In Re Abaunza
452 B.R. 866
Bankr. S.D. Florida2011Background
- Debtors Abaunza filed a Chapter 13 petition on Sept 15, 2010; assets between $100k-$500k and liabilities $500k-$1,000k.
- Trustee objected to plan confirmation on Mar 16, 2011, asserting improper treatment of a creditor outside the plan.
- Debtors proposed to pay all projected disposable income to unsecured creditors while paying student loan outside the plan.
- Student loan debt listed as $7,204.58; monthly payments of $95 continuing.
- Plan would dedicate all PDI to unsecured creditors over five years, with the student loan debt kept current outside the plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether paying a creditor outside the plan creates de facto classification | Trustee argues outside-plan payments trigger classification | Debtors contend post-BAPCPA semantics do not raise de facto class | No de facto unfair classification; not required to restructure plan. |
| Whether outside-plan payments to non-dischargeable debt constitute unfair discrimination | Trustee relies on pre-BAPCPA discrimination standards | Post-BAPCPA framework centers on PDI; discrimination not unfair given PDI goes to unsecureds | Not unfair discrimination when all PDI funds the plan and outside-plan payments use discretionary income. |
| How PDI and discretionary income affect plan confirmability for above-median debtors | Trustee discounts discretionary use as discriminatory | BAPCPA means test fixes PDI; discretionary income may be spent outside plan | Plan can be confirmed if all PDI is used to fund unsecured claims and discretionary use does not discriminate. |
| Role of various post-BAPCPA tests (Leser/Wolff, Bentley, Machado) in this context | Trustee advocates traditional multifactor tests | No single test controls; PDI framework governs | No single test controls; discrimination assessed via PDI framework; plan not unfairly discriminates. |
| Impact of case law (Sharp, Orawsky, Potgieter) on result here | Precedents support unfair discrimination analysis | Post-BAPCPA decisions align with PDI-based justification | Consistent with Sharp and Orawsky that discretionary use of PDI outside plan is permissible when plan uses PDI to pay unsecureds. |
Key Cases Cited
- In re Sharp, 415 B.R. 803 (Bankr. D. Colo. 2009) (unfair discrimination analysis tied to PDI; outside-plan payments allowed if no prejudice to unsecureds)
- In re Orawsky, 387 B.R. 128 (Bankr. E.D. Pa. 2008) (framework focusing on PDI and funding to unsecureds; outside-plan payments permissible)
- In re Potgieter, 436 B.R. 739 (Bankr. M.D. Fla. 2010) (discrimination not unfair in plan paying outside-plan student loan)
- In re Kalfayan, 415 B.R. 907 (Bankr. S.D. Fla. 2009) (separate classification not unfair where necessary to maintain student loan payments)
- In re Harding, 423 B.R. 568 (Bankr. S.D. Fla. 2010) (three-part balancing test used to assess unfair discrimination; varied outcomes)
- In re Leser, 939 F.2d 669 (8th Cir. 1991) (multifactor test for unfair discrimination (Leser/Wolff))
- Bentley v. Boyajian (In re Bentley), 266 B.R. 229 (1st Cir. BAP 2001) (baseline framework for analyzing unfair discrimination in Chapter 13)