01-2149 In re: Edwin R. Smith

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“In an oral ruling, the court modified the Plan and then confirmed it. The court did so after stating that he ‘closely scrutinizes these cases to determine whether there – the plan is proposed in good faith.’ Bankr. Tr. at 75. The court was satisfied that Mr. Smith’s disclosures were accurate and that his pre-petition conduct did not warrant denial of confirmation: ‘I just have to make sure that this debtor puts all [his] disposable income into the plan.'”

“One could argue that implicit in the court’s above-quoted conclusion is a belief that the Plan as submitted by Mr. Smith was not in good faith and that it was only upon adjustment by the court that the Plan’s payout was sufficient to meet the good faith test. Or one could suppose that the court believed that Mr. Smith was padding his expenses, or understating his income, and adjusted the Plan accordingly. If the court did so believe, it would have been within its discretion to deny confirmation of the Plan. The likely result would have been to return the issue to Mr. Smith, to permit him to file an amended plan and then to return to court to seek confirmation. Essentially, the bankruptcy court skipped that intermediate step and adjusted the Plan in light of the information before him. Mr. Smith did not object to the Plan as adjusted by the court. Ms. Watson does not invite our attention to any evidence ignored or improperly weighed by the bankruptcy court. Our review of the evidence indicates no clear error on the part of the bankruptcy court.”

“The bankruptcy court’s adjustment of the Plan forecloses Ms. Watson’s good faith challenge. In order for Ms. Watson to prevail, she would need to combine the evidence of Mr. Smith’s pre-petition conduct with any discrepancies in Mr. Smith’s financial disclosures in the bankruptcy court. The court’s action increasing Mr. Smith’s payout under the Plan compensates for any irregularities or understatements in Mr. Smith’s proposed Plan and precludes a determination on our part that the bankruptcy court erred.”

Affirmed.

Appeal from the United States District Court for the Southern District of Indiana, Barker, J., Ripple, J.