Trustee: “Is this expense necessary?”
Debtor: “It brings me joy!”
Trustee: Eyebrows raised
Debtor’s Attorney: Does it matter? It’s secured.“
It is once again time to reexamine debtors who elect to retain and pay for luxury items in Chapter 13. We look to the often-cited 9th Circuit case of Drummond v. Welsh 711 F3rd 1120 (9th Cir, 2013). What has transpired since 2013? How have courts addressed retention of and payments for certain assets? Under what circumstances can a plan including those assets be confirmed?
Let us recall the secured debt in Welsh (the other important holding was that social security income is not counted under the Means Test): The debtors kept 2 ATV’s and an Airstream trailer, and the payments for those items reduced the distribution to unsecured. The 9th Circuit held the plan was proposed in good faith as payment for secured debt is contemplated under the Means Test and allowed under the Code. Moreover, BAPCPA removed the case-by-case analysis for disposable income.
What are some examples of high-cost assets debtors attempt to retain: High monthly payment vehicles, Harley-Davidson’s, ATVs, RVs, boats, and vacation homes. Some justifications: “I need a reliable vehicle for work”, or “my motor cycle is fuel efficient and economical”, or “the boat is an emotional support boat”, or “the vacation property is actually a good investment.”
How have recent court decisions treated secured obligations for luxury items:
The Humble Fishing Boat:
Does a 38-year-old fishing boat really qualify as a luxury? Apparently, it may in Maine. In re: Broder 607 BR 774 (Bankr D Maine 2019) The issue before the court was an objection confirmation by the Maine State Tax Assessor office on several grounds, including that the plan was not proposed in good faith. This objection focused upon the debtor’s attempt to retain and pay as secured a boat, motor, and trailer. With subsequent amendments to the plan prior to confirmation, the debtor proposed to pay on unsecured creditors a 14% dividend. The boat in question was a relatively modest recreational fishing boat, a 1981 Robalo R250. Notwithstanding the holding in Welsh, the Court shared the views of jurisdictions that hold Sections 1325(a)(3) and 1325(b) have different purposes. As such the Court said it may look at a particular case and still find in the context of the facts presented, it is improper to pay for luxury items. Including these items in a plan suggests the debtor is not making an honest effort to repay creditors. Accordingly, the Court sustained the objection and denied confirmation.
A Pool and a Porsche:
In another case the debtor had installed an expensive pool and drove a Porsche. In re: Kash, 2020 WL 6811849 (Bankr D. Conn 2020). Here, the trustee filed a motion to dismiss for bad faith. The bad faith was evidenced by the financing of a $65,000 pool approximately four months prior to the commencement of the chapter 13. Also, the debtor was continuing to pay for a 2012 Porsche Cayenne. The Court denied confirmation and dismissed the case, stating the debtor was attempting to maintain a luxurious lifestyle to the detriment of her unsecured creditors. It didn’t help that the debtor also had a $738,000 plus mortgage and lavish monthly dining out expenses.
The Hunting Vehicle
You still need to hunt in the Western District of Louisiana. This is what was allowed in the case of In re: Green 2019 WL 3943670 (Bankr. W.D. La. 2019). The debtors in this case surrendered two late model GMC trucks, a camper, a 2016 Polaris Ranger, and 2 acres of land. The proposed plan included retention of their home and a 2014 Polaris Ranger. The Court confirmed the plan over the Trustee’s objection. The plan met the good faith standard under the “totality of the circumstances”. Further the Court found the debtors committed all their disposable income as required under section 1325 (b) even with the payment for the secured 2014 Polaris.
The Expensive Home Mortgage
The mechanical Means Test calculation was found to be properly imposed in Bledsoe v. Cook 70 F.4th 746 (4th Cir 2023). This case involved an expensive home mortgage payment. The 4th Circuit held an above median income debtor may use their actual mortgage payments when calculating the Means Test. The debtors’ actual mortgage payments were more than twice the relevant local standard amount. Nevertheless, the debtors are permitted in the 4th Circuit to deduct large home mortgage payments. The Court referenced and followed the rationale from the 9th Circuit (Welsh) and the 6th Circuit (Baud v Carroll 634 F3rd 327 (6th Circuit 2011).
