Debtors Win Bankruptcy Cases Too

In a case filed before the Bankruptcy District Court of Rhode Island in January of 2013, Maribeth Cobb, a debtor, won her appeals case against the U.S. Trustee that filed an objection to the Chapter 13 plan she had made in the same court. This case illustrates how debtors sometimes win bankruptcy cases too.

English: Great seal of the state of Rhode Isla...

Great seal of the state of Rhode Island

Facts of Debtor’s Appeal in Bankruptcy Case

According to court documents, Maribeth Cobb had a disposable monthly income (DMI) of $1,094.99 to contribute to paying unsecured debts. Since Cobb’s current monthly income is above the applicable state median income for the debtor’s household size, the applicable plan commitment period for the debtor for a Chapter 13 plan is five years. Cobb’s unsecured debts totaled an amount that enabled her to make a plan to pay 100% of her unsecured debts in five years at $214.00 per month. The amount, substantially lower than her DMI, would allow her to stash back almost $60,000 if the extra money was not already earmarked for some type of secured loan for an asset she was trying to keep.

The U.S. Trustee contended that Maribeth Cobb made the plan in bad faith because she could have paid the debts off sooner, and either the case should be dismissed or a shorter payoff time with increased payments to match her DMI should be made.

Bankruptcy Court Ruling on Debtor’s Case

The Bankruptcy Court Judge did not agree with the U.S. Trustee. The Judge said, “There is no evidence before this Court regarding serious misconduct, unfair manipulation of the Bankruptcy Code or any factor raised by the Trustee alleging a lack of good faith other than the amount of the monthly payments the Debtor is committing to the Plan.” Since Maribeth Cobb did not violate the spirit of the bankruptcy laws in any other way, such as fraud, subterfuge or any other manipulative actions, the Judge could not penalize the debtor for following what was plainly written as her rights under the existing laws. The Judge said in conclusion, “While the Court does not particularly like the outcome, the Court is confined to the facts presented in this case. Those facts do not provide the Court with the authority to require the Debtor to pay her creditors in full over a shorter time period. The Trustee’s Objection is overruled, and the Plan may be confirmed.”

What Winning Bankruptcy Cases Means to New Filers

In the bankruptcy process, it is understood by those who work in the system that the bankruptcy laws are an ongoing work in progress. This means the laws can be very complicated and interpreted differently from one court jurisdiction to the next. That is why the bankruptcy system has bankruptcy courts and judges that can help to resolve differences of opinions between debtors, creditors, and trustees.

Differences of opinions on the law have to be ultimately resolved or nothing will ever get done. A Chapter 13 bankruptcy plan can be a very complicated thing within itself. If you plan on filing for bankruptcy protection, it is a good idea to consult with a bankruptcy lawyer that has experience within the bankruptcy framework you intend on filing. It is good news that debtors can win bankruptcy cases too. It is all a part of the process.




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