Emory Bankruptcy Developments Journal

Per Se Bad Faith? An Empirical Analysis of Good Faith in Chapter 13 Fee-Only Plans
Alexander F. Clamon Editor-in-Chief, Emory Bankruptcy Developments Journal; J.D. Candidate, Emory University School of Law (2014); B.S., United States Military Academy at West Point (2007). Above all, I am thankful to God for the blessing of each day. I would like to thank Professor Rafael Pardo for his invaluable help with this Comment. Without his facilitation of the statistical analysis for the empirical study, and his thoughtful and thorough guidance throughout the writing process, this Comment would not have been possible. I would like to thank the staff members and editors of the Emory Bankruptcy Developments Journal—particularly Patty Boxold, Tommy Ryan, Juan Mendoza, and Ben Roth—for their extensive editing and advisement. I also give thanks to my family for their unwavering support: to my wife Neda for her love and friendship every day; to my parents, aunt, and grandmother; and to my brother David for serving in our military and fighting to keep America safe. Lastly, and perhaps most importantly: Beat Navy.

Abstract

Section 1325(a)(3) of the Bankruptcy Code requires chapter 13 plans to be “proposed in good faith and not by any means prevented by law.” Section 1325(a)(7) requires that “the action of the debtor in filing the petition was in good faith.” Courts evaluate both good faith provisions through a subjective inquiry into the totality of the circumstances in each case, typically using similar factors in the analysis. Many jurisdictions provide a list of factors for this assessment. Courts caution that any list is non-exhaustive and should not limit the subjective nature of the good faith inquiry. Some chapter 13 plans propose to pay little more than the trustee and attorney fees, and leave nothing or a nominal repayment to general unsecured creditors. These so-called “fee-only” plans challenge one of the underlying goals of chapter 13: a fair distribution of the debtor’s future income to repay creditors. While courts find most fee-only plans fail to satisfy the good faith requirements, three circuit courts have ruled that fee-only plans are not per se bad faith.

This Comment provides insight into how courts are actually dealing with fee-only cases through an empirical study of good faith litigation over plans proposing zero or a nominal repayment to general unsecured creditors. This study compiles data and conducts a broad analysis of the factors that courts have listed and discussed in the totality of the circumstances test for good faith. This Comment hypothesizes that two particular variables are significant predictors of a court’s ruling on good faith: (1) the repayment to general unsecured creditors and (2) the number of factors discussed in the case. Analysis of the data does not support the first hypothesis but does support the second. This Comment concludes that, in the absence of a strong correlation between the number of factors and good faith rulings, courts should not overhaul the traditional good faith analysis when dealing with fee-only plans. This Comment suggests, however, one of the circuit court rulings may provide a modified approach that balances the benefits of a subjective, discretionary standard against the wide-ranging concern over plans that propose little or no repayment to general unsecured creditors.

Introduction

“I am not going to allow these folks to come in here and pay lawyers,” proclaimed the bankruptcy judge. 1Brown v. Gore (In re Brown), 742 F.3d 1309, 1313 (11th Cir. 2014) (internal quotation marks omitted) (quoting from the transcript of the bankruptcy court’s confirmation hearing in the case). The judge had been curious why, other than an inability to pay the attorney fee up front, the debtor wished to file for chapter 13 relief instead of chapter 7. 2Id. at 1312. The attorney replied, “Well, the reason he wants to is because he wants some relief and he can't get it with a [c]hapter 7 because he has no money.” 3Id. But the judge replied, “And he has no money to, you have to finish the sentence, pay his lawyer.” 4Id.

The judge suggested that the debtor need only save his proposed chapter 13 payment for a few months, and then pay the attorney for a chapter 7 filing. 5Id. at 1312. But for ethical reasons, the judge would not allow debtors to file for chapter 13 relief merely to finance their attorney fees. 6Id. at 1313. If debtors cannot afford the fee up front, the judge explained, “I don't see how in the world you expect that they are going to be able to pay a five or three-year plan and not default and then, once they do, they are back in the soup again and they have made no headway.” 7Id.

This exchange highlights the problems in chapter 13 bankruptcy with so-called “fee-only” plans, which propose to pay the debtor’s attorney fees through plan payments while leaving nothing or a nominal amount to general unsecured creditors. 8See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 80–81 (1st Cir. 2012). In this case, as with many fee-only plans, the judge denied confirmation of the plan because it violated chapter 13’s good faith provisions under 11 U.S.C. §§ 1325(a)(3) and 1325(a)(7). 9Brown, 742 F.3d at 1313.

When it enacted the modern Bankruptcy Code (Code), 10Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as amended at title 11 of the United States Code). Congress included § 1325(a)(3), an ambiguous confirmation requirement that “the plan has been proposed in good faith and not by any means forbidden by law.” 1111 U.S.C. § 1325(a)(3) (2012). Unsurprisingly, the good faith standard spurred litigation. 12Bradley M. Elbein, The Hole in the Code: Good Faith and Morality in Chapter 13, 34 San Diego L. Rev. 439, 448 & n.47 (1997) (citing Conrad K. Cyr, The Chapter 13 “Good Faith” Tempest: An Analysis and Proposal For Change, 55 Am. Bankr. L.J. 271, 273 (1981)) (identifying at least 53 cases through 1981 and approximately 700 cases from 1981 to 1996 that litigated the chapter 13 good faith standard). In 2005, Congress added § 1325(a)(7), 13Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, sec. 102(g)(3), § 1325(a), 119 Stat. 23, 33 (codified as amended at 11 U.S.C. § 1325(a)(7)). another confirmation requirement that “the action of the debtor in filing the petition was in good faith.” 1411 U.S.C. § 1325(a)(7) (emphasis added). In assessing good faith under both provisions, courts typically apply a totality of the circumstances test, which requires a fact-intensive inquiry in each case. 15See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012). Various lists of factors have emerged as a result, though courts acknowledge that these lists are not exhaustive. 16See Elbein, supra note 12, at 454 (providing a list of consensus factors among courts, but also noting courts interpret the standard loosely and do not articulate exhaustive lists).

Although the Code only requires general unsecured creditors in chapter 13 to receive at least as much as they would in a hypothetical chapter 7 liquidation, 1711 U.S.C. § 1325(a)(4). fee-only plans nevertheless challenge one of chapter 13’s primary goals: to distribute a debtor’s future income to repay creditors in lieu of liquidating the debtor’s assets. 18See In re Heard, 6 B.R. 876, 881 (Bankr. W.D. Ky. 1980). As one court explained, “[c]hapter 13 is titled ‘Adjustment of Debts of an Individual with Regular Income.’ [With fee-only plans, debtors] are not adjusting anything, much less debt; they are canceling and eliminating the claims of creditors while simply paying their attorneys.” 19In re Paley, 390 B.R. 53, 59 (Bankr. N.D.N.Y. 2008).

“Fee-only” and other court-coined terms for these plans do not have a concrete definition. 20See infra Part II.A. Regardless of the terminology, fee-only plans uniformly allow debtors the benefits of retaining their assets and financing their legal fees through a chapter 13 bankruptcy plan while offering little or nothing in return to general unsecured creditors. 21See infra Part II.A. Three federal circuit courts have rejected the view that fee-only plans are bad faith per se. 22Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014); Puffer, 674 F.3d at 85, 87–88; Sikes v. Crager (In re Crager), 691 F.3d 671, 675–76 (5th Cir. 2012). Though in one of the opinions, Berliner v. Pappalardo (In re Puffer), the First Circuit seems to narrow their treatment of fee-only plans within the totality of the circumstances test. 23Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012). See infra Part II.B.1. No other circuits have definitively addressed the issue, and lower courts have taken various approaches. 24Puffer, 674 F.3d at 79. See also In re Barnes, No. 12-06613-8, 2013 WL 153848, at *9–12 (Bankr. E.D.N.C. Jan. 15, 2013) (also noting that while fee-only plans might be more susceptible to a finding of bad faith, courts continue to determine good faith on a case-by-case basis in lieu of a per se rule against fee-only plans).

Regardless of the approach, and despite the appellate courts’ unwillingness to adopt a per se rule so far, courts invariably view fee-only plans with a great deal of suspicion; as one court explained, “a heavy burden of proof” is required to rule that fee-only plans comply with chapter 13’s good faith requirements. 25Barnes, 2013 WL 153848, at *10 (citing Puffer, 674 F.3d at 79; In re Arlen, 461 B.R. 550 (Bankr. W.D. Mo. 2011)).

Although the Code doesn’t necessarily require any repayment to unsecured creditors in chapter 13, 26See supra note 17 and accompanying text; infra note 43 and accompanying text. courts seem to acknowledge that something is inherently wrong with a chapter 13 plan that only exists to finance attorney (and court) fees. 27See infra Parts I.B.2 and II. Where chapter 13 exists to allow debtors to repay debts through future income when they are able to do so, 28See infra note 36 and accompanying text. fee-only plans appear to be “little more than disguised [c]hapter 7 proceedings.” 29Arlen, 461 B.R. at 555 (also noting that a fee-only plan “blurs the distinctions between [chapters 7 and 13] and the various differences in their scope . . .” (citing In re Paley, 390 B.R. 53, 59–60 (Bankr. N.D.N.Y. 2008)). Perhaps this is the perfect place to examine the line between good faith and bad. When a chapter 13 plan offers no more repayment to general unsecured creditors than a chapter 7 liquidation, should courts adopt a per se rule against fee-only plans, or at least modify the totality of the circumstances test for good faith? Are any particular factors within the totality of the circumstances test more significant than others?

This Comment addresses these questions by conducting an empirical analysis of chapter 13 fee-only plans, specifically the factors courts list and discuss in the totality of the circumstances test for good faith. This analysis provides insight on the actual application of those factors within the specific context of fee-only plans, and determines whether courts are indeed trending toward common considerations in ruling on good faith. To the author’s knowledge, the factors have not been studied empirically, and certainly not with a focus on fee-only plans. Empirical research can provide valuable insight in consumer bankruptcy. 30See generally Jay Lawrence Westbrook, Empirical Research in Consumer Bankruptcy, 80 Tex. L. Rev. 2123 (2002). This Comment only provides a rough sketch of how courts are actually applying the good faith standard within the specific context of fee-only plans. While the totality of the circumstances test is subjective, the factors courts list offer a hook for which an empirical study can examine the test.

In light of three recent circuit court decisions, this study offers insight on whether courts are focusing their good faith analysis in fee-only cases with any statistical significance. Conducting this analysis will help inform courts whether the traditional good faith test should be modified in the context of fee-only plans.

Part I provides relevant background discussion of chapter 13 and the evolution of its good faith standard. Part II dissects the concept of “fee-only,” defines its scope for purposes of this study, and discusses the three circuit court decisions that have definitively ruled on the validity of fee-only plans.

Part III first discusses the empirical study’s method, assumptions and limitations, and the list of good faith factors. It then presents the results of the analysis. The study found no statistically significant relationship between the percentage of repayment to general unsecured creditors and a good faith finding. The findings, however, did reveal a few statistically significant relationships: (1) within the totality of the circumstances test, as the difference between the number of factors a court discusses and the number of factors a court lists increases, the likelihood that a court finds the plan to be in good faith decreases; (2) one factor’s listing and one other factor’s discussion are statistically significant predictors of a good faith finding; and (3) four pairs of factors are discussed in the same case at statistically significant rates.

Part IV discusses the overall implications of the study’s results and offers options moving forward, including a discussion of a modified approach to fee-only plans, which would require special circumstances to justify the plan under 11 U.S.C. §§ 1325(a)(3) and 1325(a)(7). This approach is derived from one possible interpretation of Puffer. 31Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012). See infra Part II.B.1.

I. Background

Part I.A. provides an overview and history of chapter 13, including the contrast between its intended purpose and how debtors actually use it. Part I.B. then discusses the pros and cons of chapter 13 compared to chapter 7, with particular attention to attorney fees and how fee-only plans challenge the underlying purpose of chapter 13. Part I.C. then traces the development of chapter 13’s good faith provisions, including courts’ listing of factors to consider in the totality of the circumstances test for good faith, on which this empirical study is based.

A. Chapter 13 History and Purpose: The Rosy Vision

Entitled “Adjustment of Debts of an Individual with Regular Income,” chapter 13 offers consumer debtors an alternative to chapter 7 liquidation. 3211 U.S.C. §§ 1301–1330 (2012). While the goals of both chapters are to provide a “fresh start” for the debtor and to secure a fair repayment to creditors, 33See Rederford v. U.S. Airways, Inc., 589 F.3d 30, 36 (1st Cir. 2009) (noting that one purpose of the Code is to provide “evenhanded treatment” to creditors); In re Hageney, 422 B.R. 254, 259 (Bankr. E.D. Wash. 2009) (“[The] commencement of a bankruptcy case under any chapter of the [] Code must be consistent with bankruptcy policy, and with [the] goal of providing a fresh start to honest but unfortunate debtors while maximizing repayment to creditors.”); H.R. Rep. No. 95-595, at 118 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6078 (stating a goal of the Bankruptcy Reform Act of 1978 is to provide debtors with a fresh start). each chapter’s method for reaching those goals is different. In chapter 7 the trustee liquidates the debtor’s non-exempt assets that are property of the bankruptcy estate and uses the proceeds to pay creditors’ claims. 3411 U.S.C. § 522(d) (listing the exemptions to property of the bankruptcy estate); id. § 541 (setting for the creation and contents of the bankruptcy estate); id. § 704(a)(1) (“The trustee shall—collect and reduce to money the property of the estate . . . .”); id. §§ 725–726 (setting forth the order in which the trustee shall distribute the liquidated property of the estate). Chapter 13, however, allows a debtor to repay creditors with future income over a given period of time under court supervision. 35H.R. Rep. No. 95-595, at 118. With the adoption of the “means test” in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), 36Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 102(h), 119 Stat. 23, 33–34 (codified as amended at 11 U.S.C. § 1325(b)). Chapter 13 incorporates the chapter 7 means test for above-median-income debtors. 11 U.S.C. § 1325(b)(3). Congress made clear that chapter 13 should be a system where “debtors who can pay creditors do pay them.” 37Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 721 (2011) (describing the intent behind both chapter 7 and chapter 13 using the means test, which seeks to force can-pay debtors out of chapter 7 and is part of the repayment calculus for above-median debtors in chapter 13). Fee-only plans call into question whether a supposed can-pay debtor is doing anything but “canceling and eliminating the claims of creditors while simply paying their attorneys.” 38In re Paley, 390 B.R. 53, 59 (Bankr. N.D.N.Y. 2008).

Chapter 13 under the modern Code 39Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as amended at 11 U.S.C. §§ 1301–1330 (2012)). replaced “Chapter XIII—Wage Earners’ Plans” from the Bankruptcy Act of 1938. 40Bankruptcy Act of 1938 (Chandler Act), ch. XIII, 52 Stat. 840, 930 (repealed 1978). Chapter 13 eliminated chapter XIII’s requirement that all creditors consent to the plan. 41H.R. Rep. No. 95-595, at 123. The consent requirement posed a significant barrier for debtors proposing a “composition plan,” one that provides less than full repayment, as creditors typically only consented to an “extension plan,” one that repaid debts in full. See, e.g., Richard E. Flint, Consumer Bankruptcy Policy: Ability to Pay and Catholic Social Teaching, 43 St. Mary’s L.J. 333, 346–72 (2011) (providing a history of composition and extension plans in bankruptcy law). By removing the consent requirement, the drafters intended to provide the debtor with more realistic repayment terms that took the debtor’s circumstances and ability to repay into consideration. 42H.R. Rep. No. 95-595, at 123–24. While the “best interests of creditors” test in § 1325(a)(4)—which ensures unsecured creditors do not receive less than they would in a hypothetical chapter 7 liquidation 4311 U.S.C. § 1325(a)(4). This provision is widely known as the “best interests of creditors test.” See, e.g., Susan A. Schneider, Bankruptcy Reform and Family Famers: Correcting the Disposable Income Problem, 38 Tex. Tech L. Rev. 309, 316 (2006). —set the repayment floor, the legislative history indicates Congress expected chapter 13 debtors would repay more. The House Report noted, “Creditors will not be disadvantaged [under the new chapter 13], because the plan must still pay them more than they would get under a liquidation.” 44H.R. Rep. No. 95-595, at 124 (emphasis added). It is unclear what the House meant by this statement given that § 1325(a)(4) was in unaltered existence at the time of the report. Perhaps stating “more than” was in recognition of the test requiring chapter 13 creditors to receive a higher total dollar amount to account for the present value of a chapter 7 repayment. See id. at 408 (stating that the phrase, “‘[v]alue, as of the effective date of the plan,’ as used in . . . proposed 11 U.S.C. . . . 1325(a)(4) . . . indicates that the promised payment under the plan must be discounted to present value as of the effective date of the plan”). The Senate Report also suggests that the drafters did not intend for repayment under the new chapter 13 plans to equal merely the liquidation value. 45S. Rep. No. 95-989, at 13 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5799 (“The [chapter 7 discharge limitation] will also . . . prevent chapter 13 plans from turning into mere offers of composition plans under which payments would equal only the non-exempt assets of the debtor.”). Nevertheless, courts wrestled with this very issue in early cases litigating good faith in chapter 13. 46Infra Part I.C.1.

Congress indeed had a rosy vision of the new chapter 13 and its perceived benefits to debtors—namely, higher postbankruptcy credit worthiness than a chapter 7 debtor, and a feeling of pride upon successful completion of the plan, particularly when it pays creditors in full. 47S. Rep. No. 95-989, at 13 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5799; H.R. Rep. No. 95-595, at 118 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6079. The reality, however, has been less rosy. Chapter 13 plans often appear on the opposite side of the repayment spectrum, as debtors attempt to leave general unsecured creditors empty-handed while creatively deducting expenses such as flat-screen televisions with surround-sound systems 48In re Aprea, 368 B.R. 558, 567–68 (Bankr. E.D. Tex. 2007). and vacation timeshares. 49In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012). Very few plans propose anything close to full repayment to creditors. 50See Scott F. Norberg & Andrew J. Velkey, Debtor Discharge and Creditor Repayment in Chapter 13, 39 Creighton L. Rev. 473, 477 (2006) (finding that, in a study of seven districts, “nearly 45% of the cases in which a proposed repayment was reported proposed to pay no more than 25%”). Credit advantages for chapter 13 over chapter 7 are almost non-existent; in fact, one study even suggests that chapter 7 debtors have the advantage. 51See Katherine Porter, Bankrupt Profits: The Credit Industry’s Business Model for Postbankruptcy Lending, 93 Iowa L. Rev. 1369, 1408–10 (2007). Porter’s study found that chapter 7 debtors are significantly more likely than chapter 13 debtors to receive credit offers, particularly secured credit, after filing bankruptcy. Id. Porter notes, “[o]verall, lenders exhibit a customer preference for [c]hapter 7 filers over [c]hapter 13 filers . . . . Despite [the lending industry’s] rhetoric championing [c]hapter 13 as the ‘honorable’ path for families in serious financial trouble . . . .” Id. at 1410–11. Also, both chapter 7 and chapter 13 filings may stay on a debtor’s credit report for the same amount of time. See 15 U.S.C. § 1681(a)(1). And nearly two-thirds of all chapter 13 debtors fail to complete the plan and receive a discharge. 52John Eggum, Katherine Porter & Tara Twomey, Saving Homes in Bankruptcy: Housing Affordability and Loan Modification, 2008 Utah L. Rev. 1123, 1144 & n.80 (citing three studies from 1989, 2001, and 2006, all of which found that approximately one-third or less of chapter 13 filings result in plan completion and discharge).

B. Chapter 13 v. Chapter 7: The Tensions That Fee-Only Plans Highlight

1. The Pros and Cons of Chapter 13

Chapter 13 some benefits over chapter 7, and three will be discussed here. First, a chapter 13 debtor may retain all of his pre-bankruptcy assets—they are not used to satisfy creditors’ claims. 53H.R. Rep. No. 95-595, at 118. Second, the discharge provisions in chapter 13 are more generous than chapter 7, but the so-called “superdischarge” has eroded over time with Code amendments, especially BAPCPA. 54See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 314(b), 199 Stat. 23, 88 (codified as amended at 11 U.S.C. § 1328) (amending § 1328(a) to expand the list of non-dischargeable debts in chapter 13); In re Platt, No. 12-6170-13, 2012 WL 5842899, at *2 n.4 (Bankr. S.D. Ind. Nov. 19, 2012) (summarizing BAPCPA’s effect on the “super discharge”); see also H.R. Rep. No. 109-31, at 76–77 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 144 (outlining BAPCPA’s amendments to non-dischargeable debts in § 1328(a)); Larry A. Pittman II & Jeffrey A. Deines, A Hitchhiker’s Guide to Consumer Bankruptcy Reform, J. Kan. B.A., Nov./Dec. 2006, at 20, 22 (describing how BAPCPA virtually eliminated the chapter 13 “super discharge”). Third, chapter 13 debtors may pay attorney fees over the duration of the plan, as opposed to paying the fees upon filing in chapter 7. 55See infra note 202. Whether up-front payment for a chapter 7 filing is impossible or merely less desirable, deferring fee payments can be a powerful motivator for a debtor to choose chapter 13 over chapter 7. 56See Jean Braucher, A Guide to Interpretation of the 2005 Bankruptcy Law, 16 Am. Bankr. Inst. L. Rev. 349, 380 & n.174 (2008) (noting that “for chapter 13 debtors at or below median income and probably for nearly all chapter 13 debtors, what drives them into chapter 13 is not failing the presumed abuse means test, but . . . such considerations as . . . paying attorneys fees over time . . .”) (emphasis added); cf. Lois R. Lupica, The Consumer Bankruptcy Fee Study: Final Report, 20 Am. Bankr. Inst. L. Rev. 17, 47, 49 n.120 (2012) (noting that in chapter 7 no-asset cases—which are a vast majority of chapter 7 filings according to Table 2 at page 47—attorneys rarely agree to accept a portion of their fee after filing the petition). But see generally David E. Frisvold & Sharron B. Lane, Attorney’s Fees in Chapter 13: Do They Influence Chapter Choice?, 2003 No. 9 Norton Bankr. L. Adviser 1 (finding no statistically significant relationship between the amount of attorney’s fees and the percentage of chapter 13 filings, as between chapter 7 and chapter 13, and concluding the fees may not be the source of influence in chapter selection as some have suggested). Although debtors always have the option to proceed pro se, studies show that debtors with legal representation tend to have a much higher success rate in bankruptcy proceedings than pro se filers. 57See Lupica, supra note 56, at 81 (“Post-BAPCPA, 100% of [pro se] cases were filed under chapter 13 with a petition preparer’s assistance. Not one of the post-BAPCPA cases filed with the assistance of a petition preparer ended in the debtor receiving a discharge.”); Rafael I. Pardo, An Empirical Examination of Access to Chapter 7 Relief by Pro Se Debtors, 26 Emory Bankr. Dev. J. 5, 22–23 (2009) (in a sample of over 85,000 chapter 7 cases, finding that the dismissal rate for pro se debtors was 6.4%, compared to only 0.9% of represented debtors).

Despite the benefits, chapter 13 also has its costs, two of which will be discussed here. First, whereas chapter 7 debtors benefit from a swift discharge, which typically occurs within a few months of filing a petition, 58Amy Y. Landry & Robert J. Landry, III, Medical Bankruptcy Reform: A Fallacy of Composition, 19 Am. Bankr. Inst. L. Rev. 151, 166 nn.91 & 93 (2011); see also Fed. R. Bankr. P. 4004(c), 4007(c) (2012) (setting time limits for objections to discharge in chapter 7 cases, and providing upon expiration of these limits, “the court shall forthwith grant the discharge”). chapter 13 debtors remain under court supervision for the entire duration of the plan, typically three to five years. 5911 U.S.C. § 1325(b)(4). The required plan duration, or “applicable commitment period,” is either three years or not less than five years, depending on the debtor’s income. Id. § 1325(b)(4)(A). But the period may be shorter “if the plan provides for payment in full of all allowed unsecured claims over a shorter period.” Id. § 1325(b)(4)(B). See also, e.g., Arlen, 461 B.R. at 555 (“Instead of getting their discharges within four to six months as they would in a no asset [c]hapter 7 proceeding, these debtors would not get a discharge, even under the design of the original plans, for approximately one and one-half years. And, of course, that discharge is less comprehensive than in [c]hapter 7.”). It is only after the trustee receives the last payment due under the plan that the debtor receives a discharge. 60Id. § 1328(a). With unforeseen future events, such as fluctuations in future income, chapter 13 debtors may default on plan payments—and indeed nearly two-thirds of them do 61Supra note 52 and accompanying text. —and thus not receive a discharge, a risk that chapter 7 debtors never face. 62Positive fluctuations in income also have a detrimental effect. Chapter 13 debtors are under the supervision of the court for the duration of the plan, and at any time the trustee or an unsecured creditor may move to modify the plan payments to capture any increase in the debtor’s income. Id. § 1329(a).

