539 B.R. 557
Bankr. E.D. Wis.2015Background
- Debtors filed a Chapter 13 plan that proposed paying Wells Fargo (secured creditor) adequate protection payments of $75/month until the Debtors’ attorney’s fees were paid, then $122/month thereafter until Wells Fargo’s claim was paid in full.
- Wells Fargo objected to confirmation, asserting the plan violated 11 U.S.C. § 1325(a)(5)(B)(iii)(I)’s requirement that periodic payments to secured creditors be in equal monthly amounts.
- Debtors initially proposed paying attorney’s fees concurrently (pro rata) with secured creditors; after objections they submitted modified plans but continued the pro rata approach or a delayed step-up to equal payments.
- The court held a hearing, received briefing from both sides, and analyzed divergent authority from bankruptcy courts on whether priority administrative fees may be paid earlier/concurrently in a way that causes secured-creditor payments to be unequal.
- The court concluded the statute requires equal monthly payments to the creditor (not merely equal debtor payments to the trustee); because Wells Fargo did not consent, the proposed stepped/unequal payments violated § 1325(a)(5)(B)(iii) and confirmation was denied.
- Order: Wells Fargo’s objection sustained; Debtors must file an amended plan within 30 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 1325(a)(5)(B)(iii)(I) allows reduced/unequal payments to a secured creditor while priority attorney fees are paid concurrently | Wells Fargo: Uneven/stepped payments violate the statute’s requirement that periodic payments to the secured creditor be equal unless creditor consents | Debtors: Paying attorney’s fees pro rata or paying priority fees earlier is permissible; trustee distributions can be pro rata so long as debtor’s payments to trustee are equal and creditor remains adequately protected | Held: Unequal payments to the creditor (absent consent) violate § 1325(a)(5)(B)(iii); plan confirmation denied |
Key Cases Cited
- In re De-Sardi, 340 B.R. 790 (Bankr. S.D. Tex. 2006) (held payments to secured creditors need not begin at trustee’s first distribution; supports allowing early priority payments even if secured payments vary)
- In re Erwin, 376 B.R. 897 (Bankr. C.D. Ill. 2007) (permitted priority claims paid concurrently despite uneven trustee distributions; emphasizes debtor’s equal payments to trustee)
- In re Hill, 397 B.R. 259 (Bankr. M.D.N.C. 2007) (supports allowing concurrent payment of priority fees with secured claims despite stepped creditor payments)
- In re Butler, 403 B.R. 5 (Bankr. W.D. Ark. 2009) (aligns with line permitting priority fees to be paid ahead/concurrently even if creditor payments vary)
- In re Sanchez, 384 B.R. 574 (Bankr. D. Or. 2008) (criticizes broad readings that allow stepped payments; suggests modifying amortization to keep secured payments equal)
- In re Kirk, 465 B.R. 300 (Bankr. N.D. Ala. 2012) (explains § 1326(b) allows concurrent payment of administrative fees but plan must not reduce or delay required equal monthly payments to secured creditors)
- In re Willis, 460 B.R. 784 (Bankr. D. Kan. 2011) (suggests structuring plans to pay creditors a sufficient set monthly amount for adequate protection while accommodating priority fees)