583 B.R. 453
Bankr. N.D. Ill.2018Background
- Debtor Felicia Williams filed a Chapter 13 petition (Nov. 6, 2017) listing a secured Ford Motor Credit claim on a 2016 Ford Fusion and proposed a 60‑month plan.
- Original plan proposed trustee payments of $785/month, with Ford to receive $459.09/month as a fixed secured‑claim payment and debtor’s counsel to receive concurrent monthly payments at the same priority level.
- Ford objected, arguing the plan failed § 1325(a)(5)(B) because it did not provide equal monthly payments to the secured claim; debtor revised the plan multiple times, ultimately proposing low interim payments to Ford ($275/month) then a step‑up to higher payments after attorney fees and administrative expenses were paid.
- Debtor argued § 1325(a)(5)(B) does not specify when equal payments must begin and that § 1326(b)(1) (priority payment of administrative claims) permits accelerating attorney fees before full secured payments commence; Ford argued equal monthly payments must start at confirmation and continue until the claim is paid.
- The court heard briefing and oral argument and concluded the plan violated § 1325(a)(5)(B)(iii) because it deferred required equal monthly payments to Ford in favor of accelerated attorney fees; confirmation was denied and debtor given 21 days to file an amended plan.
Issues
| Issue | Debtor's Argument | Ford's Argument | Held |
|---|---|---|---|
| Whether § 1325(a)(5)(B)(iii)’s “equal monthly amounts” must begin at confirmation | Statute silent on start date; equal payments may begin later if adequate protection paid pre/post‑confirmation and § 1326(b)(1) requires priority payment of administrative claims | Equal monthly periodic payments to secured creditors must commence at confirmation and continue until claim is paid | Court held payments to the creditor must be equal monthly amounts beginning with the first post‑confirmation distribution; plan defers required payments and is noncompliant |
| Whether § 1326(b)(1) allows accelerated attorney fees to supersede equal payments to an objecting secured creditor | § 1326(b)(1) requires paying administrative claims before/at same time as creditor payments, so counsel may be paid earlier | § 1326(b)(1) does not override § 1325(a)(5)(B); plan must be structured so attorney payments do not reduce or delay equal monthly secured payments | Court held § 1326(b)(1) does not trump § 1325(a)(5)(B); debtor must calculate plan payments to cover both administrative expenses and equal secured payments |
| Whether pre‑confirmation adequate protection payments can be continued post‑confirmation in lesser amounts and satisfy § 1325(a)(5)(B) | Adequate protection payments covering depreciation can continue post‑confirmation until attorney fees paid, protecting creditor until equal payments start | Adequate protection cannot be used to justify continuing lower payments post‑confirmation when plan treatment of the secured claim provides for larger equal payments | Court held adequate protection under § 1326(a) cannot be treated as the § 1325(a)(5)(B) periodic payment if it results in unequal payments to the secured creditor |
| Whether "equal monthly amounts" refers to debtor’s payments to the trustee or trustee’s distributions to the creditor | Equal payments can refer to debtor’s payments into the plan (trustee priorities may alter distributions) | "Equal monthly amounts" refers to periodic distributions to the creditor under § 1325(a)(5) (not merely debtor’s payments into the plan) | Court adopted the view that the phrase governs trustee distributions to the secured creditor, not merely debtor’s plan contributions |
Key Cases Cited
- In re Marks, 394 B.R. 198 (Bankr. N.D. Ill. 2008) (held allowed secured creditors may receive interim adequate protection while administrative claims are paid first, allowing delayed equal post‑confirmation payments)
- In re DeSardi, 340 B.R. 790 (Bankr. S.D. Tex. 2006) (supports deferring full secured payments while providing adequate protection)
- In re Erwin, 376 B.R. 897 (Bankr. C.D. Ill. 2006) (same rationale permitting interim adequate protection)
- In re Hill, 397 B.R. 259 (Bankr. M.D. N.C. 2007) (same)
- In re Butler, 403 B.R. 5 (Bankr. W.D. Ark. 2009) (concluded administrative fees may dictate timing of distributions, affecting equal monthly payments)
- In re Brennan, 455 B.R. 237 (Bankr. M.D. Fla. 2009) (supports prompt payment of attorneys while providing adequate protection)
- In re Sanchez, 384 B.R. 574 (Bankr. D. Or. 2008) (held equal monthly payments must commence at confirmation and continue until claim paid)
- In re Denton, 370 B.R. 441 (Bankr. S.D. Ga. 2007) (distinguished adequate protection from the § 1325 equal‑payment requirement)
- In re Willis, 460 B.R. 784 (Bankr. D. Kan. 2011) (criticized majority’s tiered‑payment approach as not authorized by the Code)
- In re Romero, 539 B.R. 557 (Bankr. E.D. Wis. 2015) (held § 1326(b)(1) does not create an exception to § 1325(a)(5)(B)’s equal‑payment requirement)
- In re Kirk, 465 B.R. 300 (Bankr. N.D. Ala. 2012) (plan must be structured so attorney payments do not delay or reduce required equal monthly payments)
- In re Williams, 385 B.R. 468 (Bankr. S.D. Ga. 2008) (explains that both equal monthly payments and adequate protection must be satisfied together)