Bobby Goddard v. Michael Burnett

Summarized by Timothy Anzenberger , Adams and Reese LLP
23 hours 4 min ago

Case Type:

Consumer

Case Status:

Affirmed

Citation:

25-1303 (4th Circuit, Apr 28,2026) Published

Tag(s):

Ruling:

The Fourth Circuit affirmed an order denying confirmation of a Chapter 13 plan, which proposed to pay off loans on three luxury vehicles while paying unsecured creditors less than 8 cents on the dollar. The Court held that technical compliance with the means test under § 1325(b) does not immunize a debtor's plan from the independent good-faith requirement of § 1325(a)(3), which requires courts to assess whether the plan would abuse the provisions, purpose, or spirit of Chapter 13.

Procedural context:

In 2023, the Debtor filed a Chapter 13 petition in the Eastern District of North Carolina. The Debtor proposed multiple plans for confirmation, none of which were confirmed. Finally, the Debtor filed a fourth plan, to which the Chapter 13 Trustee objected. The Trustee argued that the plan was not proposed in good faith under § 1325(a)(3) because it provided for minimal payment to unsecured creditors while permitting the Debtor to retain three recently purchased luxury vehicles. Following a hearing, the bankruptcy court agreed with the Trustee and denied confirmation, concluding that technical compliance with the means test under § 1325(b) did not obviate the court's obligation to evaluate whether the plan was proposed in good faith. The Debtor appealed, and the district court affirmed. The Debtor appealed to the Fourth Circuit, which unanimously affirmed in a published opinion.

Facts:

At the time of filing, the Debtor was earning $7,167 per month from his employment with the Department of Labor as a Veteran Employee Specialist, $2,748 per month in Army retirement income, and $2,353 per month in disability benefits from the Department of Veterans Affairs, for gross monthly income of $12,268 and take-home income of $9,589. The Debtor's wife, who did not file for bankruptcy, earned $4,189 per month, taking home $2,285. The debtor's income placed him in the above-median income status for purposes of Chapter 13. Petition, the Debtor purchased three luxury vehicles: a 2015 Chevrolet Corvette, on which he owed $33,865 and was paying $839 per month; a 2021 GMC Sierra 1500, on which he owed $44,811 and was paying $1,080 per month; and a 2022 Genesis G70, on which he owed $58,930 and was paying $1,141 per month. His monthly payments on the three vehicles totaled roughly $3,060. The Debtor also had approximately $84,700 in general unsecured debt, more than $35,000 of which was attributable to four personal loans he took out between December 2021 and November 2022 — around the time he purchased the three luxury vehicles. Indeed, he took out one of the personal loans the day before he purchased the Genesis G70. Because the Debtor was an above-median income debtor, his disposable income was calculated using the statutory means test. Under the means test, the Debtor was permitted to deduct from his monthly income his average mortgage payment of $2,543 and average monthly car loan payments totaling $2,521. When these amounts, together with other allowable expenses, were deducted from his income, the result was negative $234, and the Debtor reported that he had no disposable income to pay unsecured creditors. In his fourth proposed plan (the plan at issue on appeal) the Debtor proposed a 60-month payment period during which he would pay his mortgage directly and pay the Chapter 13 Trustee $3,070 per month for the first two months, then $3,700 per month thereafter. From that, the Trustee would pay $2,958 per month to the creditors on the three vehicle loans, along with several miscellaneous priority expenses. The Trustee calculated that, over the life of the five-year plan, only roughly $6,500 would be available for general unsecured creditors, which is approximately 7.7% of their claims. Under the proposed plan, after 60 months, all three vehicle loans would be paid off and the Debtor would own the vehicles free and clear, while more than $78,000 in unsecured debt would be discharged. The bankruptcy court found that the Debtor's testimony did not establish any practical necessity for retaining all three vehicles and that, based on the timing of the personal loans, The Debtor may have serviced the debts related to the vehicles with the very loans he was now seeking to discharge. The Debtor himself conceded that he "probably could have" remained current on his unsecured debt obligations pre-petition if he had reduced his obligations related to the vehicles. While the Debtor's plan technically passed the means test under Section 1325, the bankruptcy court concluded the Debtor's plan was simply not filed in good faith and so could not be confirmed. On appeal, the district court and Fourth Circuit agreed and affirmed.

Judge(s):

Niemeyer, Thacker, and Berner

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