Law on Rice

Posts such as what you’re about to read really undercut my popularity in the blogosphere, I know. But I can’t resist. I’m reading a recent Ninth Circuit Bankruptcy Appellate Panel Case, In re Smith. It’s pretty significant, but I’ll get to that later.

The thing I found most interesting at this point was the difference between sections 1328(a) and 1328(b). Under 1328(a), the court “shall” confirm a plan that complies with the subsections of 1328(a)(1)-(9). The most important of those appear to be that the plan is in “good faith.”

It seems like the debtor is only required to commit all of the debtor’s projected disposable income, however, if the trustee (or an unsecured creditor) objects to the plan’s confirmation as provided for by 1328(b)(1)(B).

So, does this mean that a plan proposed “in good faith” has to commit all the debtor’s disposable income? Or does it simply mean that the debtor is required to make the best effort possible, even if not all disposable income is committed?

I have an ancillary question too. What is it about trustee economics that would motivate them to object? If, for example, the debtor has very little disposable income, does it economically make sense for the trustee to object when the trustee will not be able to recover much in fees? Or am I missing something important here?