Second, attorney fees in chapter 13 are usually significantly higher than in chapter 7, 63Jean Braucher, Lawyers and Consumer Bankruptcy: One Code, Many Cultures, 67 Am. Bankr. L.J. 501, 581 (1993) (“Some local officials set standard attorneys’ fees for chapter 13 much higher than the local median fee for chapter 7.”); see also, e.g., In re Arlen 461 B.R. 550, 554 (Bankr. W.D. Mo. 2011) (“It is difficult to understand how a [c]hapter 13 plan under these circumstances benefits anyone other than counsel. The fees charged by counsel in this case are approximately twice what would be charged for [c]hapter 7 proceedings for these [d]ebtors.”). especially after the passage of BAPCPA. 64Lupica, supra note 56, at 56–57, 69. As reflected below, the fee study compared chapter 7 and chapter 13 mean attorney fees before and after BAPCPA. Note that a chapter 7 “no-asset case” occurs when, based on the schedules, “the debtor has no non-exempt assets for liquidation . . . .” In re Venegas, 257 B.R. 41, 44 (Bankr. D. Idaho 2001). The findings were as follows:Table 1 Lupica, supra note 56, at 57, 69”). In some circumstances, using chapter 13 to defer fee payments, despite having the option to liquidate in chapter 7 and receive a much quicker discharge, might be the more responsible choice for debtors. 65See, e.g., Crager, 691 F.3d at 674 (involving a debtor who had not yet defaulted on debt payments and chose chapter 13 over chapter 7 because “it would have taken her over a year to save enough money to pay the [upfront] costs for a [c]hapter 7 bankruptcy and to do so she would have needed to stop making her minimum monthly credit card payments”). Nevertheless, attorneys have an incentive to generate business by funneling debtors into chapter 13 who would otherwise not be in the bankruptcy system due to reluctance or inability to file for chapter 7. 66See Braucher, supra note 63, at 580–81 (studying attorney culture and noting from one city that “high-volume lawyers are much more willing to use chapter 13, primarily for financial reasons, while the low-volume lawyers think that chapter 13 is a bad deal for clients”). Even if they have the ability to use either chapter, debtors often lack sufficient information to make an informed decision between chapters 7 and 13 and are vulnerable to self-serving advice from their attorney. 67Braucher, supra note 63, at 581. In a close decision, an attorney motivated by the promise of higher attorney fees may counsel more debtors into chapter 13, 68David S. Kennedy, Vanessa A. Lantin & Brent Heilig, Attorney Compensation in Chapter 13 Cases and Related Matters, 13 J. Bankr. L. & Prac., no. 6, 2004 (citing Jean Braucher, Increasing Uniformity in Consumer Bankruptcy: Means Testing as a Distraction and the National Bankruptcy Review Commission's Proposal as a Starting Point, 6 Am. Bankr. Inst. L. Rev. 1, 21 (1998); Teresa A. Sullivan, Elizabeth Warren & Jay Lawrence Westbrook, The Persistence of Local Legal Culture: Twenty Years of Evidence from the Federal Bankruptcy Courts, 17 Harv. J. L. & Pub. Pol'y 801, 844 (1994)) (“Do larger fees for debtors' attorneys in chapter 13 cases influence the choice of that chapter over chapter 7? It has been suggested that it does. Are larger fees for debtors' attorneys in chapter 13 cases a carrot or incentive for some attorneys to inappropriately encourage clients to file cases under chapter 13 instead of chapter 7 cases? It has been suggested that they are.”). despite delaying the debtor’s discharge for years, raising the likelihood of default, and increasing the burden on the court system. 69See Scott F. Norberg, Consumer Bankruptcy’s New Clothes: An Empirical Study of Discharge and Debt Collection in Chapter 13, 7 Am. Bankr. Inst. L. Rev. 415, 437 & n.71 (1999); supra notes 52, 58–62 and accompanying text.

2. The Tension: Does “Can Pay” = “Can Pay Fees”?

In fairness to attorneys, a comparison of fees between chapters ought to account for the time value of money by comparing chapter 7 fees paid in today’s dollars with chapter 13 fees paid over time, discounted to present value. Arguably, the higher fee rate in chapter 13 compensates the attorney for this—that is, the debtor is essentially financing, not deferring, payment to the attorney. And given the high rate of default on chapter 13 plans, arguably these fees ought to earn a significant risk rate. 70See supra note 52 and accompanying text. For debtors who simply cannot afford to pay for chapter 7 up front, perhaps this arrangement gives debtors access to the bankruptcy system while fairly compensating the attorney for the risk of nonpayment.

But financing attorney fees is not the purpose of chapter 13. 71See Brown v. Gore (In re Brown), 742 F.3d 1312 (11th Cir. 2014). Should debtors be allowed to access chapter 13 when they are merely financing attorney fees and deferring other mandatory costs, and doing nothing else that could not be done in chapter 7? 72See supra note 19 and accompanying text. Are these debtors truly “can pay” debtors? 73See supra note 37 and accompanying text. Shouldn’t such a debtor, as one U.S. Circuit Court of Appeals has suggested, proceed pro se instead 74Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012) (“There is no showing, however, that the debtor had a pressing need for the [attorney’s] services, . . . that it was infeasible to proceed pro se.”). —either in chapter 7 or chapter 13? For example, in chapter 13, proceeding pro se, the debtor could provide some repayment to unsecured creditors with money that otherwise would have gone to the attorney. Or suppose the debtor took one bankruptcy judge’s, advice mentioned at the beginning of this comment: save the money that would otherwise be used for chapter 13 plan payments; wait a few months; and pay an attorney for a chapter 7 filing. 75Brown, 742 at 1312; supra notes 1–7 and accompanying text.

There are two worthy counter-arguments: recall that 1) pro se debtors are less successful in bankruptcy than represented debtors, 76Supra note 57 and accompanying text. and 2) under § 1325(a)(4) the Code does not actually require a chapter 13 debtor to repay unsecured creditors any more than they would have received in chapter 7. 77Supra note 43 and accompanying text.

This is the tension that a fee-only plan highlights. Debtors are using chapter 13 to do what the Code seems to implicitly authorize under § 1325(a)(4), read together the provisions granting attorney fees priority status: finance the full amount of attorney fees and pay little or nothing to general unsecured creditors. 78Attorney fees are a priority administrative expense claim that must be paid in order to receive a discharge. See infra note 202 and accompanying text. Thus, under these provisions and § 1325(a)(4), a debtor must pay his attorney but does not necessarily have to repay unsecured creditors anything. Put another way, debtors are using chapter 13 to finance the full amount of attorney fees and doing exactly what they could have done in chapter 7. Yet courts seem to agree that fee-only plans do not pass the smell test, at least not often. 79See, e.g., In re Barnes, No. 12-06613-8, 2013 WL 153848, at *1–2 (Bankr. E.D.N.C. Jan. 15, 2013) (citing In re Buck, 432 B.R. 13, 22 n.14 (Bankr. D. Mass. 2010)) (noting that a vast majority of courts find fee-only plans to be in bad faith); In re Hopper, 474 B.R. 872, 886 n.27 (Bankr. E.D. Ark. 2012). And the basic smell test for chapter 13 is whether the plan is proposed and filed in good faith. 8011 U.S.C. § 1325(a)(3), (7) (2012). The next section traces the development of the good faith test.

C. Chapter 13 Good Faith Analysis: The Development of the Totality of the Circumstances Test

The concept of good faith is integral to both consumer and business bankruptcies and is a mandatory requirement for plan confirmation. 81Id. §§ 1129(b)(3); 1325(a)(3), (7).; In re Gonzales, 172 B.E. 320, 325 (E.D. Wash. 1994) (citing In re Chinichian, 784 F.2d 1440, 1442–44 (9th Cir.1986)). Congress never defined the term, presumably in deference to judicial discretion. 82See Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1389–90 (9th Cir. 1982) (noting that “courts are impeded not only by [“good faith”] being an ambiguous term that resists precise definition in any case, but also by the lack of authoritative guidance on its meaning in § ),” and indicating that as a court of equity, bankruptcy judges have discretion to determine what good faith requires in each case (citing Am. United Mut. Life Ins. Co. v. City of Avon Park, Fla., 311 U.S. 138, 145 (1940))); In re Mathis, No. 12-05618-8, 2013 WL 153833, at *9 (Bankr. E.D.N.C. Jan. 15, 2013) (noting Congress’s silence on defining “good faith” in the chapter 13 statute); In re Buck, 432 B.R. 13, 19–20 (Bankr. D. Mass. 2010) (citing Keach v. Boyajian (In re Keach), 243 B.R. 851, 856 (B.A.P. 1st Cir. 2000) (noting the lack of a definition, courts’ varying approaches to interpretation, and that “Congress presumably used the phrase ‘good faith’ in its ordinary sense”)), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014). Courts often turn to Collier’s definition of good faith, which states, “[a] comprehensive definition of good faith is not practical. Broadly speaking, the basic inquiry should be whether or not under the circumstances of the case there has been an abuse of the provisions, purpose, or spirit of [the Chapter] in the proposal of the plan.” 83See, e.g., United States v. Estus (In re Estus), 695 F.2d 311, 316 (8th Cir. 1982) (citing Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (quoting 9 Collier on Bankruptcy ¶ 9.10 at 319 (14th ed. 1978))). As discussed in the remainder of this Part, courts began applying this broad concept on a case-by-case basis and developed non-exhaustive lists of factors to consider.

1. Pre-1984 Case Law

Prior to the 1984 amendments to the Code, 84Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333. cases challenging chapter 13 plans for lack of good faith largely turned on the amount of disposable income the debtor proposed to pay in the plan, as well as the repayment to general unsecured creditors. 85See Brian G. Smooke, Comment, Section 1325(b) and Zero Payment Plans in Chapter 13, 4 Bankr. Dev. J. 449, 450–54 (1987) (discussing key case law in pre-1984 good faith litigation). Some courts held chapter 13 plans required a “substantial” or “meaningful” repayment to unsecured creditors, above what § 1325(a)(4) would require. 86See Estus, 695 F.2d at 314; In re Hurd, 4 B.R. 551, 556 (Bankr. W.D. Mich. 1980); In re Iacovoni, 2 B.R. 256, 268 (Bankr. D. Utah 1980). One court relied on legislative history to conclude that § 1325(a)(4) merely sets a floor, from which the good faith standard can be used as a tool to “[e]nsure reasonable offers of repayment.” 87Iacovoni, 2 B.R. at 266–67 (noting the legislative intent of § 1325(a)(4) requiring “not less than,” rather than “more than,” was to prevent overpayment where the debtor could liquidate and repay 100 percent of the unsecured creditors’ claims, as well as “to impose a firm minimum upon which a flexible ‘good faith’ requirement for additional payments could be based”). Other courts dissented from this view and held that § 1325(a)(4) was the sole standard for how much unsecured creditors should be repaid. 88Barnes v. Whelan (In re Barnes), 689 F.2d 193, 198–200 (D.C. Cir. 1982); Estus, 695 F.2d at 314–15; see also Smooke, supra note 85, at 452–54 (discussing In re Sadler, 3 B.R. 536, 536–37 (Bankr. E.D. Ark. 1980)). These courts reasoned good faith only requires “honesty of intention” 89Barnes, 689 F.2d at 200. and that plans would fail the good faith standard under § 1325(a)(3) “only in those unusual cases in which there has been an abuse of the provisions, purposes, or spirit of [c]hapter 13.” 90In re Barnes, 13 B.R. 997, 999 (D.D.C. 1981) (quoting In re Cloutier, 3 B.R. 584, 584 (Bankr. D. Colo. 1980)).

Eventually, the circuit courts generally agreed that while the amount of repayment to unsecured creditors is one of many considerations weighing on the good faith of a chapter 13 plan, 91Estus, 695 F.2d at 315–16 (providing a synopsis of good faith standard development in the federal circuits); Smooke, supra note 85, at 452–54 (citing as the foundation for this theory Deans v. O’Donnell (In re Deans), 692 F.2d 968 (4th Cir. 1982), which involved a plan where the debtor proposed to payment of a vast majority of her disposable income but nevertheless resulted in no payments to general unsecured creditors). good faith should be analyzed on a case-by-case basis, considering the totality of the debtor’s circumstances. 92Estus, 695 F.2d at 315–16 (citing Deans, 692 F.2d 968; Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426 (7th Cir. 1982); Goeb v. Heid (In re Goeb), 675 F.2d 1386 (9th Cir. 1982); Barnes, 689 F.2d 193).

Concurrently, what specific circumstances a court should consider in each case also came into focus. In Ga. R.R. Bank & Trust Co. v. Kull (In re Kull), the Southern District of Georgia made an early attempt to develop a list of such factors. 93Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 659 (S.D. Ga. 1981) (listing: “(a) [T]he amount of income of the debtor and the debtor’s spouse from all sources; (b) the regular and recurring living expenses for the debtor and his dependents; (c) the amount of the attorney’s fees to be awarded in the case and paid by the debtor; (d) the probable or expected duration of the [c]hapter 13 plan; (e) the motivations of the debtor and his sincerity in seeking relief under the provisions of [c]hapter 13; (f) the ability of the debtor to earn and the likelihood of future increase or diminution of earnings; (g) special situations such as inordinate medical expense, or unusual care required for any member of the debtor’s family; (h) the frequency with which the debtor has sought relief under any section or title of the Bankruptcy Reform Act or its predecessor’s statutes; (i) the circumstances under which the debtor has contracted his debts and his demonstrated bona fides, or lack of same, in dealing with his creditors; (j) whether the amount or percentage of payment offered by the particular debtor would operate or be a mockery of honest, hard-working, well-intended debtors who pay a higher percentage of their claims consistent with the purpose and spirit of [c]hapter 13; (k) the burden which the administration of the plan would place on the trustee; and (l) the salutary rehabilitative provisions of the Bankruptcy Reform Act of 1978 which are to be construed liberally in favor of the debtor.”). The Fourth Circuit was the first circuit court to offer a list of factors in Deans v. O’Donnell (In re Deans), 94Deans, 692 F.2d at 972 (“[N]ot only the percentage of proposed repayment, but also the debtor’s financial situation, the period of time payment will be made, the debtor’s employment history and prospects, the nature and amount of unsecured claims, the debtor’s past bankruptcy filings, the debtor’s honesty in representing facts, and any unusual or exceptional problems facing the particular debtor.”). followed by the Eighth Circuit a few months later in United States v. Estus (In re Estus). 95Estus, 695 F.2d at 317. In Estus the court developed an eleven-factor list, based in part on the Deans and lower court decisions, including Kull:

(1) [T]he amount of the proposed payments and the amount of the debtor’s surplus; (2) the debtor’s employment history, ability to earn and likelihood of future increases in income; (3) the probable or expected duration of the plan; (4) the accuracy of the plan’s statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court; (5) the extent of preferential treatment between classes of creditors; (6) the extent to which secured claims are modified; (7) the type of debt sought to be discharged and whether any such debt is nondischargeable in [c]hapter 7; (8) the existence of special circumstances such as inordinate medical expenses; (9) the frequency with which the debtor has sought relief under the Bankruptcy Reform Act; (10) the motivation and sincerity of the debtor in seeking [c]hapter 13 relief; and (11) the burden which the plan’s administration would place upon the trustee. 96Id. (citing Deans, 692 F.2d at 972; Kull, 12 B.R. at 659; In re Heard, 6 B.R. 876, 882 (Bankr. W.D. Ky. 1980); In re Iacovoni, 2 B.R. 256, 267 (Bankr. D. Utah 1980)).

In adopting a variation of Kull and Estus, the Eleventh Circuit noted that all circuit courts agreed the amount of repayment to unsecured creditors was also a factor, even though it was not on the enumerated list. 97Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983).

Today, all but two of the federal circuit courts have expressly adopted the “totality of the circumstances” test as their standard. 98 See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012); Brandon L. Johnson, Comment, Good Faith and Disposable Income: Should the Good Faith Inquiry Evaluate the Proposed Amount of Repayment?, 36 Gonz. L. Rev. 375, 379 & n.26 (2001) (noting that the “totality of the circumstances” approach is used in the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits). While not specifically addressing the issue, the Supreme Court implicitly approved the test by citing lower court cases that applied it. 99Hamilton v. Lanning, 560 U.S. 505, 522–23 (2010) (citing In re Myers, 491 F.3d 120, 125 (3d Cir. 2007); Neufeld v. Freeman, 794 F.2d 149, 153 (4th Cir. 1986); In re Glenn, 288 B.R. 516, 520 (Bankr. E.D. Tenn. 2002)). The two federal circuits that have not expressly adopted the test—the Second Circuit and the District of Columbia Circuit—have used a subjective, case-by-case determination and cited other circuit precedent approvingly. 100See Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir. 1983) (citations omitted) (holding that the good faith standard requires the debtor’s honesty, and focuses on his “conduct in the submission, approval, and implementation of a [c]hapter 13 bankruptcy plan”); Barnes v. Whelan (In re Barnes), 689 F.2d 193, 198–200 (D.C. Cir. 1982) (finding good faith requires an “honesty of intention”); Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1390 (9th Cir. 1982) (holding that “whether the debtor has misrepresented facts in his plan, unfairly manipulated the [Code], or otherwise proposed his [c]hapter 13 plan in an inequitable manner”). All of the lower courts in both circuits have also adopted the test, either expressly 101See Tennessee Commerce Bank v. Hutchins, 409 B.R. 680, 683 (D. Vt. 2009); Plagakis v. Gelberg (In re Plagakis), No. 03-CV-0728, 2004 WL 203090, at *4 (E.D.N.Y. Jan. 27, 2004); Connelly v. Bath Nat’l Bank, No. 93-CV-6449, 1995 WL 822677, at *3 (W.D.N.Y. Apr. 13, 1995); In re Paley, 390 B.R. 53, 57–58 (Bankr. N.D.N.Y. 2008); Finizie v. City of Bridgeport (In re Finizie), 184 B.R. 415, 419 (Bankr. D. Conn. 1995). or implicitly. 102In re Yavarkovsky, 23 B.R. 756, 759 (S.D.N.Y. 1982) (finding a similar, if not largely the same, standard for good faith that “contemplates a broad judicial inquiry into the conduct and state of mind of the debtor” and considers “all aspects of fair dealing . . . the lawfulness of the debtor’s conduct . . . good faith in dealing with creditors and their claims”); In re Allen, 300 B.R. 105, 123 (Bankr. D.D.C. 2003).

Courts uniformly agree that—like many fact-intensive, subjective standards in the law—any list of factors is not exhaustive of all the relevant considerations. 103See Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014); Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012) (“The totality of the circumstances test cannot be reduced to a mechanical checklist, and we do not endeavor here to canvass the field and catalogue the factors that must be weighed when [when ruling on good faith].”); In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992); United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982) (“We make no attempt to enumerate all relevant considerations since the factors and the weight they are to be given will vary with the facts and circumstances of the case.”); In re Dicey, 312 B.R. 456, 459 (Bankr. D.N.H. 2004) (“No one factor is determinative, but it is the totality of all the various factors and the facts of the particular case that is considered.”). See generally Elbein, supra note 12. But these lists have become guideposts and drive a substantial portion of the good-faith inquiry in chapter 13. 104See generally Elbein, supra note 12, at 453–54; Ellen M. Horn, Good Faith and Chapter 13 Discharge: How Much Discretion Is Too Much?, 11 Cardozo L. Rev. 657, 667–69 (1990).

2. 1984, Disposable Income, and Ability to Pay

With the passage of the Bankruptcy Amendments and Federal Judgeship Act (“BAFJA”) of 1984, Congress added § 1325(b) to the Code. 105Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, § 317, 98 Stat. 333, 356 (codified as amended at 11 U.S.C. § 1325 (2012)). In its original form, § 1325(b)(1) provided that upon objection by the trustee or an unsecured claim holder, the court may only approve the plan if the debtor either repays 100% of the objecting unsecured creditor’s claim or commits to the plan his entire “projected disposable income to be received” during the plan’s duration. 106Id. Section 1325(b)(2) sets forth the statutory measure of what constitutes “disposable income” under the “ability to pay” test in § 1325(b)(1)(B). 107Id.

While the ability to pay test effectively ended good faith litigation over the amount of disposable income a debtor proposed to pay into the plan, the new test raised scholarly debate over whether it swallowed up the entire good faith inquiry, except where the debtor was clearly fraudulent or misrepresented the facts. 108Compare In re McGehan 495 B.R. 37, 43 (Bankr. D. Colo. 2013) (noting that “enactment of the ability to pay test in § 1325(b)(1) narrowed the good faith analysis, subsuming most of the [factors set forth by early Tenth Circuit precedent]”), with Richard S. Bell, The Effect of the Disposable Income Test of Section 1325(b)(1)(B) upon the Good Faith Inquiry of Section 1325(a)(3), 5 Bankr. Dev. J. 267, 267–71 (1988) (arguing that the disposable income test did not significantly alter the good faith totality of the circumstances standard in response to Raymond T. Nimmer, Consumer Bankruptcy Abuse, 50 Law & Contemp. Probs. 89 (1987), which argued the opposite). Section 1325(b) appeared to eliminate the disposable income payment ratio in good faith analysis, and courts wrestled with whether the amount of repayment to unsecured creditors was now an issue of § 1325(b), § 1325(a)(3), or both. 109See Smooke, supra note 85, at 465–74 (reviewing case law reaching each of these three conclusions). For example, the Seventh Circuit held that a chapter 13 plan “otherwise confirmable will be confirmed even if it provides for minimal (or no) payments if those payments meet the [§ 1325(b)] ‘ability to pay’ test.” 110In re Smith, 848 F.2d 813, 820 (7th Cir. 1988) (citations omitted).

3. BAPCPA

With the passage of BAPCPA, Congress amended § 1325(b)(1)(B) to make a plan confirmable if the debtor commits all projected disposable income received during the plan period “to make payments to unsecured creditors under the plan.” 11111 U.S.C. § 1325(b)(1)(B) (2012) (emphasis added). This amendment supported the view that the percentage of repayment to general unsecured creditors was not an issue of good faith. Congress also added § 1325(a)(7), a mandatory requirement for plan confirmation that “the action of the debtor in filing the petition was in good faith.” 112Id. § 1325(a)(7) (emphasis added). Whereas § 1325(a)(3) requires good faith in proposing the plan, this new provision sought to eliminate confusion amongst courts as to whether § 1325(a)(3) applies only to proposing the plan or also extends to filing the petition. 113Compare In re Ford, 78 B.R. 729, 733 & n.1 (Bankr. E.D. Pa. 1987) (quoting In re Flick, 14 B.R. 912, 916 (Bankr. E.D. Pa. 1981)) (noting “there is no requirement that the petition be filed in good faith . . . only a requirement that the plan be proposed in good faith”) (internal quotation marks omitted), with Smith, 848 F.2d at 820 (citations omitted) (holding that the court must assess, using the same analysis, the good faith standard in filing the plan and petition). Now, litigants often challenge good faith under both provisions, and courts’ analysis of the provisions is indistinguishable. 114See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012); see also In re Yarborough, No. 12-30549, 2012 WL 4434053, at *4 n.5 (Bankr. E.D. Tenn. Sept. 24, 2012) (citing In re Hall, 346 B.R. 420, 426 (Bankr. W.D. Ky. 2006)) (noting that “good faith standards under § 1325(a)(3) and (a)(7) are almost identical to those involving good faith and dismissal under § 1307(c)”).

II. “Fee-Only”

A. Defining the Term for Analysis

For practicality and simplicity, this Comment defines and uses the term “fee-only” to mean any chapter 13 plan that proposes to pay the debtor’s attorney fees and other mandatory administrative costs, while repaying 2% or less of the total amount of prepetition claims to general unsecured creditors. 115The repayment amount refers to the pro rata rate. Suppose a debtor’s chapter 13 plan proposes she pay her two general unsecured creditors (“creditor 1” and “creditor 2”) $300 over the life of the plan. If creditor 1 has an allowed claim of $5,000, and creditor 2 has an allowed claim of $10,000, then the total general unsecured debt is $15,000. The $300 payment represents 2% of the total general unsecured debt. Thus, each creditor would receive a pro rata payment of 2% of its allowed claim. The result is creditor 1 receives $100, and creditor 2 receives $200. Drawing the line at 2% or less mirrors the range repayment occurring in a vast majority of the cases that refer to the plan as “fee-only,” or some related term. This Comment will also discuss other cases in the study’s data set, which include general unsecured repayment as high as 10%, as “low percentage.”

