470 B.R. 838
9th Cir. BAP2012Background
- Renteria filed a chapter 13 bankruptcy with roughly $100,000 in unsecured claims, including about $20,000 to Preston (attorney).
- Renteria’s plan separated Preston’s unsecured claim and paid it in full with 10% interest, while other unsecured creditors would receive 0%.
- Preston’s claim was guaranteed by Renteria’s mother, Reser, who was a codebtor on the debt.
- Trustee Meyer objected, arguing the separate classification and full payment to Preston impermissibly discriminated against other unsecured creditors and violated §1322(b)(1).
- Bankruptcy court overruled the objection and confirmed the plan, holding codebtor consumer claims may be treated differently under the “however clause.”
- Panel affirmed the bankruptcy court, holding Congress intended to permit separate classification and preferential treatment of codebtor consumer claims under §1322(b)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1322(b)(1) allows separate classification and preferential treatment of a codebtor consumer claim | Meyer: discrimination against other unsecureds violates §1322(b)(1). | Renteria: 'however clause' exempts codebtor claims from unfair discrimination. | Yes; codebtor claims may be treated differently. |
| Whether the Wolff unfair discrimination test applies to codebtor claims after the 1984 amendments | Trustee: Wolff test applies to all separate classifications. | Renteria: unfair discrimination test does not apply to codebtor claims due to the 'however clause'. | Wolff test does not control exclusion of codebtor claims. |
| What legislative history shows about the 'however clause' purpose | Statutory language requires applying the traditional discrimination rule. | Clause demonstrates Congress’s intent to permit separate classification for codebtor claims to ensure feasible plans. | Legislative history supports permitting separate classification for codebtor claims. |
| Did the facts show a genuine basis for preferential treatment of Preston’s claim | Trustee: plan was unfairly discriminatory and unsupported by feasibility. | Renteria: preferential treatment was to protect the codebtor (Reser) and feasible given disposable income. | Yes; the facts supported the plan’s treatment of Preston. |
| Does this case leave open whether any codebtor preference violates unfair discrimination | Remains a question for future record. | N/A (opinion acknowledges unresolved issue). | Conclude not resolved; affirm on current record |
Key Cases Cited
- In re Wolff, 22 B.R. 510 (Bankr.E.D. Cal. 1982) (unfair discrimination test for separate classification)
- In re Hill, 268 B.R. 548 (9th Cir. BAP 2001) (however clause interpretation in codebtor context)
- In re Dornon, 103 B.R. 61 (Bankr.N.D.N.Y. 1989) (codebtor treatment under 1322(b)(1))
- In re Battista, 180 B.R. 355 (Bankr.D.N.H. 1995) (statutory interpretation of however clause)
- In re Easley, 72 B.R. 948 (Bankr.M.D.Tenn. 1987) (different words imply different meanings)
- In re Ramirez, 204 F.3d 595 (5th Cir. 2000) (judge Benevides’ view on however clause interpretation)