Opinion ID: 2653399
Heading Depth: 2
Heading Rank: 3

Heading: “Good Faith” Under Chapter 13

Text: As quoted above, Chapter 13 contains two “good faith” requirements. First, subsection (a)(3) of § 1325 requires the bankruptcy court to determine if the plan was proposed in good faith. 11 U.S.C. § 1325(a)(3). Subsection (a)(7), similarly, mandates consideration of whether the petition was filed in good faith. Id. § 1325(a)(7). 6 Congress did not define or articulate standards for “good faith” in subsections (a)(3) or (a)(7). 6 The former provision was an original component of Chapter 13, enacted as part of the Bankruptcy Reform Act. See Pub. L. No. 95-598, § 1325, 92 Stat. 2549 (1978). Congress added the second good faith requirement when it enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. See Pub. L. No. 109-8, § 102, 119 Stat. 23. 16 Case: 13-10260 Date Filed: 02/14/2014 Page: 17 of 23 As to subsection (a)(3), this Court has set forth a non-exhaustive list of factors relevant to whether a plan was proposed in good faith. In re Kitchens, 702 F.2d at 888–89. These factors are: (1) “the amount of the debtor’s income from all sources”; (2) “the living expenses of the debtor and his dependents”; (3) “the amount of attorney’s fees”; (4) “the probable or expected duration of the debtor’s Chapter 13 plan”; (5) “the motivations of the debtor and his sincerity in seeking relief under the provisions of Chapter 13”; (6) “the debtor’s degree of effort”; (7) “the debtor’s ability to earn and the likelihood of fluctuation in his earnings”; (8) “special circumstances such as inordinate medical expense”; (9) “the frequency with which the debtor has sought relief under the Bankruptcy Reform Act and its predecessors”; (10) “the circumstances under which the debtor has contracted his debts and his demonstrated bona fides, or lack of same, in dealings with his creditors”; (11) “the burden which the plan’s administration would place on the trustee”; (12) “the extent to which claims are modified and the extent of preferential treatment among classes of creditors”; (13) “substantiality of the repayment to the unsecured creditors”; and (14) “other factors or exceptional circumstances.” Id. These same Kitchens factors for subsection (a)(3) are equally relevant to determining whether a petition was filed in good faith under subsection (a)(7). Importantly too, “the facts of each bankruptcy case must be individually examined 17 Case: 13-10260 Date Filed: 02/14/2014 Page: 18 of 23 in light of [these] various criteria to determine whether the chapter 13 plan at issue was proposed in good faith.” Id. at 888. While Kitchens does not use this phrase, it basically adopts a “totality of the circumstances” approach for determining good faith or lack thereof, which is what other circuits do, too. See id. at 888–89; see also Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012) (“In this circuit, courts apply a ‘totality of the circumstances’ test to determine whether a Chapter 13 petition and plan are filed in good faith . . . .”); Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012) (reversing because the bankruptcy court did not consider the totality of the circumstances when evaluating whether the debtor proposed his Chapter 13 plan in good faith but, rather, applied a per se rule that attorney-fee-centric Chapter 13 petitions and plans are filed and proposed in bad faith). Further, “prudence dictates that we hew to the overarching principle that the presence or absence of good faith should be ascertained case by case.” Id. With this background, we turn to Brown’s Chapter 13 petition and plan.