## Facts

- Wayne Puffer, a consumer debtor with modest income, sought bankruptcy relief with approximately $15,000 in unsecured debt.
- Attorney L. Jed Berliner advised that Chapter 7 would require $2,300 up front because unpaid attorney’s fees would be discharged, while Chapter 13 could be filed with $500 up front and the remaining fees paid through a plan.
- Berliner filed a Chapter 13 plan under which Puffer’s disposable income (about $100 per month) would be paid largely to Berliner and the Chapter 13 trustee, with little or nothing distributed to preexisting unsecured creditors.
- The Chapter 13 trustee objected, arguing the plan was an improper “fee-only” plan.
- The bankruptcy court denied confirmation, ruling that fee-only Chapter 13 plans are per se filed in bad faith, allowed conversion to Chapter 7, and later denied Berliner’s fee application (about $2,800) because he was not entitled to compensation for filing a bad-faith plan.
- The district court affirmed the fee denial.

## Issues

1. Whether a Chapter 13 “fee-only” plan that pays primarily debtor’s counsel and the trustee and virtually nothing to unsecured creditors is per se filed in bad faith under the Bankruptcy Code.
2. Whether a bankruptcy court may deny all compensation to debtor’s counsel solely because the proposed plan is fee-only, without a fact-specific good-faith analysis.

## Decision

- The First Circuit vacated the district court’s judgment and remanded.
- The court held that fee-only Chapter 13 plans are not per se submitted in bad faith.
- The court required a case-by-case, totality-of-the-circumstances good-faith inquiry for plan confirmation and for assessing counsel’s entitlement to compensation.
- The court did not decide whether Puffer’s specific plan was filed in good faith or whether Berliner must be paid, leaving those determinations to the lower courts under the correct standard.

## Legal Principles

- Chapter 13’s good-faith requirement (11 U.S.C. § 1325(a)(3)) calls for a fact-intensive totality-of-the-circumstances assessment; categorical rules that short-circuit that inquiry are improper.
- A plan’s allocation of payments largely to administrative expenses (including debtor’s counsel fees and trustee fees) may raise concerns about abuse but does not, by itself, establish bad faith.
- Courts evaluating fee-only plans may consider the debtor’s ability to pay up-front fees, any circumstances justifying the plan structure, and whether the plan is being used primarily to finance attorney compensation rather than to provide meaningful bankruptcy relief.
- Attorney fee awards in Chapter 13 must be assessed for reasonableness in context and cannot be denied solely on the basis of a per se rule against fee-only plans.

## Conclusion

The First Circuit rejected a categorical bad-faith rule for Chapter 13 fee-only plans and required lower courts to evaluate good faith and counsel compensation through a case-specific totality-of-the-circumstances analysis, then reconsider plan treatment and fees on remand under that standard.


In re Puffer, 674 F.3d 78 (1st Cir. 2012)