509 B.R. 728
Bankr. M.D. Fla.2014Background
- Debtor proposes a Chapter 13 plan with 59 equal monthly payments to Wells Fargo, followed by a balloon payment at month 60 on a $135,000 secured claim.
- Property is located at 2690 64th Avenue South, St. Petersburg, Florida; the court valued the property at $135,000 despite Wells Fargo’s claim of $310,868.36.
- Select Portfolio Servicing objects to the plan as violating 11 U.S.C. § 1325(a)(5)(B) by including a balloon payment.
- Wells Fargo holds the mortgage on the property and is the secured creditor under the plan.
- The court must determine whether balloon payments are permitted under § 1325(a)(5)(B) when disbursing on a secured claim.
- Debtor’s plan as proposed is found to violate § 1325(a)(5)(B) and cannot be confirmed as is.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does balloon payment violate § 1325(a)(5)(B)? | Select Portfolio argues it violates equal monthly payments. | Debtor argues balloon payments may be permissible under certain interpretations. | Balloon payments are not permitted; plan cannot be confirmed as proposed. |
| Whether § 1322 overrides § 1325(a)(5) or legislative history supports balloon payments. | Davis supports override of § 1325(a)(5) by § 1322(e) using state-law cure mechanics. | Hamilton rejects override and supports plain text and history limiting balloon payments. | § 1322 does not override § 1325(a)(5); balloon payments are not allowed. |
Key Cases Cited
- In re Hamilton, 401 B.R. 539 (1st Cir. BAP 2009) (balloon payments not equal to prior payments under §1325(a)(5)(B))
- In re Hill, 397 B.R. 259 (Bankr.M.D.N.C.2007) (courts generally disfavor balloon payments under §1325(a)(5))
- In re Davis, 343 B.R. 326 (Bankr.M.D.Fla.2006) (some view §1322(e) overrode §1325(a)(5); rejected by Hamilton)