The Emotional Support Corvette
However, not long after the 4th Circuit’s holding in Bledsoe, U.S. District Court for the Eastern District of North Carolina, Western Division affirmed the Bankruptcy Court denial of confirmation based on lack of good faith as required under Section 1325(a)(3). Goddard v Burnett 2025 U.S. Dist. LEXIS 47196 (D. E.D. N.C. W.D. 2025). The Court distinguished Bledsoe in that Bledsoe did not involve a good faith review. Goddard proposed a plan to retain Three (3) expensive vehicles, including a 2015 Chevrolet Corvette. The debtor was an Army veteran suffering from PTSD, and the Corvette was a “stress reliever” for him. The Trustee objected that retaining all three (3) vehicles while only making a token payment to unsecured creditors was not a good faith plan. The Court affirmed the Bankruptcy Court’s denial of confirmation. It held although the Means Test was satisfied, the plan improperly allowed the debtor to retain luxuries at the expense of his creditors.
What Does This All Mean?
We are now 20 years in from the enactment of BAPCPA. At the time, the intent was to make the application of the law more uniform throughout the country. Hence, the adoption of the mechanical Means Test, and since then, the court’s efforts to apply it in real world situations. As usual, where a case is filed determines what assets a debtor can retain in chapter 13. As one commentator noted discussing the Goddard decision:
“The court’s ruling in Goddard risks reviving the pre-BAPCPA ‘smell test’ that Congress deliberately replaced with a more mechanical means test. While the court paid lip service to Bledsoe v. Cook, its approach invited subjective moralizing about what a debtor “deserves” to keep, which runs counter to the explicit Congressional purpose and structure of Chapter 13 that not only limited judicial activism but privileged secured claims over unsecured claims.” See Ed Boltz, 30 April, 2025 Your NC Bankruptcy Expert Blog.
Sometimes, however, reality takes over. What might seem as ideal in theory can be overshadowed by presented facts. If appropriate, it may be necessary to analyze the totality of the circumstances to determine good faith. Awareness of how the judge, district and federal circuit interpret good faith and luxury asset retention is essential.
Printed with permission, NACTT Academy, Considerchapter13.org, July 3, 2025)
1521 Concord Pike
Treatment of Luxury Assets Under Chapter 13
Trustee: “Is this expense necessary?”
Debtor: “It brings me joy!”
Trustee: Eyebrows raised
Debtor’s Attorney: Does it matter? It’s secured.“
It is once again time to reexamine debtors who elect to retain and pay for luxury items in Chapter 13. We look to the often-cited 9th Circuit case of Drummond v. Welsh 711 F3rd 1120 (9th Cir, 2013). What has transpired since 2013? How have courts addressed retention of and payments for certain assets? Under what circumstances can a plan including those assets be confirmed?
Let us recall the secured debt in Welsh (the other important holding was that social security income is not counted under the Means Test): The debtors kept 2 ATV’s and an Airstream trailer, and the payments for those items reduced the distribution to unsecured. The 9th Circuit held the plan was proposed in good faith as payment for secured debt is contemplated under the Means Test and allowed under the Code. Moreover, BAPCPA removed the case-by-case analysis for disposable income.
What are some examples of high-cost assets debtors attempt to retain: High monthly payment vehicles, Harley-Davidson’s, ATVs, RVs, boats, and vacation homes. Some justifications: “I need a reliable vehicle for work”, or “my motor cycle is fuel efficient and economical”, or “the boat is an emotional support boat”, or “the vacation property is actually a good investment.”
How have recent court decisions treated secured obligations for luxury items:
The Humble Fishing Boat:
Does a 38-year-old fishing boat really qualify as a luxury? Apparently, it may in Maine. In re: Broder 607 BR 774 (Bankr D Maine 2019) The issue before the court was an objection confirmation by the Maine State Tax Assessor office on several grounds, including that the plan was not proposed in good faith. This objection focused upon the debtor’s attempt to retain and pay as secured a boat, motor, and trailer. With subsequent amendments to the plan prior to confirmation, the debtor proposed to pay on unsecured creditors a 14% dividend. The boat in question was a relatively modest recreational fishing boat, a 1981 Robalo R250. Notwithstanding the holding in Welsh, the Court shared the views of jurisdictions that hold Sections 1325(a)(3) and 1325(b) have different purposes. As such the Court said it may look at a particular case and still find in the context of the facts presented, it is improper to pay for luxury items. Including these items in a plan suggests the debtor is not making an honest effort to repay creditors. Accordingly, the Court sustained the objection and denied confirmation.
