Petition was filed in bad faith

Where the debtor inflated his expenses to hide disposable income, and the record showed a pattern of making unsubstantiated expense claims, the court concluded that he filed his three Chapter 13 plans in an effort to unreasonably delay and thwart his creditors. As a result, his latest plan was dismissed.

Background

Patrick Roch filed this case on Dec. 30, 2020. He previously filed two cases that were both dismissed for material default of plan payments. The trustee has moved to dismiss the case for lack of good faith and for unreasonable delay.

The trustee believes the case was filed to “buy time for a loan mod” and that the debtor is not proceeding toward confirmation because the plans he has filed fail to satisfy the disposable income and good faith requirements. The trustee has also objected to the debtor’s Chapter 13 plan on the same grounds. Furthermore, the trustee asserts that this is the debtor’s third Chapter 13 filing in just over two years. The trustee notes that the debtor has been in Chapter 13 for over two years without making a meaningful payment to any of his creditors.

Analysis

The court finds that the debtor’s means tests that rely on a household size of two are flawed and inherently overstate the debtor’s expenses. Additionally, because the debtor did not produce satisfactory evidence of the additional $1,500 in childcare expenses he continues to claim on his latest amended schedule or the $1,000 in childcare expenses he claims on his latest amended means test, that amount’s inclusion also renders the debtor’s means tests flawed.

The trustee has also identified, and the debtor has not refuted, that the debtor’s means tests contained various inaccuracies and unsubstantiated entries with respect to certain expense figures. For example, the debtor repeatedly failed to accurately record his vehicle expenses. The debtor also misapplied the retirement deduction in his means test by initially indicating it was a mandatory contribution and by continuously overstating the amount of his retirement contributions during the applicable look back period.

Additionally, the debtor initially claimed to incur a $400 monthly expense for his mother’s health insurance, but conveniently decided to forego that expense when the trustee objected. The court notes that this expense was not scheduled in the debtor’s prior cases. The court is troubled by the debtor’s pattern of making unsubstantiated expense claims, reducing or eliminating the expense when questioned, but then never substantiating the expense. The debtor did not meaningfully refute the inaccuracies and shortcomings that the trustee has pointed out.

The court is particularly troubled with the inaccuracies and moving numbers given that this is the third time counsel has represented the debtor before this court. Also, the trustee has identified what appears to be the debtor’s attempt to manipulate the means test to unreasonably delay and divert income from creditors.

With respect to the retirement contribution, it is not per se bad faith for a Chapter 13 debtor to make post-petition contributions to a retirement account. Here, the testimony before the court is that the debtor did not previously contribute to a retirement account because he could not afford to while driving for Uber and Lyft. However, this argument is undercut by the debtor’s willingness to fund payments on mortgage arrearages in the prior cases.

In other words, the debtor has the disposable monthly income when it comes to debts that he is motivated to pay (such as mortgage arrearages before his loan modification) but does not when it comes to paying other debts. Under the totality of the circumstances and when viewed in tandem with the debtor’s history, the court cannot find that the debtor commenced making retirement contributions in good faith when he had no prepetition history of any contributions.

Based on the foregoing, the court has no confidence in the accuracy of any of the debtors’ means tests and proposed budgets. Indeed, the only confidence the court has is that the debtor has inflated his expenses to hide disposable income. Further, under the totality of the circumstances, the court finds that the debtor prepared and filed those documents and the corresponding Chapter 13 plans in an effort to unreasonably delay and thwart his creditors.

Trustee’s motion to dismiss granted.

In re Roch, No. 20-12792, Nov. 4, 2021. EDVA Bankr. at Alexandria (Kindred). VLW No. 021-4-011. 8 pp.