“Fee-only” is an informal term; 116See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 80 (1st Cir. 2012) (noting it is “colloquially known as a ‘fee-only’ plan”). other phrasings for the concept include “zero payment,” 117See Smooke, supra note 85, at 450–54. “attorney fee-only,” 118See In re Buck, 32 B.R. 13, 18, & n.7 (Bankr. D. Mass. 2010), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014). “de minimis,” 119See Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 658 (S.D. Ga. 1981). and “attorney-fee-centric.” 120Brown v. Gore (In re Brown), 742 F.3d 1309, 1314 (11th Cir. 2014). While no precise definition exists, these terms generally refer to chapter 13 plans that propose either zero or nominal repayments to general unsecured creditors, though the plans may nevertheless pay secured and priority unsecured claims. 121See, e.g., Puffer, 674 F.3d at 80–81 (describing fee-only plans as those that leave “the general [unsecured] creditors holding an empty (or nearly empty) bag”) (emphasis added). Compare id. at 80 (involving a plan payment of “$300 (or about 2% of the roughly $15,000 owed by the debtor)”), and Buck, 432 B.R. at 18 n.7 (noting the “Attorney Fee-Only” plan actually “provided a [de minimis] dividend to unsecured creditors”), with Deans v. O’Donnell (In re Deans), 692 F.2d 968, 969 (4th Cir. 1982) (involving plan where general unsecured creditors received nothing). Trustees have even challenged the reasonableness of attorney fee awards under the good faith standard specifically when the plan proposes to pay almost the entire amount of repayments to the debtor attorney’s fees, thereby rendering the fee award unreasonable. 122See Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012) (involving a trustee challenge that the bankruptcy court erroneously awarded debtor’s attorney a fee amounting to “almost the entire amount paid to the Trustee”). One court even used the term “fee-only” to refer to two chapter 13 plans proposing general unsecured creditor repayments of 16% and 18%. In re Jackson, No. 11-42528-13, 2012 WL 909782, at *1–2, 4–7 (Bankr. N.D. Ala. Mar. 16, 2012), aff’d sub nom. Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014). Fee-only analysis may have been used because the court concluded the debtors’ primary motivation for using chapter 13 instead of chapter 7 was to finance their attorneys’ fees over time. Also, at least one of the plans would not begin funding unsecured creditors until almost halfway through the duration of the plan. Id. at *1–2. Some fee-only plans do exactly that: pay only the mandatory administrative expense claims, including attorney and trustee fees. 123See Ingram v. Burchard, 482 B.R. 313, 316–17 (N.D. Cal. 2012); In re Molina, 420 B.R. 825, 826 (Bankr. D.N.M. 2009). These plans do not pay secured or priority debts through the plan, and also propose to discharge 100% of the general unsecured debt. 124See, e.g., Ingram, 482 B.R. at 316; In re Molina, 420 B.R. at 826.

Two interesting subsets of cases have arisen that are worth noting: 1) plans with “early termination language,” which almost always leave unsecured creditors with no repayment 125In re Barnes, No. 12-06613-8, 2013 WL 153848, at *1–2 (Bankr. E.D.N.C. Jan. 15, 2013). ; and 2) “attorney-fee-centric” plans, which front-load attorney fees in the monthly plan payments and do not begin repayment to unsecured creditors until the final months of the plan. 126Brown, 742 F.3d at 1311, 1314.

1. Early Termination Language

Early termination language allows the debtor, with the trustee’s consent, to cease payments and receive a discharge as soon as the plan satisfies all mandatory requirements—including attorney fees as a priority administrative expense—even though this occurs before the end of the applicable commitment period. 127Barnes, 2013 WL 153848, at *1–2. The early termination language in that case was as follows:This [c]hapter 13 [p]lan will be deemed complete and shall cease and a discharge shall be entered, upon payment to the Trustee of a sum sufficient to pay in full: (A) [a]llowed administrative priority claims, including specifically the Trustee’s commissions and attorneys’ fees and expenses ordered by the Court to be paid to the Debtor’s Attorney, (B) allowed secured claims (including but not limited to arrearage claims), excepting those which are scheduled to be paid directly by the Debtor “outside” the plan, (C) [a]llowed unsecured priority claims, (D) [c]osign protect consumer debt claims (only where the Debtor proposes such treatment), (E) [postpetition] claims allowed under 11 U.S.C. § 1305, (F) [t]he dividend, if any, required to be paid to non-priority general unsecured creditors (not including priority unsecured creditors) pursuant to 11 U.S.C. § 1325(b)(1)(B), and (G) [a]ny extra amount necessary to satisfy the “liquidation test” as set forth in 11 U.S.C. § 1325(a)(4).Id. Because chapter 13 requires debtors to pay all projected disposable income to general unsecured creditors for the applicable commitment period, early termination benefits debtors with zero or negative projected disposable income. 128See 11 U.S.C. § 1325(b)(1)(B) (2012). Early termination language prevents general unsecured creditors from receiving the full benefit of applicable commitment period for repayment.

Recently, the Bankruptcy Court for the Eastern District of North Carolina disposed of three cases, all involving similar facts, where each plan contained early termination language. 129Barnes, 2013 WL 153848; In re Mathis, No. 12-05618-8, 2013 WL 153833 (Bankr. E.D.N.C. Jan. 15, 2013); In re Tedder, No. 12-06232-8, 2013 WL 145416 (Bankr. E.D.N.C. Jan. 14, 2013). Each of the chapter 13 debtors listed zero or negative projected disposable income. 130Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *1. The applicable commitment period was 36 months for two of the plans and 60 months for the third. 131Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *1. The early termination language however allowed payments to cease after 23, 32, and 36 months, respectively, and repay nothing to general unsecured creditors. 132Barnes, 2013 WL 153848, at *2; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *2. Without the early termination language, and assuming the debtor completed payments through the applicable commitment period, general unsecured creditors would have received repayments of 5.2%, 2.1%, and 6.5%, respectively. 133Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *13. Using nearly identical analysis in all three cases, the court suggested the plans would not satisfy the good faith standard as proposed. 134Barnes, 2013 WL 153848, at *12; Mathis, 2013 WL 153833, at *12; Tedder, 2013 WL 145416, at *12–13. The court held the early termination language in each plan was void and ordered the trustees to file a confirmation motion on the plans without early termination. 135Barnes, 2013 WL 153848, at *12–13; Mathis, 2013 WL 153833, at *12–13; Tedder, 2013 WL 145416, at *13. The court found the resulting minimal repayment to unsecured creditors were sufficient to satisfy the good faith standard because the “attorney[s] will not be the only recipient of plan dividends.” 136Barnes, 2013 WL 153848, at *12; Mathis, 2013 WL 153833, at *12; Tedder, 2013 WL 145416, at *12.

2. Attorney-Fee-Centric Plans

Attorney-fee-centric plans structure the plan payments such that the attorney gets paid first; the facts of Brown v. Gore (In re Brown), 137See generally Brown v. Gore (In re Brown), 742 F.3d 1309 (11th Cir. 2014). discussed in more detail later in this Comment, 138See infra Part II.B.3. are illustrative. In Brown the plan proposed to make monthly payments of $150 (the debtor’s monthly projected disposable income) for the full three-year applicable commitment period. 139Brown, 742 F.3d at 1311. But the attorney and administrative fees would be paid in full first, which would take seventeen months, and the plan would not begin repaying unsecured creditors until the eighteenth month. 140Id. These plans, however, may propose a higher repayment to unsecured creditors than what this Comment has defined as fee-only or low percentage; in fact, the plan in Brown proposed to repay 17% of general unsecured claims. 141Id. at 1311. But because the plans front-load payments to the attorney and trustee, the chances that general unsecured creditors will be repaid becomes more remote, even if the plan proposes some meaningful amount of repayment. 142See supra note 52 and accompanying text.

B. Bad Faith Per Se?

During the first decade following the adoption of the Code, some courts ruled fee-only plans were a per se violation of good faith under § 1325(a)(3). An extreme example is In re Lattimore, where the court held the debtors’ “zero payment plan” was per se bad faith, despite the debtors proposing a monthly payment of $214, which exceeded their monthly disposable income by $26. 143See In re Lattimore, 69 B.R. 622, 623–26 (Bankr. E.D. Tenn. 1987) (also finding that the excessive payment failed the § 1325(a)(6) requirement that the debtor will be able to complete all plan payments). A competing view emerged in cases like In re Greer, maintaining that first, fee-only plans are not per se bad faith, and second, courts should not abandon the totality of the circumstances test when evaluating them. 144See In re Greer, 60 B.R. 547, 554 (Bankr. C.D. Cal. 1986). Courts remain divided to this day when dealing with fee-only plans. 145Compare In re Okosisi, 451 B.R. 90, 102–03 (Bankr. D. Nev. 2011) (concluding under a totality standard that no payments to unsecured creditors is insufficient for finding bad faith, especially in this case, where “[a]ll of the [d]ebtor’s disposable income, and then some, is devoted to the plan”), with In re Jackson, No. 11-42528-13, 2012 WL 909782, at *4 (Bankr. N.D. Ala. Mar. 16, 2012) (noting most courts find fee-only plans to be per se bad faith), and In re Arlen, 461 B.R. 550, 554 (Bankr. W.D. Mo. 2011) (holding that fee-only plans are per se bad faith as “inconsistent with the purpose and spirit of [c]hapter 13” and failing “to understand how a [fee-only plan] . . . benefits anyone other than counsel”). Three recent federal circuit court decisions have held there is no per se rule against fee-only plans. 146Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 79 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012). The remainder of this Part discusses those opinions.

1. Berliner v. Pappalardo (In re Puffer) and Special Circumstances

In March 2012, the First Circuit decided In re Puffer, which involved a debtor with nearly $15,000 in general unsecured debt. 147Puffer, 674 F.3d at 80. The debtor’s attorney presented his fee schedule as follows: $2,300 from the previous chapter 7 filing, which must be paid up front, and approximately $4100 for chapter 13 fees, which could be paid over the course of the plan. 148Id. As in Crager, the debtor lacked sufficient funds to pay the chapter 7 fees and thus filed for chapter 13. 149Id. The debtor’s plan proposed $3,600 in payments over three years, distributed as follows: $2,900 for debtor’s attorney fees, $400 for trustee fees, and only $300 to general unsecured claims—approximately 2% of repayment. 150Id. The bankruptcy court held the debtor’s filing was a fee-only plan and therefore was per se bad faith under § 1325(a)(3) and (7). 151Id. at 81.

The First Circuit reversed, holding fee-only plans are not per se bad faith. 152Id. at 82. The court explained, “[n]otwithstanding [a fee-only plan’s] shortcomings, endorsing a blanket rule that fee-only [c]hapter 13 plans are per se submitted in bad faith would be to throw out the baby with the bathwater.” 153Id. at 83. While conceding a case-by-case inquiry governs the good faith analysis in all chapter 13 cases, 154Id. the court warned, “[t]his opinion should by no means be read as a paean to fee-only [c]hapter 13 plans. The dangers of such plans are manifest, and a debtor who submits such a plan carries a heavy burden of demonstrating special circumstances that justify its submission.” 155Id. (citing Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 1990)). Because the bankruptcy court had not applied the totality of the circumstances test, the court remanded the case to determine whether the plan was in good faith. 156Id. While it did not offer a definitive list of special circumstances, the court offered guidance on the circumstances that might justify a fee-only plan:

There is no showing, however, that the debtor had a pressing need for the appellant’s services, that he could not secure adequate representation that he could afford without resorting to a fee-only plan, or that it was infeasible to proceed pro se. Furthermore, the debtor himself asserted that he could have retained the appellant for representation in [c]hapter 7—a course usually more in line with the interests of the debtor, the creditors, and the bankruptcy court—if he had waited three months longer; and the record contains no compelling reason why a three-month wait would have been intolerable. 157Id.

a. The Remand

On remand, the bankruptcy court found the debtor’s chapter 13 plan still failed the good faith standard. 158In re Puffer, 478 B.R. 101, 101, 107 (Bankr. D. Mass. 2012). Satisfied that the First Circuit had fully adopted the totality of the circumstances test for assessing good faith, the court focused its attention on whether special circumstances existed. 159Id. at 107. The court noted that there “can be no exhaustive definition of the term ‘special circumstances,’” but emphasized the First Circuit’s notion that such circumstances justifying a fee-only plan are “far from the norm.” 160Id. Instead of using the First Circuit’s examples, the court described the debtor’s financial and living situations, his vehicle repossession, the constant harassment he received from his creditors, and the fact he had waited 10 months to file for chapter 13 protection after the initial meeting with his attorney. 161Id. at 107–08. Based on these facts, the court concluded no special circumstances existed. 162Id.

b. Interpreting the Holding

Special circumstances, however, is already included in most court’s list of totality of the circumstances factors. 163See supra notes 94–102 and accompanying text. This raises ambiguity in Puffer as to whether 1) a showing of special circumstances is a mandatory requirement for fee-only plans, or 2) special circumstances is merely the most important factor in the totality of the circumstances test. The remand opinion from the bankruptcy court seemed to think the former was correct. If that is the case, this special circumstances requirement is similar to the abuse presumption in the chapter 7 means test, which if raised may be rebutted “by demonstrating special circumstances.” 16411 U.S.C. § 707(b)(2)(B) (2012) (emphasis added). Section 707(b)(1) provides for a chapter 7 case dismissal or conversion to chapter 11 or 13 upon a finding that “the granting of relief would be an abuse of the provisions of this chapter.” Id. § 707(b)(1). Section 707(b)(2) provides that abuse is presumed if a debtor fails the means test. Id. § 707(b)(2). Analogously, a fee-only plan raises a presumption that the plan is in bad faith, but that presumption may be rebutted by a showing of special circumstances. This comparison—or a detailed procedure for showing special circumstances similar to § 707(b)(2)(B)—was not suggested by the First Circuit or the bankruptcy court on remand but the analysis appears to be similar. 165See id. § 707(b)(2)(B) (setting forth detailed requirements for showing special circumstances to rebut the abuse presumption).

2. Sikes v. Crager (In re Crager)

The Fifth Circuit decided In re Crager in August 2012. 166Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012). The debtor had over $40,000 in mortgage debt and over $7,800 in general unsecured consumer debt from credit cards. 167Id. at 674. Despite her unemployment, reliance on food stamps, and that her only income was from Social Security benefits, the debtor was able to remain current on her mortgage and credit card payments. 168Id. The debtor filed for bankruptcy after learning she would not complete her credit card payments for nearly two decades at her current rate of payment. 169Id. The debtor filed for chapter 13 instead of chapter 7 in part due to the attorney fee burden. 170Id. To save enough money to pay for the chapter 7 attorney fees up front, she would have been forced to forgo her credit card payments and wait over a year. 171Id. The trustee objected to plan confirmation under § 1325(a)(3) and (7). 172Id.

The bankruptcy court overruled the objection, but the district court reversed and found the plan to be in bad faith because nearly all of the plan payments would go to the debtor’s attorney fees. 173Id. The Fifth Circuit reversed the district court, holding as a matter of law that a fee-only plan “leaving other unsecured creditors unpaid, is [not] a per se violation of the ‘good faith’ requirement.” 174Id. at 675–76. The court found the debtor’s fee-only plan was not an attempt to abuse chapter 13, “but rather a responsible decision given [the debtor’s] particular circumstances.” 175Id. at 675.

3. Brown v. Gore (In re Brown)

The Eleventh Circuit weighed in the fee-only issue in February 2014 and also declined to adopt a per se rule. 176Brown v. Gore (In re Brown), 742 F.3d 1309 (11th Cir. 2014). As discussed earlier, the debtor in Brown proposed an attorney-fee-centric plan where repayment to the unsecured creditors would not begin until the eighteenth month of the thirty-six-month plan. 177Supra notes 139–39 and accompanying text. The debtor’s plan proposed to pay $150 per month, a total of $5,400, as follows: $2,000 in attorney fees, $281 to the court as a filing fee, $70 to the attorney to cover the debtor’s credit report and mandatory credit counseling, $243 in trustee commission, and the remainder to creditors, all of whom were general unsecured. Full completion of the plan would result in a 17% repayment to general unsecured creditors, taking the plan far outside the bounds of fee-only. 178Brown, 742 F.3d at 1311. The debtor filed the plan prior to the creditors’ deadline for filing claims, and ultimately, only three creditors filed claims, representing less than 10% of the total debt owed. “The bankruptcy court speculated that few ‘creditors bothered to file claims perhaps because the likelihood of any meaningful payments was not feasible’ under Brown's meagre budget, and any ‘distribution from the trustee will be of little consequence.’” Id. Nevertheless, the court expressed doubt the debtor could successfully do so 179Id. and treated the case as a fee-only plan that would not repay any creditors and would only benefit the debtor’s attorney. 180Id. at 1318. The court stated “there was a reasonable likelihood that Brown would not complete his [c]hapter 13 plan and would never pay those creditors anything.” 181Id.

The court thoroughly recited the bankruptcy judge’s strong language against attorney-fee-centric plans and upheld the application of the totality of the circumstances test (here, using the Kitchens list of factors) under a clearly erroneous standard of review. 182Id. at 1313–19. Noting that the bankruptcy court did not adopt a per se rule against attorney-fee-centric or fee-only plans, the court stated, “Our precedent demands a multi-factor analysis of the particular facts of a case to determine whether good faith existed, . . . which is what the bankruptcy court did here.” 183Id. at 1318–19.

The court did not address the Puffer special circumstances approach, but did note that no “unique circumstances” existed that would justify why the debtor was better off filing for chapter 13 relief rather than chapter 7. 184Id. at 1318. This analysis, however, appeared to be in the context of applying the Kitchens factors, though the court did not expressly state it was applying the eighth factor, “special circumstances such as inordinate medical expense.” 185See id. at 1317–18.

In summary, three circuit opinions all agree that fee-only plans should not be automatically barred for bad faith, though Puffer potentially applies a modified approach to the traditional totality of the circumstances test. With this precedent as a backdrop, Part III proceeds with the empirical analysis to determine whether courts’ application the totality of the circumstances test to fee-only plans reveals any statistically significant trends.

III. Analysis

This empirical study has three goals. First, it seeks to understand whether chapter 13 fee-only plans are statistically significant to a court’s finding of good faith compared to low percentage plans. Again, this study chooses to define a fee-only plan as any plan proposing a 2% or less repayment to general unsecured creditors while paying debtor attorney fees. Second, it seeks to determine if any factors in the totality of the circumstances test are statistically significant to a finding of good faith for fee-only plans. Third, it analyzes how the discussion or listing 186See infra Part III.C. of any factor, or combination of factors, affects a finding of good faith.

Part III contains four subparts. Part III.A describes the method of analysis, including the types of data gathered and a description of the sample. Part III.B discusses the assumptions and limitations of the study, as well as any corresponding effects on the sample. Part III.C lists and describes the totality of the circumstances factors that the study coded and the specific judicial language that triggered coding for each factor. 187When this study refers to coding for factors or other data points, “coding” means to account for a variable in a quantifiable way, such as assigning the court’s ruling on the good faith issue (one of the variables) a set of values. For example, the ruling on good faith is a simple binary variable: good or bad. Finally, Part III.D presents the results of the study and offers brief insights to precede a fuller discussion of the implications of the results in Part IV.

A. Method

For the data sample, this study selected cases decided after the enactment of the modern Code in 1978. This wide date range recognizes that while the totality of the circumstances test may have evolved over time, courts have always encountered chapter 13 plans that pay attorney’s fees while leaving a nominal amount, or nothing, for general unsecured creditors. 188See supra Part I.B. From this broad sample, the study screened cases for inclusion in the data set from two sources. First, the study consulted an American Law Reports article that analyzed rulings on the § 1325(a)(3) good faith standard as the repayment to general unsecured creditors changed. 189Diane M. Allen, Annotation, Effect, on “Good-Faith” Requirement of § 1325(a)(3) of Bankruptcy Code of 1978 (11 USCS § 1325(a)(3)) for Confirmation of Chapter 13 Plan, of Debtor’s Offer of Less Than Full Repayment to Unsecured Creditors, 73 A.L.R. Fed. 10, 13 (1985). Next, the study formulated a search query in WestlawNext for all federal cases with the following terms and connectors: “1325(a)” and “good faith.” 190Placing a phrase in parentheses ensures that the search will only retrieve cases with the exact phrase, “good faith,” as opposed to any case that merely contains “good” and “faith” somewhere in the text. The purpose of this initial query was to capture any case in which § 1325(a)(3), § 1325(a)(7), or both were at issue.

This search query was then narrowed in three iterations, independent of one another. The first iteration narrowed the search to cases containing the phrases “fee only,” “fee centric,” or “zero payment.” 191This was done in WestlawNext’s “search within results” feature and inputted as: “fee only” or “fee centric” or “zero payment.” These singular terms also retrieve all plural and possessive forms, as well as hyphenations (e.g., “fee-only”). This narrowed query retrieved a total of 147 cases. The narrowing terms were sufficient to capture all the previously discussed terminologies for fee only plans except “de minimis,” 192See supra text accompanying notes 116–19. which was narrowed separately for convenience. The second iteration narrowed the search to cases containing the phrase “de minimis.” This query retrieved all cases with the “Amount of Repayment; De Minimis Repayment” headnote, a total of 365 cases. 193In the Key Numbering System for Westlaw Headnotes, key number 51k3710 is entitled “Amount of Repayment; De Minimis Repayment.” Finally, the third iteration included the following terms and connectors: (attorney! or counsel! or lawyer!) /6 (pay! or paid! or receiv!). 194The exclamation point is a root expander and will retrieve any case that contains the word in front of the exclamation point or its variant, as long as the variant contains at least the root word. For example, using “attorney!” will retrieve “attorneys” and “attorney’s” in addition to “attorney.” The use of “receiv!” instead of “receive!” ensures retrieval of “receiving” as well. This terms and connectors string retrieves any case where at least one of the words or its variant in the first parenthetical appears in the text within six words of any word or its variant within the second parenthetical. This iteration retrieved a total of 390 cases.

The third iteration—intended to capture additional cases that discuss payment to attorneys—was motivated by the Crager opinion. 195Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012). The first two iterations did not capture Crager because the opinion does not refer to a fee-only plan or analogous terminology, but merely states, “There is no rule in this circuit that a [c]hapter 13 plan that results in the debtor’s counsel receiving almost the entire amount paid to the Trustee, leaving other unsecured creditors unpaid, is a per se violation of the ‘good faith’ requirement.” 196Id. at 675–76. The decision to retrieve cases where the first string of terms falls within six words of the second string was based on Crager, where a term from the first string (counsel) appears within six words of a second string word (paid). 197Id. at 675. While a second string word (receiving) did immediately follow a first string word (counsel), 198Id. the expansion to six words between the strings ensured broader retrieval. III.B discusses the practical limitations a case like Crager presents.

Unsurprisingly, two or more of the search queries often retrieved the same cases. From this broad retrieval, the study then screened cases for fee-only and low percentage criteria—that is, chapter 13 plans proposing payment between 0% and 10% to allowed general unsecured claims. 199As defined by this Comment, fee-only plans are those with a 0% to 2% repayment, and low percentage plans are those with a greater than 2% but less than or equal to 10% repayment. See supra Part II.A.

Ultimately, the study proceeded with data set 61 cases. At a minimum, cases used in the study include 1) a final ruling from the court on good faith and 2) the amount of repayment to general unsecured creditors. 200For the general unsecured creditor repayment, this means that either the case listed the percentage or contained sufficient, unambiguous information—the total amount of general unsecured debt and the proposed repayment on those claims—to calculate the percentage. See, e.g., In re Weiser, 391 B.R. 902, 910 (Bankr. S.D. Fla. 2008) (“proposing to pay approximately 5% of the total unsecured debt over five years”). When coding for the general unsecured creditor repayment, this study assigned a percentage, defined as the total repayment to general unsecured creditors, divided by the total amount of general unsecured debt from allowed claims. 201See supra note 115. As mentioned in Part III.A., coding for the court’s ruling on good faith is a simple binary value, as there are only two possible outcomes: a court finds the plan to be in good faith or in bad faith. Before discussing the list of factors this study used to code for the totality of the circumstances test, Part III.B. discusses the assumptions and limitations of this study.

B. Assumptions and Limitations

This study assumed the debtor’s attorney fees in each case are an allowed priority administrative expense claim for which the plan must provide payment. 202See 11 U.S.C. §§ 330(a)(4)(B), 503(b)(2), 507(a)(2), 1322(a)(2) (2012). Section 1322(a)(2) states that a chapter 13 plan “shall provide for the full payment . . . of all claims entitled to priority under section 507.” Id. § 1322(a)(2). Section 507(a)(2) lists as a priority claim “administrative expenses allowed under section 503(b).Id. § 507(a)(2). Section 503(b)(2) lists as an allowed administrative expense “compensation and reimbursement awarded under section 330(a).Id. § 503(b)(2). Section 330(a)(4)(B) states, “[i]n a . . . chapter 13 case . . . the court may allow reasonable compensation to the debtor’s attorney [with certain qualifications].” Id. § 330(a)(4)(B). Even beyond this one assumption, there are also four specific limitations to this study.

