Unpublished Disposition, 920 F.2d 936 (9th Cir. 1990)

No. 88-3769.

United States Court of Appeals, Ninth Circuit.

Before HUG and NELSON, Circuit Judges, WALKER,^*  District Judge.

MEMORANDUM^** 

Debtors Steven and Charlene Ivy appeal the district court's affirmance of the bankruptcy court's denial of confirmation of their proposed reorganization plan under Chapter 13 of the Bankruptcy Code. The Ivys contend that the bankruptcy court's denial of their plan, which included a monthly tithe to their church based on ten percent of their annual income, unconstitutionally burdened their right to the free exercise of their religion in violation of the First Amendment to the United States Constitution. We have jurisdiction under 28 U.S.C. § 158(d), and we affirm.

A Chapter 13 reorganization plan may not be confirmed unless the debtor proposes to pay into the plan all of the debtor's disposable income. 11 U.S.C. § 1325(b) (1) (B). "Disposable income" is defined in relevant part under the Code as "income which is received by the debtor and which is not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor." Id. Sec. 1325(b) (2) (A).

This definition comports with the Code's requirement that a plan only be confirmed if it is proposed in good faith. Id. Sec. 1325(a) (3). While not defined expressly in the Code, "good faith" has been held to require, "at least, that the debtor is willing to pay to the trustee for the benefit of his creditors all of his disposable income after provision for his necessary and reasonable living expenses and a reasonable contingency." In re Curry, 77 Bankr. 969, 969 (Bankr.S.D. Fla. 1987) (emphasis added).

In the present case, the Ivys' plan, along with the monthly tithe, proposed 36 monthly payments to unsecured creditors amounting to payment of approximately 27 percent of their total unsecured debt. The bankruptcy court denied the plan, concluding that, under these circumstances, the monthly charitable contribution did not constitute a reasonably necessary living expense. The court found that the plan's exclusion of the tithe from the amount of disposable income payable to the Ivys' creditors would effectively require the creditors to contribute to the Ivys' chosen charity.

It is not necessary for us here, however, to determine whether the tithe constituted a reasonably necessary living expense or whether denial of the plan amounted to an unconstitutional infringement on the Ivys' freedom to practice their religion. In denying the plan, the bankruptcy court indicated it would confirm an amended plan that allowed the proposed monthly tithe if the Ivys would extend their 24 monthly payments of $745 an additional 18 months. Eighteen additional monthly payments of $745 would amount to an additional $13,410 of payments available to the Ivys' creditors. As the bankruptcy court pointed out, this would have resulted in payments into the plan in "the same amount that somebody who was not required to tithe would have paid in a period of 36 months," the length of time initially proposed in the Ivys' plan.

Thus, the bankruptcy court, rather than ruling that the existence of the tithe was, under any circumstances, an unreasonable living expense, instead presented the Ivys an alternative that would have allowed the tithe in the proposed amount at no expense to the Ivys' creditors. This alternative would have provided satisfactory payment to creditors while simultaneously accommodating the Ivys' sincerely held religious beliefs. In rejecting the amended plan, the Ivys instead sought to choose accommodation of their religious beliefs at the expense of their creditors. We decline to hold that this satisfies the Code's requirements. Accordingly, the judgment of the district court is AFFIRMED.