A Pool and a Porsche:
In another case the debtor had installed an expensive pool and drove a Porsche. In re: Kash, 2020 WL 6811849 (Bankr D. Conn 2020). Here, the trustee filed a motion to dismiss for bad faith. The bad faith was evidenced by the financing of a $65,000 pool approximately four months prior to the commencement of the chapter 13. Also, the debtor was continuing to pay for a 2012 Porsche Cayenne. The Court denied confirmation and dismissed the case, stating the debtor was attempting to maintain a luxurious lifestyle to the detriment of her unsecured creditors. It didn’t help that the debtor also had a $738,000 plus mortgage and lavish monthly dining out expenses.
The Hunting Vehicle
You still need to hunt in the Western District of Louisiana. This is what was allowed in the case of In re: Green 2019 WL 3943670 (Bankr. W.D. La. 2019). The debtors in this case surrendered two late model GMC trucks, a camper, a 2016 Polaris Ranger, and 2 acres of land. The proposed plan included retention of their home and a 2014 Polaris Ranger. The Court confirmed the plan over the Trustee’s objection. The plan met the good faith standard under the “totality of the circumstances”. Further the Court found the debtors committed all their disposable income as required under section 1325 (b) even with the payment for the secured 2014 Polaris.
The Expensive Home Mortgage
The mechanical Means Test calculation was found to be properly imposed in Bledsoe v. Cook 70 F.4th 746 (4th Cir 2023). This case involved an expensive home mortgage payment. The 4th Circuit held an above median income debtor may use their actual mortgage payments when calculating the Means Test. The debtors’ actual mortgage payments were more than twice the relevant local standard amount. Nevertheless, the debtors are permitted in the 4th Circuit to deduct large home mortgage payments. The Court referenced and followed the rationale from the 9th Circuit (Welsh) and the 6th Circuit (Baud v Carroll 634 F3rd 327 (6th Circuit 2011).
The Emotional Support Corvette
However, not long after the 4th Circuit’s holding in Bledsoe, U.S. District Court for the Eastern District of North Carolina, Western Division affirmed the Bankruptcy Court denial of confirmation based on lack of good faith as required under Section 1325(a)(3). Goddard v Burnett 2025 U.S. Dist. LEXIS 47196 (D. E.D. N.C. W.D. 2025). The Court distinguished Bledsoe in that Bledsoe did not involve a good faith review. Goddard proposed a plan to retain Three (3) expensive vehicles, including a 2015 Chevrolet Corvette. The debtor was an Army veteran suffering from PTSD, and the Corvette was a “stress reliever” for him. The Trustee objected that retaining all three (3) vehicles while only making a token payment to unsecured creditors was not a good faith plan. The Court affirmed the Bankruptcy Court’s denial of confirmation. It held although the Means Test was satisfied, the plan improperly allowed the debtor to retain luxuries at the expense of his creditors.
What Does This All Mean?
We are now 20 years in from the enactment of BAPCPA. At the time, the intent was to make the application of the law more uniform throughout the country. Hence, the adoption of the mechanical Means Test, and since then, the court’s efforts to apply it in real world situations. As usual, where a case is filed determines what assets a debtor can retain in chapter 13. As one commentator noted discussing the Goddard decision:
“The court’s ruling in Goddard risks reviving the pre-BAPCPA ‘smell test’ that Congress deliberately replaced with a more mechanical means test. While the court paid lip service to Bledsoe v. Cook, its approach invited subjective moralizing about what a debtor “deserves” to keep, which runs counter to the explicit Congressional purpose and structure of Chapter 13 that not only limited judicial activism but privileged secured claims over unsecured claims.” See Ed Boltz, 30 April, 2025 Your NC Bankruptcy Expert Blog.
Sometimes, however, reality takes over. What might seem as ideal in theory can be overshadowed by presented facts. If appropriate, it may be necessary to analyze the totality of the circumstances to determine good faith. Awareness of how the judge, district and federal circuit interpret good faith and luxury asset retention is essential.
Printed with permission, NACTT Academy, Considerchapter13.org, July 3, 2025)