In re Precise
501 B.R. 67
Bankr. E.D. Pa.2013Background
- Debtor filed Chapter 13 petition on Oct 15, 2012.
- Debtor proposed a second modified plan dated Mar 15, 2013.
- Trustee amended objection filed Apr 26, 2013.
- Plan totals $19,766.28, with $1,255.48 paid prepetition and $330.55 monthly from post-petition earnings.
- Plan designates $15,192.75 to a prepetition Bank of America mortgage, $196.46 to the City of Philadelphia water lien, and $2,400 to debtor’s attorney; ECMC holds an unsecured student loan claim; Schedule J shows $4,588.55 in current monthly expenses including $85 for student loans; debtor intends to make direct $85 monthly payments on student loans outside the plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 1322(b)(5) permits cure and maintenance of a long-term unsecured debt like a student loan for a below-median debtor. | Trustee argues 1322(b)(1) controls; direct payment to ECMC creates unfair discrimination. | Debtor relies on 1322(b)(5) to cure and maintain payments for student loans. | Denied; plan cannot implement 1322(b)(5) cure/maintenance for nondischargeable student loan under current structure. |
| Whether paying a student loan directly while paying other unsecured creditors at minimal dividends constitutes unfair discrimination under 1322(b)(1). | Trustee says direct payments to ECMC discriminate against other unsecured creditors. | Debtor asserts allowed plan structure accommodates cure/maintenance of long-term debt. | Unfair discrimination found; plan cannot be confirmed as proposed. |
| Whether 1322(b)(10) allows interest on nondischargeable student loans when other claims are not paid in full. | Trustee contends interest to ECMC would violate §1322(b)(10) absent full payment of all claims. | Debtor contends statutory language permits interest only if disposable income remains after full payment to all claims. | Plan violates §1322(b)(10); cannot be confirmed. |
| Whether debtor’s disposable income, determined by Schedules I and J, supports confirmation under 1325(b). | Trustee asserts below-median debtor has no discretionary income to fund a plan as proposed. | Debtor relies on schedules I/J and below-median treatment. | Confirmation denied based on PDI treatment and plan structure. |
Key Cases Cited
- In re Orawsky, 387 B.R. 128 (Bankr.E.D.Pa.2008) (applies 1322(b)(1) to direct student-loan payments and suggests fairness analysis under Bentley)
- In re Labib-Kiyarash, 271 B.R. 189 (9th Cir. BAP 2001) (discrimination analysis under 1322(b)(1) for long-term unsecured debts)
- In re Bentley, 266 B.R. 229 (1st Cir. BAP 2001) (Bentley baseline test for unfair discrimination in plan classifications)
- In re Crawford, 324 F.3d 539 (7th Cir. 2003) (discussion of 1322(b) discrimination concepts)
- In re Stull, 489 B.R. 217 (Bankr.D.Kan.2013) (reiterates limits of 1322(b)(10) and treatment of nondischargeable debts)