## Facts

- Phillip and Judy Greer filed a joint Chapter 13 bankruptcy case.
- Mr. Greer was a U.S. Marine Corps staff sergeant, and Mrs. Greer worked as a secretary/office manager; their combined net monthly income was about $3,200.
- The Greers owned a residence (valued at roughly $98,000) encumbered by two deeds of trust, and they were behind on both.
- The Greers proposed a Chapter 13 plan requiring payments of $707.43 per month for 36 months.
- The plan applied all plan proceeds to secured and priority claims and to the Chapter 13 trustee’s fees; general unsecured creditors would receive nothing.
- The Greers represented that unsecured creditors would also receive no distribution in a Chapter 7 liquidation.
- Elsie Davis, the standing Chapter 13 trustee, objected to confirmation, arguing the Greers should pay more per month and extend the plan beyond 36 months so unsecured creditors would receive some payment.

## Issues

1. May a Chapter 13 plan be confirmed over the trustee’s objection when it commits the debtors’ available income for 36 months but provides no distribution to general unsecured creditors, and unsecured creditors would receive nothing in Chapter 7?
2. Does the fact that unsecured creditors would receive nothing, by itself, provide “cause” to require a plan term longer than 36 months (up to five years) or to require higher monthly payments to fund a dividend to unsecured creditors?

## Decision

- The court overruled the trustee’s objection to confirmation.
- The court held that a Chapter 13 plan is not unconfirmable solely because it proposes a zero-percent distribution to unsecured creditors, where the plan otherwise satisfies the confirmation requirements.
- The court held that the absence of any payment to unsecured creditors, standing alone, is not “cause” to extend a 36-month plan beyond three years.
- The court confirmed the Greers’ 36-month plan as proposed (subject only to any non-substantive, technical requirements identified by the court).

## Legal Principles

- A Chapter 13 plan may satisfy the “best interests of creditors” test if unsecured creditors receive at least as much as they would in a Chapter 7 liquidation; if Chapter 7 would pay nothing, a plan paying nothing can still satisfy that requirement. 11 U.S.C. § 1325(a)(4).
- A low or zero dividend to unsecured creditors is not automatically bad faith; good faith under § 1325(a)(3) depends on the case’s overall facts, including the debtors’ financial situation and the plan’s proposed treatment of creditors.
- When the trustee (or an unsecured creditor) objects on disposable-income grounds, confirmation generally turns on whether the debtor is committing the required income for the applicable period rather than on a required minimum percentage payout to unsecured creditors. 11 U.S.C. § 1325(b).
- A three-year plan term is the standard commitment period; extending a Chapter 13 plan beyond three years (up to five years) requires a separate showing of “cause,” and the desire to generate a dividend for unsecured creditors, by itself, is not sufficient cause. 11 U.S.C. § 1322(c) (as in effect at the time).

## Conclusion

In re Greer confirmed a 36-month Chapter 13 plan that devoted all plan payments to secured and priority obligations and trustee fees, leaving nothing for unsecured creditors, because unsecured creditors would receive nothing in Chapter 7 and the plan otherwise met the Code’s confirmation standards; the court also held that a zero-percent unsecured distribution alone does not justify forcing a longer-than-three-year plan term.


In re Greer, 60 B.R. 547 (1986)