555 B.R. 892
Bankr. M.D. Ga.2016Background
- Debtor pledged residence + adjoining 157 acres as collateral; loan later assigned to RREF II PB-GA, LLC (RREF), which initiated foreclosure prompting Debtor to file Chapter 13 (Oct 2015).
- RREF filed a secured claim for $649,990.09; parties agreed property value exceeds RREF’s claim (RREF is oversecured).
- Plan proposed continued monthly adequate-protection payments of $2,500 and a balloon payment within 12 months to pay RREF in full; trustee reported plan payments were current and did not oppose confirmation.
- RREF objected: (1) § 1325(a)(5)(B)(iii)(I) prohibits a balloon that is unequal to preceding periodic payments; (2) plan is not feasible under § 1325(a)(6).
- Debtor testified refinancing by his wife (after six months at increased salary) would produce funds for the balloon; no commitment letter was offered but bank loan officer indicated refinancing was likely; RREF did not present rebuttal evidence.
- Court directed post-hearing briefs, considered statutory text, legislative history, pre- and post-BAPCPA practice, and confirmed plan with addition of a self-executing stay-relief provision if RREF is not paid in 12 months.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1325(a)(5)(B)(iii)(I) bars a balloon payment following periodic payments | Debtor: balloon is not a “periodic payment” and thus not subject to equal-monthly-payment rule; statute permits one-time lump-sum final payment | RREF: balloon is part of the payment stream and thus must be equal to prior periodic payments; unequal balloon prohibited | Court: balloon payments are not “periodic payments” under the plain text, so §1325(a)(5)(B)(iii)(I) does not bar them |
| Whether pre-/post-confirmation adequate-protection payments are excluded from “periodic payments” analysis | Debtor: labeling payments as adequate protection distinguishes them from periodic payments reducing applicability of the equal-payment rule | RREF: labels don't matter; payments are payments and fall within §1325(a)(5)(B)(iii)(I) if made over time | Court: unnecessary to decide labeling issue; holds balloon itself is not periodic regardless of preceding payments |
| Whether legislative history/intent supports prohibiting balloon payments | RREF: BAPCPA aimed to prevent backloading and abuses (so Congress intended to eliminate balloons) | Debtor: legislative history is scant and text does not show intent to ban balloons; Chapter 13 favors flexibility | Court: legislative history does not show an intent to eliminate balloon payments; statutory text and Chapter 13 policy support flexibility |
| Feasibility under §1325(a)(6) of plan with a balloon contingent on refinancing | RREF: lack of commitment letter/term sheet and uncertain refinance makes plan infeasible | Debtor: payments current, oversecured creditor receiving adequate protection, testimony and bank officer’s statement support likely refinance; debtor willing to accept self-executing stay relief | Court: plan feasible given adequate protection payments, oversecured status, debtor’s testimony and inclusion of self-executing stay-relief; overrules feasibility objection |
Key Cases Cited
- Hamilton v. Wells Fargo Bank, N.A. (In re Hamilton), 401 B.R. 539 (1st Cir. B.A.P. 2009) (holds balloon payments are proscribed by §1325(a)(5)(B)(iii)(I))
- DeSardi (In re DeSardi), 340 B.R. 790 (Bankr. S.D. Tex. 2006) (supports view that BAPCPA intended to prevent backloading, including balloons)
- Erwin (In re Erwin), 376 B.R. 897 (Bankr. C.D. Ill. 2007) (concludes Congress intended to eliminate balloon/backloaded plans)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (canon against reading amendments as overturning established pre‑amendment practice absent clear intent)
- Hamilton v. Lanning, 560 U.S. 505 (2010) (courts should not infer major departures from pre‑BAPCPA practice without clear legislative intent)
- United States v. Ron Pair Enters., Inc., 489 U.S. 235 (1989) (plain meaning of statute controls except in rare cases)