445 B.R. 509
Bankr. D.S.C.2011Background
- Debtors filed Chapter 13 petition on November 24, 2010 and proposed a plan filed November 29, 2010.
- Debtors are above-median income with Schedule J disposable income of $2,063.82 monthly.
- Total secured debt is $176,759, including a mortgage of $137,019 and three other accounts; unsecured debt is $62,946.
- Plan proposed monthly payments of $1,535 for 57 months, claiming 100% to general unsecured creditors makes 57 months proper.
- Trustee objected to confirmation due to excess disposable income unless unsecured creditors receive interest; Debtors agreed to amend but no amended plan was filed by continued hearing date.
- Debtors added non-conforming provisions: (i) arbitration provisions rejection, (ii) mortgage ownership dispute reservation, and (iii) numerous post-confirmation arrearage-related provisions; the court found them improper.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the plan complies with §1325(a) given non-conforming terms | Madera argues form-plan non-conforming terms are permissible under 1325(a). | Duncan argues plan fails §1325(a) due to non-conforming provisions that undermine code requirements and efficiency goals. | Plan could not be confirmed; non-conforming provisions render it inconsistent with §1325(a). |
| Whether a form plan may include blanket rejection of arbitration provisions | Madera contends cases permit rejection of arbitration clauses; form plan supports rejection. | Duncan contends debtor cannot reject all arbitration provisions while assuming contracts and must consider each contract; principal rule is cum onere. | Non-conforming arbitration rejection language is improper; plan cannot be confirmed. |
| Whether the plan may reserve the right to dispute mortgage debt ownership/amount | Madera asserts need to reserve ownership/amount dispute due to lack of proofs of claim. | Duncan finds language unnecessary and prejudicial; disputes should be resolved by timely objections to proofs of claim. | Reservation language improper; not allowed in plan. |
| Whether other non-conforming post-confirmation provisions are permissible | Madera argues provisions safeguard creditors’ rights and notice. | Duncan finds these provisions duplicative, confusing, and not needed for notice or rights; undermines efficiency. | End-of-plan non-conforming provisions rejected; plan not confirmable. |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (U.S. 2010) (independent duty to review plans for §1325 compliance)
- In re Maupin, 384 B.R. 421 (Bankr. W.D. Va. 2007) (uniform plan benefits efficiency; cannot reject contract terms selectively)
- In re Walat, 89 B.R. 11 (E.D. Va. 1988) (uniform plan advantages; form plan aiding efficiency)
- In re Italian Cook Oil Corp., 190 F.2d 994 (3rd Cir. 1951) (debtor generally must assume entire contract upon assumption)
- In re Burretto, No. 05-07146-jw (Bankr.D.S.C. Jul. 23, 2008) (Bankr. D.S.C. 2008) (loan ownership disputes; estoppel considerations in mortgage payments)