Good Faith and Disposable Income: Should the Good Faith Inquiry Evaluate the Proposed Amount of Repayment?

Brandon L. Johnson, Good Faith and Disposable Income: Should the Good Faith Inquiry Evaluate the Proposed Amount of Repayment?, 36 Gonz. L. Rev. 375 (2001).

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More and more debtors facing bankruptcy are choosing to file for Chapter 13 relief rather than Chapter 7 relief.[1] The enactment of the new Bankruptcy Code in 1978 loosened the requirements to be eligible for Chapter 13 and as a result, issues relating to Chapter 13 cases are being litigated at an increasing rate. One of the most litigated issues in Chapter 13 cases is whether the debtor’s plan has been proposed in good faith. Good faith litigation has generated a myriad of published decisions, many of which are utterly irreconcilable with one another. Much of the litigation has concerned how the standard of good faith should be defined and applied to individual cases.

Prior to 1984, most courts considered the amount or percentage of unsecured claims the debtor proposed to pay. The courts’ interpretation of Chapter 13’s legislative history led them to conclude repayment of debts was a primary objective of Chapter 13 debtors. As such, courts looked closely at how much debtors proposed to pay their unsecured creditors… Read more

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