First, some chapter 13 debtors pay their attorneys prior to filing, and such cases were not excluded from the study. 203See, e.g., In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007). Of course, the debtor may not have paid for legal counsel (e.g., pro bono representation or pro se filings), and if the opinion indicated this, the case was excluded. Otherwise, the study assumed that the debtor paid for an attorney. Exclusion of pro se filings was not problematic, as each opinion listed the attorney of record for both parties to the case. Pro bono representation was not always apparent from the opinion, but this is unlikely to have a significant impact on the data, as a recent bankruptcy fee study found that less than 7% of all chapter 13 filings are pro bono. 204Lupica, supra note 56, at 83 & n.141 (reporting that 6.8% of pre-BAPCPA chapter 13 filings and 4.9% of post-BAPCPA filings contained “an attorney of record on the docket listing, but there was no fee paid”).

Second, cases often lacked the information necessary for inclusion in the study, leading to the exclusion of many potentially relevant cases (i.e., cases litigating § 1325(a)(3) or (7) in part because of a low repayment to unsecured creditors). 205For example, some cases may discuss a plan proposal with one or more amendments. The opinion may have been unclear on the contents of the final plan or under which amended version it is analyzing good faith, For example, In re Oliver, 186 B.R. 403, 405–06 (Bankr. E.D. Va. 1995), involved a three-year plan proposing approximately a 10% repayment to unsecured creditors—qualifying for this study as low percentage plan. The debtor orally amended the plan to five years, promising a roughly 17% repayment—thus taking the plan outside the range of this study. Then, when analyzing good faith, the court seemed to ignore the oral modification and assessed only the original three-year plan proposal. Id. This case was excluded from this study. Unless the percentage of repayment on total unsecured claims was clear in the opinion, the case was excluded. Time and resource constraints prevented this study from seeking plan schedules or other court documents that might have provided missing information or resolved these ambiguities. While inclusion of such cases might have affected the outcome of the data, this study contains an adequate sample by which to gain insight into good faith analysis of fee-only plans.

Third, it is difficult at times to determine which factors each court has truly considered. While some level of subjectivity is unavoidable, this study does not intend to parse out a court’s subjective rationale, such as the weight a judge gives a particular factor compared to others. Rather, the intent of the study, to the extent possible, is to objectively measure the factors on which a court relies to reach its ruling. The goal is to provide a general picture, not necessarily a precise measurement, of how courts treat chapter 13 cases as the general unsecured repayment approaches zero. Certainly there may be considerations that do not appear in the text of an opinion, and as courts readily admit, the intent of the factors is to serve as an analytical framework, not an exhaustive list of all considerations. 206Supra note 103 and accompanying text.

Fourth, and finally, the various lists of factors across jurisdictions do not fall into one definitive list with perfect overlap. For example, the Eighth Circuit’s traditional list includes “the extent of preferential treatment between classes of creditors”; 207See Estus, 695 F.2d at 317. while the Seventh Circuit lists “the debtor’s treatment of creditors both before and after the petition was filed.” 208See In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992). As shown below, the study treats these factors analogously, though there may be practical and theoretical differences. As best it can, this study compiles all the factors into a workable list, making such discrepancies and inconsistencies unavoidable. To the extent possible, the study groups similar concepts together to serve the purpose of identifying statistically significant considerations courts use to address good faith in fee-only plans. The next section will offer some examples of these challenges and the study’s treatment of them.

C. Factors Used in Determining Good Faith

This study gathered data on the totality of the circumstances factors that a case opinion lists and those that it discusses. Listed factors are those that the court lists in each case. This study coded listed factors as simple binary values: a case either lists a given factor or it does not. If the court does not list its factors but cites to previous binding authority that does, those factors are coded as listed in the present case. If there was any ambiguity, such as citation to multiple authorities, this study coded for the factor list on which the court most clearly relies. 209For example, suppose the text of the opinion cites to authority with a factor listing, but there is also an express listing of factors from another authority in a footnote. In that circumstance the study counted the actual list in the footnote, not the list from the text citation. See, e.g., In re Sanchez, No. 13-09-10955, 2009 WL 2913224, at *2 n.3 (Bankr. D.N.M. May 19, 2009).

Likewise, this study coded discussed factors as simple binary values: a case either discusses a given factor or it does not. Discussed factors are those that are determinative to a court’s ruling on good faith. Because very few opinions contain distinct sections or paragraphs analyzing a particular factor, 210Compare In re Thomas, 443 B.R. 213, 217–19 (Bankr. N.D. Ga. 2010) (not including distinct sections), with In re Lancaster. 280 B.R. 468, 480–82 (W.D. Mo. 2002) (including distinct, numbered paragraphs for the discussion of each factor). this study counted any identifiable analysis of the totality of the circumstances under the facts of the case. 211But many opinions do analyze good faith under a distinct, identifiable heading. See, e.g., Thomas, 443 B.R. at 217 (using “Good Faith” as a heading). Others did not, but this study only included such cases when the analysis of good faith was clearly identifiable. See, e.g., In re Molina, 420 B.R. 825, 827–33 (Bankr. D.N.M. 2009) (containing only an “Analysis” heading, but included in the study because discussion of good faith was easily identifiable). As Part III.B. explained above, a court’s subjective analysis may implicate more than one factor in ways that are not easily separable. The remainder of this Part explains those challenges within the context of each factor and how the study addressed them.

The following sections present the list of factors that this study coded. Included is a brief description of each factor, its various phrasings and examples where the study coded for it, and any theoretical overlaps. When practical and unambiguous, this Comment refers to each factor by its Subsection number (e.g., “Factor 1”).

1. Percent Repayment to General Unsecured Creditors (“Factor 1”)

Despite Factor 1’s clear relevance to fee-only plans, it rarely appears in a factor list. Regardless of whether it stood alone or in concert with another consideration, this study coded for Factor 1 any time the court discussed the low (or lack of) payment to general unsecured creditors. 212See United States v. Smith (In re Smith), 199 B.R. 56, 59 (N.D. Okla. 1996). Factor 1 was coded in this case due to the following: “The fact that the unsecured claim was previously not discharged, that the Appellees had previously filed under [c]hapter 7, and that Appellant’s unsecured claims will receive a [2%] pro rata payment does not mean that the Bankruptcy Court’s finding that the Plan was filed in good faith is clearly erroneous.” Id. at 59 (emphasis added).

For example, one court found that a chapter 13 plan was in bad faith where the debtor proposed to pay nothing to general unsecured creditors, to continue monthly payments into a retirement account, and to retain all secured assets. 213In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007) (holding that a chapter 13 “plan that proposes to pay 0% to creditors when a debtor could pay substantially more is not a plan proposed in good faith”). While the Code otherwise authorizes this approach, the court clarified, “Achieving an appropriate balance between payment of unsecured creditors and saving retirement funds is the natural end of viewing the totality of [d]ebtor’s circumstances.” 214Id. at 869. This language strongly suggests, if not expressly states, that neither the 0% repayment nor the retirement account contributions alone would be sufficient for the court to find bad faith. In this particular circumstance, this case coded for two factors: Factor 1 and the debtor’s budget proposal (Factor 8). 215As another example of coding for Factor 1 and Factor 8, see In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012) (finding bad faith in a fee-only plan involving nearly $200,000 of general unsecured debt where the debtor proposed to retain a vacation time share through monthly payments of $480, and noting that “chapter 13 is . . . a bargain between debtors and creditors” and that the plan “tilts so dramatically in the debtors’ favor as to cause the plan to fail the test of good faith”). In another case, Factor 1 and fairness to creditors (Factor 12) were coded when the debtor’s plan “provides for inconsistent treatment of similarly situated creditors in that it would allow an apparently undersecured mortgage creditor to receive a full cure of its undersecured claim while other unsecured creditors receive a de minimis payment.” 216In re Namie, 395 B.R. 594, 597 (Bankr. D.S.C. 2008). Notwithstanding payment of the entire unsecured portion of the mortgage claim, the total repayment on general unsecured claims was only 1%. Id. at 596.

2. Substantial Repayment Above the § 1325(a)(4) “Best Interests of Creditors” (“Factor 2”)

As previously discussed, the amount of unsecured debt repayment relative to a chapter 7 liquidation was particularly relevant to good faith analysis prior to the enactment of § 1325(b) in 1984. 217See supra Part I.C.1. Section 1325(b) requires all projected disposable income to go toward the plan during the applicable commitment period. 21811 U.S.C. § 1325(b)(1)(B) (2012). Nevertheless, retaining Factor 2 as well as pre-1984 cases is important to capture the development of chapter 13 good faith analysis over time. This study coded for Factor 2 even in post-1984 cases when the court clearly referred to § 1325(a)(4) in its good faith analysis. 219See, e.g., Ingram v. Burchard, 482 B.R. 313, 322 (N.D. Cal. 2012) (listing “unsecured creditors would receive the same dividend they would have if the case had been filed as a Chapter 7,” as a factor that favored plan confirmation).

3. Plan Duration (“Factor 3”)

Section 1322(d) provides that a chapter 13 plan’s duration may not be longer than either three or five years, depending on whether the income of the debtor and debtor’s spouse is above or below median income. 22011 U.S.C. § 1322(d). Within these constraints, the ultimate length of a debtor’s plan can be discretionary. 221See supra Part II.A.1. Courts consider this factor as a measure of the debtor’s genuine willingness to produce a fair repayment to creditors, especially if the plan duration is directly tied to the attorney fees. 222E.g., In re Lavilla, 425 B.R. 572, 578–79 (Bankr. E.D. Ca. 2010) (citing In re Paley, 390 B.R. 53, 56, 59 (Bankr. N.D.N.Y. 2008)). See also supra Part II.A.1. While wording may vary, this factor is uniformly used and straightforwardly applied across courts providing a factor lists. 223See Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992) (“[T]he expected duration of the [c]hapter 13 plan . . . .”); Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 888 (11th Cir. 1983) (“[T]he probable or expected duration of the debtor’s [c]hapter 13 plan . . . .”); Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (“[T]he period of time payment will be made . . . .”).

This study coded for Factor 3 whenever the court discussed the plan duration’s effect on good faith, unless the court merely stated the statutory applicable commitment period for a given plan. 224But see In re Tobiason, 185 B.R. 59, 63–64 (Bankr. D. Neb. 1995). In this case the objecting creditors put the plan’s duration at issue under the good faith standard, and the court discussed the merits of the objection by turning to the statutory requirements for plan duration. Id. at 63–64. In this circumstance, the study coded for Factor 3. For example, this study coded for Factor 3 when a court stated, “If unsecured creditors are only going to receive 5%, an unmeaningful recovery, a good faith issue arises for the debtor unless the debtor extends the recovery period to five years making the recovery for unsecured creditors more meaningful.” 225In re Williams, 231 B.R. 280, 282 (Bankr. S.D. Ohio 1999) (emphasis added). Cases with early termination language, as discussed in Part II of this Comment, were coded for Factor 3. 226See supra Part II.A.1.

4. The Amount, Nature, and Type of General Unsecured Debts (“Factor 4”)

Phrasings of Factor 4 in court taxonomies include “the type of debt sought to be discharged and whether any such debt is nondischargeable in [c]hapter 7”; 227United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982). “the circumstances under which the debt was incurred”; 228Barrett, 964 F.2d at 592. “the nature and amount of unsecured claims”; 229Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982). “how the debt arose”; 230In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992). and “the debtor’s [prepetition] conduct that gave rise to the debts.” 231Solomon v. Cosby (In re Solomon), 67 F.3d 1128, 1134 (4th Cir. 1995). Courts announce these concepts both independently and as part of the same factor; however, courts within the same jurisdiction may separate or combine the concepts in later cases. 232See In re Ault, 271 B.R. 617, 620 (Bankr. E.D. Ark. 2002) (citations omitted). The court announced as separate factors the types of debt sought to be discharged and also whether a debt would be non-dischargeable in chapter 7. Id. Yet, the Eighth Circuit cases to which it attributes these two factors actually treat them as one. Estus, 695 F.2d at 317; Ault, 271 B.R. at 620 (citing Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1349 (8th Cir. 1990)). This study combined these concepts into one factor given their commonality. Courts’ phrasings of both factors pertain to the characteristics of the specific general unsecured debts in the case, such as the total amount and whether they are dischargeable in chapter 7.

Coding for this factor included discussion of the debtor’s prepetition behavior, such as debtors who sought to discharge debt from a fraudulent mortgage scheme. 233In re Weiser, 391 B.R. 902, 909–10 (Bankr. S.D. Fla. 2008) (discussing at length the origin of debt from a mortgage scheme in which the debtors were probably participating, but at least behaving “recklessly”). Fraudulently obtained debt is a common occurrence in chapter 13 good faith cases. 234See, e.g., In re Keach, 225 B.R. 264, 269 (Bankr. D.R.I. 1998) (finding bad faith where “nearly all of the Debtor’s pre-[c]hapter 7 nondischargeable debt arose from his fraudulent actions; claims on which he now proposes to pay only a minimal dividend”). One might think that fraud alone likely weighs toward a finding of bad faith. But courts occasionally reach a contrary result when other circumstances favorable to the debtor are present. For example, one court ruled in favor of a debtor who proposed to pay only $20,000 of a $267,000 court judgment arising from fraudulent behavior while serving in a fiduciary capacity. 235In re Smith 286 F.3d 461, 463–64 (7th Cir. 2002). The court explained, “There is no question that [the debtor’s behavior] was deplorable . . . [but] this consideration alone, however, is not sufficient to defeat [the debtor’s] plan.” 236Id. at 467. After noting that Congress had allowed certain debts to be nondischargeable in chapter 7 but dischargeable in chapter 13, the court stated, “What is required is that the plan must be proposed in good faith, not that the debt was incurred in good faith.” 237Id. (internal quotation marks omitted). The study coded for Factor 4 in this case.

5. Debtor’s Past Bankruptcy Filings (“Factor 5”)

Phrasings for Factor 5 include “debtor’s past bankruptcy filings” 238See Solomon v. Cosby (In re Solomon), 67 F.3d 1128, 1134 (4th Cir. 1995). and “the frequency with which the debtor has sought relief under the Bankruptcy Reform Act.” 239See Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983) (citation omitted). This study coded for Factor 5 when, for example, a court discussed the debtor’s current ineligibility for chapter 7 due to a recent discharge, thereby forcing the debtor into chapter 13. 240See, e.g., In re Paley, 390 B.R. 53, 54–55, 59 (Bankr. N.D.N.Y. 2008) (noting that two consolidated cases—each involving previous chapter 7 discharges—were, “[r]educed to their cores . . . two cases with debtors ineligible for [c]hapter 7 discharges seeking another round of debt forgiveness”). When the subsequent chapter 13 filing is a fee-only plan, courts have expressed concern that this behavior undermines the Code’s timeline for successive filings. 241See, e.g., id. at 59–60 (citations omitted) (“These cases, basically [c]hapter 7 cases hidden within [c]hapter 13 petitions, blur the distinction between the chapters into a meaningless haze. To allow them to go forward would, in effect, judicially invalidate § 727(a)(8)’s requirement of an eight year hiatus between [c]hapter 7 discharges and replace it with either the four year break required by § 1328(f)(1), or the two year gap mandated by § 1328(f)(2).”).

Previous filings have always played a role in good faith assessments, especially prior dismissals. 242See In re Hurt, 369 B.R. 274, 281–82 (Bankr. W.D. Va. 2007) (finding bad faith when two previous chapter 13 filings were dismissed due to default); In re Thornes, 386 B.R. 903, 910 (Bankr. S.D. Ga. 2007) (finding bad faith in third chapter 13 filing when debtor failed to show a substantial change in conditions after previous two cases were dismissed). Debtors often use multiple bankruptcy chapters in sophisticated ways. A common example is a so-called “chapter 20” case, 243“Chapter 20” refers generally to successive filings of 1) a chapter 7 plan and 2) a subsequent chapter 13 plan “to further restructure secured debt”—often in the form of lien stripping—or deal with debt that is nondischargeable in chapter 7 but is dischargeable in chapter 13. Lawrence Ponoroff, Hey the Sun Is Hot and the Water’s Fine: Why Not Strip Off That Lien?, 30 Emory Bankr. Dev. J. 13, 17 n.18 (2013). See also In re Cushman, 217 B.R. 470, 473, 476–78 (Bankr. E.D. Va. 1998) (citation omitted) (describing chapter 20 as “a chapter 13 case brought while the ink on the debtor’s chapter 7 discharge is just barely dry,” and finding bad faith when, during chapter 7 proceedings, the debtor converted a car lease into an installment purchase agreement, secured by the car, and then filed for chapter 13 months later to strip down the lien—that is, discharge the unsecured portion of the debt). when a debtor files for chapter 13 relief after a chapter 7 discharge and the debtor seeks, for example, to “strip off” a wholly unsecured junior lien on his primary residence. 244See, e.g., Fisette v. Keller (In re Fisette), 455 B.R. 177, 184–86 (B.A.P. 8th Cir. 2011). See generally Ponoroff, supra note 243 (providing a thorough analysis of lien stripping in bankruptcy). Chapter 20’s usefulness has been limited by BAPCPA, which added § 1328(f) to address the effect of past filings on obtaining a chapter 13 discharge. 24511 U.S.C. § 1328(f) (2012) (rendering chapter 13 debtors ineligible for a discharge if they received a discharge under chapters 7, 11, or 12 within four years prior to filing a chapter 13 petition).

This study does not include chapter 20 cases when the debtor is ineligible for a chapter 13 discharge under § 1328(f), but nevertheless files to strip off a wholly unsecured junior lien. These cases raise special concerns, including an unresolved split in case law. 246See Bryan J. Hall, Stripping Liens to Save Their Homes: Debtors’ Options to Reduce Mortgage Debt in Bankruptcy, Fed. Law., Jan./Feb. 2013, at 56 (discussing the split) (citing Fisette v. Keller (In re Fisette), 455 B.R. 177, 185–86 (B.A.P. 8th Cir. 2011) (in a chapter 20 case, holding that modifying a wholly unsecured lien in chapter 13 is not conditioned on eligibility for a discharge); In re Orkwis, 457 B.R. 243, 250 (Bankr. E.D.N.Y. 2011) (in a chapter 20 case, holding that a wholly unsecured lien may not be avoided in chapter 13 unless the debtor receives a discharge in the chapter 13 case)). To the extent that their inclusion may change this study’s analysis, the most likely effect would be to increase the frequency in which courts discuss Factor 5 and Factor 12 (fairness to creditors). Otherwise, this study includes chapter 20 247In re Keach, 225 B.R. 264, 267 (Bankr. D.R.I. 1998) (citations omitted). and “veiled chapter 7” 248Ingram v. Burchard, 482 B.R. 313, 319 (N.D. Cal. 2012) (citation omitted). cases and likely coded for Factor 5 in each.

6. Debtor’s Honesty and Accuracy of Schedules and Statements (“Factor 6”)

Misrepresentations in bankruptcy filing schedules, or other acts of dishonesty during the judicial process, weigh heavily on a court’s evaluation of good faith, even before the enactment of the modern Code. 249See Johnson, supra note 98, at 378–79. After BAFJA and BAPCPA, many courts suggested that the income-based factors are less important and instead focused on indications of dishonesty. 250See In re Shelton, 370 B.R. 861, 868-69 (Bankr. N.D. Ga. 2007); Baxter v. Johnson (In re Johnson), 346 B.R. 256, 261-62 (Bankr. S.D. Ga. 2006). Factor 6 has many phrasings but generally pertains to any attempt to mislead the court or creditors through inaccuracies in the statements and schedules filed during the case. 251In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992) (listing “whether the debtor has been forthcoming with the bankruptcy court and the creditors”); Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 2001) (listing “the accuracy of the plan’s statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court”) (quoting United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982)); In re Ault, 271 B.R. 617, 619-20 (Bankr. E.D. Ark. 2002) (listing “whether the debtor has accurately stated his debts and expenses on his bankruptcy statements and schedules” and “whether the debtor has made any fraudulent misrepresentation in connection with the case to mislead the Bankruptcy Court or his creditors”). One court noted that good faith may be ambiguous but “certainly does . . . require ‘honesty of intention.’” 252Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir. 1983) (quoting Barnes v. Whelan (In re Barnes), 689 F.2d 193, 200 (D.C. Cir. 1982)). The study coded for Factor 6 discussion is based on the following language:

The debtor has not been forthcoming with the [c]ourt or the [c]hapter 13 trustee regarding his income and expenses. The debtor’s statements regarding his fiancée’s contributions to his household income have been inconsistent, and the [c]ourt did not find his testimony at the confirmation hearing to be credible on this issue. 253In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007).

The court followed this with details on the inaccuracies it saw in the debtor’s forms and schedules. 254Id. In a more subtle example—and one that pointed towards a finding of good faith—this study coded for Factor 6 when the court stated, “[The debtor] has accurately stated his debts, assets and liabilities and, in this regard, has been forthcoming with the court.” 255In re Ristic, 142 B.R. 856, 860 (Bankr. E.D. Wis. 1992); see also id. at 860 n.3.

7. Debtor’s Special Circumstances (“Factor 7”)

While Puffer may open the door to a separate “special circumstances” analysis specifically for fee-only plans, 256Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012). courts have always analyzed special circumstances in chapter 13 good faith analysis, such as unanticipated health care expenses. 257See Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012); In re Corino, 191 B.R. 283, 289 (Bankr. N.D.N.Y. 1995) (listing medical costs as an example of special circumstances in the court’s list of factors). While “special circumstances” may suggest this is a broad, catch-all factor, courts typically do not face much litigation over good faith (fee-only plans or otherwise) where such circumstances exist, perhaps because adverse parties do not raise the objection when a clear debtor hardship is present.

This study coded for Factor 7 based on reference to special or exigent circumstances. A common example of Factor 7 discussion coding occurs when a court notes a lack of special circumstances that would justify a fee-only plan, such as the following: “[n]either is there any evidence that the [d]ebtors were facing any exigency, such as the loss of a home or a car, which would render them unable to save the amount of counsel fees over a period of time.” 258In re Arlen, 461 B.R. 550, 555 (Bankr. W.D. Mo. 2011); see also In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007) (“Absent disability, Debtor’s age . . . or other extenuating circumstances, foregoing or substantially reducing retirement contributions for the length of the plan is unlikely to unreasonably impair Debtor’s ability to obtain his fresh start.”).

8. Debtor’s Budget Proposal (“Factor 8”)

Factor 8 differs from Factor 6 (debtor’s honesty and accuracy of schedules and statements), in that it is not an assessment of fraud or misrepresentation, but of the overall reasonableness of the debtor’s financial plan. In assessing the overall plan, considerations for reasonableness include current income and proposed living expenses, 259E.g., Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992); In re Farmer, 186 B.R. 781, 783 (Bankr. D.R.I. 1995). plan payments relative to the debtor’s overall finances, 260United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982) (“[T]he amount of the proposed payments and the amount of the debtor’s surplus….”). excluded or exempted assets that might create greater surplus for creditors, 261In re Thomas, 443 B.R. 213, 217 (Bankr. N.D. Ga. 2010) (citations omitted). and ultimately whether these components result in a fair distribution to creditors. 262Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992) (“[T]he amount of payment offered by debtor as indicative of the debtor’s sincerity to repay the debt . . . .”). Furthermore, debtors sometimes propose to pay more than their projected disposable income, which is the only amount required by statute, such as when the disposable income test results in a negative value. 263See, e.g., In re McDonald, 437 B.R. 278, 280 (Bankr. S.D. Ohio 2010). Such an effort could support a finding of good faith but may not be outcome-determinative. 264Compare In re Spruch, 410 B.R. 839, 840–41, 844 (Bankr. S.D. Ind. 2008) (finding good faith where the debtor had a statutory disposable income of negative $1,311 but proposed a monthly payment plan of $1,900), with In re McDonald, 437 B.R. at 28081, 293 (finding bad faith despite debtor’s statutory disposable income of negative $1,239 and a proposed monthly payment plan of $5,000 for 60 months).

As an example, this study coded for Factor 8 based on the following language:

The debtor provides complete or nearly complete financial support for his fiancée, and his amended Schedule J shows that he anticipates spending more than $700 a month on food and recreation. The debtor leases a new, luxury vehicle for his unemployed fiancée to drive. He plans to continue paying his fiancée’s expenses and contributing 15% of his monthly salary to his 401k. The debtor also proposes to continue making direct payments to Sony for his 50″ television set and surround sound system. 265 In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007). Unsurprisingly, the court found this plan to be in bad faith. Id. at 567.

In another interesting example of Factor 8 coding, one plan sought to retain a vacation property while leaving general unsecured creditors with no repayment:

Here, the debtors propose to pay their unsecured creditors nothing while retaining a vacation venue costing them at least $314 per month, net of any rental income they may receive. Redirecting the funds dedicated to the Disney timeshare to their chapter 13 plan instead, even after reserving a reasonable monthly allowance for recreation, would result in a meaningful dividend to unsecured creditors. 266In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012).

