DEBTOR CASE NO. 93-70364





This matter is before the Court on the Renewed Motion to Dismiss of creditor Family Federal Savings Bank ("Family Federal") filed herein on March 2, 1994. The debtor filed a Response to Renewed Motion to Dismiss on March 11, 1994. Family Federal contends that the debtor's Chapter 13 bankruptcy petition was not filed in good faith and so should be dismissed.

The record in this case indicates that the debtor filed her Chapter 13 petition in this Court on August 18, 1993. Her Chapter 13 Plan was filed on August 27, 1993. She proposed therein to pay $84.00 per month over a period of 60 months to creditors holding allowed unsecured claims. Family Federal filed an Objection to Bankruptcy Plan on October 27, 1993. The Objection raised two issues: the dismissal of the debtor's Chapter 7 petition on August 13, 1993, because she had been discharged in a previous Chapter 7 in 1990; and the alleged underreporting of her income.

The Chapter 13 Trustee filed an Amended Report and Recommendation as to Confirmation on December 20, 1993, in which he recommended that the debtor's Plan not be confirmed because her income was underreported on Schedule I of her petition. By an order entered on January 13, 1994, the Court gave the debtor 15 days to amend her Chapter 13 Plan. The debtor filed an Amendment on January 27, 1994, correcting the amount of her gross monthly income.

Family Federal filed a Motion to Dismiss on January 31, 1994, stating that it had "not received amendments conforming with the instructions of the United States Bankruptcy Court." The Motion was taken under advisement at a hearing conducted on February 8, 1994. This Court entered an Order on February 15, 1994, denying confirmation of the debtor's Plan, reserving ruling on the good faith issues raised by Family Federal's Motion to Dismiss, and giving the debtor 15 days to file an Amended Plan.

The debtor filed her Amended Plan on February 25, 1994, increasing the amount to be paid monthly under the Plan to $109.00. Family Federal then filed its Renewed Motion to Dismiss as set out above. Therein Family Federal contends that the debtor "filed a false Chapter 7 Bankruptcy Petition," that she misrepresented her disposable income "in an attempt to pay less than should be required under a proper re-organization Plan," and that the debtor "is only utilizing Chapter 13 as a vehicle to delay enforcement of a Judgment until she can convert to a Chapter 7..."

Finally Family Federal contends that it "will receive a very small percent of the adjudged indebtedness under the Bankruptcy (sic) Plan. This creditor will only receive monies after payment of attorney fees to Debtor and Administrative costs, which payments will terminate before the Plan expires when Debtor converts to a Chapter 7." Family Federal asks for the dismissal of the bankruptcy action for not having been filed in good faith.

The debtor's Response states that she provided the Court with a copy of her 1993 W2 form (the Court only finds a copy of a pay stub), and so cannot be said to have misrepresented her income. She further argues that Family Federal's assertions concerning her intent to convert to a Chapter 7 at the first possible moment are speculation, and that her attempt to file a Chapter 7 in August 1993 when she was ineligible to do so was a mistake. The Chapter 13 Trustee filed his Second Amended Report and Recommendation as to Confirmation on March 11, 1994. He recommended confirmation of the Amended Plan.

Lack of good faith is sufficient cause for dismissal under Chapter 13. The burden is on the creditor to show a lack of good faith that warrants dismissal. A determination regarding lack of good faith is made by looking at the totality of circumstances. Matter of Love, 957 F.2d 1350, 1354 (7th Cir. 1992). The Love court set out

some of the factors that are relevant when determining if a Chapter 13 petition was filed in good faith: the nature of the debt, including the question of whether the debt would be nondischargeable in a Chapter 7 proceeding; the timing of the petition; how the debt arose; the debtor's motive in filing the petition; how the debtor's actions affected creditors; the debtor's treatment of creditors both before and after the petition was filed; and whether the debtor has been forthcoming with the bankruptcy court and the creditors.

At page 1357.

In the instant case, the debt to Family Federal is a judgment deficiency debt. It would be dischargeable in a Chapter 7 case, and this is why the debtor first tried to file a Chapter 7 in August 1993. In its Objection to Bankruptcy Plan, Family Federal argued that 11 U.S.C. '1325 requires that a creditor not receive less under a Chapter 13 plan than it would in a Chapter 7 liquidation. Family Federal complains mightily that it will receive only "a small fraction of the indebtedness owed."

Family Federal will in fact receive something in a Chapter 13, whereas it would get nothing in a Chapter 7. What Family Federal truly objects to is the fact that the debtor has an alternative to a Chapter 7. It states in its Objection: "In the instant case, the debtor does not qualify to file for Chapter 7, and this creditor would receive 100% but for the filing of the Chapter 13 Bankruptcy." The only way Family Federal would "receive 100%" is outside of bankruptcy and then only if sufficient assets could be found to satisfy the claim.

As concerns the reporting of the debtor's income, she corrected the amount in her Amended Plan within the time alloted to her by the Court. The Chapter 13 Trustee has reviewed the Amended Plan and has recommended confirmation. The Court does not believe that Family Federal has demonstrated lack of good faith on the part of the debtor sufficient to warrant dismissal of her Chapter 13 petition.

It is therefore the opinion of this Court that Family Federal's Renewed Motion to Dismissed should be overruled and the proposed plan should be confirmed. Orders in conformity with this opinion will be entered separately.


By the Court -






Copies to:


Charles K. Belhasen, Esq.

George K. Wells, Esq.