§ 107.5     Special Circumstances: The Unusually Worthy or Needy Debtor
Revised:  June 7, 2004
CASES UPDATED: January 24, 2020
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 107.5, at ¶ ____, LundinOnChapter13.com (last visited __________).

Bankruptcy courts are occasionally moved to find good faith notwithstanding de minimis payment of unsecured claims when the Chapter 13 debtor has been the victim of extraordinary outside forces. After a fairly short time on the bench, bankruptcy judges have heard all the run-of-the-mill tales of woe. But most bankruptcy judges strive to remain human. When the debtor’s financial distress has been caused by great medical expenses or an accident at work or the death or sickness of a family member, these facts illuminate the debtor’s good faith in proposing a deep composition plan.1


1  See, e.g., In re Johnson, 262 B.R. 831, 839 (Bankr. D. Idaho 2001) (Debtor was an especially needy individual for good-faith purposes because of “very serious medical problems, including rheumatoid arthritis, crushed discs in his back and damaged discs in his neck, high blood pressure, and obesity. He also experiences ‘migraine syndrome,’ . . . . Mr. Johnson was deemed totally disabled by the Social Security Administration.”); Todd v. Railroad Fed. Credit Union (In re Todd), 181 B.R. 997 (Bankr. N.D. Ala. 1995) (Applying Kitchens v. Georgia Railroad Bank & Trust Co. (In re Kitchens), 702 F.2d 885 (11th Cir. 1983) factors and considering totality of the circumstances, plan was in good faith that proposed to pay unsecured creditors in full; the debtor had made all payments since the filing of the case, the debtor had substantial income from commissions as a real estate agent, the debtor had solved his domestic relations problems by divorce, the debtor’s cancer was in remission, the debtor had reliable transportation and the estimate of income and expenses was reasonable.); In re Oglesby, 161 B.R. 917 (Bankr. E.D. Pa. 1993) (On remand, court confirms fourth case by debtor with 11 dependent children and two dependent grandchildren where first case failed because of “inadequate counsel,” and second and third cases failed because the debtor became ill and was disabled to complete payments.); In re Fulton, 148 B.R. 838, 840 (Bankr. S.D. Tex. 1992) (Debtor recently undertook to support his daughter and the child care expenditures for her two children due to her divorce and return to school. “Debtor credibly testified that he was just barely able to keep up with his expenses. . . . Debtors’ Monthly Family Budget filed in his case is consistent with his testimony.”); In re Hughes, 98 B.R. 784 (Bankr. S.D. Ohio 1989) ($100 per month for three years toward judgment in excess of $100,000 is not bad faith where “the debtor, through no active fault of her own, finds herself faced with enormous debts because of the reprehensible conduct of her husband.”); In re Harmon, 72 B.R. 458 (Bankr. E.D. Pa. 1987) (0% plan is proposed in good faith where debtor is working two jobs and supporting three minor children.); In re Kazzaz, 62 B.R. 308 (Bankr. E.D. Va. 1986) (Court confirmed 16% plan compromising large claim that would be nondischargeable in a Chapter 7 case where one of the debtors could not read or write English, the debtors had no alternative to solve their financial problems and the debtors had been honest in presenting the case.); In re Raschke, 41 B.R. 182 (Bankr. W.D. Wis. 1984) (A debtor’s personal history and difficulties of speech overcome bad-faith objection to plan when accuracies and omission were apparent in the court documents.); Illinois Dep’t of Pub. Aid v. Jones, 31 B.R. 485 (Bankr. N.D. Ill. 1983) (Court confirms 10% plan when debtor is divorced with four children.). But see In re Haskell, 252 B.R. 236, 244 (Bankr. M.D. Fla. 2000) (Although the bankruptcy court “takes consideration of Debtor’s injuries,” including that the debtor was hurt and not able to work at his business selling and repairing boats, other evidence of lack of good faith overcame the debtor’s appeal.); In re Petersen, 228 B.R. 19, 26 (Bankr. M.D. Fla. 1998) (“The Court understands the loss of Debtor’s child. Further, the Court is painfully aware of the psychological effects litigation can cause and how litigation often leads to parties seeking bankruptcy protection. However, in this case, the circumstances surrounding Debtor’s supposed financial collapse leading to bankruptcy are questionable. The Court finds Debtor to have little integrity and even less sincerity in seeking bankruptcy protection for the purposes it is meant for.”).