In re: Lionel Bea
NC-14-1376-DKiTa
| 9th Cir. BAP | May 29, 2015Background
- Debtor Lionel Bea filed a Chapter 13 plan proposing $584/month for 60 months; unsecured creditors receive 0%.
- Plan pays $3,000 in attorney fees first, delaying equal payments to three nonpurchase-money secured creditors (City of Oakland, FTB, IRS) until month seven.
- The Plan proposes to pay the secured claims in full well within the 60-month term; none of the three secured creditors objected to confirmation.
- Chapter 13 Trustee Bronitsky objected, arguing the six-month delay violated § 1325(a)(5)(B)(iii)(II)’s adequate-protection requirement for personal-property secured claims.
- Bankruptcy court overruled the trustee, reasoning that unsecured creditors’ silence can constitute acceptance under § 1325(a)(5)(A), and confirmed the Plan; trustee appealed.
- The BAP affirmed, holding the adequate-protection rule in § 1325(a)(5)(B)(iii)(II) is not a clear, self-executing Code requirement that precludes treating creditor silence as acceptance under Espinosa.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Chapter 13 plan violates the Code if equal payments to secured creditors start after the first plan payment | Trustee: A delayed start denies adequate protection required by § 1325(a)(5)(B)(iii)(II) and is therefore unconfirmable | Debtor: § 1325(a)(5) offers alternatives; creditor silence = acceptance under § 1325(a)(5)(A), so delayed start is permissible | Held: No per se violation. Adequate-protection timing is fact-based; delayed start not automatically fatal where creditors did not object and will be paid in full during the plan. |
| Whether a secured creditor’s failure to object constitutes acceptance under § 1325(a)(5)(A) when the plan delays payments that may implicate adequate protection | Trustee: Espinosa means courts must police plans and cannot treat silence as acceptance where the plan conflicts with Code requirements | Debtor: Precedent (Ninth Circuit and other circuits) supports treating silence as acceptance; § 1325(a)(5)(A) applies | Held: Silence can constitute acceptance. Espinosa requires courts to police self-executing Code provisions, but § 1325(a)(5)(B)(iii)(II)’s adequate-protection requirement is not self-executing; creditor silence may be treated as acceptance. |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (Sup. Ct. 2010) (courts must refuse confirmation when plan violates clear, self-executing Code requirements even if creditor fails to object)
- Great Lakes Higher Educ. Corp. v. Pardee, 193 F.3d 1083 (9th Cir. 1999) (failure to object generally translates into acceptance of the plan by the secured creditor)
- Andrews v. Loheit (In re Andrews), 49 F.3d 1404 (9th Cir. 1995) (creditor silence can satisfy § 1325(a)(5)(A))
- Shaw v. Aurgroup Fin. Credit Union, 552 F.3d 447 (6th Cir. 2009) (failure to object to confirmation binds secured creditor to plan treatment under § 1325(a)(5))
- Wachovia Dealer Servs. v. Jones (In re Jones), 530 F.3d 1284 (10th Cir. 2008) (creditor’s failure to object constitutes acceptance of the plan for § 1325(a)(5) purposes)