9. Debtor’s Employment History and Prospects (“Factor 9”)

The likelihood of a debtor successfully completing a chapter 13 plan rests on the viability of his future income stream. While the projection of future disposable income falls within a separate chapter 13 provision, § 1325(b)(1)(B), 26711 U.S.C. § 1325(b)(1)(B) (2012); see Hamilton v. Lanning, 560 U.S. 505, 509, 524 (2010) (holding that projecting future disposable income is “forward-looking” and “may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation”). courts still look to the debtor’s employment when assessing good faith. 268See In re Dunning, 157 B.R. 51 (Bankr. W.D.N.Y. 1993) (finding bad faith where self-employed sales representative’s earnings significantly increased but only proposed a 1% repayment to unsecured creditors); In re Dos Passos, 45 B.R. 240, 243 (Bankr. D. Mass. 1984) (finding good faith in dentist’s chapter 13 plan where, “[a]lthough the [10% repayment to unsecured creditors] is low and the debtor is a skilled professional, his past employment history is not marked by success”). Phrasings include “the debtor’s employment history, ability to earn and likelihood of future increases in income”; 269United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982). “the debtor’s ability to earn and the likelihood of fluctuation in his earnings”; 270Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983). and “the debtor’s employment history and prospects.” 271Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982). Like most courts, this study also treats Factor 9 separately from the debtor’s income, a component of Factor 8. 272See, e.g., In re Molina, 420 B.R. 825, 828 (Bankr. D.N.M. 2009) (applying Factor 8 by stating that the “[d]ebtor’s monthly surplus is $50, exactly what she is committing to the plan,” and applying Factor 9 by stating that from the schedules filed, the debtor “did not expect any increases or decreases in income or expenses,” and that the debtor’s job and age did “not suggest the likelihood of a significant increase in income”). Factor 9 intends to assess the debtor’s ability to earn future income and any fluctuations that may alter the projection of future income. 273See, e.g., id. This study coded for Factor 9 any time a court addressed the debtor’s present or future employment. 274E.g., In re Baird, 234 B.R. 546, 553 (Bankr. M.D. Fla. 1999) (“At the confirmation hearing, [d]ebtor appeared to have regained much of his health and now, according to his testimony and Memorandum, is hopeful of gaining employment in his area of his expertise in the near future…. [T]he Court finds [d]ebtor in a position to substantially increase his payment to creditors throughout the life of his plan.”).

10. Amount of Attorney’s Fees (“Factor 10”)

BAPCPA addressed fees by establishing more rigid pre-filing standards for bankruptcy counsel, including disclosing fee amounts. 27511 U.S.C. § 528(a) (2012) (stating in part, “[a] debt relief agency shall . . . execute a written contract with [the debtor] that explains clearly and conspicuously . . . the fees or charges for [services rendered], and the terms of payment”). In response to BAPCPA, bankruptcy courts now usually require debtors’ counsel to submit a fee application that itemizes services rendered for the case. 276Lupica, supra note 56, at 39. Many jurisdictions have established a “no look” fee concept, where the court allows an attorney to claim a “presumptively reasonable” fee up to a given amount without filing a fee application. 277Id. at 40; see also Kennedy, Lantin, & Heilig, supra note 68, at 4–6. Nevertheless, courts may still scrutinize a “presumptively reasonable” fee. See Lupica, supra note 56, at 40–41 & n.58; see also, e.g., In re Debtor’s Attorney Fees in Chapter 13 Cases, 374 B.R. 903, 906–09 (Bankr. M.D. Fla. 2007) (establishing, sua sponte, a presumptively reasonable fee plan but also allowing any party in interest to object to the fee within 10 days of the fee award). While a presumptively reasonable fee would seem to pass good faith muster, that is not entirely clear. The reasonableness of attorney’s fees is often litigated separately from good faith, and the study did not code for Factor 11 when this occurred. 278See, e.g., Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012). The timing of fee payment, however, may also suggest bad faith if it evidences a debtor’s ability to pay more into the plan than he proposed. 279See In re Steinhorn, 27 B.R. 43, 45 (Bankr. S.D. Fla. 1983) (finding bad faith where court noted “that these debtors were able to pay their attorney $1,000 before they filed this petition, more than they propose to pay all their creditors for the next seven months”).

Unsurprisingly for a data set comprised of fee-only and low percentage plans, attorney fees are mentioned frequently in the opinions. The focus of Factor 10, however, is on the fee amount, not the extent that plan payments are composed of attorney fees. For this reason, this study only coded for Factor 10 when the fee amount was at issue; furthermore, the amount must have been at issue under good faith analysis, not another legal provision pertaining to fees. 280In re Arlen, 461 B.R. 550, 554–55 (Bankr. W.D. Mo. 2011) (coding for Factor 10 when the court, while analyzing the good faith of the plan, notes, “[t]he fees charged by counsel in this case are approximately twice what would be charged for [c]hapter 7 proceedings for these [d]ebtors”).

11. Trustee’s Burden (“Factor 11”)

The most common phrasing of Factor 11 is “the burden which the plan’s administration would place upon the trustee.” 281United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982). This study coded for Factor 11 when plans may pose unique challenges to the trustee. 282See In re Loper, 367 B.R. 660, 661 (Bankr. D. Colo. 2007) (finding no undue burden on trustee). While it is very common in factor lists, Factor 11 rarely arises as a distinct concern in good faith analysis. 283Only 2 cases in this study’s data set discussed this factor. Ingram v. Burchard, 482 B.R. 313, 322 (N.D. Cal. 2012); In re Lancaster, 280 B.R. 468, 482 (Bankr. W.D. Mo. 2002).

12. Fairness to Creditors (“Factor 12”)

While a fair distribution of the debtor’s assets to creditors lies at the heart of any bankruptcy plan, courts have carved out Factor 12 for good faith analysis. To constitute Factor 12, this study combined several factors from various courts’ lists, including “the extent of preferential treatment between classes of creditors”; 284Estus, 695 F.2d at 317. “the extent to which secured claims are modified”; 285Id. “the debtor’s treatment of creditors both before and after the petition was filed”; 286In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992). and “how the debtor’s actions affected creditors.” 287In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007).Kull and other cases list the former two as separate factors in the list. 288Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 659 (S.D. Ga. 1981). While preferential treatment between creditor classes and modification of secured claims are distinct concepts, this study chose to combine them into a general category, partly because courts simply did not discuss modification of secured claims in the analyzed cases.

13. Debtor’s Motivation (“Factor 13”)

Phrasings for factor 13 include “the motivation and sincerity of the debtor in seeking [c]hapter 13 relief”; 289Estus, 695 F.2d at 317; see also Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983) (almost identical). “the timing of the petition”; 290Love, 957 F.2d at 1357. “[w]hether the debtor has unfairly manipulated the [] Code in any aspect of his plan”; 291In re Wilcox, 251 B.R. 59, 65 (Bankr. E.D. Ark. 2000) (citation omitted). and “whether the [c]hapter 13 filing was an attempt to defer or avoid the claims of legitimate creditors.” 292In re Vick, 327 B.R. 477, 486 (Bankr. M.D. Fla. 2005). Factor 13 is especially susceptible to conceptual overlap with other factors as well as the foundational inquiry of good faith analysis: whether the proposal is an “abuse of the provisions, purpose or spirit” of chapter 13. 293Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426, 431 (7th Cir. 1982) (internal quotation marks omitted). Courts, however, do examine the factor separately, 294See, e.g., In re Zellmer, 465 B.R. 517, 524–25 (Bankr. D. Minn. 2012) (internal quotation marks omitted) (noting first that the central focus of good faith analysis is whether the plan is an “abuse of the provisions, purpose or spirit of [c]hapter 13,” then listing “whether [the debtor] has unfairly manipulated the [] Code” as a factor, and finally applying that factor to the case). and trustees often cite Factor 13 when raising their good faith objections. 295See Meyer v. Lepe (In re Lepe), 470 B.R. 851, 858–59 (B.A.P. 9th Cir. 2012) (citation omitted). For example, this study coded for Factor 13 based on the following language: “The sole and overriding purpose of this [b]ankruptcy is to discharge an otherwise nondischargeable debt. [A single claim] represents 100% of the unsecured debt. This motivation and intention to escape nearly all liability of this debt hardly comports with the true ‘spirit and purpose’ of [c]hapter 13.” 296In re Jacobs, 102 B.R. 239, 242 (Bankr. E.D. Okla. 1988) (quoting In re Sanders, 28 B.R. 917, 922 (Bankr. D. Kan. 1983)) (internal quotation marks omitted).

The following is another example where the study coded for Factor 13: “The bottom line is whether the debtor is attempting to thwart his creditors, or is making an honest effort to repay them to the best of his ability. There is little doubt that the [d]ebtors are attempting to manipulate the [] Code to ‘thwart’ this one [c]reditor.” 297In re Dicey, 312 B.R. 456, 460 (Bankr. D.N.H. 2004) (quoting In re Virden, 279 B.R. 401, 409 (Bankr. D. Mass. 2002)) (internal quotation marks omitted).

D. Results

This Subsection presents the results of the empirical analysis. This study examined four possible sets of predictors in litigation under the good faith standards of § 1325(a)(3) and (7). This study seeks to determine 1) if the percentage repayment to general unsecured creditors is a statistically significant predictor of a finding of good faith, as compared to low percentage plans with repayment of greater than 2%; 2) if the number of listed or discussed factors in a courts’ totality of the circumstances test is a statistically significant predictor of a finding of good faith; 3) if the listing or discussion of any single factor is a statistically significant predictor of a finding of good faith; and 4) if any combination of listed or discussed factors occurs at a statistically significant rate. As a preliminary matter, the courts reached a finding of good faith in 26% of the 61 cases in the data set.

With respect to the first set of predictors, the general unsecured creditor repayment is not statistically significant to a finding of good faith in the data set. Regarding the second set of predictors, neither the number of factors discussed nor the number of factors listed in a case are statistically significant to a finding of good faith in the data set.

However, the difference between the number of listed factors and discussed factors is a statistically significant predictor of a good faith finding. Using a logistic regression model, as the number of factors discussed in a case decreases in relation to the number of factors listed in a case, the odds of the court finding good faith decreases at a statistically significant rate (p = 0.019). For each additional unit of increase in the difference (i.e., each time a court discusses one less factor than it lists), the odds of a good faith finding decrease by a factor of 0.78. Table 1 depicts this model:

Table 1: Logistic Regression Model for Good Faith Finding

Independent Variable

Odds Ratio

Difference in Number of Listed and Discussed Factors

0.779* (0.632, 0.960)

Note: N = 61. * p ≤ 0.05. Odds ratio presented with 95% confidence interval in parentheses. 298This means that with 95% certainty, the odds ratio could be as low as 0.632 and as high as 0.960.

For example, if a court lists twelve factors and discusses two factors rather than three, the odds of the court finding good faith decreases by 22.1%. 299With 95% certainty, this figure could be as low as 1.4% and as high as 31.3%. Although measuring judges’ subjective decision-making quantitatively has limitations, the study’s results suggest that judges do narrow their focus when finding a fee-only or low-percentage plan to be in bad faith. One might say this also suggests the converse: judges cast a broader net to justify good faith in a fee-only plan. 300One possible limitation to this conclusion occurs when a court chooses to discuss all the good faith factors as a matter of course. However, this was a rare occurrence in this study’s data set.

Overall, the data show much less correlation than hypothesized. The result is nevertheless insightful, and Part IV provides further discussion. The remainder of this Subsection discusses each statistically significant relationship with respect to the third and fourth sets of predictors.

1. Significant Relationships Between Factors and a Finding of Good Faith

A statistically significant relationship (at the 10% level) exists between a discussion of Factor 2 (substantial repayment above the § 1325(a)(4) standard) and a finding of good faith. Of the opinions analyzed, 26% found the plan to be in good faith. Thus, in the absence of a relationship, one would expect to find the same percentage of good faith findings in opinions that discuss Factor 2. However, 75% of opinions discussing Factor 2 also found good faith, and opinions that did not discuss Factor 2 only found good faith 22% of the time. Only one of the opinions discussing Factor 2 was decided after BAFJA. 301See Ingram v. Burchard, 482 B.R. 313 (N.D. Cal. 2012). Table 2 depicts this relationship.

TABLE 2: Relationship Between Discussing Factor 2 and Finding Good Faith

Factor 2 discussion – substantial repayment above the § 1325(a)(4) “best interests of creditors” test

Good Faith Finding

No

Yes

Total

Not Discussed

44

(77.19%)

13

(22.81%)

57

(100%)

Discussed

1

(25.00%)

3

(75.00%)

4

(100%)

Total

45

(73.77%)

16

(26.23%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a two-sided Fisher’s exact test is 0.052.

A statistically significant relationship also exists between a listing of Factor 7 (a debtor’s special circumstances) and a finding of good faith. Just as before, in the absence of such a relationship, one would expect courts to find good faith for cases that list Factor 7 at the same rate that they find good faith for the entire set of analyzed cases (i.e., 26.2%). However, cases that list Factor 7 found good faith only 12.0% of the time, and cases that did not list Factor 7 found good faith 36.1% of the time. Table 2 depicts this relationship.

Of the four cases that listed Factor 7 and found good faith, only one also discussed Factor 7. 302In re Molina, 420 B.R. 825, 829 & n.11 (Bankr. D.N.M. 2009) (finding this factor to support good faith where “[t]here appear to be no special circumstances driving this filing (other than the collection action); the cost of caring for the grandson appears to be a relatively small incremental one over what would be [the] [d]ebtor’s expenses for herself”). This supports the Puffer court’s guidance that fee-only plans should only be allowed when special circumstances exist, which will be “relatively rare.” 303Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012). However, of the twenty-four cases that listed Factor 7 and did not find good faith, only six cases also discussed Factor 7. All six cases found the debtor to lack special circumstances weighing in favor of good faith. 304Ingram, 482 B.R. at 323; In re Arlen, 461 B.R. 550, 555 (Bankr. W.D. Mo. 2011); In re McDonald, 437 B.R. 278, 293 (Bankr. S.D. Ohio 2010); In re Pearson, 398 B.R. 97, 102 (Bankr. M.D. Ga. 2008); In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007); In re Lancaster. 280 B.R. 468, 482 (W.D. Mo. 2002). Thus, the negative influence of listing Factor 7 on a finding of good faith may have little practical significance. Perhaps it suggests that before they reject a debtor’s plan for lack of good faith, courts tend to ensure that no exigent circumstances exist that would justify a small repayment to general unsecured creditors.

TABLE 3: Relationship Between Listing Factor 7 and Finding Good Faith

Factor 7 listing – Debtor’s Special Circumstances

Good Faith Finding

No

Yes

Total

Not Listed

23

(63.89%)

13

(36.11%)

36

(100%)

Listed

22

(88.00%)

3

(12.00%)

25

(100%)

Total

45

(73.77%)

16

(26.23%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a chi-square test with one degree of freedom is 0.035.

2. Significant Relationships Between Factors Discussed in the Same Case

A statistically significant relationship exists between discussion of Factor 9 (the debtor’s employment history and prospects) and three other factors. First, Factor 9 discussion is a significant predictor of a discussion of Factor 3 (plan duration). Factor 3 was discussed in approximately 23.0% of the analyzed cases, and in the absence of a relationship, one would expect to find the same percentage in cases that discuss both Factor 3 and Factor 9. However, analyzed cases that discuss Factor 9 also discuss Factor 3 approximately 71.4% of the time, and cases that did not discuss Factor 9 only discussed Factor 3 approximately 16.7% of the time. Table 3 depicts this relationship.

TABLE 4: Relationship Between Discussion of Factors 9 and 3

Factor 9 – Debtor’s Employment History & Prospects

Factor 3 – Plan Duration

Not Discussed

Discussed

Total

Not Discussed

45

(83.33%)

9

(16.67%)

54

(100%)

Discussed

2

(28.57%)

5

(71.43%)

7

(100%)

Total

47

(77.05%)

14

(22.95%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a two-sided Fisher’s exact test is 0.005.

Next, Factor 9 discussion was a significant predictor of a discussion of Factor 5 (past bankruptcy filings). Factor 5 was discussed in approximately 23.0% of the analyzed cases, and in the absence of a relationship, one would expect to again find the same percentages in cases that discuss both Factor 5 and Factor 9. However, in the analyzed cases that also discuss Factor 9, approximately 71.4% of those discuss Factor 5. Analyzed cases that did not discuss Factor 9 only discussed Factor 5 approximately 16.7% of the time. Table 4 depicts this relationship.

TABLE 5: Relationship Between Discussion of Factors 9 and 5

Factor 9 – Debtor’s Employment History & Prospects

Factor 5 – Past Filings

Not Discussed

Discussed

Total

Not Discussed

45

(83.33%)

9

(16.67%)

54

(100%)

Discussed

2

(28.57%)

5

(71.43%)

7

(100%)

Total

47

(77.05%)

14

(22.95%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a two-sided Fisher’s exact test is 0.005.

Finally, Factor 9 discussion was a significant predictor of a discussion of Factor 11 (fairness to creditors). Factor 11 was discussed in 9.8% of the analyzed cases, but was discussed in approximately 57.1% of the analyzed cases that also discussed Factor 9. Analyzed cases that did not discuss Factor 9 only discussed Factor 11 approximately 3.7% of the time. Table 5 depicts this relationship.

TABLE 6: Relationship Between Discussion of Factors 9 and 11

Factor 9 – Debtor’s Employment History & Prospects

Factor 11 – Fairness to Creditors

Not Discussed

Discussed

Total

Not Discussed

52

(96.30%)

2

(3.70%)

54

(100%)

Discussed

3

(42.86%)

4

(57.14%)

7

(100%)

Total

55

(90.16%)

6

(9.84%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a two-sided Fisher’s exact test is 0.001.

One could draw several conclusions from the correlation between Factor 9 and the three other factors. When a debtor proposes little or no payment to general unsecured creditors, a court may look to the debtor’s employment prospects to determine whether fluctuations in the debtor’s income are likely. Again, the projected disposable income test is the statutory requirement for repayment, 30511 U.S.C. § 1325(b)(1)(B) (2012). but the extent to which the debtor attempts to hide or downplay such fluctuations in his disposable income prior to confirmation reflects on the debtor’s good faith in proposing and filing the plan. Seven cases either discuss Factor 9 and Factor 3, or Factor 9 and Factor 5. In both circumstances, six of the seven cases found bad faith. The correlation between employment prospects and past filings seems to reflect cases in which debtors file for chapter 13 after receiving a recent chapter 7 discharge. 306See, e.g., In re Keach, 225 B.R. 264, 269 (Bankr. D.R.I. 1998) (discussing Factor 9 and Factor 5 in a chapter 13 plan seeking to discharge debt that was nondischargeable in a recent chapter 7 case).

A statistically significant relationship also exists between Factor 6 (the debtor’s honesty and the accuracy of schedules and statements) and Factor 4 (the total debt and nature of the debt). Factor 4 was discussed in approximately 36.1% of the analyzed cases. However, analyzed cases that discussed Factor 6 also discussed Factor 4 approximately 72.2% of the time, and analyzed cases that did not discuss Factor 6 only discussed Factor 4 approximately 20.9% of the time. Table 6 depicts this relationship. This correlation suggests that courts, when examining cases with wrongfully-obtained debt or nondischargeable debt in chapter 7, look especially to the debtor’s behavior during chapter 13 proceedings to assess the debtor’s honesty and willingness to be forthright with the court.

TABLE 7: Relationship Between Discussion of Factors 6 and 4

Factor 6 – Debtor’s Honesty & Accuracy of Schedules & Statements

Factor 4 – Total, Nature, and Type of General Unsecured Debts

Not Discussed

Discussed

Total

Not Discussed

34

(79.07%)

9

(20.93%)

43

(100%)

Discussed

5

(27.78%)

13

(72.22%)

18

(100%)

Total

39

(63.93%)

22

(36.07%)

61

(100%)

Row percentages are reported in parentheses. The p-value from a chi-square test with one degree of freedom is less than 0.0001.

IV. Discussion

This Part begins by discussing the study’s findings within the context of the current judicial landscape and the relative benefits of bright-line or discretionary rules for fee-only plans. Then, this Part will discuss two possible modifications for fee-only plans in light of the study’s findings, theoretical backdrop, and the Puffer decision. This Part does not intend to overstate the significance of the empirical analysis. Attaching empirical data to a subjective standard is difficult, particularly within the very specific context of fee-only plans. Rather, this Part offers general thoughts on how courts might approach the fee-only issue in the future.

A. Muddy Versus Bright-Line Rules

So far, three circuits have rejected a bright-line standard for fee-only plans, notwithstanding the Puffer court’s more focused approach of determining whether the debtor’s special circumstances sufficiently support a finding of good faith. 307See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82–83 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671, 675–77 (5th Cir. 2012). Whether courts should adhere to a bright-line rule or adopt a more discretionary approach hinges on, among other considerations, the purpose of the standard and the competency of judges to make informed decisions. 308See generally Ted Janger, Crystals and Mud in Bankruptcy Law: Judicial Competence and Statutory Design, 43 Ariz. L. Rev. 559, 560–61 (2001) (citing Carol M. Rose, Crystals and Mud in Property Law, 40 Stan. L. Rev. 577 (1988)) (discussing bright-line and discretionary rules in bankruptcy law in light of factors such as judicial competency). Murky standards requiring fact-intensive, case-specific judicial determinations often encounter criticism and resistance. 309See, e.g., Robert W. Hamilton, Jonathan R. Macey & Douglas K. Mill, Corporations Including Partnerships and Limited Liability Companies 213–14 (11th ed. 2010) (discussing the criticism of the vague standard for corporate veil-piercing cases, for which some courts have articulated multiple factors to consider). But Congress has repeatedly declined to further articulate the chapter 13 good faith provision; thus, the legislative intent to maintain a murky standard seems clear. 310See In re Mathis, No. 12-05618-8, 2013 WL 153833, at *9 (Bankr. E.D.N.C. Jan. 15, 2013) (discussing Congress’s silence on defining “good faith” in the chapter 13 statute); In re Buck, 432 B.R. 13, 20 (Bankr. D. Mass. 2010) (quoting Keach v. Boyajian (In re Keach), 243 B.R. 851, 856 (B.A.P. 1st Cir. 2000)) (noting the lack of a definition, courts’ varying approaches to interpretation, and that “Congress presumably used the phrase ‘good faith’ in its ordinary sense”), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014). Accordingly, courts have made clear that the test is ambiguous and flexible. 311Alt v. United States (In re Alt), 305 F.3d 413, 419 (6th Cir. 2002) (citations omitted); In re Thomas, 443 B.R. 213, 217 (Bankr. N.D. Ga. 2010) (citing Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983)).

Ted Janger’s research offers support for the flexible standard. 312See generally Janger, supra note 308, 43 Ariz. L. Rev. 559. Janger compared the use of bright-line (“crystalline”) and discretionary (“muddy”) standards in bankruptcy law. 313See id. He concluded that regardless of the level of competence one assumes in a judge, the “muddy” rules have merit. 314Id. at 564–65. Janger also explored research that suggests good faith clauses in contracts promote optimal levels of cooperation better than an alternative bright-line rule. 315Id. at 603–04 (citing Gillian K. Hadfield, Judicial Competence and the Interpretation of Incomplete Contracts, 23 J. Legal Stud. 159 (1994)). Hadfield’s research suggests that in absence of an express term in a contract, parties tend to operate at a suboptimal level of cooperation, because the individual costs of cooperation outweigh the shared benefits. Good faith clauses try to solve this problem by promoting a more optimal level of effort by introducing the risk of liability under the standard. Since they lack full information, judges are unable to identify the optimal level of effort for a given contract. Thus, instead of judicial searching for a bright-line rule, a muddy good faith standard promotes efficiency across “a broader range of contractual types and reduce[s] the costs associated with overcompliance.” Id. Janger found that this analysis has merit in business bankruptcies, where insolvent creditors act collectively to dismantle an insolvent debtor. 316Id. at 604. However, consumer bankruptcy is less about preserving an ongoing relationship between parties and more of a one-time transaction, often with lower stakes than a business bankruptcy. 317Id. at 596–98. Furthermore, complying with the chapter 13 good faith standard is the sole responsibility of the debtor and usually does not require negotiation with creditors or the trustee. The chapter 13 debtor must weigh the benefits of a particular plan proposal against the risk of encountering an objection to confirmation under § 1325(a)(3) or (7). 318For the trustee and creditors, the likely calculus is comparing the litigation costs to the value of raising the objection. Assuming the trustee or creditor prevails, the value ranges from forcing the debtor to amend the plan, which may provide for an only slightly greater repayment, to effectively barring a discharge altogether. See 11 U.S.C. § 1307(c)(5) (2012) (on objection from the trustee or any party in interest, allowing the court to dismiss the case or convert to chapter 7 if confirmation is denied for any reason under § 1325, which includes for lack of good faith). Although, the Code provides the debtor with a broad right to convert the case to a chapter 7 proceeding, which if approved by the court, will likely result in a discharge. See id. § 1307(a).

