## Facts

- Lerin Brown, a Social Security disability recipient, filed a Chapter 13 petition with minimal assets and only unsecured, nonpriority debts.
- Brown reported monthly income of $1,364 (disability benefits plus rental income) and monthly expenses of $1,214, leaving $150 in monthly disposable income.
- Brown listed personal property totaling about $920 and no real property or vehicle.
- Brown scheduled approximately $16,203 in unsecured, nonpriority debts owed to ten creditors.
- Brown proposed a 36-month plan requiring payments of $150 per month ($5,400 total).
- The plan paid about $2,000 in attorney’s fees and roughly $360 in administrative expenses before any distribution to unsecured creditors, delaying creditor payments for nearly 17 months.
- The Chapter 13 trustee objected, arguing the petition and plan were not filed in good faith and that a Chapter 7 case better fit Brown’s circumstances.
- The record indicated Brown could not pay a typical Chapter 7 attorney fee upfront, which made Chapter 13 attractive because attorney fees could be paid through the plan.
- The bankruptcy court found Brown filed Chapter 13 primarily to pay counsel in installments, that the plan chiefly benefited counsel, imposed administrative burdens on the trustee, and was unlikely to be completed given Brown’s tight budget.

## Issues

1. Whether the bankruptcy court clearly erred in finding Brown’s Chapter 13 petition and proposed plan were not filed in good faith under 11 U.S.C. § 1325(a)(7) and § 1325(a)(3).
2. Whether the bankruptcy court’s factual findings about Brown’s purpose and the plan’s economic effects warranted appellate deference under clear-error review.

## Decision

- The Eleventh Circuit affirmed the district court’s judgment, which had affirmed the bankruptcy court’s denial of plan confirmation.
- The court held Brown did not show clear error in the bankruptcy court’s finding that both the petition and plan lacked good faith under § 1325(a)(3) and § 1325(a)(7).
- The court accepted the bankruptcy court’s totality-of-the-circumstances analysis, including that the plan was structured primarily to finance attorney’s fees and provided little timely benefit to creditors.
- The court noted the bankruptcy court could consider the likely availability of a quicker, more certain Chapter 7 discharge and the plan’s doubtful feasibility given Brown’s limited disposable income.
- The court declined to adopt a categorical rule that fee-driven Chapter 13 filings are always in bad faith, but concluded the denial of confirmation was supportable on this record.

## Legal Principles

- Good faith under 11 U.S.C. § 1325(a)(3) (plan proposed in good faith) and § 1325(a)(7) (petition filed in good faith) is assessed under a fact-intensive totality-of-the-circumstances inquiry.
- A bankruptcy court’s good-faith determination is a factual finding reviewed for clear error, with substantial deference to the bankruptcy court’s assessment of motive and plan structure.
- A Chapter 13 filing may be found lacking good faith where the plan’s practical effect is to prioritize installment payment of debtor’s counsel, delay or minimize distributions to unsecured creditors, and impose administrative costs without a realistic prospect of completion.
- The availability of a more suitable Chapter 7 outcome (e.g., likely no-asset case and prompt discharge) may be considered as part of the totality analysis, without imposing a per se requirement that such debtors must file under Chapter 7.

## Conclusion

The Eleventh Circuit upheld denial of Chapter 13 plan confirmation because the bankruptcy court did not clearly err in finding, based on the totality of the circumstances, that the petition and plan were not filed in good faith where the plan principally functioned to pay attorney’s fees and offered limited, delayed value to unsecured creditors with questionable feasibility.


In re Brown, 742 F.3d 1309 (11th Cir. 2014)