Chapter 13

CHAPTER 13 1. Chapter 13 Plan

2. Chapter 13 Trustee

3. Child Support

4. Claim and issue preclusion–binding effect of plan

5. Direct payment of claims “outside” the plan

6. Dismissal or conversion

7. Disposable Income

8. Good Faith/Bad Faith

9. Tax debts

10. §109–Eligibility

11. §1322

12. §1325

13. §1325 (hanging paragraph)

14. Student Loans

15. Fees

16. Discharge-§ 1328

17. §1305

18. Misc

1. Chapter 13 Plan

In re Fridley, 380 B.R. 538, 544 (9th Cir. BAP 2007)

The “applicable commitment period” of § 1325(b)(1) has a temporal component. “ A

debtor desiring to prepay a chapter 13 plan and obtain an early discharge without paying allowed

unsecured creditors in full must follow the § 1329 modification procedure prescribed by Rule

3015(g).”

In re Brawders, 325 B.R. 405 (9th Cir. BAP 2005), aff”d, 503 F.3d 856 (9th Cir. 2007)

Debtors could not alter taxing authority’s lien rights on residence through a vague form

plan provision that did not give adequate notice of debtor’s intent. Thus, “the res judicata effect of

the Plan did nothing to reduce the amount of Ventura’s underlying tax assessments or affect

Ventura’s lien rights.”

In re Sunahara, 326 B.R. 768 (9th Cir. BAP 2005)

A debtor may modify a confirmed 36-month chapter 13 plan so as to pay it off in a single

lump sum and receive an early discharge. Model plan which requires a 100% pay out to

unsecured creditors if it extends less than 36 months is invalid.

In re Profit, 283 B.R. 567 (9th Cir. B.A.P. 2002)

1. Under 1329(b)(1), a modified plan must meet some of the same requirements as an

original plan, including the 60-month duration limit.

2. The 60-month period begins to run from the date the first plan payment is due.

In re Braker, 125 B.R. 798, (9th Cir. B.A.P. 1991)

A Chapter 13 plan may not cure and reinstates a mortgage subsequent to a pre-petition

foreclosure sale, but prior to the expiration of a statutory right of redemption

2. Chapter 13 Trustee

In re Cohen, 305 B.R. 886 (9th Cir. B.A.P. 2004)

1. Chapter 13 trustee has standing to pursue avoiding actions for the benefit of the estate;

2. The right to receive a tort settlement fund is neither a “payment intangible” nor an

equitable assignment

.

In re Powers, 202 B.R. 618 (9th Cir. B.A.P. 1996), amended …. (1997)

Trustee need not show change in debtor’s circumstances in order to move for modification

of debtor’s plan

In re Andrews, 49 F.3d 1404 (9th Cir. 1995)

Chapter 13 trustee has standing to object if plan doesn’t comply with Title 11, even if

none of creditors object

In re Andrews, 155 B.R. 769 (9th Cir. B.A.P. 1993), aff’d. 49 F.3d 1404 (9th Cir. 1995)

Chapter 13 trustee has standing to object to plan extending beyond three years. Court

properly denied confirmation for lack of cause.

3. Child Support

In re Foster, 319 F.3d 495 (9th Cir. 2003)

Interest on nondischargeable child support continues to accrue after a chapter 13 petition

is filed and survives a chapter 13 discharge.

In re Pacana, 125 B.R. 19 (9th Cir. B.A.P. 1991)

Child support debt provided for in chapter 13 plan may be collected upon by claimant

outside of plan.

4. Claim and issue preclusion–binding effect of plan

United Student Aid Funds, Inc. v. Espinosa, -U.S.-, 130 S.Ct. 1367 (2010)

A student loan creditor whose proof of claim includes interest, but who receives adequate

notice of a plan the terms of which do not provide for the payment of interest may be bound by it

and have its claim covered by the debtor’s discharge. The confirmation of the plan without a

showing of undue hardship pursuant to an adversary proceeding was legal error, but does not void

the confirmation order. However, bankruptcy courts have the authority and responsibility to deny

confirmation of plans that do not comply with chapter 13.

