984 F.3d 471
5th Cir.2021Background
- Debtor Lucio Barragan‑Flores had two auto loans from Evolve Federal Credit Union: one for a 2011 GMC Sierra and one for a 2016 Toyota Camry. Both loan agreements included a cross‑collateralization clause (each vehicle secures each loan).
- Evolve filed two separate proofs of claim (Camry Claim and Sierra Claim).
- Barragan‑Flores’s Chapter 13 plan proposed to keep the Sierra (cramdown the Sierra Loan) and surrender the Camry as collateral for the Camry Loan (a “partial surrender” of collateral securing the Camry Claim).
- The bankruptcy court confirmed the plan; Evolve objected and the district court reversed, holding a debtor cannot treat different collateral securing the same claim differently under 11 U.S.C. § 1325(a)(5).
- On appeal, the Fifth Circuit affirmed the district court: a debtor must select a single § 1325(a)(5) option for all collateral securing a particular allowed secured claim and may not mix cramdown and surrender for the same claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a debtor may apply different § 1325(a)(5) treatments to different pieces of collateral securing the same allowed secured claim | Barragan‑Flores: § 1325(a)(5) requires a choice “with respect to each allowed secured claim,” so debtor may pick different options for different collateral securing the same claim | Evolve: The statute’s options are joined by “or,” so for each claim the debtor must choose one option for all collateral securing that claim | Court: Debtor cannot mix options for collateral securing the same claim; must pick one § 1325(a)(5) option per claim |
| Whether cross‑collateralization or multiple claims secured by the same collateral permits split treatment | Barragan‑Flores: Multiple claims and § 1325(a)(5)’s "each claim" language allow selective treatment of collateral | Evolve: Cross‑collateralization does not change § 1325(a)(5); Williams forecloses mixing options for collateral securing a claim | Court: Cross‑collateralization does not permit mixing; Williams governs and debtor must treat all collateral securing a claim the same |
Key Cases Cited
- Assocs. Com. Corp. v. Rash, 520 U.S. 953 (1997) (explains the three alternative § 1325(a)(5) treatments: creditor acceptance, cramdown, or surrender)
- Williams v. Tower Loan of Mississippi (In re Williams), 168 F.3d 845 (5th Cir. 1999) (holds debtor may not combine cramdown and surrender for collateral securing the same claim)
- First Brandon Nat’l Bank v. Kerwin (In re Kerwin), 996 F.2d 552 (2d Cir. 1993) (adopts rule that debtor must choose either cramdown or surrender and cannot mix treatments)