UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
KATHY OUSLEY CASE NO. 93-70364
This matter is before the Court upon hearing for confirmation of the debtor's Plan and the pending Motion to Dismiss the proceeding filed herein by creditor, Family Federal Savings Bank (Family Federal). While the Chapter 13 Trustee initially recommended confirmation of the Plan, upon further review of the debtor's financial situation, the Trustee filed an Amended Trustee's Report and Recommendation as to Confirmation in which the Trustee recommended against confirmation because the debtor did not meet the "disposable income test". 11 U.S.C.'1325(b)(1)(B). The debtor's Plan proposes to pay $84 per month for a period of 60 months.
The substance of the Motion to Dismiss filed by Family Federal cites a prior discharge in Chapter 7 less than six years before the filing of the present proceeding. The arguments made by Family Federal are that (1) the debtor is not eligible to file a Chapter 13 Plan by way of composition within six years of the discharge received in her earlier Chapter 7 proceeding and, (2) that the present proceeding is not in good faith because of the prior discharge in a Chapter 7 proceeding and the low composition percentage to be received by unsecured creditors in this proceeding. Family Federal had obtained a Judgment in the amount of $28,414 against the debtor shortly before she filed this proceeding. That Judgment was based upon a foreclosure deficiency. Family Federal is the only unsecured non-priority debt listed in the debtor's schedules.
With respect to the question of eligibility, while it is true that, under the Bankruptcy Act, a Chapter XIII Plan by way of composition could not be confirmed within the proscribed period following a Chapter VII proceeding, Perry v. Commerce Loan Company, 383 U.S. 392 (1966), it appears equally clear that the changes Congress effected in passing the Bankruptcy Code in 1978 changed the eligibility for Chapter 13 proceedings substantially. In re Galt, 70 Bankr. Rep. 57 (S.D. Ohio, 1987). It is now clear that having received a Chapter 7 discharge does not categorically foreclose relief under Chapter 13 under the Bankruptcy Code. Johnson v. Home State Bank, 111 S.Ct. 2150 (1991). The creditor's first argument must fail simply because of the plain language of the Bankruptcy Code. 11 U.S.C.'109(e) and '1328.
In the present matter, however, it appears that the Trustee's objection to confirmation is based upon the debtor's under reporting of her income under Schedule I. The Court finds that the objection of the Trustee is well taken in that the debtor has not met the disposable income test.
Because the present Plan cannot be confirmed because of the substance of the Trustee's objection, the Court will reserve the question of good faith raised by the creditor, Family Federal, for subsequent hearing in the present matter if necessary.
Dated this ______ day of February, 1994.
BY THE COURT
Sidney N. White, Esq.
Charles K. Belhasen, Esq.
George K. Wells, Esq.