The Prices, who are above median income debtors, but nonetheless have negative projected disposable monthly and no non-exempt assets, proposed an estimated 15% dividend to the class of dischargeable general unsecured creditors, which totaled $11,728.38. They also proposed to separately classify the $10,463.48 claim by Navient for non-dischargeable student loans. The Chapter 13 Trustee supported confirmation, but the Bankruptcy Administrator filed a limited objection to such treatment.
The bankruptcy court first addressed whether the prohibition in §1322(b)(1) against “unfair discrimination” in favor of one class of unsecured creditors was applicable as §1322(b)(5) allows the a plan to cure and maintain payments on “any unsecured claim … on which the last payment is due after the date on which the final payment under the plan is due.” While recognizing a split in opinions on this question, the court held that since §1322(b)(5) specifically applies despite the limitations in §1322(b)(2), it does not similarly explicitly override the “unfair discrimination” restrictions in §1322(b)(1). … Read More
Prior to filing Chapter 13, the Debtors entered into an Offer in Compromise (“OIC”) with the IRS, agreeing to make four installment payments of $1,000.00 each. After making the first due payment, the Debtors filed bankruptcy four months later and the IRS filed a secured claim for $21,033.15 and an unsecured claim for $83,289.35. The Debtors objected asserting that the IRS should remain bound by the terms of the OIC pursuant to the anti-discrimination provisions of 11 U.S.C. § 525(a). The IRS countered asserting that the terms of the OIC specifically provided that if the Debtors filed bankruptcy “before the terms are fully met, any claim the IRS files in the bankruptcy proceedings will be a tax claim”, interpreting the term “tax claim” to mean the full amount owed prior to the OIC.… Read More
The Debtor proposed a plan that would have paid roughly a 3.8% dividend to general unsecured claims, but would have separately classified his non-dischargeable student loans and paid them in full. The general unsecured class did not accept this plan.
11 U.S.C. § 1129(b)(1) provides the bankruptcy court shall confirm a plan that “does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.”
“There can be ‘discrimination,’ so long as it is not ‘unfair’’” 7 Collier on Bankruptcy ¶ 1129.03 (16th ed.… Read More