## Facts

- Patricia Ann Crager, an unemployed debtor, received about $1,060 per month in Social Security benefits and $16 per month in food stamps.
- Her principal asset was a residence valued at about $55,000, subject to a mortgage of about $40,662 with monthly payments of $327.10.
- She owed roughly $7,000 in unsecured credit-card debt and had limited ability to increase income.
- Crager filed a Chapter 13 case and proposed a 36-month plan that maintained mortgage payments and paid a small amount to unsecured creditors.
- The plan provided for payment of debtor’s counsel’s fees; the Chapter 13 trustee argued the plan functioned largely to pay fees and trustee expenses with a low dividend to unsecured creditors.
- The bankruptcy court confirmed the plan over the trustee’s objection and awarded debtor’s counsel $2,800 in attorney’s fees plus costs.
- On interlocutory appeal, the district court reversed, concluding the petition and plan were filed in bad faith and directing a bad-faith finding on remand.
- Crager appealed; the Fifth Circuit reversed the district court and reinstated the bankruptcy court’s confirmation and fee award.

## Issues

1. Whether the bankruptcy court clearly erred in finding Crager filed her Chapter 13 petition and plan in good faith under 11 U.S.C. § 1325(a), despite low payments to unsecured creditors and significant plan payments devoted to attorney’s fees.
2. Whether the bankruptcy court abused its discretion by awarding $2,800 in attorney’s fees to debtor’s counsel in light of the plan’s limited funding and distributions.

## Decision

- The Fifth Circuit reversed the district court and affirmed the bankruptcy court’s confirmation order and fee award.
- The court held the bankruptcy court did not clearly err in finding good faith under the totality of the circumstances.
- The court rejected treating “fee-only” or fee-heavy Chapter 13 plans as categorically filed in bad faith.
- The court held the bankruptcy court did not abuse its discretion in approving $2,800 in attorney’s fees.

## Legal Principles

- Good faith under § 1325(a) is a fact-intensive, case-by-case inquiry evaluated under the totality of the circumstances.
- Appellate review of a bankruptcy court’s good-faith finding is for clear error; a reviewing court may not replace plausible factual findings with its own view of the record.
- A plan’s low dividend to unsecured creditors, or the fact that attorney’s fees consume a large share of plan payments, is not dispositive of bad faith.
- Bankruptcy courts have broad discretion to approve reasonable compensation; proportionality to plan distributions may inform, but does not control, the reasonableness analysis in low-funded plans.

## Conclusion

The Fifth Circuit held that a low-income debtor’s Chapter 13 plan was not filed in bad faith merely because it produced a low return to unsecured creditors and paid significant attorney’s fees, and it affirmed the bankruptcy court’s discretionary approval of a $2,800 fee award supported by the record.


Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012)