Ellett v. Stanislaus, 506 F.3d 774 (9th Cir. 2007)

Franchise Tax Board was not bound by debtor’s discharge for lack of proper notice, where

debtor listed the wrong Social Security number on his bankruptcy petition and the wrong number

appeared on his § 341(a) notice.

In re Lynch, 363 B.R. 101 (9th Cir. BAP 2007)

Trustee should not have been compelled to abandon property. Even though the debtor

valued the property at 560,000 as of the date of the filing of the chapter 13 petition, and the plan

was confirmed without objection, that valuation was not binding on the trustee under § 348(f)(1),

since no implicit valuation occurred. However, the relevant valuation date was the petition date,

not the conversion date (absent a showing of bad faith).

In re Summerville, 361 B.R. 133 (9th Cir. BAP 2007)

Where plan did not affect or address the validity of a note or deed of trust other than to

cure arrearages and continue regular payments, debtor was not precluded from challenging the

validity of note and deed of trust in subsequent state court action.

In re Ransom, 336 B.R. 790 (9th Cir. BAP 2005)

Chapter 13 plan which prohibited student loan creditor from collecting accrued interest

after completion of the plan was a de facto discharge of the student loan debt, for which an

adversary proceeding was required and a finding of undue hardship. Thus, the provision is

unenforceable.

In re Enewally, 368 F.3d 1165,1165 (9th Cir. 2004), cert. denied, 125 S.Ct. 669 (2004)

“Although confirmed plans are res judicata to issues therein, the confirmed plan has no

preclusive effect on issues that must be brought by an adversary proceeding, or were not

sufficiently evidenced in a plan to provide adequate notice to the creditor.”

In re Repp, 307 B.R. 144 (9th Cir. BAP 2004)

Chapter 13 debtor’s plan could not discharge a partially-repaid student loan without

giving the creditor the due process protections of an adversary proceeding.

In re Shook, 278 B.R. 815 (9th Cir. B.A.P. 2002)

Debtor who failed to object to secured claim based on judgment lien after repeated notices

from chapter 13 trustee was barred by laches from objecting after claim was paid. Creditor’s lien

could not be avoided by plan alone, which in any event did not “provide for” the lien.

In re Pardee, 218 B.R. 916 (9th Cir. B.A.P. 1998), aff’d, 193 F.3d 1083 (9th Cir. 1999)

Student loan creditor waived claim to postpetition interest by failing to object to discharge

provision of debtor’s Chapter 13 plan before plan’s confirmation.

“In summary, the bankruptcy court erred in concluding that a holder of a nondischargeable

student loan was precluded from collecting postpetition interest on this debt if the creditor’s

allowed claim is paid in full pursuant to the Chapter 13 plan. We are bound by the Supreme

Court’s holding in Bruning and reject the bankruptcy court’s reliance on Wasson.

“However, this error was harmless given the facts of this case. Although the Plan should

not have been confirmed because it included the Discharge Provision, which was inconsistent

with the Code, once confirmed, it was res judicata and binding on Appellant. Additionally,

Appellant’s failure to object to the Plan at the confirmation hearing constituted an implied

acceptance of the Plan. By failing to appeal the Confirmation Order and having impliedly

accepted the Plan, Appellant cannot now collaterally attack the Plan. Accordingly, we affirm.”

5. Direct Payment of Claims “Outside” the Plan

In re Giesbrecht, 429 B.R. 682, 688 (9th Cir. BAP 2010)

A bankruptcy court may exercise it’s discretion in determining when a debtor may make

direct payments to creditors, since neither § 1322 nor § 1326 provides any guidance on the

subject. Here, the bankruptcy court abused it’s discretion when it failed to articulate clear

standards for refusing to allow such direct payments.

