460 B.R. 708
Bankr. N.D. Tex.2011Background
- Debtors filed a voluntary chapter 13 petition on January 31, 2011.
- An initial plan was denied, leading Debtors to file a revised Amended Plan on May 23, 2011.
- The Trustee objected on May 25, 2011, alleging unfair discrimination under section 1322(b)(1).
- A confirmation hearing was held July 21, 2011, with arguments from both sides.
- Debtors owe $115,651.58 in non-priority unsecured claims, including $65,439.00 student loan claims.
- The UCP amount agreed for unsecured creditors is $12,449.40; student loan creditors receive direct payments outside the UCP.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plan discrimination is unfair under 1322(b)(1) | Trustee contends discrimination favors student loans excessively. | King plan justifies discrimination to treat student loans separately and does not diminish non-student creditors' recovery. | Overruled; plan does not unfairly discriminate. |
| Whether Simmons test remains applicable post-BAPCPA | Simmons should be modified or discarded due to 2005 amendments. | Simmons remains applicable with modifications reflecting BAPCPA. | Simmons remains applicable with the 2005 amendments modifications. |
| Whether the plan complies with 1325 and provides fair share of UCP | Plan shortchanges non-student creditors by concentrating UCP on student loans. | Dispositive income to student loans does not reduce non-student creditors' pro rata share of the UCP. | Plan complies; non-student creditors receive no worse than their pro rata share. |
Key Cases Cited
- In re Simmons, 288 B.R. 737 (Bankr.N.D.Tex.2003) (two-prong test for unfair discrimination of student loan debt; rational purpose and fair share of UCP)
- In re Bentley, 266 B.R. 229 (1st Cir. BAP 2001) (discrimination analysis pre-BAPCPA guidance cited for comparison)
- In re Abaunza, 452 B.R. 866 (Bankr.S.D.Fla.2011) (post-BAPCPA view supporting use of discretionary income with respect to projected disposable income)
- Sharp, 415 B.R. 803 (Bankr.D.Colo.2009) (recognizes discrepanсy between projected disposable income and actual discretionary income)