In re Romero
DECISION AND ORDER SUSTAINING WELLS FARGO’S OBJECTION TO CONFIRMATION
Undеr Bankruptcy Code § 1325(a)(5)(B)(iii)(I), the holders of certain secured claims are. entitled to receive “equal monthly payments.” Wells Fargo Bank, N.A. d/b/a Wells Fargo Dealer Services (‘Wehs Fargo”) holds such a claim. The Debtors’ Chapter 13 plan proposes to pay post-confirmation adequate protection payments to Wells Fargo until the Debtors’ attorney’s fees аre paid in full and then to begin higher payments until Wells Fargo’s claim is paid in full. Wells Fargo objected to confirmation citing § 1325(a)(5)(B)(iii)’s equаl monthly payment requirement.
The Debtors’ first plan provided that the Debtors’ attorney’s fees would be paid concurrently with the sеcured creditors until the attorney’s fees were paid in full, (ECF No. 3.) Wells Fargo objected and argued that the reduced payments it would receive during the period the Debtors’ attorney’s fees were being paid violated the equal monthly payments requirement of Bankruptcy Code § 1325(a)(5)(B)(iii)(I). (ECF No. 17.) Although the Debtors modified the plan, the proposed modification still contemplated paying, attorney’s fees pro rata with secured creditors. (ECF No. 28 at 3.) Wells Fargo renewed its objection.
ANALYSIS
This Court has issued two decisions interpreting the equal monthly payments requirement, although the issue in the priоr cases involved balloon payments, not a delayed start to the secured creditor’s equal payments. See In re Ehiorobo, No. 13-24713,
A strong contingent of courts has interpreted § 1325(a)(5)(B)(iii) to permit priority claims to be paid prior to or concurrently with secured claims, even if the result is that the early payments on the secured claims are thereby rendered unequal to the later payments. See, e.g., In re De-Sardi,
• In Erwin, the bankruptcy сourt explained the problems that the equal payments provision was enacted to remedy and found that as long as the debtor’s payments to the trustee were equal, and did not involve a balloon, step-up, or seasonal skip, the trustee’s distributiоn of the payments pro rata with priority claims did not violate the equal monthly payments provision. Erwin,
The Court appreciates the policy reasons cited by the Erwin court and recognizes the quandary that debtors and their attorneys face when the equal payments requirement is interpreted to prohibit the long-standing practice in this District of paying the debtor’s attorney’s fees pro rata with secured creditors. But the statute permits no оther interpretation. The equal monthly payments required by the Bankruptcy Code are not those made to the trustee, but rathеr to the creditor. As Judge Halfenger recently noted in In re Enders, Case No. 15-21737,
Section 1325(a)(5)(B)(iii)(I) states, ‘if ... property to be distributed pursuant to this subsection is in the form of periodicpayments, such payments shall be in equal monthly amounts, ’(emphasis added). The рayments required to be in equal monthly amounts are ‘periodic payments’ of ‘property to be distributed pursuant to this subsectiоn’. ‘[Pjroperty to be distributed pursuant to this subsection’ cannot be understood to mean the debtor’s payments to the trustee.
Enders,
Since the periodic payments to the secured creditor must be equal, unless the creditor consents, payment of attorney’s fees “pro rata” with the secured creditor invariably will violate the equal paymеnt requirement. In order to accomplish payment of priority attorneys’ fees without running afoul of the requirement, one cоurt has suggested: “[D]ebtors could propose to pay creditors not less than a set amount every month, so long as that amоunt is sufficient to provide the creditor adequate protection.” In re Willis,
The Erwin court also reasoned that the trustee could distributе the property in uneven amounts in recognition of the special treatment afforded priority claims in Bankruptcy Codе § 1326(b). Erwin,
Since the plan in this case proposes to pay Wells Fargo’s claim a smaller payment until the Debtors’ attorney’s fees are paid in full, Wells Fargo will not receive equal monthly payments. Wells Fargo has not consented to this treatment, and the plan does not comply with the requirements of § 1325(a)(5)(B)(iii). Accordingly, confirmation must be denied.
IT IS THEREFORE ORDERED: Wells Fargo’s objection to confirmation of the Debtors’ Plan is sustained. The Debtors must file an amended Plan within 30 days of this order.