In re Pearson (08-30768)
The Chapter 13 trustee contended that the debtor's Chapter 13 plan was not proposed in good faith. The plan proposed to pay in full the unsecured claims. The plan proposed to pay in full the secured claims and priority claims before any distributions were made on the unsecured claims. The plan also proposed to accelerate the payments on the secured claims by paying about $100 per month more than required under the terms of the contractual obligations. The trustee argued that the debtors could decide to, or circumstances may force them to, convert their Chapter 13 case to a Chapter 7 case after the secured claims are paid and before dividends are paid or completed on the unsecured claims. The Court determined that there were no unusual or exceptional circumstances that warranted preferring the secured creditors over the unsecured creditors. The Court held that the Chapter 13 plan was not proposed in good faith and sustained the trustee's objection to confirmation.