In re Diaz

586 B.R. 588

IN RE: Annette Marie DIAZ, Debtor.

CASE NO. 17–52761–CAG

United States Bankruptcy Court, W.D. Texas, San Antonio Division.

Signed May 14, 2018

J. Todd Malaise, Malaise Law Firm, San Antonio, TX.

Mary K. Viegelahn, San Antonio Chapter 13 Trustee, San Antonio, TX, for Trustee.

MEMORANDUM OPINION DENYING CONFIRMATION OF DEBTOR'S FIRST AMENDED CHAPTER 13 PLAN

CRAIG A. GARGOTTA, UNITED STATES BANKRUPTCY JUDGE

Came on to be considered the above-numbered bankruptcy case, and, in particular, the Chapter 13 Trustee's (the "Trustee") oral objection to confirmation of Debtor's First Amended Chapter 13 Plan (the "Objection").¹ The Court has subject matter jurisdiction over this proceeding under 28 U.S.C. §§ 157 and 1334. Venue is proper under 28 U.S.C. § 1408(1). This matter is referred to this Court under the District's Standing Order of Reference. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(L) (confirmation of plans) in which the Court may enter a final order. The Court notes that, under the Supreme Court's decision in Bullard v. Blue Hills Bank , ––– U.S. ––––, 135 S.Ct. 1686, 191 L.Ed.2d 621 (2015), this Court has the authority to hear and enter orders regarding a debtor's chapter 13 plan, but an order denying confirmation of a chapter 13 plan is not a final order unless the bankruptcy case is also dismissed. The Court finds that this is a contested matter as defined under Fed. R. Bankr. P. 9014. As such, the Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Bankr. P. 7052. The Court took this matter under advisement and finds that confirmation of Debtor's First Amended Plan is DENIED.

BACKGROUND

Debtor filed a chapter 13 petition for relief on December 1, 2017 (ECF No. 1). See 11 U.S.C. § 101 et seq. On the same day, Debtor filed her Schedules, Statement of Financial Affairs ("SOFA"), and Chapter 13 Plan (ECF Nos. 1 and 2). Debtor filed her Amended Schedules and First Amended Chapter 13 plan on February 13, 2018, two days before the confirmation hearing. (ECF Nos. 14–16). The Court considered confirmation of the Debtor's First Amended Chapter 13 Plan ("Plan") on February 15, 2018.² Pursuant to the District Form Chapter 13 Plan ("District Plan") used in the Western District of Texas, Debtor proposes to pay 100% of all of Debtor's allowed administrative, secured, and priority claims, and 12% of Debtor's nonpriority unsecured claims (ECF No. 16, p. 1–2). The proposed Plan payment is $1,440.00 for months 1–4 of the Plan and $1,505.00 for months 5–60 of the Plan. (Id. at p. 1).

The Court considered the Plan at the February 15, 2018 confirmation hearing wherein the Trustee made oral objections to the Plan. Trustee filed her Objection on March 1, 2018, in response to the Debtor's First Amended Chapter 13 Plan filed on February 13, 2018.

Trustee objected to the Plan because Debtor's counsel struck through Section 4.1 of the District Plan regarding the treatment of tax refunds. (ECF No. 16, p. 2). Trustee argued that Debtor could not strike through any of the provisions contained in the District Plan. The District Plan contains a non-standard provision that allows a debtor to add additional terms to the District Plan if the non-standard provision is contained in Section 8. In this case, Debtor indicated in Section 1.3 of the District Plan that there are non-standard provisions in Section 8 of the Plan, yet there are not any non-standard provisions listed in Section 8 of the Plan. As such, it is unclear what Debtor intended regarding any non-standard provisions. Moreover, with Debtor's striking of Section 4.1 of the Plan, it is unclear what Debtor's intentions are regarding the disposition of tax refunds. Trustee also contends that without the inclusion of Debtor's tax refund, Debtor's Plan is infeasible.

FINDINGS OF FACT

Debtor testified at the confirmation hearing. The Court admitted a number of exhibits, but Debtor's testimony focused on Debtor's tax returns and refunds.³ Debtor is single with two dependents. Debtor works as a medical assistant and earns $2,644.16 per month. Debtor's Schedule I (Statement of Income) pro-rates Debtor's refund for 2017 of $3,261.00 in the monthly amount of $272.00 per month.

DISTRICT FORM CHAPTER 13 PLAN

Bankruptcy courts have the statutory and rule making authority to propose and use local bankruptcy rules. The United States Supreme Court has "the power to prescribe by general rules the forms of process, writs, pleadings, and motions, and the practice and procedure in cases under title 11. Such rules shall not abridge, enlarge, or modify any substantive right." 28 U.S.C.A. § 2075 (2018).

