A Chapter 13 debtor and her non-filing spouse had jointly purchased a condominium property outright at a foreclosure sale in 2012. However, they had struggled to make HOA payments since 2013, amassing an arrearage in excess of $20,000, and to pay real property taxes on the property since 2018.
In 2019, the debtor’s husband filed a Chapter 13 case to halt a foreclosure action by the HOA. The husband was unable to obtain a confirmed plan due to his failure to file and pay state and federal income taxes, and his case was ultimately dismissed for failure to make plan payments. The husband later testified that his plan payments were “too expensive.”
Three days after the closure of her husband’s Chapter 13 case, the debtor filed this case to halt a second foreclosure action by the HOA. The debtor’s second amended Chapter 13 plan proposed to cure the arrearage owed to the HOA over 44 months, and to pay 100% of her nominal unsecured debt over 60 months. The debtor, who was a student, had long-suffered medical problems which prevented her from attending school or working during the COVID-19 pandemic. Accordingly, the sole source of income to fund the debtor’s plan was “income from husband.”
The HOA objected to confirmation of the debtor’s plan, arguing that the plan was not feasible, the plan was not proposed in good faith, and the HOA was not adequately protected by a plan which proposed to cure the HOA’s arrearage in 4 years. The HOA also moved for relief from the automatic stay and the co-debtor stay.
The Court held an evidentiary hearing on the matters wherein the evidence showed that property taxes were owed for 2019; property taxes for the second half of 2018 had been sold at tax sale and not yet redeemed; the debtor’s husband had shielded her from problems relating to the HOA and his Chapter 13 case to avoid upsetting her while she was ill; the couple’s finances were “beyond tight” due to the debtor’s ongoing medical bills; the couple had been experiencing martial problems and only lived together part time; and the couple had been unable to obtain homeowner’s insurance on the property for several years due to unrepaired flood damage to the interior walls.
The debtor’s husband testified that he owned his own business, and that his current income was from landscaping and labor work. He did not specify the amount of his income or provide any documentation of its source or amount. Nor did he provide evidence of his current expenses. The husband also did not provide any documentation to establish that he had filed his outstanding income tax returns or paid any of the outstanding federal and state income taxes.
The threshold issue was whether the plan was feasible. Relying, in part, on In re Khan, No. 14-13514 MER, 2015 WL 739854 (Bankr. D. Colo. Feb. 19, 2015), the Court found that the totality of the circumstances demonstrated that the plan was not feasible. Because the Court found that the plan was not feasible, it did not need to reach the issue of good faith.
The Court denied confirmation, dismissed the case, and granted both requests for stay relief, but the Court stayed the dismissal and stay relief orders for 30 days to allow the debtor and her husband time to file a motion to sell the property.