587 B.R. 573
Bankr. S.D. Florida2018Background
- Two Chapter 13 debtors (Benedicto and Gonzalez) proposed five‑year plans that include large balloon payments to mortgage holders in the final month(s) as part of either a modified plan (Benedicto) or a cure‑and‑maintain plan (Gonzalez).
- Mortgagees objected to confirmation arguing the plans violate 11 U.S.C. § 1325(a)(5)(B)(iii)(I), which requires periodic payments to be "in equal monthly amounts."
- The debtors had attempted mortgage modification through the court's Mortgage Modification Mediation Program; mediation failed and modified plans proposed uneven final payments (balloons).
- The court consolidated briefing/hearing on whether balloon payments constitute nonconforming "periodic payments" banned by § 1325(a)(5)(B)(iii)(I).
- The court concluded that balloon payments are the last in a series of periodic payments and thus must be equal to preceding monthly payments; plans containing balloon payments were held nonconforming and confirmation was denied.
- The court limited its ruling: the equal monthly payment requirement applies starting with the first post‑confirmation (or first month a modified) plan is operative, and the opinion is narrowly applied; other issues reserved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do balloon payments in a Chapter 13 plan violate § 1325(a)(5)(B)(iii)(I)? | Balloon payments are periodic payments and thus must be equal monthly amounts; nonconforming balloons violate § 1325(a)(5). | Balloon payments are a one‑time final payment that completes the debt and therefore are not "periodic" and not subject to the equal monthly requirement. | Held: Balloon payments are periodic (the final member of a series) and must be equal; balloons violate § 1325(a)(5)(B)(iii)(I) and confirmation must be denied. |
| Does the equal monthly payment requirement apply to all secured claims (including mortgages)? | N/A (creditors argue it does) | Debtors suggest the BAPCPA placement indicates focus on personal property creditors. | Held: The statute's text and BAPCPA structure show the requirement applies to all secured claims, including mortgages. |
| When does the equal monthly payment requirement begin? | Debtors may have argued earlier payments should count or be governed by prior plan payments. | Creditors argued equal payments must run from plan inception. | Held: Equal‑payment obligation begins no earlier than the first payment after confirmation (or the first month the modified plan takes effect). |
| Should pre‑BAPCPA practice permitting balloon plans control interpretation? | Debtors point to pre‑BAPCPA permissibility and scarce legislative history to justify balloons. | Creditors emphasize the plain statutory language enacted in BAPCPA. | Held: Plain statutory text governs; pre‑BAPCPA practice and sparse legislative history do not override the clear equal‑monthly requirement. |
Key Cases Cited
- Hamilton v. Wells Fargo Bank, N.A., 401 B.R. 539 (1st Cir. B.A.P.) (majority rule that balloon payments are proscribed under § 1325)
- Spark, In re, 509 B.R. 728 (Bankr. M.D. Fla.) (holding balloon payments impermissible under § 1325)
- Erwin, In re, 376 B.R. 897 (Bankr. C.D. Ill.) (same)
- Cochran, In re, 555 B.R. 892 (Bankr. M.D. Ga.) (contrary holding that balloon payments are not "periodic")
- DeSardi, In re, 340 B.R. 790 (Bankr. S.D. Tex.) (discussion that equal payments must be level once they begin)
- Lamie v. United States Trustee, 540 U.S. 526 (2004) (plain‑meaning statutory interpretation governs)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (courts should not assume Congress intended to alter pre‑BAPCPA practice absent clear indication)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (same principle cited on statutory interpretation)