

The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Order of 

Reference entered by the U.S.District Court for this District on August 15, 1984. This is a core 

proceeding under 28 U.S.C. § 157(b)(2)(L) (confirmation of plans).

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The Debtor bears the burden of proof with respect to all of the statutory requirements for 

confirmation, by a preponderance of the evidence. In re Cole, 548 B.R.132, 141 (Bankr. E.D.

Va. 2016); In re Colston, 539 B.R. 738, 746 (Bankr. W.D. Va. 2015).

Section 1325 of the Bankruptcy Code lists the requirements a plan must meet in order to 

achieve confirmation. Mr. Khan contends that the plan cannot be confirmed because it fails to 

meet the requirements of this Section. First, he argues that the plan was not filed in good faith as 

required by 11 U.S.C. § 1325(a)(3). Second, he alleges the plan fails to pay unsecured creditors 

under the plan as much as they would receive in a chapter 7 liquidation as described in 11 U.S.C. 

§ 1325(a)(4). This requirement is generally referred to as the “liquidation test”. Third, he 

contends that the Debtor will not be able to make all payments under the plan as required under 

11 U.S.C. § 1325(a)(6). This requirement is referred to as the test for “feasibility”. Finally, he 

argues that the plan cannot be confirmed because the petition was not filed in good faith as 

required by 11 U.S.C. § 1325(a)(7). The Court declines to address the violations of the 

liquidation and feasibility tests in this case because the good faith issues are dispositive. 

Bankruptcy Code Section 1325(a)(3) provides that a chapter 13 plan must be “proposed 

in good faith and not by any means forbidden by law.” 11 U.S.C. § 1325(a)(3). The Code also 

provides that the Court may only confirm a plan if “the action of the Debtor in filing the petition 

was in good faith.” 11 U.S.C. § 1325(a)(7). Although these Sections are not identical, they will 

be considered in tandem because the facts in the case implicate both Sections.

To determine whether a chapter 13 petition and plan are filed in good faith, the Fourth 

Circuit applies a totality of the circumstances test as set forth in Deans v. O'Donnell, 692 F.2d at

972 and expanded in In re Solomon, 67 F.3d 1128, 1134 (4th Cir. 1995), and Neufeld v. 

Freeman, 794 F.2d 149, 152 (4th Cir. 1986). The test for good faith contains both objective and 

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subjective components. Id. The underlying inquiry is based on fundamental fairness. The nonexhaustive list of the factors to be considered includes:

1. the Debtor’s past bankruptcy filings;

2. the Debtor’s financial situation;

3. the Debtor’s employment history, and current and future employment prospects;

4. the percentage of proposed repayment to creditors;

5. the time over which creditors will receive payment;

6. the nature of the Debtor’s pre-petition conduct that gave rise to the case;

7. whether the debts would be dischargeable in a chapter 7 proceeding;

8. the nature and amount of unsecured claims;

9. the Debtor’s honesty in disclosing facts of the case; and

10. any other unusual or exceptional problems the debtor faces, 

The foregoing factors are each still relevant in post-BAPCPA cases. In re Edmunds, 350 B.R. 

636, 649 (Bankr. D.S.C. 2006). The Court will address the factors above that are relevant to the 

instant case.

Factors That Support a Good Faith Finding

To her credit, the Debtor has never filed for bankruptcy before and she has a stable 

employment history. Her financial situation is secure, in part because she shares a household 

with two sisters who are also gainfully employed. Both sisters anticipate receiving more income 

in the future. Maryam Sarfraz testified that she expects to be promoted and receive a raise soon. 

(Tr. at 93). Tahira Sarfraz, who currently works part-time, testified that she is one semester 

away from acquiring her Degree, and upon graduation she intends to get full time employment. 

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(Tr. at 113.) Both sisters have a vested interest in making sure this plan is successful because if 

it fails, they lose their home.

In addition to the claim of Mr. Khan, three other creditors filed unsecured claims in this 

case. No objections to these claims have been raised, so they are presumed to be allowed. The 

total amount owed on the three claims is $21,823.48, so these creditors would receive a total 

payout of $6,082.57 over 5 years and the balance of their claims would be discharged if the 

Debtor receives a discharge of any kind under 11 U.S.C. § 1328. See Case No. 17-12840,

(“Claims Register”). Their claims would be discharged in full if the Debtor received a discharge

under chapter 7, so these creditors fare better under a chapter 13 case than they would under a

chapter 7 case.

Factors Against a Finding of Good Faith

Mr. Khan’s claim for $264,337.50 comprises 92% of the total allowed unsecured claims.

Id. Under the plan, he would receive $74,015 over 5 years and the remainder of his claim would 

be discharged if Ms. Sarfraz completes her plan and receives a discharge under 11 U.S.C. §

1328(a). However, his claim has been reduced to a non-dischargeable judgement, so if the 

Debtor fails to complete the plan payments and her case is dismissed, then he could record his 

judgement to perfect a lien against her home and sell the property to acquire her share of any

equity.3 Moreover, he could garnish the Debtor’s wages and possibly recoup much more than 

the $74,015 he is limited to under the current plan.

Ms. Sarfraz argues that discharge of the debt to Mr. Khan through use of the expanded 

discharge in Chapter 13 was contemplated by Congress and represents a legitimate use of the 

bankruptcy process. Mr. Khan argues that even though this is permissible under the Code, it 

 

3 Khan Ex. 5 (“Residential Appraisal” dated November 1, 2018) indicates the current market value of the property is 

$530,000.

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would be unfair, in light of the totality of the circumstances, to allow Ms. Sarfraz to avoid 

repaying 72% of an obligation she acquired as a result of fraudulent activity. The Court finds 

Mr. Khan’s argument persuasive for the reasons stated below.

