Matter of Faust

MEMORANDUM

DAVID L. CRAWFORD, Bankruptcy Judge.

The issue before this Court is whether Chapter 13 plans proposing no payment to unsecured creditors meet the § 1325(a)(3) requirement of good faith where the debtors desire to pay secured creditors under their plans.

Recently, the Eighth Circuit ruled on the validity of a no-payment Chapter 13 plan. In re Terry, 630 F.2d 634 (8th Cir. 1980). In that case, Stuart and Sheila Terry possessed only exempt property and proposed no payment to any creditor, all of whom were unsecured. Although the Terry had a regular income, their monthly expenses exceeded…