While he did not discuss good faith provisions in bankruptcy law, Janger prescribed muddy standards in consumer bankruptcy where one expects abuse. 319Janger, supra note 308, at 601. Since curbing abuse in the bankruptcy system is the hallmark of the good faith provisions, Janger’s prescription suggests that good faith analysis should remain muddy. 320See Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (emphasis added) (quoting 9 Collier on Bankruptcy ¶ 9.20 at 319 (14th ed. 1978)) (following other circuits by defining good faith as a provision where “[a] comprehensive definition of good faith is not practical . . . the basic inquiry should be whether or not under the circumstances of the case there has been an abuse of the provisions, purpose, or spirit of [the Chapter] in the proposal or plan”). A muddy standard is also favorable to a per se approach because fee-only plans raise a particularly strong suspicion of abuse. 321See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012); In re Barnes, No. 12-06613-8, 2013 WL 153848, at *10 (Bankr. E.D.N.C. Jan. 15, 2013). This study offers some support for this proposition because the findings suggest that courts are using the totality of the circumstances test to its fullest extent. Given that only one of thirteen factors that the study coded for discussion was significantly correlated with a finding of good faith, courts seem to be deciding fee-only cases based on various factors. In light of this finding, is there a need to modify the totality of the circumstances approach to good faith analysis for fee-only plans?

One option of course is to retain the test. While courts usually find fee-only plans to be in bad faith, Crager reminds us that these plans may still satisfy good faith given the debtor’s particular circumstances. 322Sikes v. Crager (In re Crager), 691 F.3d 671, 675, 677 (5th Cir. 2012).Crager reaches this conclusion without modifying the totality of the circumstances test or taking a per se approach. 323Id. at 675–77. This study may provide support for this approach, first with its finding that the general unsecured repayment is not a significant predictor of good faith, which suggests that bad faith requires something more than zero or nominal repayment. Second, despite all of the possible correlations between factor discussion and good faith, or between combinations of factors discussed, this study found relatively few that were statistically significant. Finally, while the data does demonstrate that courts tend to narrow their factor discussion when finding bad faith, judges did not focus on any particular set of factors.

The remainder of this Part discusses two other possible modifications to good faith analysis in fee-only plans: follow the Puffer special circumstances approach or issue a sua sponte order for fee-only plans.

B. A Modified Approach

Recall that the First Circuit’s opinion in Puffer may be read (on remand, the bankruptcy court did) to adopt a modified approach to fee-only plans: requiring the debtor to show special circumstances that sufficiently indicate good faith. 324See supra Part II.B.1. Whether or not this is what the court actually meant—versus merely indicating that special circumstances was the most important factor in the totality of the circumstances test 325See supra Part II.B.1. —such a modified approach may make sense. After all, the study found very little correlation between the good faith of fee-only plans and any specific variable, despite the fact that most fee-only plans are found in bad faith. 326Only 26% of the total cases in this study’s data set passed the good faith test. See also supra note 79.

Requiring the debtor to affirmatively show special circumstances creates an extra hurdle for fee-only plans and moves in the direction of a more “crystalline” rule. One might consider this to be a “good faith-plus” approach: 327This term is merely illustrative and, to the author’s knowledge, has not been used in this context anywhere else. before a court applies the traditional totality of the circumstances test for good faith, a fee-only plan debtor must make an additional showing of special circumstances. This approach may strike an appropriate balance between preserving a “muddy” standard and providing a clearer presumption against plans courts usually view as abusive.

Also, recall that this Comment suggests the modified-approach reading of Puffer is similar to the rebuttable presumption provisions in chapter 7, where the debtor may rebut the presumption of abuse found under the means test by showing special circumstances. 328Supra notes 164–64 and accompanying text. The two are not completely analogous, but the resemblance is noteworthy. Just as showing sufficient circumstances to rebut the abuse presumption is difficult and infrequent, 329Anthony P. Cali, Note, The “Special Circumstance” of Student Loan Debt Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 52 Ariz. L. Rev. 473, 485–86 (2010) (citations omitted) (internal quotation marks omitted) (noting that many courts describe the special circumstances of § 707(b)(2)(B) as “effectively off limits for most debtors” and “uncommon, unusual, exceptional, distinct, peculiar, particular, additional or extra conditions or facts”); Lauren E. Tribble, Note, Judicial Discretion and the Bankruptcy Abuse Prevention Act, 57 Duke L.J. 789, 802–03 (2007). justifying a fee-only plan with special circumstances, Puffer tells us, will be “relatively rare.” 330Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012). The legislative intent behind the chapter 7 abuse rebuttal provision is to provide an exception to the means test for “debtors whose special circumstances require adjustments to income or expenses that place them in dire need of chapter 7 relief.” 331 S. Rep. No. 106-49, at 7 (1999) (report from the Senate Committee on the Judiciary); see also Cali, supra note 329, at 485 (discussing the legislative history of § 707(b)(2)(B)). Showing special circumstances to justify fee-only plans would presumably serve a very similar purpose: because of his special circumstances, the debtor is in dire need of chapter 13 relief, and thus an otherwise abusive fee-only plan is justifiable. Such a rule shifts the burden to the debtor to affirmatively present special circumstances.

In response to the modified approach, a debtor proposing would have several options: (1) affirmatively show special circumstances; (2) propose a higher repayment to general unsecured creditors (perhaps while also showing special circumstances); or (3) do not file for chapter 13 relief. These responses have potential benefits: (1) they promote higher repayment to general unsecured creditors; (2) courts use fewer resources when litigating plans that are likely to be abusive; and (3) courts have more complete information about the debtor’s particular circumstances.

This approach could be implemented in two ways. The first is through judicial precedent, like the Puffer decision (again, if it is indeed adopting a modified approach). With judicial precedent, fee-only plans would only be subjected to this modified rule when a party objects to the plan on good faith grounds, or during the court’s review of the plan at the confirmation stage. Knowing that the plan is even more likely to fail under a modified approach, this implementation could serve as a powerful deterrent from filing fee-only plans in the first place.

The second implementation is through a sua sponte order, which courts have similarly used for to implement the presumptively reasonable, or “no-look,” fee scheme for attorney compensation. 332See Lupica, supra note 56, at 40. Nevertheless, courts may still scrutinize a “presumptively reasonable” fee. Id. at 40–41 & n. 58; see also, e.g., In re Debtor’s Attorney’s Fees in Chapter 13 Cases, 374 B.R. 903, 903, 906–09 (Bankr. M.D. Fla. 2007) (establishing, sua sponte, a presumptively reasonable fee plan, but also allowing any party in interest to object to the fee within ten days of the fee award). This order might state that a fee-only plan is presumptively in bad faith (or unreasonable), in violation of § 1325(a)(3) and § 1325(a)(7), and requires debtor to list special circumstances. Compared to implementation through judicial precedent, a sua sponte order provides more procedural clarity and may be an even stronger deterrent from filing a fee-only plan, as the order firmly assigns the debtor with the burden of showing special circumstances, regardless of whether an objection is raised.

C. Challenges to Implementing a Modified Approach

Regardless of how it is implemented, a modified approach in practice does become more of a bright-line rule, and as such, presents challenges. Creating a modified approach for fee-only plans under the good faith provisions—whether through case law or a sua sponte order—begs the question of what qualifies as a fee-only plan. Although the precise line is far from clear now, adopting a modified rule would likely bring this issue to the forefront, as debtors may seek to avoid the rule by arguing their plan does not qualify as fee-only. Would a court draw a somewhat arbitrary line at a 2% or less repayment to unsecured creditors, as this study did for empirical analysis purposes? What if, instead, the court defines fee-only in terms of the percentage of total plan payments that fund attorney fees? Regarding the latter, what should be the threshold percentage to qualify as a fee-only plan?

Even if a court establishes a workable threshold for fee-only plans, no matter where the court sets it, debtors will propose a plan that just barely avoids qualifying as a fee-only plan, thereby avoiding the special circumstances requirement. This highlights Janger’s prescription for using muddy standards instead of bright-line rules where one expects abuse. 333Janger, supra note 308, at 601. Once the rule becomes crystal clear, fee-only debtors will move up to, but not over, the line of abuse. If, on the other hand, it is unclear exactly what constitutes a fee-only plan, debtors remain subject to the court’s discretion. And that leads to one of the primary benefits of a muddy standard: for the court to take debtors as they come to bankruptcy, in light of all their circumstances.

Conclusion

Three circuit courts have made clear that a per se approach to fee-only plans should not replace the totality of the circumstances standard for determining good faith. 334Brown v. Gore (In re Brown), 742 F.3d 1309, 1318–19 (11th Cir. 2014); Puffer, 674 F.3d at 82; Sikes v. Crager (In re Crager), 691 F.3d 671, 675–76 (5th Cir. 2012). By requiring debtors to justify fee-only plans through special circumstances, one of those decisions, Puffer, adds some teeth to the prevailing view that fee-only plans are usually bad faith. 335Puffer, 674 F.3d at 83.

In light of the Puffer court’s shift to a more rigid rule, this Comment conducted an empirical analysis of chapter 13 fee-only and low percentage plans to shed light on the actual application of the current good faith standard. The findings show that, even within the context of fee-only plans, which are usually found to be in bad faith, courts are not always finding bad faith for the same reasons. The study reveals that a court narrows its focus when finding bad faith but not on any particular set of factors. Such a result may favor the current totality of the circumstances standard.

This Comment, however, suggests Puffer strikes an appropriate balance between retaining the subjective test and placing a heavier burden on the debtor to justify a fee-only plan. This analysis makes a modest attempt to build upon the discussion of good faith in chapter 13, as courts continue to wrestle with balancing the debtor’s fresh start with a fair distribution to creditors. The discussion might benefit from a further study of all chapter 13 good faith litigation regardless of the amount of repayment to general unsecured creditors.

Footnotes

1Brown v. Gore (In re Brown), 742 F.3d 1309, 1313 (11th Cir. 2014) (internal quotation marks omitted) (quoting from the transcript of the bankruptcy court’s confirmation hearing in the case).

2Id. at 1312.

3Id.

4Id.

5Id. at 1312.

6Id. at 1313.

7Id.

8See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 80–81 (1st Cir. 2012).

9Brown, 742 F.3d at 1313.

10Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as amended at title 11 of the United States Code).

1111 U.S.C. § 1325(a)(3) (2012).

12Bradley M. Elbein, The Hole in the Code: Good Faith and Morality in Chapter 13, 34 San Diego L. Rev. 439, 448 & n.47 (1997) (citing Conrad K. Cyr, The Chapter 13 “Good Faith” Tempest: An Analysis and Proposal For Change, 55 Am. Bankr. L.J. 271, 273 (1981)) (identifying at least 53 cases through 1981 and approximately 700 cases from 1981 to 1996 that litigated the chapter 13 good faith standard).

13Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, sec. 102(g)(3), § 1325(a), 119 Stat. 23, 33 (codified as amended at 11 U.S.C. § 1325(a)(7)).

1411 U.S.C. § 1325(a)(7) (emphasis added).

15See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012).

16See Elbein, supra note 12, at 454 (providing a list of consensus factors among courts, but also noting courts interpret the standard loosely and do not articulate exhaustive lists).

1711 U.S.C. § 1325(a)(4).

18See In re Heard, 6 B.R. 876, 881 (Bankr. W.D. Ky. 1980).

19In re Paley, 390 B.R. 53, 59 (Bankr. N.D.N.Y. 2008).

20See infra Part II.A.

21See infra Part II.A.

22Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014); Puffer, 674 F.3d at 85, 87–88; Sikes v. Crager (In re Crager), 691 F.3d 671, 675–76 (5th Cir. 2012).

23Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012). See infra Part II.B.1.

24Puffer, 674 F.3d at 79. See also In re Barnes, No. 12-06613-8, 2013 WL 153848, at *9–12 (Bankr. E.D.N.C. Jan. 15, 2013) (also noting that while fee-only plans might be more susceptible to a finding of bad faith, courts continue to determine good faith on a case-by-case basis in lieu of a per se rule against fee-only plans).

25Barnes, 2013 WL 153848, at *10 (citing Puffer, 674 F.3d at 79; In re Arlen, 461 B.R. 550 (Bankr. W.D. Mo. 2011)).

26See supra note 17 and accompanying text; infra note 43 and accompanying text.

27See infra Parts I.B.2 and II.

28See infra note 36 and accompanying text.

29Arlen, 461 B.R. at 555 (also noting that a fee-only plan “blurs the distinctions between [chapters 7 and 13] and the various differences in their scope . . .” (citing In re Paley, 390 B.R. 53, 59–60 (Bankr. N.D.N.Y. 2008)).

30See generally Jay Lawrence Westbrook, Empirical Research in Consumer Bankruptcy, 80 Tex. L. Rev. 2123 (2002).

31Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012). See infra Part II.B.1.

3211 U.S.C. §§ 1301–1330 (2012).

33See Rederford v. U.S. Airways, Inc., 589 F.3d 30, 36 (1st Cir. 2009) (noting that one purpose of the Code is to provide “evenhanded treatment” to creditors); In re Hageney, 422 B.R. 254, 259 (Bankr. E.D. Wash. 2009) (“[The] commencement of a bankruptcy case under any chapter of the [] Code must be consistent with bankruptcy policy, and with [the] goal of providing a fresh start to honest but unfortunate debtors while maximizing repayment to creditors.”); H.R. Rep. No. 95-595, at 118 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6078 (stating a goal of the Bankruptcy Reform Act of 1978 is to provide debtors with a fresh start).

3411 U.S.C. § 522(d) (listing the exemptions to property of the bankruptcy estate); id. § 541 (setting for the creation and contents of the bankruptcy estate); id. § 704(a)(1) (“The trustee shall—collect and reduce to money the property of the estate . . . .”); id. §§ 725–726 (setting forth the order in which the trustee shall distribute the liquidated property of the estate).

35H.R. Rep. No. 95-595, at 118.

36Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 102(h), 119 Stat. 23, 33–34 (codified as amended at 11 U.S.C. § 1325(b)). Chapter 13 incorporates the chapter 7 means test for above-median-income debtors. 11 U.S.C. § 1325(b)(3).

37Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 721 (2011) (describing the intent behind both chapter 7 and chapter 13 using the means test, which seeks to force can-pay debtors out of chapter 7 and is part of the repayment calculus for above-median debtors in chapter 13).

38In re Paley, 390 B.R. 53, 59 (Bankr. N.D.N.Y. 2008).

39Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as amended at 11 U.S.C. §§ 1301–1330 (2012)).

40Bankruptcy Act of 1938 (Chandler Act), ch. XIII, 52 Stat. 840, 930 (repealed 1978).

41H.R. Rep. No. 95-595, at 123. The consent requirement posed a significant barrier for debtors proposing a “composition plan,” one that provides less than full repayment, as creditors typically only consented to an “extension plan,” one that repaid debts in full. See, e.g., Richard E. Flint, Consumer Bankruptcy Policy: Ability to Pay and Catholic Social Teaching, 43 St. Mary’s L.J. 333, 346–72 (2011) (providing a history of composition and extension plans in bankruptcy law).

42H.R. Rep. No. 95-595, at 123–24.

4311 U.S.C. § 1325(a)(4). This provision is widely known as the “best interests of creditors test.” See, e.g., Susan A. Schneider, Bankruptcy Reform and Family Famers: Correcting the Disposable Income Problem, 38 Tex. Tech L. Rev. 309, 316 (2006).

44H.R. Rep. No. 95-595, at 124 (emphasis added). It is unclear what the House meant by this statement given that § 1325(a)(4) was in unaltered existence at the time of the report. Perhaps stating “more than” was in recognition of the test requiring chapter 13 creditors to receive a higher total dollar amount to account for the present value of a chapter 7 repayment. See id. at 408 (stating that the phrase, “‘[v]alue, as of the effective date of the plan,’ as used in . . . proposed 11 U.S.C. . . . 1325(a)(4) . . . indicates that the promised payment under the plan must be discounted to present value as of the effective date of the plan”).

45S. Rep. No. 95-989, at 13 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5799 (“The [chapter 7 discharge limitation] will also . . . prevent chapter 13 plans from turning into mere offers of composition plans under which payments would equal only the non-exempt assets of the debtor.”).

46Infra Part I.C.1.

47S. Rep. No. 95-989, at 13 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5799; H.R. Rep. No. 95-595, at 118 (1978), reprinted in 1978 U.S.C.C.A.N. 5963, 6079.

48In re Aprea, 368 B.R. 558, 567–68 (Bankr. E.D. Tex. 2007).

49In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012).

50See Scott F. Norberg & Andrew J. Velkey, Debtor Discharge and Creditor Repayment in Chapter 13, 39 Creighton L. Rev. 473, 477 (2006) (finding that, in a study of seven districts, “nearly 45% of the cases in which a proposed repayment was reported proposed to pay no more than 25%”).

51See Katherine Porter, Bankrupt Profits: The Credit Industry’s Business Model for Postbankruptcy Lending, 93 Iowa L. Rev. 1369, 1408–10 (2007). Porter’s study found that chapter 7 debtors are significantly more likely than chapter 13 debtors to receive credit offers, particularly secured credit, after filing bankruptcy. Id. Porter notes, “[o]verall, lenders exhibit a customer preference for [c]hapter 7 filers over [c]hapter 13 filers . . . . Despite [the lending industry’s] rhetoric championing [c]hapter 13 as the ‘honorable’ path for families in serious financial trouble . . . .” Id. at 1410–11. Also, both chapter 7 and chapter 13 filings may stay on a debtor’s credit report for the same amount of time. See 15 U.S.C. § 1681(a)(1).

52John Eggum, Katherine Porter & Tara Twomey, Saving Homes in Bankruptcy: Housing Affordability and Loan Modification, 2008 Utah L. Rev. 1123, 1144 & n.80 (citing three studies from 1989, 2001, and 2006, all of which found that approximately one-third or less of chapter 13 filings result in plan completion and discharge).

53H.R. Rep. No. 95-595, at 118.

54See Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 314(b), 199 Stat. 23, 88 (codified as amended at 11 U.S.C. § 1328) (amending § 1328(a) to expand the list of non-dischargeable debts in chapter 13); In re Platt, No. 12-6170-13, 2012 WL 5842899, at *2 n.4 (Bankr. S.D. Ind. Nov. 19, 2012) (summarizing BAPCPA’s effect on the “super discharge”); see also H.R. Rep. No. 109-31, at 76–77 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 144 (outlining BAPCPA’s amendments to non-dischargeable debts in § 1328(a)); Larry A. Pittman II & Jeffrey A. Deines, A Hitchhiker’s Guide to Consumer Bankruptcy Reform, J. Kan. B.A., Nov./Dec. 2006, at 20, 22 (describing how BAPCPA virtually eliminated the chapter 13 “super discharge”).

55See infra note 202.

56See Jean Braucher, A Guide to Interpretation of the 2005 Bankruptcy Law, 16 Am. Bankr. Inst. L. Rev. 349, 380 & n.174 (2008) (noting that “for chapter 13 debtors at or below median income and probably for nearly all chapter 13 debtors, what drives them into chapter 13 is not failing the presumed abuse means test, but . . . such considerations as . . . paying attorneys fees over time . . .”) (emphasis added); cf. Lois R. Lupica, The Consumer Bankruptcy Fee Study: Final Report, 20 Am. Bankr. Inst. L. Rev. 17, 47, 49 n.120 (2012) (noting that in chapter 7 no-asset cases—which are a vast majority of chapter 7 filings according to Table 2 at page 47—attorneys rarely agree to accept a portion of their fee after filing the petition). But see generally David E. Frisvold & Sharron B. Lane, Attorney’s Fees in Chapter 13: Do They Influence Chapter Choice?, 2003 No. 9 Norton Bankr. L. Adviser 1 (finding no statistically significant relationship between the amount of attorney’s fees and the percentage of chapter 13 filings, as between chapter 7 and chapter 13, and concluding the fees may not be the source of influence in chapter selection as some have suggested).

57See Lupica, supra note 56, at 81 (“Post-BAPCPA, 100% of [pro se] cases were filed under chapter 13 with a petition preparer’s assistance. Not one of the post-BAPCPA cases filed with the assistance of a petition preparer ended in the debtor receiving a discharge.”); Rafael I. Pardo, An Empirical Examination of Access to Chapter 7 Relief by Pro Se Debtors, 26 Emory Bankr. Dev. J. 5, 22–23 (2009) (in a sample of over 85,000 chapter 7 cases, finding that the dismissal rate for pro se debtors was 6.4%, compared to only 0.9% of represented debtors).

58Amy Y. Landry & Robert J. Landry, III, Medical Bankruptcy Reform: A Fallacy of Composition, 19 Am. Bankr. Inst. L. Rev. 151, 166 nn.91 & 93 (2011); see also Fed. R. Bankr. P. 4004(c), 4007(c) (2012) (setting time limits for objections to discharge in chapter 7 cases, and providing upon expiration of these limits, “the court shall forthwith grant the discharge”).

5911 U.S.C. § 1325(b)(4). The required plan duration, or “applicable commitment period,” is either three years or not less than five years, depending on the debtor’s income. Id. § 1325(b)(4)(A). But the period may be shorter “if the plan provides for payment in full of all allowed unsecured claims over a shorter period.” Id. § 1325(b)(4)(B). See also, e.g., Arlen, 461 B.R. at 555 (“Instead of getting their discharges within four to six months as they would in a no asset [c]hapter 7 proceeding, these debtors would not get a discharge, even under the design of the original plans, for approximately one and one-half years. And, of course, that discharge is less comprehensive than in [c]hapter 7.”).

60Id. § 1328(a).

61Supra note 52 and accompanying text.

62Positive fluctuations in income also have a detrimental effect. Chapter 13 debtors are under the supervision of the court for the duration of the plan, and at any time the trustee or an unsecured creditor may move to modify the plan payments to capture any increase in the debtor’s income. Id. § 1329(a).

63Jean Braucher, Lawyers and Consumer Bankruptcy: One Code, Many Cultures, 67 Am. Bankr. L.J. 501, 581 (1993) (“Some local officials set standard attorneys’ fees for chapter 13 much higher than the local median fee for chapter 7.”); see also, e.g., In re Arlen 461 B.R. 550, 554 (Bankr. W.D. Mo. 2011) (“It is difficult to understand how a [c]hapter 13 plan under these circumstances benefits anyone other than counsel. The fees charged by counsel in this case are approximately twice what would be charged for [c]hapter 7 proceedings for these [d]ebtors.”).

64Lupica, supra note 56, at 56–57, 69. As reflected below, the fee study compared chapter 7 and chapter 13 mean attorney fees before and after BAPCPA. Note that a chapter 7 “no-asset case” occurs when, based on the schedules, “the debtor has no non-exempt assets for liquidation . . . .” In re Venegas, 257 B.R. 41, 44 (Bankr. D. Idaho 2001). The findings were as follows:Table 1 Lupica, supra note 56, at 57, 69”).

65See, e.g., Crager, 691 F.3d at 674 (involving a debtor who had not yet defaulted on debt payments and chose chapter 13 over chapter 7 because “it would have taken her over a year to save enough money to pay the [upfront] costs for a [c]hapter 7 bankruptcy and to do so she would have needed to stop making her minimum monthly credit card payments”).

66See Braucher, supra note 63, at 580–81 (studying attorney culture and noting from one city that “high-volume lawyers are much more willing to use chapter 13, primarily for financial reasons, while the low-volume lawyers think that chapter 13 is a bad deal for clients”).

67Braucher, supra note 63, at 581.

68David S. Kennedy, Vanessa A. Lantin & Brent Heilig, Attorney Compensation in Chapter 13 Cases and Related Matters, 13 J. Bankr. L. & Prac., no. 6, 2004 (citing Jean Braucher, Increasing Uniformity in Consumer Bankruptcy: Means Testing as a Distraction and the National Bankruptcy Review Commission's Proposal as a Starting Point, 6 Am. Bankr. Inst. L. Rev. 1, 21 (1998); Teresa A. Sullivan, Elizabeth Warren & Jay Lawrence Westbrook, The Persistence of Local Legal Culture: Twenty Years of Evidence from the Federal Bankruptcy Courts, 17 Harv. J. L. & Pub. Pol'y 801, 844 (1994)) (“Do larger fees for debtors' attorneys in chapter 13 cases influence the choice of that chapter over chapter 7? It has been suggested that it does. Are larger fees for debtors' attorneys in chapter 13 cases a carrot or incentive for some attorneys to inappropriately encourage clients to file cases under chapter 13 instead of chapter 7 cases? It has been suggested that they are.”).