This bankruptcy was filed on the eve of a trial that might have led to the entry of a 

substantial state court money judgement against the Debtor in favor of Mr. Khan. Even though 

the state court action was stayed by this case, Mr. Khan promptly filed an adversary proceeding 

against the Debtor alleging fraud in order to pursue his claim in this Court. On the eve of the 

trial in the adversary proceeding, Ms. Sarfraz again attempted to sidestep or minimize the 

financial consequences of her fraudulent behavior by converting her chapter 7 bankruptcy to a 

case under chapter 13. 

As was the case in the adversary proceeding, the Court continues to question the Debtor’s 

honesty in disclosing material facts in this case. The timing and nature of the disclosures 

included in some of the amendments filed by Ms. Sarfraz are suspiciously convenient and 

demonstrate a lack of candor with this Court. For example:

1. Only after Mr. Khan initiated the adversary proceeding against her, did Ms. Sarfraz 

amend her petition to add the name of the business she intended to open using the funds 

she borrowed from him. (Docket No. 16 at p. 2.)

2. Only after the trial date was set in the adversary proceeding did Ms. Sarfraz amend

Schedule B to delete the $500,000 value she ascribed to her claims against Mr. Khan and 

others and amend Schedule F to increase the value of his claim against her from $0 to 

$150,00. (Docket No. 17 at pp. 5 and 12.)

3. She also amended her Statement of Financial Affairs to add the names of those insiders

who received transfers within 1 year of filing her petition. (Docket No. 17 at p.17.)

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4. The Official Form 122A-1, Chapter 7 Statement of Your Current Monthly Income filed 

with the original petition required the disclosure of the average monthly income received 

from all sources, derived during the six months before the case was filed. In this case, the

applicable period was February 2017 through July 2017. The Debtor’s Form 122A-1

discloses gross monthly income for the applicable look-back period of $2,389.01.

(Docket No. 17 at p. 44.) However, this figure is inconsistent with her testimony and 

other Court records. Ms. Sarfraz testified that she was unemployed for a month between 

the end of July and her start date with her new employer in early September 2017. (Tr. at 

80:00-81:00.) If she was employed by United Bank until the middle of July and was

receiving gross wages of $5,091 monthly as previously determined, then the gross 

monthly income reported on Form 122A-1 appears to be only one-half the income that 

should have been disclosed.

Conversion from a chapter 7 to a chapter 13 case is not uncommon in bankruptcy, and it 

generally entails amendments to schedules. In this case, Ms. Sarfraz’ new employment and the 

acquisition of a tenant post-petition were reasonable justifications for amending her schedules 

and statements. However, other amendments appear to have been triggered by Mr. Khan’s 

vigorous pursuit of his claim. For example, the Debtor’s income from family contributions 

decreased from $1,965 to $1,050 for reasons unknown when she decided to convert her case. 

Moreover, after the case was converted, Ms. Sarfraz’ projected household monthly income rose 

from $5,002.50 to $9,586 which resulted in an increase in projected monthly disposable income 

from $525 to $1,408. Some of the changes were clearly warranted. However, most were 

manipulations to suit her needs first, to appear penniless at the beginning of the case, then to 

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become eligible to be a chapter 13 debtor, and finally to have sufficient resources to pay $93,000

into a chapter 13 plan. 

Conclusion

Ms. Sarfraz has jumped through several hoops to avoid repaying Mr. Khan when she had 

the funds readily available to do so, and to avoid facing the consequences of her actions

thereafter. She sought sanctuary in bankruptcy while she was between jobs to avoid a trial that 

involved fraud; then she moved to convert her case in order to avoid a second trial based on

fraud. Finally, her access to financial resources has been a moving target throughout this 

proceeding.

Although her plan may be feasible, the totality of the circumstances surrounding this case 

clearly indicate that the petition and plan have not been filed in good faith as required under 11

U.S.C. §§ 1325(a)(3) and 1325(a)(7). Both objective and subjective factors support this 

determination including, the nature of her pre-petition fraudulent conduct, the timing of the filing 

of the petition and conversion to chapter 13, and the non-dischargeable nature of her debt to Mr. 

Khan. Furthermore, the timing and nature of the amendments to her schedules and statements

demonstrate the Debtor’s lack of candor in disclosing material facts about this case.

The Bankruptcy Code was amended to add 11 U.S.C. § 1325(a)(7) by the Bankruptcy 

Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). In In re Bateman, the 

Court indicated that, in the context of Section 1307(c), the proper good faith inquiry is whether 

or not under the circumstances of the case there has been an abuse of the provisions, purpose, or 

spirit of [the Chapter] in the proposal or plan. Branigan v. Bateman (In re Bateman), 515 F.3d 

272, 283 (4th Cir. 2008) (quoting Deans v. O'Donnell, 692 F.2d 968, 972 (4th Cir. 1982)). See 

also In re Bland, No. 06-1159, Bankr. LEXIS 1331, at *7 (Bankr. N.D. W. Va. May 6, 2008).

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Ultimately, the Debtor has failed to present sufficient evidence to convince the Court that 

she is the poor but honest Debtor the Bankruptcy Code is designed to protect. Accordingly, 

confirmation of her second amended chapter 13 plan shall be denied and this case shall be 

dismissed. 

The Court will enter a separate Order consistent with findings of fact and conclusions of 

law contained in this Memorandum Opinion.

Date: _________________ ___________________________

Klinette H. Kindred

United States Bankruptcy Judge

Electronic copies to:

Jonathan Baird Vivona 

Martin R. Mann

Thomas P. Gorman

Copy by Mail to:

Tabinda Sarfraz 

2736 Bulkhead Drive 

Woodbridge, VA 22191

Mar 8 2019 /s/ Klinette Kindred

Entered on Docket:Mar 8 2019

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