6. Dismissal or Conversion

In re Rosson, 545 F.3d 764 (9th Cir. 2008)

A chapter 13 debtor does not have an absolute right to dismiss his case. The bankruptcy

court did not clearly err in converting the debtor’s case to chapter 7, where the debtor engaged in

bad faith conduct by failing to deliver arbitration proceeds to the chapter 13 trustee. This is true

even though the debtor received virtually no notice of the sua sponte conversion.

In re Marrama, 549 U.S. 365, 127 S.Ct. 1105 (2007)

Debtor forfeited his right to convert his case to chapter 13 where he did not qualify as a

debtor because of his bad faith concealment of assets

In re Sobczak, 369 B.R. 519, 518 (9th Cir. BAP 2007)

Court should not have considered interests of the debtor in determining whether to dismiss

under § 1307(c). It should only have considered the best interests of the estate and creditors.

In re Nelson, 343 B.R. 671 (9th Cir. BAP 2006)

Dismissal for cause under § 1307(c)(5) requires not only a denial of confirmation

,

but

denial of a motion to file an amendment or modification of the plan. Debtor had to be given an

opportunity to file an amended plan before dismissal was proper.

In re Tran, 309 B.R. 330 (9th Cir. B.A.P. 2004), aff’d, 177 Fed. Appx. 754 (9th Cir. 2006)

Home refinancing proceeds revested in debtor after dismissal of chapter 13 petition; funds

in chapter 13 trustee’s hands had to be turned over to the debtor.

In re Leavitt, 171 F.3d 1219 (9th Cir. 1999)

Ch 13 bankruptcy debtor’s concealment of assets and inflation of expenses could amount to

bad faith warranting dismissal of petition with prejudice.

In re Morimoto, 171 B.R. 85 (9th Cir. B.A.P. 1994)

Dismissed for bad faith for failure to file tax returns was appropriate

In re Beatty, 162 B.R. 853 (9th Cir. B.A.P. 1994)

Debtors dismissal before the order of conversion was docketed was effective

7. Disposable Income

Hamilton v. Lanning, -U.S.-, 130 U.S. 2464, 2478 (2010)

“Consistent withe the text of § 1325 and pre-BAPCPA practice, we hold that when a

bankruptcy court calculates a debtor’s projected disposable income, the court may account for

changes in the debtor’s income or expenses that are known or virtually certain at the time of

confirmation.”

In re Smith, 418 B.R. 359 (9th Cir. BAP 2009)

In calculating projected disposable income, above-median-income debtors were not entitled

to include as amounts contractually due to secured creditors payments on collateral that the debtors

are surrendering.

In re Martinez, 418 B.R. 347 (9th Cir. BAP 2009)

In calculating projected disposable income, above-median-income debtors were not entitled

to include as amounts contractually due to secured creditors mortgage payments as to junior

mortgages that had been stripped off.

In re Ransom, 131 S. Ct. 716 (2010)

In determining “projected disposable income” of an above-median income debtor in a

chapter 13 case, the means test does not permit the debtor to claim a vehicle ownership expense

for a vehicle owned free and clear of any liens.

In re Wiegand, 386 B.R. 238 (9th Cir. BAP 2008)

Official Form 22C, which allows an individual debtor in a chapter 13 case to deduct

business expenses from income generated from a business

,

conflicts with § 1325(b)(2)(B), which

allows the deduction of business income for purposes of determining disposable income, and is

thus invalid.

In re Hull, 251 B.R. 726 (9th Cir. B.A.P. 2000)

Debtor’s community property interest under Washington law in the income of his nondebtor

spouse is part of his “disposable income” and must be counted in calculating whether he meets the

test of § 1322(a)(1) and § 1325(b)(1)(B).

In re Burgie, 239 B.R. 406 (9th Cir. B.A.P. 1999)

Nonexempt assets from sale of house not subject to inclusion in plan as disposable income.

(Not clear from decision whether some other ground, such as liquidation test, might justify trustee

motion to modify plan).

