581 B.R. 1
Bankr. D. Mass.2018Background
- Debtor Claudia V. Thompson filed a Chapter 13 plan proposing to surrender her home at 36 Nichols Road, Malden, MA effective July 1, 2019, while making mortgage/escrow payments until that date.
- CIT Bank, N.A., holder of the first mortgage, objected, contending a deferred surrender violates the Bankruptcy Code and thus the plan is not confirmable.
- Thompson argued § 1325(a)(5)(C) permits surrender and does not specify timing, and that deferred surrender is consistent with Chapter 13’s extended payment structure and her need to remain in the home until her son graduates.
- The dispute turned on the statutory meaning of “surrender” in § 1325(a)(5)(C) and whether surrender may be deferred post-confirmation.
- The court analyzed § 1325(a)(5) alongside § 521 and § 362(h), related case law, and recent amendments to Bankruptcy Rule 3015.1 addressing surrender and stay relief language in Chapter 13 plans.
- The court found Thompson failed to satisfy any of § 1325(a)(5)’s alternatives (acceptance, payment over plan, or surrender) and denied confirmation of the plan.
Issues
| Issue | Thompson's Argument | CIT's Argument | Held |
|---|---|---|---|
| Whether § 1325(a)(5)(C) permits deferred surrender (surrender effective post-confirmation) | § 1325(a)(5)(C) allows surrender and contains no timing requirement; deferred surrender aligns with Chapter 13 practice | § 1325(a)(5)(C) requires present surrender; deferred surrender impairs creditor rights and is inconsistent with the statute | Court: § 1325(a)(5)(C) requires actual surrender at or before confirmation; deferred surrender is not surrender under the statute; plan denied |
| Whether debtor satisfied § 1325(a)(5)(A) (creditor acceptance) | Plan meets creditor’s interests by making payments until surrender | CIT rejected the plan; no acceptance | Court: CIT did not accept; § 1325(a)(5)(A) not satisfied |
| Whether § 1325(a)(5)(B) (provide value/payments over plan) applies to first mortgage | Debtor cannot feasibly pay full secured claim but can provide periodic payments until surrender | CIT must be paid the allowed secured amount as of effective date; first mortgage unimpaired and not modifiable | Court: § 1325(a)(5)(B) not satisfied; plan would impermissibly modify an unmodifiable first mortgage claim |
| Whether related statutes and rules (§ 521, § 362(h), Rule 3015.1) support deferred surrender | Chapter 13 differs from Chapter 7; Chapter 13 plans routinely delay creditor remedies; rule changes are not retroactive | Statutory scheme and Rule 3015.1 reflect prompt surrender and stay-termination mechanics; surrender contemplated as immediate | Court: statutory text, related provisions, and Rule 3015.1 support prompt surrender; negative inference for delay unavailing |
Key Cases Cited
- In re Canning, 706 F.3d 64 (1st Cir. 2013) (defines surrender as ceding possessory rights to collateral; creditor may accept or reject)
- In re Pratt, 462 F.3d 14 (1st Cir. 2006) (treats surrender as relinquishment of possessory rights)
- In re Burr, 160 F.3d 843 (1st Cir. 1998) (describes Chapter 7 debtor’s limited options re: secured property)
- In re White, 487 F.3d 199 (4th Cir. 2007) (holds surrender must occur at or before confirmation; deferred surrender inconsistent with § 1325(a)(5)(C))
- Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000) (construes § 1325(a)(5)(C) as permitting only pre-confirmation surrender)
- Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997) (distinguishes surrender from retention/assumption of collateral)