Pursuant to Fed. R. Bank. P. 9029, bankruptcy courts may mandate local rules:

(a) Local bankruptcy rules

(1) Each district court acting by a majority of its district judges may make and amend rules governing practice and procedure in all cases and proceedings within the district court's bankruptcy jurisdiction which are consistent with—but not duplicative of—Acts of Congress and these rules and which do not prohibit or limit the use of the Official Forms. Rule 83 F.R.Civ.P. governs the procedure for making local rules. A district court may authorize the bankruptcy judges of the district, subject to any limitation or condition it may prescribe and the requirements of 83 F.R.Civ.P., to make and amend rules of practice and procedure which are consistent with—but not duplicative of—Acts of Congress and these rules and which do not prohibit or limit the use of the Official Forms. Local rules shall conform to any uniform numbering system prescribed by the Judicial Conference of the United States.

(2) A local rule imposing a requirement of form shall not be enforced in a manner that causes a party to lose rights because of a nonwillful failure to comply with the requirement.

(b) Procedure when there is no controlling law. A judge may regulate practice in any manner consistent with federal law, these rules, Official Forms, and local rules of the district. No sanction or other disadvantage may be imposed for noncompliance with any requirement not in federal law, federal rules, Official Forms, or the local rules of the district unless the alleged violator has been furnished in the particular case with actual notice of the requirement.

Under Fed. R. Bankr. P. 9029(a), bankruptcy courts may require local rules of bankruptcy procedure. Prior to this Court's implementation of the District Plan, the Bankruptcy Rules Committee allowed bankruptcy courts to either use a national form chapter 13 plan or adopt a form plan that must be used in all divisions within a judicial district.⁴ Further, should a bankruptcy court adopt a form chapter 13 plan, it must be formatted in accordance with Fed. R. Bankr. P. 3015.1 and include certain provisions contained in Rule 3015.1 :

Notwithstanding Rule 9029(a)(1), a district may require that a Local Form for a plan filed in a chapter 13 case be used instead of an Official Form adopted for that purpose if the following conditions are satisfied:

(a) a single Local Form is adopted for the district after public notice and an opportunity for public comment;

(b) each paragraph is numbered and labeled in boldface type with a heading stating the general subject matter of the paragraph;

(c) the Local Form includes an initial paragraph for the debtor to indicate that the plan does or does not:

(1) contain any nonstandard provision;

(2) limit the amount of a secured claim based on a valuation of the collateral for the claim; or

(3) avoid a security interest or lien;

(d) the Local Form contains separate paragraphs for:

(1) curing any default and maintaining payments on a claim secured by the debtor's principal residence;

(2) paying a domestic-support obligation;

(3) paying a claim described in the final paragraph of § 1325(a) of the Bankruptcy Code; and

(4) surrendering property that secures a claim with a request that the stay under §§ 362(a) and 1301(a) be terminated as to the surrendered collateral; and

(e) the Local Form contains a final paragraph for:

(1) the placement of nonstandard provisions, as defined in Rule 3015(c), along with a statement that any nonstandard provision placed elsewhere in the plan is void; and

(2) certification by the debtor's attorney or by an unrepresented debtor that the plan contains no nonstandard provision other than those set out in the final paragraph.

Pursuant to Rule 3015.1, this District issued its Consolidated Standing Order for the Adoption of a District Form Chapter 13 Plan on October 16, 2017, adopting a form chapter 13 plan to be used throughout the Western District of Texas. (Order # 17–02). The District Plan is attached to the Court's Standing Order and went into effect on November 1, 2017.

Section 4.1 of the District Plan states:

4. Tax Refunds and Annual Tax Returns

4.1 Tax Refunds.

All tax refunds received by Debtor (or either Debtor if a joint case) while the chapter 13 case is pending shall be allocated as set forth below:

1) The total amount of the aggregate tax refund(s) received for any tax period that exceeds $2,000.00 shall, upon receipt, be paid and turned over to the Trustee as additional disposable income and such amount shall increase the base amount of the Plan. The Plan shall be deemed modified accordingly, and the Trustee will file a notice of plan modification within 21 days of receipt of the tax refund;

2) This $2,000.00 annual limit shall apply to both joint-debtor and single-debtor cases;

3) The $2,000.00 otherwise retained by Debtor must first be applied to any Plan arrearages;

4) Notwithstanding subparagraph (1) above, Debtor may file a notice to retain the portion of the tax refund otherwise payable to the Plan under subparagraph (1) with twenty-one (21) day negative notice as set forth in Local Rule 9014(a) if, at the time of receipt of a refund, Debtor's Plan provides for the payment of 100% of allowed general unsecured claims within the term of this Plan. If the Trustee does not object

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