In re Than, 215 B.R. 430 (9th Cir. B.A.P. 1997)

1. § 1329 does not require changed financial circumstances, but merely changed

circumstances

2. Debtor need not meet disposable income test in a plan modification where no objection

to confirmation of the original plan was made on those grounds.

In re Hagel, 184 B.R. 793 (9th Cir. B.A.P. 1995)

Debtor’s social security disability income included in disposable income, even though

exempt

In re Anderson, 21 F.3d 355 (9th Cir. 1994)

Debtor need only devote his projected rather than actual disposable income for 36 months

8. Good Faith/Bad Faith

In re Villanuevo, 274 B.R. 836 (9th Cir. B.A.P. 2002)

Debtor’s proposal to reduce chapter 13 repayment plan from 60 to 36 months, thereby

reducing percentage to unsecured creditors from 50% to 19%, did not indicate bad faith or lack of

best efforts.

In re Ho, 274 B.R. 867 (9th Cir. B.A.P. 2002)

1. “While a dispute as to liability will not “necessarily render a debt unliquidated,” In re

Slack, 187 F.3d at 1074, the nature of this dispute does.” 2. Bankruptcy court abused its

discretion in not applying all four of the Eisen factors in finding bad faith.

In re Scovis, 249 F.3d 975 (9th Cir. 2001)

“….[E]ligibility would normally be determined by the debtor’s originally filed schedules,

checking only to see if the schedules were made in good faith.” Court also assumed that a lien

would be partially avoided under § 522(f), rendering the debtor over the unsecured debt limit.

In re Padilla, 213 B.R. 349 (9th Cir. B.A.P. 1997)

Timing of Chapter 13 case filed immediately after entry of adverse judgment in prior

Chapter 7 case was not conclusive evidence of bad faith.

In re Eisen, 14 F.3d 469 (9th Cir. 1994)

Bad faith filing

9. Tax Debt

In re Jones, 420 B.R. 506 (9th Cir. BAP 2009)

Because a California Franchise Tax Board debt did not fall within three-year lookback

period of § 507(a)(8)(A)(ii), neither the unnumbered paragraph of § 507(a)(8) nor equitable

tolling apply

,

and thus the tax was discharged in the debtor’s chapter 7 case. Furthermore,

because all estate property vested in the debtor upon plan confirmation, the FTB could have

pursued collection of the tax debt as a postpetition debt not subject to the automatic stay or the

debtor’s chapter 13 case.

In re Joye, 578 F.3d 1070 (9th Cir. 2009)

Tax debt owed to California Franchise Tax Board was discharged, where the debtor

properly listed the FTB in his schedules as being owed $10,000, even though the actual amount

owed was over $26,000. Section 1305(a)(1) was not applicable, since the debt was incurred

prepetition. “. . . [W]e hold that taxes become “payable” for purposes of section 1305(a)(1) when

they are capable of being paid.” here, the taxes were capable of being paid prepetition.

In re Fowler, 394 F.3d 1208 (9th Cir. 2005)

“We hold that § 348(d) requires that postpetition employment tax debt, incurred as an

administrative expense of a Chapter 11 bankruptcy estate, retains its first priority administrative

expense status upon conversion to a Chapter 13 bankruptcy plan. Section 1305 is not in conflict

with this holding because it does not govern the priority of the postpetition claims it allows into

the bankruptcy.”

U.S. I.R.S. v. Snyder, 343 F.3d 1171 (9th Cir. 2003)

Debtor’s interest in a pension plan was not property of the estate, and thus it could not

used to secure the IRS’s claim for delinquent taxes in his chapter 13 case. This is so, even though

the IRS is not subject to ERISA’s antialienation provisions.

In re Bevan, 327 F.3d 994 (9th Cir. 2003)

Senior lienholder who bids in amount of deed of trust into foreclosure, takes possession of

the property, then pays off amount of IRS lien is not equitably subrogated to the rights of the IRS

in the debtor’s chapter 13 case.