69See Scott F. Norberg, Consumer Bankruptcy’s New Clothes: An Empirical Study of Discharge and Debt Collection in Chapter 13, 7 Am. Bankr. Inst. L. Rev. 415, 437 & n.71 (1999); supra notes 52, 58–62 and accompanying text.

70See supra note 52 and accompanying text.

71See Brown v. Gore (In re Brown), 742 F.3d 1312 (11th Cir. 2014).

72See supra note 19 and accompanying text.

73See supra note 37 and accompanying text.

74Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012) (“There is no showing, however, that the debtor had a pressing need for the [attorney’s] services, . . . that it was infeasible to proceed pro se.”).

75Brown, 742 at 1312; supra notes 1–7 and accompanying text.

76Supra note 57 and accompanying text.

77Supra note 43 and accompanying text.

78Attorney fees are a priority administrative expense claim that must be paid in order to receive a discharge. See infra note 202 and accompanying text. Thus, under these provisions and § 1325(a)(4), a debtor must pay his attorney but does not necessarily have to repay unsecured creditors anything.

79See, e.g., In re Barnes, No. 12-06613-8, 2013 WL 153848, at *1–2 (Bankr. E.D.N.C. Jan. 15, 2013) (citing In re Buck, 432 B.R. 13, 22 n.14 (Bankr. D. Mass. 2010)) (noting that a vast majority of courts find fee-only plans to be in bad faith); In re Hopper, 474 B.R. 872, 886 n.27 (Bankr. E.D. Ark. 2012).

8011 U.S.C. § 1325(a)(3), (7) (2012).

81Id. §§ 1129(b)(3); 1325(a)(3), (7).; In re Gonzales, 172 B.E. 320, 325 (E.D. Wash. 1994) (citing In re Chinichian, 784 F.2d 1440, 1442–44 (9th Cir.1986)).

82See Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1389–90 (9th Cir. 1982) (noting that “courts are impeded not only by [“good faith”] being an ambiguous term that resists precise definition in any case, but also by the lack of authoritative guidance on its meaning in § ),” and indicating that as a court of equity, bankruptcy judges have discretion to determine what good faith requires in each case (citing Am. United Mut. Life Ins. Co. v. City of Avon Park, Fla., 311 U.S. 138, 145 (1940))); In re Mathis, No. 12-05618-8, 2013 WL 153833, at *9 (Bankr. E.D.N.C. Jan. 15, 2013) (noting Congress’s silence on defining “good faith” in the chapter 13 statute); In re Buck, 432 B.R. 13, 19–20 (Bankr. D. Mass. 2010) (citing Keach v. Boyajian (In re Keach), 243 B.R. 851, 856 (B.A.P. 1st Cir. 2000) (noting the lack of a definition, courts’ varying approaches to interpretation, and that “Congress presumably used the phrase ‘good faith’ in its ordinary sense”)), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014).

83See, e.g., United States v. Estus (In re Estus), 695 F.2d 311, 316 (8th Cir. 1982) (citing Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (quoting 9 Collier on Bankruptcy ¶ 9.10 at 319 (14th ed. 1978))).

84Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333.

85See Brian G. Smooke, Comment, Section 1325(b) and Zero Payment Plans in Chapter 13, 4 Bankr. Dev. J. 449, 450–54 (1987) (discussing key case law in pre-1984 good faith litigation).

86See Estus, 695 F.2d at 314; In re Hurd, 4 B.R. 551, 556 (Bankr. W.D. Mich. 1980); In re Iacovoni, 2 B.R. 256, 268 (Bankr. D. Utah 1980).

87Iacovoni, 2 B.R. at 266–67 (noting the legislative intent of § 1325(a)(4) requiring “not less than,” rather than “more than,” was to prevent overpayment where the debtor could liquidate and repay 100 percent of the unsecured creditors’ claims, as well as “to impose a firm minimum upon which a flexible ‘good faith’ requirement for additional payments could be based”).

88Barnes v. Whelan (In re Barnes), 689 F.2d 193, 198–200 (D.C. Cir. 1982); Estus, 695 F.2d at 314–15; see also Smooke, supra note 85, at 452–54 (discussing In re Sadler, 3 B.R. 536, 536–37 (Bankr. E.D. Ark. 1980)).

89Barnes, 689 F.2d at 200.

90In re Barnes, 13 B.R. 997, 999 (D.D.C. 1981) (quoting In re Cloutier, 3 B.R. 584, 584 (Bankr. D. Colo. 1980)).

91Estus, 695 F.2d at 315–16 (providing a synopsis of good faith standard development in the federal circuits); Smooke, supra note 85, at 452–54 (citing as the foundation for this theory Deans v. O’Donnell (In re Deans), 692 F.2d 968 (4th Cir. 1982), which involved a plan where the debtor proposed to payment of a vast majority of her disposable income but nevertheless resulted in no payments to general unsecured creditors).

92Estus, 695 F.2d at 315–16 (citing Deans, 692 F.2d 968; Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426 (7th Cir. 1982); Goeb v. Heid (In re Goeb), 675 F.2d 1386 (9th Cir. 1982); Barnes, 689 F.2d 193).

93Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 659 (S.D. Ga. 1981) (listing: “(a) [T]he amount of income of the debtor and the debtor’s spouse from all sources; (b) the regular and recurring living expenses for the debtor and his dependents; (c) the amount of the attorney’s fees to be awarded in the case and paid by the debtor; (d) the probable or expected duration of the [c]hapter 13 plan; (e) the motivations of the debtor and his sincerity in seeking relief under the provisions of [c]hapter 13; (f) the ability of the debtor to earn and the likelihood of future increase or diminution of earnings; (g) special situations such as inordinate medical expense, or unusual care required for any member of the debtor’s family; (h) the frequency with which the debtor has sought relief under any section or title of the Bankruptcy Reform Act or its predecessor’s statutes; (i) the circumstances under which the debtor has contracted his debts and his demonstrated bona fides, or lack of same, in dealing with his creditors; (j) whether the amount or percentage of payment offered by the particular debtor would operate or be a mockery of honest, hard-working, well-intended debtors who pay a higher percentage of their claims consistent with the purpose and spirit of [c]hapter 13; (k) the burden which the administration of the plan would place on the trustee; and (l) the salutary rehabilitative provisions of the Bankruptcy Reform Act of 1978 which are to be construed liberally in favor of the debtor.”).

94Deans, 692 F.2d at 972 (“[N]ot only the percentage of proposed repayment, but also the debtor’s financial situation, the period of time payment will be made, the debtor’s employment history and prospects, the nature and amount of unsecured claims, the debtor’s past bankruptcy filings, the debtor’s honesty in representing facts, and any unusual or exceptional problems facing the particular debtor.”).

95Estus, 695 F.2d at 317.

96Id. (citing Deans, 692 F.2d at 972; Kull, 12 B.R. at 659; In re Heard, 6 B.R. 876, 882 (Bankr. W.D. Ky. 1980); In re Iacovoni, 2 B.R. 256, 267 (Bankr. D. Utah 1980)).

97Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983).

98 See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012); Brandon L. Johnson, Comment, Good Faith and Disposable Income: Should the Good Faith Inquiry Evaluate the Proposed Amount of Repayment?, 36 Gonz. L. Rev. 375, 379 & n.26 (2001) (noting that the “totality of the circumstances” approach is used in the Third, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits).

99Hamilton v. Lanning, 560 U.S. 505, 522–23 (2010) (citing In re Myers, 491 F.3d 120, 125 (3d Cir. 2007); Neufeld v. Freeman, 794 F.2d 149, 153 (4th Cir. 1986); In re Glenn, 288 B.R. 516, 520 (Bankr. E.D. Tenn. 2002)).

100See Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir. 1983) (citations omitted) (holding that the good faith standard requires the debtor’s honesty, and focuses on his “conduct in the submission, approval, and implementation of a [c]hapter 13 bankruptcy plan”); Barnes v. Whelan (In re Barnes), 689 F.2d 193, 198–200 (D.C. Cir. 1982) (finding good faith requires an “honesty of intention”); Goeb v. Heid (In re Goeb), 675 F.2d 1386, 1390 (9th Cir. 1982) (holding that “whether the debtor has misrepresented facts in his plan, unfairly manipulated the [Code], or otherwise proposed his [c]hapter 13 plan in an inequitable manner”).

101See Tennessee Commerce Bank v. Hutchins, 409 B.R. 680, 683 (D. Vt. 2009); Plagakis v. Gelberg (In re Plagakis), No. 03-CV-0728, 2004 WL 203090, at *4 (E.D.N.Y. Jan. 27, 2004); Connelly v. Bath Nat’l Bank, No. 93-CV-6449, 1995 WL 822677, at *3 (W.D.N.Y. Apr. 13, 1995); In re Paley, 390 B.R. 53, 57–58 (Bankr. N.D.N.Y. 2008); Finizie v. City of Bridgeport (In re Finizie), 184 B.R. 415, 419 (Bankr. D. Conn. 1995).

102In re Yavarkovsky, 23 B.R. 756, 759 (S.D.N.Y. 1982) (finding a similar, if not largely the same, standard for good faith that “contemplates a broad judicial inquiry into the conduct and state of mind of the debtor” and considers “all aspects of fair dealing . . . the lawfulness of the debtor’s conduct . . . good faith in dealing with creditors and their claims”); In re Allen, 300 B.R. 105, 123 (Bankr. D.D.C. 2003).

103See Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014); Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82 (1st Cir. 2012) (“The totality of the circumstances test cannot be reduced to a mechanical checklist, and we do not endeavor here to canvass the field and catalogue the factors that must be weighed when [when ruling on good faith].”); In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992); United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982) (“We make no attempt to enumerate all relevant considerations since the factors and the weight they are to be given will vary with the facts and circumstances of the case.”); In re Dicey, 312 B.R. 456, 459 (Bankr. D.N.H. 2004) (“No one factor is determinative, but it is the totality of all the various factors and the facts of the particular case that is considered.”). See generally Elbein, supra note 12.

104See generally Elbein, supra note 12, at 453–54; Ellen M. Horn, Good Faith and Chapter 13 Discharge: How Much Discretion Is Too Much?, 11 Cardozo L. Rev. 657, 667–69 (1990).

105Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, § 317, 98 Stat. 333, 356 (codified as amended at 11 U.S.C. § 1325 (2012)).

106Id.

107Id.

108Compare In re McGehan 495 B.R. 37, 43 (Bankr. D. Colo. 2013) (noting that “enactment of the ability to pay test in § 1325(b)(1) narrowed the good faith analysis, subsuming most of the [factors set forth by early Tenth Circuit precedent]”), with Richard S. Bell, The Effect of the Disposable Income Test of Section 1325(b)(1)(B) upon the Good Faith Inquiry of Section 1325(a)(3), 5 Bankr. Dev. J. 267, 267–71 (1988) (arguing that the disposable income test did not significantly alter the good faith totality of the circumstances standard in response to Raymond T. Nimmer, Consumer Bankruptcy Abuse, 50 Law & Contemp. Probs. 89 (1987), which argued the opposite).

109See Smooke, supra note 85, at 465–74 (reviewing case law reaching each of these three conclusions).

110In re Smith, 848 F.2d 813, 820 (7th Cir. 1988) (citations omitted).

11111 U.S.C. § 1325(b)(1)(B) (2012) (emphasis added).

112Id. § 1325(a)(7) (emphasis added).

113Compare In re Ford, 78 B.R. 729, 733 & n.1 (Bankr. E.D. Pa. 1987) (quoting In re Flick, 14 B.R. 912, 916 (Bankr. E.D. Pa. 1981)) (noting “there is no requirement that the petition be filed in good faith . . . only a requirement that the plan be proposed in good faith”) (internal quotation marks omitted), with Smith, 848 F.2d at 820 (citations omitted) (holding that the court must assess, using the same analysis, the good faith standard in filing the plan and petition).

114See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012); see also In re Yarborough, No. 12-30549, 2012 WL 4434053, at *4 n.5 (Bankr. E.D. Tenn. Sept. 24, 2012) (citing In re Hall, 346 B.R. 420, 426 (Bankr. W.D. Ky. 2006)) (noting that “good faith standards under § 1325(a)(3) and (a)(7) are almost identical to those involving good faith and dismissal under § 1307(c)”).

115The repayment amount refers to the pro rata rate. Suppose a debtor’s chapter 13 plan proposes she pay her two general unsecured creditors (“creditor 1” and “creditor 2”) $300 over the life of the plan. If creditor 1 has an allowed claim of $5,000, and creditor 2 has an allowed claim of $10,000, then the total general unsecured debt is $15,000. The $300 payment represents 2% of the total general unsecured debt. Thus, each creditor would receive a pro rata payment of 2% of its allowed claim. The result is creditor 1 receives $100, and creditor 2 receives $200.

116See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 80 (1st Cir. 2012) (noting it is “colloquially known as a ‘fee-only’ plan”).

117See Smooke, supra note 85, at 450–54.

118See In re Buck, 32 B.R. 13, 18, & n.7 (Bankr. D. Mass. 2010), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014).

119See Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 658 (S.D. Ga. 1981).

120Brown v. Gore (In re Brown), 742 F.3d 1309, 1314 (11th Cir. 2014).

121See, e.g., Puffer, 674 F.3d at 80–81 (describing fee-only plans as those that leave “the general [unsecured] creditors holding an empty (or nearly empty) bag”) (emphasis added). Compare id. at 80 (involving a plan payment of “$300 (or about 2% of the roughly $15,000 owed by the debtor)”), and Buck, 432 B.R. at 18 n.7 (noting the “Attorney Fee-Only” plan actually “provided a [de minimis] dividend to unsecured creditors”), with Deans v. O’Donnell (In re Deans), 692 F.2d 968, 969 (4th Cir. 1982) (involving plan where general unsecured creditors received nothing).

122See Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012) (involving a trustee challenge that the bankruptcy court erroneously awarded debtor’s attorney a fee amounting to “almost the entire amount paid to the Trustee”). One court even used the term “fee-only” to refer to two chapter 13 plans proposing general unsecured creditor repayments of 16% and 18%. In re Jackson, No. 11-42528-13, 2012 WL 909782, at *1–2, 4–7 (Bankr. N.D. Ala. Mar. 16, 2012), aff’d sub nom. Brown v. Gore (In re Brown), 742 F.3d 1309, 1316 (11th Cir. 2014). Fee-only analysis may have been used because the court concluded the debtors’ primary motivation for using chapter 13 instead of chapter 7 was to finance their attorneys’ fees over time. Also, at least one of the plans would not begin funding unsecured creditors until almost halfway through the duration of the plan. Id. at *1–2.

123See Ingram v. Burchard, 482 B.R. 313, 316–17 (N.D. Cal. 2012); In re Molina, 420 B.R. 825, 826 (Bankr. D.N.M. 2009).

124See, e.g., Ingram, 482 B.R. at 316; In re Molina, 420 B.R. at 826.

125In re Barnes, No. 12-06613-8, 2013 WL 153848, at *1–2 (Bankr. E.D.N.C. Jan. 15, 2013).

126Brown, 742 F.3d at 1311, 1314.

127Barnes, 2013 WL 153848, at *1–2. The early termination language in that case was as follows:This [c]hapter 13 [p]lan will be deemed complete and shall cease and a discharge shall be entered, upon payment to the Trustee of a sum sufficient to pay in full: (A) [a]llowed administrative priority claims, including specifically the Trustee’s commissions and attorneys’ fees and expenses ordered by the Court to be paid to the Debtor’s Attorney, (B) allowed secured claims (including but not limited to arrearage claims), excepting those which are scheduled to be paid directly by the Debtor “outside” the plan, (C) [a]llowed unsecured priority claims, (D) [c]osign protect consumer debt claims (only where the Debtor proposes such treatment), (E) [postpetition] claims allowed under 11 U.S.C. § 1305, (F) [t]he dividend, if any, required to be paid to non-priority general unsecured creditors (not including priority unsecured creditors) pursuant to 11 U.S.C. § 1325(b)(1)(B), and (G) [a]ny extra amount necessary to satisfy the “liquidation test” as set forth in 11 U.S.C. § 1325(a)(4).Id.

128See 11 U.S.C. § 1325(b)(1)(B) (2012).

129Barnes, 2013 WL 153848; In re Mathis, No. 12-05618-8, 2013 WL 153833 (Bankr. E.D.N.C. Jan. 15, 2013); In re Tedder, No. 12-06232-8, 2013 WL 145416 (Bankr. E.D.N.C. Jan. 14, 2013).

130Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *1.

131Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *1.

132Barnes, 2013 WL 153848, at *2; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *2.

133Barnes, 2013 WL 153848, at *1; Mathis, 2013 WL 153833, at *1; Tedder, 2013 WL 145416, at *13.

134Barnes, 2013 WL 153848, at *12; Mathis, 2013 WL 153833, at *12; Tedder, 2013 WL 145416, at *12–13.

135Barnes, 2013 WL 153848, at *12–13; Mathis, 2013 WL 153833, at *12–13; Tedder, 2013 WL 145416, at *13.

136Barnes, 2013 WL 153848, at *12; Mathis, 2013 WL 153833, at *12; Tedder, 2013 WL 145416, at *12.

137See generally Brown v. Gore (In re Brown), 742 F.3d 1309 (11th Cir. 2014).

138See infra Part II.B.3.

139Brown, 742 F.3d at 1311.

140Id.

141Id. at 1311.

142See supra note 52 and accompanying text.

143See In re Lattimore, 69 B.R. 622, 623–26 (Bankr. E.D. Tenn. 1987) (also finding that the excessive payment failed the § 1325(a)(6) requirement that the debtor will be able to complete all plan payments).

144See In re Greer, 60 B.R. 547, 554 (Bankr. C.D. Cal. 1986).

145Compare In re Okosisi, 451 B.R. 90, 102–03 (Bankr. D. Nev. 2011) (concluding under a totality standard that no payments to unsecured creditors is insufficient for finding bad faith, especially in this case, where “[a]ll of the [d]ebtor’s disposable income, and then some, is devoted to the plan”), with In re Jackson, No. 11-42528-13, 2012 WL 909782, at *4 (Bankr. N.D. Ala. Mar. 16, 2012) (noting most courts find fee-only plans to be per se bad faith), and In re Arlen, 461 B.R. 550, 554 (Bankr. W.D. Mo. 2011) (holding that fee-only plans are per se bad faith as “inconsistent with the purpose and spirit of [c]hapter 13” and failing “to understand how a [fee-only plan] . . . benefits anyone other than counsel”).

146Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 79 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012).

147Puffer, 674 F.3d at 80.

148Id.

149Id.

150Id.

151Id. at 81.

152Id. at 82.

153Id. at 83.

154Id.

155Id. (citing Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 1990)).

156Id.

157Id.

158In re Puffer, 478 B.R. 101, 101, 107 (Bankr. D. Mass. 2012).

159Id. at 107.

160Id.

161Id. at 107–08.

162Id.

163See supra notes 94–102 and accompanying text.

16411 U.S.C. § 707(b)(2)(B) (2012) (emphasis added). Section 707(b)(1) provides for a chapter 7 case dismissal or conversion to chapter 11 or 13 upon a finding that “the granting of relief would be an abuse of the provisions of this chapter.” Id. § 707(b)(1). Section 707(b)(2) provides that abuse is presumed if a debtor fails the means test. Id. § 707(b)(2).

165See id. § 707(b)(2)(B) (setting forth detailed requirements for showing special circumstances to rebut the abuse presumption).

166Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012).

167Id. at 674.

168Id.

169Id.

170Id.

171Id.

172Id.

173Id.

174Id. at 675–76.

175Id. at 675.

176Brown v. Gore (In re Brown), 742 F.3d 1309 (11th Cir. 2014).

177Supra notes 139–39 and accompanying text.

178Brown, 742 F.3d at 1311. The debtor filed the plan prior to the creditors’ deadline for filing claims, and ultimately, only three creditors filed claims, representing less than 10% of the total debt owed. “The bankruptcy court speculated that few ‘creditors bothered to file claims perhaps because the likelihood of any meaningful payments was not feasible’ under Brown's meagre budget, and any ‘distribution from the trustee will be of little consequence.’” Id.

179Id.

180Id. at 1318.

181Id.

182Id. at 1313–19.

183Id. at 1318–19.

184Id. at 1318.

185See id. at 1317–18.

186See infra Part III.C.

187When this study refers to coding for factors or other data points, “coding” means to account for a variable in a quantifiable way, such as assigning the court’s ruling on the good faith issue (one of the variables) a set of values. For example, the ruling on good faith is a simple binary variable: good or bad.

188See supra Part I.B.

189Diane M. Allen, Annotation, Effect, on “Good-Faith” Requirement of § 1325(a)(3) of Bankruptcy Code of 1978 (11 USCS § 1325(a)(3)) for Confirmation of Chapter 13 Plan, of Debtor’s Offer of Less Than Full Repayment to Unsecured Creditors, 73 A.L.R. Fed. 10, 13 (1985).

190Placing a phrase in parentheses ensures that the search will only retrieve cases with the exact phrase, “good faith,” as opposed to any case that merely contains “good” and “faith” somewhere in the text.

191This was done in WestlawNext’s “search within results” feature and inputted as: “fee only” or “fee centric” or “zero payment.” These singular terms also retrieve all plural and possessive forms, as well as hyphenations (e.g., “fee-only”).

192See supra text accompanying notes 116–19.

193In the Key Numbering System for Westlaw Headnotes, key number 51k3710 is entitled “Amount of Repayment; De Minimis Repayment.”

194The exclamation point is a root expander and will retrieve any case that contains the word in front of the exclamation point or its variant, as long as the variant contains at least the root word. For example, using “attorney!” will retrieve “attorneys” and “attorney’s” in addition to “attorney.” The use of “receiv!” instead of “receive!” ensures retrieval of “receiving” as well. This terms and connectors string retrieves any case where at least one of the words or its variant in the first parenthetical appears in the text within six words of any word or its variant within the second parenthetical.

195Sikes v. Crager (In re Crager), 691 F.3d 671 (5th Cir. 2012).

196Id. at 675–76.

197Id. at 675.

198Id.

199As defined by this Comment, fee-only plans are those with a 0% to 2% repayment, and low percentage plans are those with a greater than 2% but less than or equal to 10% repayment. See supra Part II.A.

200For the general unsecured creditor repayment, this means that either the case listed the percentage or contained sufficient, unambiguous information—the total amount of general unsecured debt and the proposed repayment on those claims—to calculate the percentage. See, e.g., In re Weiser, 391 B.R. 902, 910 (Bankr. S.D. Fla. 2008) (“proposing to pay approximately 5% of the total unsecured debt over five years”).

201See supra note 115.

202See 11 U.S.C. §§ 330(a)(4)(B), 503(b)(2), 507(a)(2), 1322(a)(2) (2012). Section 1322(a)(2) states that a chapter 13 plan “shall provide for the full payment . . . of all claims entitled to priority under section 507.” Id. § 1322(a)(2). Section 507(a)(2) lists as a priority claim “administrative expenses allowed under section 503(b).Id. § 507(a)(2). Section 503(b)(2) lists as an allowed administrative expense “compensation and reimbursement awarded under section 330(a).Id. § 503(b)(2). Section 330(a)(4)(B) states, “[i]n a . . . chapter 13 case . . . the court may allow reasonable compensation to the debtor’s attorney [with certain qualifications].” Id. § 330(a)(4)(B).

203See, e.g., In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007).

204Lupica, supra note 56, at 83 & n.141 (reporting that 6.8% of pre-BAPCPA chapter 13 filings and 4.9% of post-BAPCPA filings contained “an attorney of record on the docket listing, but there was no fee paid”).

205For example, some cases may discuss a plan proposal with one or more amendments. The opinion may have been unclear on the contents of the final plan or under which amended version it is analyzing good faith, For example, In re Oliver, 186 B.R. 403, 405–06 (Bankr. E.D. Va. 1995), involved a three-year plan proposing approximately a 10% repayment to unsecured creditors—qualifying for this study as low percentage plan. The debtor orally amended the plan to five years, promising a roughly 17% repayment—thus taking the plan outside the range of this study. Then, when analyzing good faith, the court seemed to ignore the oral modification and assessed only the original three-year plan proposal. Id. This case was excluded from this study.

206Supra note 103 and accompanying text.

207See Estus, 695 F.2d at 317.

208See In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992).

209For example, suppose the text of the opinion cites to authority with a factor listing, but there is also an express listing of factors from another authority in a footnote. In that circumstance the study counted the actual list in the footnote, not the list from the text citation. See, e.g., In re Sanchez, No. 13-09-10955, 2009 WL 2913224, at *2 n.3 (Bankr. D.N.M. May 19, 2009).

210Compare In re Thomas, 443 B.R. 213, 217–19 (Bankr. N.D. Ga. 2010) (not including distinct sections), with In re Lancaster. 280 B.R. 468, 480–82 (W.D. Mo. 2002) (including distinct, numbered paragraphs for the discussion of each factor).

