Summary of a Recent
Judicial Development in
Bankruptcy

Bad Faith Filing Results in Dismissal of Chapter 13 Case

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In In re Vantiger-Witte, No. 05-02931, 2008 WL 4493426 (Bankr. N.D. Iowa Sept. 29, 2008), the United States Bankruptcy Court for the Northern District of Iowa denied confirmation of a debtor's Chapter 13 plan and dismissed her case after concluding that she had filed her bankruptcy petition in bad faith.

Background

Farm Service Agency (FSA) objected to confirmation of a debtor's Chapter 13 plan, alleging that the debtor failed to account for collateral securing its loan. Id. at *1.

Arguments

FSA argued that the plan and the bankruptcy case were not filed in good faith because the debtor failed to account for cattle and other property which served as collateral for its loans, and sought dismissal of the case. Id.

The debtor claimed that she filed her bankruptcy case and Chapter 13 plan in good faith. Id.

Analysis and Holdings

The court may dismiss a case or convert it for cause, including filing a petition in bad faith. See Id. at *3 (citing 11 U.S.C. § 1307(c)). Additionally, § 1325(a)(3) provides that, in order to be confirmed, a Chapter 13 plan must be "proposed in good faith and not by any means forbidden by law." Id. The Eighth Circuit's good faith analysis considers whether the debtor has stated his debts and expenses accurately, whether he has made any fraudulent representation to mislead the bankruptcy court, and whether he has unfairly manipulated the Bankruptcy Code, combined with a "totality of the circumstances" approach with particular emphasis on factors such as the type of debt sought to be discharged, whether the debt is nondischargeable in Chapter 7, and the debtor's motivation and sincerity in seeking Chapter 13 relief. Id. Applying this analysis, the court found that the debtor in this case had accurately stated her assets, debts, and expenses, and there was no indication of fraudulent misrepresentations made to mislead the court. Id. at *5. There was also insufficient evidence to determine whether the debt would be nondischargeable in a Chapter 7 or Chapter 12 case. Id. There were other facts, however, which indicated a lack of good faith in filing the bankruptcy petition, and therefore the court held that the debtor's plan violated § 1325(a)(3) and dismissed her case pursuant to § 1307(c). Id. at *5-6.

The case was decided on September 29, 2008.