In re Beam, 192 F.3d 941 (9th Cir. 1999)

The court of appeals affirmed a judgment of the district court. The court held that a Ch. 13

bankruptcy trustee must honor an IRS notice of levy on funds deposited by the debtor toward a

proposed plan that is not confirmed.

In re Greatwood, 194 B.R. 637 (9th Cir. B.A.P. 1996), aff’d. 120 F.3d 268 (9th Cir. 1997)

Tax protestor cannot maintain Chapter 13 proceedings to dispose of debt to IRS -

statements in lieu of returns not adequateIn re Osborne, 76 F.3d 306 (9th Cir. 1996)

Prior to Bankruptcy Reform Act of 1994, Ninth Circuit case law dictated that, in Chapter

13 cases, IRS priority claim disallowed as untimely

In re Heath, 182 B.R. 557 (9th Cir. B.A.P. 1995)

In order to require Chapter 13 debtor to commit to plan all tax refunds debtor receives

during plan’s term, trustee must make minimal showing that debtor may receive tax refunds

10. §109

In re Smith, 435 B.R. 637 (9th Cir. BAP 2010)

Where debtor’s schedules indicate that the value of a residence is less than the value of the

first mortgage on the property, then any junior liens must be counted as unsecured debts for

eligibility purposes under Scovis, infra. Holding a security interest on the petition date does not

mean that a creditor is secured for purposes of the bankruptcy code.

In re Guastella, 341 B.R. 908 (9th Cir. BAP 2006)

Tentative decision quantified the amount of the debt the debtor would be liable for in an

amount certain. The debt was thus liquidated, since is was readily ascertainable. The court

correctly looked beyond the schedules to determine the amount of the debt (which was listed as

$0) and correctly determined that the schedules were not filed in good faith.

In re Scovis, 249 F.3d 975 (9th Cir. 2001)

“….[E]ligibility would normally be determined by the debtor’s originally filed schedules,

checking only to see if the schedules were made in good faith.” Court also assumed that a lien

would be partially avoided under § 522(f), rendering the debtor over the unsecured debt limit.

In re Slack, 187 F.3d 1070, 1073-75 (9th Cir. 1999)

“

. . .

[A] debt is liquidated if the amount is readily ascertainable, notwithstanding the fact

that the question of liability has not been finally decided.”

In re Nicholes, 184 B.R. 82, 99-91 (9th Cir. B.A.P. 1995)

“Construing Sylvester with Wenberg and Loya, we hold that the fact that a claim is

disputed does not per se exclude the claim from the eligibility calculation under § 109(e), since a

disputed claim is not necessarily unliquidated. So long as a debt is subject to ready determination

and precision in computation of the amount due, the it is considered liquidated and included for

eligibility purposes under § 109(e) regardless of any dispute. On the other hand, if the dispute

itself makes the claim difficult to ascertain or prevents the ready determination of the amount due,

the debt is unliquidated and excluded from the § 109(e) computation.”

In re Carty, 149 B.R. 601 (9th Cir. B.A.P. 1993)

109(g)- 180 day period not tolled or renewed between time of second filing and time when

motion to dismiss heard, at least based on equities of the case (10 months lapse between second

filing and motion to dismiss)

11. §1322

In re Herrera, 422 B.R. 698 (9th Cir. BAP 2010)

Optional plan addendum promulgated by the bankruptcy judges of the Central District of

California did not violate RESPA, the separation of powers, or § 1325(b)(2)’s prohibition against

modification of residential mortgages.

In re Frazier, 377 B.R. 621 (9th Cir. BAP 2007)

Curing of a default as to a Montana contract for deed was governed by § 1322(b)(3)

,

not

the 60-day limitation in § 108(b).

In re Enewally, 368 F.3d 1165 (9th Cir. 2004), cert. denied, 125 S.Ct. 669 (2004)

Lien stripping cannot be accomplished under § 1322(b)(2) unless the lien will be paid off

within the life of the plan.

