Under section 1325(a)(5), a chapter 13 plan cannot provide for different treatment of two vehicles which were purchased at different times with loans from the same creditor where both lending agreements included cross-collateralization clauses securing each loan by both vehicles. Barragan-Flores v. Evolve Federal Credit Union, No. 18-50420 (5th Cir. Jan 14, 2021). Read More
Tag Archive: Plan confirmation
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Two Vehicles Securing One Claim Must Receive Identical Treatment in Ch 13 Plan
Posted by NCBRC - January 21st, 2021
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Texas District’s Treatment of Tax Refund In Chapter 13 Invalidated
Posted by NCBRC - September 8th, 2020
Finding that it encroached on a below-median debtor’s substantive rights, the Fifth Circuit invalidated a local form chapter 13 plan provision that required all debtors to turn over any tax refund in excess of $2,000. Diaz v. Viegelahn, No. 19-50982 (5th Cir. Aug. 26, 2020).
NCBRC filed an amicus brief on behalf of the NACBA membership in support of the debtor in this case. Read More
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“Good Reason” Required to Not Revest Property in Debtor after Plan Confirmation
Posted by NCBRC - July 14th, 2020
Finding that “[a] bankruptcy court may confirm a plan that holds property in the estate only after finding good case-specific reasons for that action,” and signaling exasperation with the whole topic, Judge Easterbrook of the Seventh Circuit reversed the bankruptcy court’s order of confirmation of the debtors’ plan in which they opted not to have their vehicles revest in themselves post-confirmation. Cherry v. City of Chicago, No. 19-1558 (7th Cir. July 6, 2020). Read More
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Chapter 13 Plan Need not Be of Fixed Duration
Posted by NCBRC - July 11th, 2020
In an important win for debtors, the Ninth Circuit held that “no express provision of Chapter 13, even when viewed in the context of its broader structure, prohibits plans with estimated lengths.” In re Sisk, No. 18-17445 (9th Cir. June 22, 2020) (reported below as In re Escarcega). In an opinion in which the circuit court adopted the bulk of the debtors’ arguments, the court reversed and vacated the BAP’s holding that the Bankruptcy Code imposes an implied temporal requirement on all initial Chapter 13 plans. Read More
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Bankruptcy Court May Not Limit Debtor’s Right to Modify as Condition of Confirmation
Posted by NCBRC - June 30th, 2020
The Fifth Circuit held that the bankruptcy court improperly required a chapter 13 debtor to amend his plan to pledge 100% payment to unsecured creditors with no right to modify unless the modification likewise paid 100% or the debtor relinquished his right to discharge. Brown v. Viegelahn (In re Brown), No. 19-50177 (5th Cir. June 8, 2020). Read More
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Debtor May Pay Car Loan Outside Plan at 15% Interest Rate
Posted by NCBRC - May 20th, 2020
The bankruptcy court did not abuse its discretion in confirming, over the trustee’s objection, a plan under which the chapter 13 debtor would pay her car loan outside the plan at the contractual interest rate of 15%. McDonald v. Chambers (In re Chambers), No. 19-10421 (E.D. Mich. Feb. 26, 2020).
The debtor had three loans with Dort Federal Credit Union (DFCU): a car loan, a credit card balance of approximately $1,500 and a cash loan of $1,000. She and DFCU compromised the two non-car loans to $2,000 which she proposed to pay through her plan. In addition, DFCU consented to her proposal to pay the car loan outside the plan at the 15% contractual interest rate. The trustee objected on the grounds that the interest rate exceeded the “prime plus” rate sanctioned in Till v. SCS Credit Corp., 541 U.S. 465 (2004), and would result in the car creditor receiving more than other unsecured creditors. The bankruptcy court confirmed the plan and the trustee appealed. Read More
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Local Rule Requires Automatic Submission of Tax Returns During Plan
Posted by NCBRC - May 14th, 2020
The Arizona District Court found that the District of Arizona’s Local Plan Form for chapter 13 bankruptcies under which all debtors must automatically submit their tax returns during the life of their plans does not conflict with the Code. Reichard v. Brown (In re Reichard), No. 19-2010 (D. Ariz. March 12, 2020) (unpublished).