211But many opinions do analyze good faith under a distinct, identifiable heading. See, e.g., Thomas, 443 B.R. at 217 (using “Good Faith” as a heading). Others did not, but this study only included such cases when the analysis of good faith was clearly identifiable. See, e.g., In re Molina, 420 B.R. 825, 827–33 (Bankr. D.N.M. 2009) (containing only an “Analysis” heading, but included in the study because discussion of good faith was easily identifiable).

212See United States v. Smith (In re Smith), 199 B.R. 56, 59 (N.D. Okla. 1996). Factor 1 was coded in this case due to the following: “The fact that the unsecured claim was previously not discharged, that the Appellees had previously filed under [c]hapter 7, and that Appellant’s unsecured claims will receive a [2%] pro rata payment does not mean that the Bankruptcy Court’s finding that the Plan was filed in good faith is clearly erroneous.” Id. at 59 (emphasis added).

213In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007) (holding that a chapter 13 “plan that proposes to pay 0% to creditors when a debtor could pay substantially more is not a plan proposed in good faith”).

214Id. at 869.

215As another example of coding for Factor 1 and Factor 8, see In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012) (finding bad faith in a fee-only plan involving nearly $200,000 of general unsecured debt where the debtor proposed to retain a vacation time share through monthly payments of $480, and noting that “chapter 13 is . . . a bargain between debtors and creditors” and that the plan “tilts so dramatically in the debtors’ favor as to cause the plan to fail the test of good faith”).

216In re Namie, 395 B.R. 594, 597 (Bankr. D.S.C. 2008). Notwithstanding payment of the entire unsecured portion of the mortgage claim, the total repayment on general unsecured claims was only 1%. Id. at 596.

217See supra Part I.C.1.

21811 U.S.C. § 1325(b)(1)(B) (2012).

219See, e.g., Ingram v. Burchard, 482 B.R. 313, 322 (N.D. Cal. 2012) (listing “unsecured creditors would receive the same dividend they would have if the case had been filed as a Chapter 7,” as a factor that favored plan confirmation).

22011 U.S.C. § 1322(d).

221See supra Part II.A.1.

222E.g., In re Lavilla, 425 B.R. 572, 578–79 (Bankr. E.D. Ca. 2010) (citing In re Paley, 390 B.R. 53, 56, 59 (Bankr. N.D.N.Y. 2008)). See also supra Part II.A.1.

223See Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992) (“[T]he expected duration of the [c]hapter 13 plan . . . .”); Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 888 (11th Cir. 1983) (“[T]he probable or expected duration of the debtor’s [c]hapter 13 plan . . . .”); Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (“[T]he period of time payment will be made . . . .”).

224But see In re Tobiason, 185 B.R. 59, 63–64 (Bankr. D. Neb. 1995). In this case the objecting creditors put the plan’s duration at issue under the good faith standard, and the court discussed the merits of the objection by turning to the statutory requirements for plan duration. Id. at 63–64. In this circumstance, the study coded for Factor 3.

225In re Williams, 231 B.R. 280, 282 (Bankr. S.D. Ohio 1999) (emphasis added).

226See supra Part II.A.1.

227United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982).

228Barrett, 964 F.2d at 592.

229Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982).

230In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992).

231Solomon v. Cosby (In re Solomon), 67 F.3d 1128, 1134 (4th Cir. 1995).

232See In re Ault, 271 B.R. 617, 620 (Bankr. E.D. Ark. 2002) (citations omitted). The court announced as separate factors the types of debt sought to be discharged and also whether a debt would be non-dischargeable in chapter 7. Id. Yet, the Eighth Circuit cases to which it attributes these two factors actually treat them as one. Estus, 695 F.2d at 317; Ault, 271 B.R. at 620 (citing Handeen v. LeMaire (In re LeMaire), 898 F.2d 1346, 1349 (8th Cir. 1990)).

233In re Weiser, 391 B.R. 902, 909–10 (Bankr. S.D. Fla. 2008) (discussing at length the origin of debt from a mortgage scheme in which the debtors were probably participating, but at least behaving “recklessly”).

234See, e.g., In re Keach, 225 B.R. 264, 269 (Bankr. D.R.I. 1998) (finding bad faith where “nearly all of the Debtor’s pre-[c]hapter 7 nondischargeable debt arose from his fraudulent actions; claims on which he now proposes to pay only a minimal dividend”).

235In re Smith 286 F.3d 461, 463–64 (7th Cir. 2002).

236Id. at 467.

237Id. (internal quotation marks omitted).

238See Solomon v. Cosby (In re Solomon), 67 F.3d 1128, 1134 (4th Cir. 1995).

239See Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983) (citation omitted).

240See, e.g., In re Paley, 390 B.R. 53, 54–55, 59 (Bankr. N.D.N.Y. 2008) (noting that two consolidated cases—each involving previous chapter 7 discharges—were, “[r]educed to their cores . . . two cases with debtors ineligible for [c]hapter 7 discharges seeking another round of debt forgiveness”).

241See, e.g., id. at 59–60 (citations omitted) (“These cases, basically [c]hapter 7 cases hidden within [c]hapter 13 petitions, blur the distinction between the chapters into a meaningless haze. To allow them to go forward would, in effect, judicially invalidate § 727(a)(8)’s requirement of an eight year hiatus between [c]hapter 7 discharges and replace it with either the four year break required by § 1328(f)(1), or the two year gap mandated by § 1328(f)(2).”).

242See In re Hurt, 369 B.R. 274, 281–82 (Bankr. W.D. Va. 2007) (finding bad faith when two previous chapter 13 filings were dismissed due to default); In re Thornes, 386 B.R. 903, 910 (Bankr. S.D. Ga. 2007) (finding bad faith in third chapter 13 filing when debtor failed to show a substantial change in conditions after previous two cases were dismissed).

243“Chapter 20” refers generally to successive filings of 1) a chapter 7 plan and 2) a subsequent chapter 13 plan “to further restructure secured debt”—often in the form of lien stripping—or deal with debt that is nondischargeable in chapter 7 but is dischargeable in chapter 13. Lawrence Ponoroff, Hey the Sun Is Hot and the Water’s Fine: Why Not Strip Off That Lien?, 30 Emory Bankr. Dev. J. 13, 17 n.18 (2013). See also In re Cushman, 217 B.R. 470, 473, 476–78 (Bankr. E.D. Va. 1998) (citation omitted) (describing chapter 20 as “a chapter 13 case brought while the ink on the debtor’s chapter 7 discharge is just barely dry,” and finding bad faith when, during chapter 7 proceedings, the debtor converted a car lease into an installment purchase agreement, secured by the car, and then filed for chapter 13 months later to strip down the lien—that is, discharge the unsecured portion of the debt).

244See, e.g., Fisette v. Keller (In re Fisette), 455 B.R. 177, 184–86 (B.A.P. 8th Cir. 2011). See generally Ponoroff, supra note 243 (providing a thorough analysis of lien stripping in bankruptcy).

24511 U.S.C. § 1328(f) (2012) (rendering chapter 13 debtors ineligible for a discharge if they received a discharge under chapters 7, 11, or 12 within four years prior to filing a chapter 13 petition).

246See Bryan J. Hall, Stripping Liens to Save Their Homes: Debtors’ Options to Reduce Mortgage Debt in Bankruptcy, Fed. Law., Jan./Feb. 2013, at 56 (discussing the split) (citing Fisette v. Keller (In re Fisette), 455 B.R. 177, 185–86 (B.A.P. 8th Cir. 2011) (in a chapter 20 case, holding that modifying a wholly unsecured lien in chapter 13 is not conditioned on eligibility for a discharge); In re Orkwis, 457 B.R. 243, 250 (Bankr. E.D.N.Y. 2011) (in a chapter 20 case, holding that a wholly unsecured lien may not be avoided in chapter 13 unless the debtor receives a discharge in the chapter 13 case)).

247In re Keach, 225 B.R. 264, 267 (Bankr. D.R.I. 1998) (citations omitted).

248Ingram v. Burchard, 482 B.R. 313, 319 (N.D. Cal. 2012) (citation omitted).

249See Johnson, supra note 98, at 378–79.

250See In re Shelton, 370 B.R. 861, 868-69 (Bankr. N.D. Ga. 2007); Baxter v. Johnson (In re Johnson), 346 B.R. 256, 261-62 (Bankr. S.D. Ga. 2006).

251In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992) (listing “whether the debtor has been forthcoming with the bankruptcy court and the creditors”); Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 2001) (listing “the accuracy of the plan’s statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court”) (quoting United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982)); In re Ault, 271 B.R. 617, 619-20 (Bankr. E.D. Ark. 2002) (listing “whether the debtor has accurately stated his debts and expenses on his bankruptcy statements and schedules” and “whether the debtor has made any fraudulent misrepresentation in connection with the case to mislead the Bankruptcy Court or his creditors”).

252Johnson v. Vanguard Holding Corp. (In re Johnson), 708 F.2d 865, 868 (2d Cir. 1983) (quoting Barnes v. Whelan (In re Barnes), 689 F.2d 193, 200 (D.C. Cir. 1982)).

253In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007).

254Id.

255In re Ristic, 142 B.R. 856, 860 (Bankr. E.D. Wis. 1992); see also id. at 860 n.3.

256Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012).

257See Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012); In re Corino, 191 B.R. 283, 289 (Bankr. N.D.N.Y. 1995) (listing medical costs as an example of special circumstances in the court’s list of factors).

258In re Arlen, 461 B.R. 550, 555 (Bankr. W.D. Mo. 2011); see also In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007) (“Absent disability, Debtor’s age . . . or other extenuating circumstances, foregoing or substantially reducing retirement contributions for the length of the plan is unlikely to unreasonably impair Debtor’s ability to obtain his fresh start.”).

259E.g., Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992); In re Farmer, 186 B.R. 781, 783 (Bankr. D.R.I. 1995).

260United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982) (“[T]he amount of the proposed payments and the amount of the debtor’s surplus….”).

261In re Thomas, 443 B.R. 213, 217 (Bankr. N.D. Ga. 2010) (citations omitted).

262Soc’y Nat’l Bank v. Barrett (In re Barrett), 964 F.2d 588, 592 (6th Cir. 1992) (“[T]he amount of payment offered by debtor as indicative of the debtor’s sincerity to repay the debt . . . .”).

263See, e.g., In re McDonald, 437 B.R. 278, 280 (Bankr. S.D. Ohio 2010).

264Compare In re Spruch, 410 B.R. 839, 840–41, 844 (Bankr. S.D. Ind. 2008) (finding good faith where the debtor had a statutory disposable income of negative $1,311 but proposed a monthly payment plan of $1,900), with In re McDonald, 437 B.R. at 28081, 293 (finding bad faith despite debtor’s statutory disposable income of negative $1,239 and a proposed monthly payment plan of $5,000 for 60 months).

265 In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007). Unsurprisingly, the court found this plan to be in bad faith. Id. at 567.

266In re Klaven, No. 11-41677, 2012 WL 2930865, at *1 (Bankr. D. Mass. July 18, 2012).

26711 U.S.C. § 1325(b)(1)(B) (2012); see Hamilton v. Lanning, 560 U.S. 505, 509, 524 (2010) (holding that projecting future disposable income is “forward-looking” and “may account for changes in the debtor’s income or expenses that are known or virtually certain at the time of confirmation”).

268See In re Dunning, 157 B.R. 51 (Bankr. W.D.N.Y. 1993) (finding bad faith where self-employed sales representative’s earnings significantly increased but only proposed a 1% repayment to unsecured creditors); In re Dos Passos, 45 B.R. 240, 243 (Bankr. D. Mass. 1984) (finding good faith in dentist’s chapter 13 plan where, “[a]lthough the [10% repayment to unsecured creditors] is low and the debtor is a skilled professional, his past employment history is not marked by success”).

269United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982).

270Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983).

271Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982).

272See, e.g., In re Molina, 420 B.R. 825, 828 (Bankr. D.N.M. 2009) (applying Factor 8 by stating that the “[d]ebtor’s monthly surplus is $50, exactly what she is committing to the plan,” and applying Factor 9 by stating that from the schedules filed, the debtor “did not expect any increases or decreases in income or expenses,” and that the debtor’s job and age did “not suggest the likelihood of a significant increase in income”).

273See, e.g., id.

274E.g., In re Baird, 234 B.R. 546, 553 (Bankr. M.D. Fla. 1999) (“At the confirmation hearing, [d]ebtor appeared to have regained much of his health and now, according to his testimony and Memorandum, is hopeful of gaining employment in his area of his expertise in the near future…. [T]he Court finds [d]ebtor in a position to substantially increase his payment to creditors throughout the life of his plan.”).

27511 U.S.C. § 528(a) (2012) (stating in part, “[a] debt relief agency shall . . . execute a written contract with [the debtor] that explains clearly and conspicuously . . . the fees or charges for [services rendered], and the terms of payment”).

276Lupica, supra note 56, at 39.

277Id. at 40; see also Kennedy, Lantin, & Heilig, supra note 68, at 4–6. Nevertheless, courts may still scrutinize a “presumptively reasonable” fee. See Lupica, supra note 56, at 40–41 & n.58; see also, e.g., In re Debtor’s Attorney Fees in Chapter 13 Cases, 374 B.R. 903, 906–09 (Bankr. M.D. Fla. 2007) (establishing, sua sponte, a presumptively reasonable fee plan but also allowing any party in interest to object to the fee within 10 days of the fee award).

278See, e.g., Sikes v. Crager (In re Crager), 691 F.3d 671, 675 (5th Cir. 2012).

279See In re Steinhorn, 27 B.R. 43, 45 (Bankr. S.D. Fla. 1983) (finding bad faith where court noted “that these debtors were able to pay their attorney $1,000 before they filed this petition, more than they propose to pay all their creditors for the next seven months”).

280In re Arlen, 461 B.R. 550, 554–55 (Bankr. W.D. Mo. 2011) (coding for Factor 10 when the court, while analyzing the good faith of the plan, notes, “[t]he fees charged by counsel in this case are approximately twice what would be charged for [c]hapter 7 proceedings for these [d]ebtors”).

281United States v. Estus (In re Estus), 695 F.2d 311, 317 (8th Cir. 1982).

282See In re Loper, 367 B.R. 660, 661 (Bankr. D. Colo. 2007) (finding no undue burden on trustee).

283Only 2 cases in this study’s data set discussed this factor. Ingram v. Burchard, 482 B.R. 313, 322 (N.D. Cal. 2012); In re Lancaster, 280 B.R. 468, 482 (Bankr. W.D. Mo. 2002).

284Estus, 695 F.2d at 317.

285Id.

286In re Love, 957 F.2d 1350, 1357 (7th Cir. 1992).

287In re Aprea, 368 B.R. 558, 568 (Bankr. E.D. Tex. 2007).

288Georgia R.R. Bank & Trust Co. v. Kull (In re Kull), 12 B.R. 654, 659 (S.D. Ga. 1981).

289Estus, 695 F.2d at 317; see also Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983) (almost identical).

290Love, 957 F.2d at 1357.

291In re Wilcox, 251 B.R. 59, 65 (Bankr. E.D. Ark. 2000) (citation omitted).

292In re Vick, 327 B.R. 477, 486 (Bankr. M.D. Fla. 2005).

293Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426, 431 (7th Cir. 1982) (internal quotation marks omitted).

294See, e.g., In re Zellmer, 465 B.R. 517, 524–25 (Bankr. D. Minn. 2012) (internal quotation marks omitted) (noting first that the central focus of good faith analysis is whether the plan is an “abuse of the provisions, purpose or spirit of [c]hapter 13,” then listing “whether [the debtor] has unfairly manipulated the [] Code” as a factor, and finally applying that factor to the case).

295See Meyer v. Lepe (In re Lepe), 470 B.R. 851, 858–59 (B.A.P. 9th Cir. 2012) (citation omitted).

296In re Jacobs, 102 B.R. 239, 242 (Bankr. E.D. Okla. 1988) (quoting In re Sanders, 28 B.R. 917, 922 (Bankr. D. Kan. 1983)) (internal quotation marks omitted).

297In re Dicey, 312 B.R. 456, 460 (Bankr. D.N.H. 2004) (quoting In re Virden, 279 B.R. 401, 409 (Bankr. D. Mass. 2002)) (internal quotation marks omitted).

298This means that with 95% certainty, the odds ratio could be as low as 0.632 and as high as 0.960.

299With 95% certainty, this figure could be as low as 1.4% and as high as 31.3%.

300One possible limitation to this conclusion occurs when a court chooses to discuss all the good faith factors as a matter of course. However, this was a rare occurrence in this study’s data set.

301See Ingram v. Burchard, 482 B.R. 313 (N.D. Cal. 2012).

302In re Molina, 420 B.R. 825, 829 & n.11 (Bankr. D.N.M. 2009) (finding this factor to support good faith where “[t]here appear to be no special circumstances driving this filing (other than the collection action); the cost of caring for the grandson appears to be a relatively small incremental one over what would be [the] [d]ebtor’s expenses for herself”).

303Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012).

304Ingram, 482 B.R. at 323; In re Arlen, 461 B.R. 550, 555 (Bankr. W.D. Mo. 2011); In re McDonald, 437 B.R. 278, 293 (Bankr. S.D. Ohio 2010); In re Pearson, 398 B.R. 97, 102 (Bankr. M.D. Ga. 2008); In re Shelton, 370 B.R. 861, 868–69 (Bankr. N.D. Ga. 2007); In re Lancaster. 280 B.R. 468, 482 (W.D. Mo. 2002).

30511 U.S.C. § 1325(b)(1)(B) (2012).

306See, e.g., In re Keach, 225 B.R. 264, 269 (Bankr. D.R.I. 1998) (discussing Factor 9 and Factor 5 in a chapter 13 plan seeking to discharge debt that was nondischargeable in a recent chapter 7 case).

307See Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 82–83 (1st Cir. 2012); Sikes v. Crager (In re Crager), 691 F.3d 671, 675–77 (5th Cir. 2012).

308See generally Ted Janger, Crystals and Mud in Bankruptcy Law: Judicial Competence and Statutory Design, 43 Ariz. L. Rev. 559, 560–61 (2001) (citing Carol M. Rose, Crystals and Mud in Property Law, 40 Stan. L. Rev. 577 (1988)) (discussing bright-line and discretionary rules in bankruptcy law in light of factors such as judicial competency).

309See, e.g., Robert W. Hamilton, Jonathan R. Macey & Douglas K. Mill, Corporations Including Partnerships and Limited Liability Companies 213–14 (11th ed. 2010) (discussing the criticism of the vague standard for corporate veil-piercing cases, for which some courts have articulated multiple factors to consider).

310See In re Mathis, No. 12-05618-8, 2013 WL 153833, at *9 (Bankr. E.D.N.C. Jan. 15, 2013) (discussing Congress’s silence on defining “good faith” in the chapter 13 statute); In re Buck, 432 B.R. 13, 20 (Bankr. D. Mass. 2010) (quoting Keach v. Boyajian (In re Keach), 243 B.R. 851, 856 (B.A.P. 1st Cir. 2000)) (noting the lack of a definition, courts’ varying approaches to interpretation, and that “Congress presumably used the phrase ‘good faith’ in its ordinary sense”), vacated sub nom. Buck v. Pappalardo (In re Buck), No. 08-43918, 2014 WL 1347216 (D. Mass. April 2, 2014).

311Alt v. United States (In re Alt), 305 F.3d 413, 419 (6th Cir. 2002) (citations omitted); In re Thomas, 443 B.R. 213, 217 (Bankr. N.D. Ga. 2010) (citing Kitchens v. Georgia R.R. Bank & Trust Co. (In re Kitchens), 702 F.2d 885, 889 (11th Cir. 1983)).

312See generally Janger, supra note 308, 43 Ariz. L. Rev. 559.

313See id.

314Id. at 564–65.

315Id. at 603–04 (citing Gillian K. Hadfield, Judicial Competence and the Interpretation of Incomplete Contracts, 23 J. Legal Stud. 159 (1994)). Hadfield’s research suggests that in absence of an express term in a contract, parties tend to operate at a suboptimal level of cooperation, because the individual costs of cooperation outweigh the shared benefits. Good faith clauses try to solve this problem by promoting a more optimal level of effort by introducing the risk of liability under the standard. Since they lack full information, judges are unable to identify the optimal level of effort for a given contract. Thus, instead of judicial searching for a bright-line rule, a muddy good faith standard promotes efficiency across “a broader range of contractual types and reduce[s] the costs associated with overcompliance.” Id.

316Id. at 604.

317Id. at 596–98.

318For the trustee and creditors, the likely calculus is comparing the litigation costs to the value of raising the objection. Assuming the trustee or creditor prevails, the value ranges from forcing the debtor to amend the plan, which may provide for an only slightly greater repayment, to effectively barring a discharge altogether. See 11 U.S.C. § 1307(c)(5) (2012) (on objection from the trustee or any party in interest, allowing the court to dismiss the case or convert to chapter 7 if confirmation is denied for any reason under § 1325, which includes for lack of good faith). Although, the Code provides the debtor with a broad right to convert the case to a chapter 7 proceeding, which if approved by the court, will likely result in a discharge. See id. § 1307(a).

319Janger, supra note 308, at 601.

320See Deans v. O’Donnell (In re Deans), 692 F.2d 968, 972 (4th Cir. 1982) (emphasis added) (quoting 9 Collier on Bankruptcy ¶ 9.20 at 319 (14th ed. 1978)) (following other circuits by defining good faith as a provision where “[a] comprehensive definition of good faith is not practical . . . the basic inquiry should be whether or not under the circumstances of the case there has been an abuse of the provisions, purpose, or spirit of [the Chapter] in the proposal or plan”).

321See, e.g., Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012); In re Barnes, No. 12-06613-8, 2013 WL 153848, at *10 (Bankr. E.D.N.C. Jan. 15, 2013).

322Sikes v. Crager (In re Crager), 691 F.3d 671, 675, 677 (5th Cir. 2012).

323Id. at 675–77.

324See supra Part II.B.1.

325See supra Part II.B.1.

326Only 26% of the total cases in this study’s data set passed the good faith test. See also supra note 79.

327This term is merely illustrative and, to the author’s knowledge, has not been used in this context anywhere else.

328Supra notes 164–64 and accompanying text.

329Anthony P. Cali, Note, The “Special Circumstance” of Student Loan Debt Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 52 Ariz. L. Rev. 473, 485–86 (2010) (citations omitted) (internal quotation marks omitted) (noting that many courts describe the special circumstances of § 707(b)(2)(B) as “effectively off limits for most debtors” and “uncommon, unusual, exceptional, distinct, peculiar, particular, additional or extra conditions or facts”); Lauren E. Tribble, Note, Judicial Discretion and the Bankruptcy Abuse Prevention Act, 57 Duke L.J. 789, 802–03 (2007).

330Berliner v. Pappalardo (In re Puffer), 674 F.3d 78, 83 (1st Cir. 2012).

331 S. Rep. No. 106-49, at 7 (1999) (report from the Senate Committee on the Judiciary); see also Cali, supra note 329, at 485 (discussing the legislative history of § 707(b)(2)(B)).

332See Lupica, supra note 56, at 40. Nevertheless, courts may still scrutinize a “presumptively reasonable” fee. Id. at 40–41 & n. 58; see also, e.g., In re Debtor’s Attorney’s Fees in Chapter 13 Cases, 374 B.R. 903, 903, 906–09 (Bankr. M.D. Fla. 2007) (establishing, sua sponte, a presumptively reasonable fee plan, but also allowing any party in interest to object to the fee within ten days of the fee award).

333Janger, supra note 308, at 601.

334Brown v. Gore (In re Brown), 742 F.3d 1309, 1318–19 (11th Cir. 2014); Puffer, 674 F.3d at 82; Sikes v. Crager (In re Crager), 691 F.3d 671, 675–76 (5th Cir. 2012).

335Puffer, 674 F.3d at 83.

Editor-in-Chief, Emory Bankruptcy Developments Journal; J.D. Candidate, Emory University School of Law (2014); B.S., United States Military Academy at West Point (2007). Above all, I am thankful to God for the blessing of each day. I would like to thank Professor Rafael Pardo for his invaluable help with this Comment. Without his facilitation of the statistical analysis for the empirical study, and his thoughtful and thorough guidance throughout the writing process, this Comment would not have been possible. I would like to thank the staff members and editors of the Emory Bankruptcy Developments Journal—particularly Patty Boxold, Tommy Ryan, Juan Mendoza, and Ben Roth—for their extensive editing and advisement. I also give thanks to my family for their unwavering support: to my wife Neda for her love and friendship every day; to my parents, aunt, and grandmother; and to my brother David for serving in our military and fighting to keep America safe. Lastly, and perhaps most importantly: Beat Navy.