In re Zimmer, 313 F.3d 1220 (9th Cir. 2002)

A wholly unsecured lienholder is not entitled to the protections of § 1322(b)(2); The

holding of In re Lam, 211 B.R. 36 (9th Cir. B.A.P. 1997) approved.

In re Labib-Kiyarash, 271 B.R. 189 (9th Cir. B.A.P. 2001)

Student loan that will extend beyond the life of the plan is a “long-term debt” for purposes

of § 1322(b)(5). Debtor could separately classify such a student loan and pay it in full “outside”

the plan if the classification meets the fairness test under § 1322(b)(1).

In re Hill, 268 B.R. 548 (9th Cir. B.A.P. 2001)

Mother whose credit cards were used by debtor daughter was not “liable with” the debtor,

and thus § 1322(b)(1) dealing with separate classification of co-debtor debt was inapplicable.

In re Lee, 215 B.R. 22 (9th Cir. B.A.P. 1997)

First deed of trust on real estate and appliances can’t be stripped under 1322(b)(2)

In re Lam, 211 B.R. 36 (9th Cir. B.A.P. 1997)

Bankruptcy debtors entitled to treat wholly unsecured deed of trust as unsecured lien

In re Lievsay, 199 B.R. 705 (9th Cir. B.A.P. 1996), cert. denied, 522 U.S. 1149 (1998)

Boilerplate language in deed of trust does not eviscerate § 1322(b)

In re Reeves, 164 B.R. 766 (9th Cir. B.A.P. 1994)

§ 1322(b)(2) applies to nonpurchase money home loans

In re Proudfoot, 144 B.R. 876 (9th Cir. B.A.P. 1992)

Garcia (sp?) Reaffirmed – cannot confirm a plan which calls for no regular payments

pending sale of house without violating 1322(b0(2)

12. §1325

Hamilton vs. Lanning, 130 S. Ct. 2464 (2010)

The United States Supreme Court rejected the “mechanical” application for above median

income Chapter 13 debtors for determining “projected disposable income,” and allows such

Chapter 13 debtors to propose a monthly payment that reflects reasonable foreseeable changes in

their income and expenses.

In re Pluma, 303 B.R. 444 (9th Cir. B.A.P. 2003), affd, 427 F.3d 1163 (9th Cir. 2005)

Under § 1325(a)(5)(B), bankruptcy court appropriately applied the “formula” approach for

setting an interest rate, whereby a base rate is determined, and then increases the rate based on the

risk of default by the debtor and the nature of the security. However, the court failed to consider

all of the default risks with this particular debtor.

In re Cavanagh, 250 B.R. 107 (9th Cir. B.AP. 2000)

Under the amendments made to § 1325(b)(2)(A) by the Religious Liberty and Charitable

Donation Protection Act of 1998, “a court is not supposed to engage in a separate analysis to

determine whether charitable contributions up to fifteen percent are reasonably necessary for the

debtor’s maintenance and support.” However, a court should look at the debtor’s purpose in

commencing or increasing the amount of tithing on the eve of or shortly after filing for

bankruptcy for purposes of determining whether a chapter

13. §1325(hanging paragraph)

In re Penrod, 392 B.R. 835 (9th Cir. BAP 2008)

1) A lender’s payoff of the deficiency on the trade-in is not secured by the purchase

money security interest in the new car, and is not thereby protected by the hanging paragraph.

2) “[T]he hanging paragraph protects that portion of the lender’s debt allocable to the car

purchased, and does not protect that portion of the debt that is allocable to negative equity.”

In re Rodriguez, 375 B.R. 535 (9th Cir. BAP 2007)

The “hanging paragraph” does not affect a 910 secured creditor’s right to seek a

deficiency claim upon surrender of the vehicle.

In re Trejos

,

374 B.R. 210, 215 (9th Cir. BAP 2007)

Under the “hanging paragraph,” chapter 13 debtor was required to pay the full contract

price of his automobile. Trial court held that § 1322(b) remained applicable, and the debtor

could alter the interest rate and monthly payments. The BAP did not address this issue, since the

creditor did not pursue it on appeal.