In 2017, Fed. R. Bankr. P. 3015 was amended to provide that a chapter 13 debtor must use federal Official Form 113, unless there is a local form governing chapter 13 plans. Part 2.3 of the Official Form 113 offers three alternatives for dealing with a debtor’s tax returns during the course of his plan, the second of which requires the debtor to provide all tax returns filed during the plan to the trustee within 14 days of filing with the taxing authority. In response, the District of Arizona amended its own Local Plan Form to mirror that second alternative.
In this case, the trustee objected to the debtors’ proposed plan because it did not provide for automatically turning over their tax returns. The bankruptcy court sustained the objection and ordered the debtors to include the provision in their plan. They appealed to the district court. Read More
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No Amortization of Tax Refund in W.D. Texas
Posted by NCBRC - November 2nd, 2019
In an opinion that reads like a father chastising his ungrateful children, the District Court for the Western District of Texas scolded the debtors for their proposed treatment of anticipated tax refunds and required them to adhere to the District Plan under which they could retain up to $2,000 of their refunds, but must turn over to the Trustee any amount remaining as disposable income. Vega v. Viegelahn, No. 18-796 and Diaz v. Viegelahn, No. 18-798 (W.D. Tex. Sept. 19, 2019) (consolidated for argument and decision).
Contrary to the District Plan structure, the debtors in this case sought to amortize their tax refunds as income over one year. Upon objection by the trustee, the debtors ultimately amended their plans to conform to the District Plan. They then appealed the Bankruptcy Court’s order of confirmation arguing that the District Plan’s treatment of the tax refunds violated various provisions of the Bankruptcy Code, the Local Rules and the Official Forms. Read More
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Fourth Circuit Overturns Anti-Modification Precedent Witt v. United Cos. Lending Corp.
Posted by NCBRC - May 29th, 2019
The en banc fourth circuit panel overturned a twenty-two-year-old precedent to join the majority of courts finding that section 1322(c)(2) “authorizes modification of covered homestead mortgage claims, not just payments, including bifurcation of undersecured homestead mortgages into secured and unsecured components.” Hurlburt v. Black, No. 17-2449 (4th Cir. May 24, 2019) (en banc). NACBA and NCBRC participated as amici in support of the debtor.
In Witt v. United Cos. Lending Corp. (In re Witt), 113 F.3d 508 (4th Cir. 1997), the Fourth Circuit held that section 1322(c)(2)’s exception to the anti-modification provision in section 1322(b)(2) was limited to permitting a chapter 13 debtor to extend the final payments on his mortgage over the course of the plan even though the terms of the lending agreement would have those payments due earlier. Thus, the Witt court found that section 1322(c)(2) does not permit a chapter 13 debtor to modify the amount owed on the claim by bifurcating the claim into secured and unsecured portions, but could alter only the timing of payments on that claim. Read More
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Debtors’ Manufactured Home Was Personal Property Under Iowa Law
Posted by NCBRC - March 8th, 2019
The Eighth Circuit found no clear error in the bankruptcy court’s finding that, under Iowa common law, the chapter 13 debtors’ manufactured home was personal property and therefore the debt it secured was not subject to section 1322(b)’s anti-modification provision. The Paddock, LLC v. Bennett, No. 18-2098 (Feb. 28, 2019).
Benjamin and Teresia Bennett purchased a manufactured home from Paddock, and placed it on a lot owned by Paddock under a 990-year lease. In their chapter 13 bankruptcy, the Bennetts proposed to bifurcate the debt secured by the manufactured home into secured and unsecured portions under section 506(a)(1). Paddock objected arguing that the home was real property and the interest was subject to the anti-modification provision of section 1322(b). The bankruptcy court found that, under Iowa law, the home was personal property and confirmed the plan. In re Bennett, 2017 WL 1417221 (Bankr. N.D. Iowa Apr. 20, 2017). The Bankruptcy Appellate Panel affirmed. In re Bennett, 584 B.R. 15 (B.A.P. 8th Cir. 2018). Read More
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HAVEN Act Guide
The Honoring American Veterans in Extreme Need Act of 2019 (“HAVEN Act”) excludes certain benefits paid to veterans or their family members from the definition of current monthly income (“CMI”) found in the Bankruptcy Code. The HAVEN Act amends § 101(10A) of the Bankruptcy Code and supplements the 2005 amendments to the Code that excluded other government benefits, such as social security income.
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