In re Buchanan

• Decision Date: 27 August 2020
• Docket Number: Case No. 3:20-bk-31045-SHB
• Citation: 621 B.R. 840
• Parties: IN RE Ann-Marie BUCHANAN fka Ann-Marie Carolyn Jones, Debtor
• Court: U.S. Bankruptcy Court — Eastern District of Tennessee

621 B.R. 840

IN RE Ann-Marie BUCHANAN fka Ann-Marie Carolyn Jones, Debtor

Case No. 3:20-bk-31045-SHB

United States Bankruptcy Court, E.D. Tennessee.

Signed August 27, 2020

Richard M. Mayer, John P. Newton, Jr., Law Offices of Mayer & Newton, Knoxville, TN, for Debtor.

MEMORANDUM AND ORDER ON CONFIRMATION OF CHAPTER 13 PLAN

Suzanne H. Bauknight, UNITED STATES BANKRUPTCY JUDGE

This contested matter is before the Court on confirmation of Debtor's Chapter 13 Plan filed on April 9, 2020 [Doc. 2], and the Objection to Confirmation filed by Gwendolyn M. Kerney, Chapter 13 Trustee ("Trustee") on May 14, 2020 [Doc. 20]. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L).

I. PROCEDURAL POSTURE AND FACTS

Debtor filed the Voluntary Petition commencing this Chapter 13 bankruptcy case on April 9, 2020, along with the statements and schedules required by 11 U.S.C. § 521(a)(1), including Schedule E/F: Creditors Who Have Unsecured Claims reflecting, inter alia , unsecured nonpriority debt of $425,853.00, of which $365,874.00 is student loan debt.¹ [Doc. 1 at p. 30-41.] The Trustee objected to confirmation on May 14, 2020, based on feasibility, disposable income, and eligibility under 11 U.S.C. § 109(e) because Debtor's scheduled unsecured debt exceeds the Chapter 13 debt limit. [Doc. 20.] At the continued confirmation hearing on June 24, 2020, in consideration of Debtor's argument that the Court should limit its eligibility determination under § 109(e) to the total amount of claims filed (rather than scheduled debt), the Court directed Debtor's counsel to file a brief in support of the threshold eligibility issue.

Debtor's Brief urges the Court to base Debtor's § 109(e) eligibility on the amount of claims filed rather than the amount of debt scheduled. As directed by the Court in its Order entered July 14, 2020 [Doc. 49], the Trustee filed a Brief in Opposition to Confirmation on August 5, 2020 [Doc. 51], arguing that the § 109(e) debt limitation contemplates debts scheduled and that confirmation of Debtor's Plan should be denied under the plain language of the Bankruptcy Code.

Notwithstanding Debtor's arguments to the contrary, the Court finds that the plain language of § 109(e) – which looks solely to the petition date based on debts scheduled, not claims filed – mandates a finding that Debtor is ineligible for Chapter 13 relief. By this finding, the Court also determines that it lacks authority to except Debtor's student loan debts from the § 109(e) analysis or to disregard the express provisions of § 109(e). Finally, the Court finds that ineligibility constitutes "cause" for conversion or dismissal under 11 U.S.C. § 1307. Thus, the Chapter 13 Trustee's Objection to Confirmation will be sustained and confirmation of Debtor's Chapter 13 Plan filed on April 9, 2020 [Doc. 2], will be denied. The Court, however, will not dismiss this Chapter 13 proceeding for fourteen days to allow Debtor to convert this case to a Chapter 7 or 11 proceeding if she so desires.

II. ANALYSIS

Section 1325 governs confirmation of Chapter 13 plans, requiring the Court to confirm a plan if it, among other things, "complies with the provisions of this chapter and with the other applicable provisions of this title." 11 U.S.C. § 1325(a)(1). Additionally, the Sixth Circuit has "consistently treated the provisions in § 1325(a) as mandatory requirements for confirmation." Shaw v. Aurgroup Fin. Credit Union , 552 F.3d 447, 455 (6th Cir. 2009). The Trustee, who has objected to confirmation based on Debtor's alleged ineligibility (among other things), bears the initial burden to present evidence in support of her objection (which she has done by reference to Debtor's schedules), after which Debtor bears the ultimate burden of proving that her plan complies with the provisions of § 1325 and the Bankruptcy Code as a whole. See In re McDonald , 437 B.R. 278, 283 (Bankr. S.D. Ohio 2010).

Unquestionably, Debtor's scheduled unsecured debts exceed the § 109(e) debt limitation for Chapter 13 cases (i.e., $419,275.00). See 11 U.S.C. § 109(e). Debtor scheduled unsecured debt totaling $425,853.00. [Doc. 1 at pp. 30-41.] On June 24, 2020, Debtor filed a claim for a scheduled debt owed to Citizens Bank in the amount of $42,048.00 [Claim No. 19], noticing the creditor as required by Federal Rule of Bankruptcy Procedure 3004. [Doc. 43.] On July 10, 2020, however, Debtor withdrew Claim No. 19. [Doc. 47.] As a result, total claims filed calculate to $400,920.59, which is less than the Chapter 13 unsecured debt limit of § 109(e). Debtor acknowledges, "If the cosigned ex-spouse's student loans are counted the Debtor's scheduled debts are $17,420.00 over the limit primarily because of the student loan debts. If only the claims filed are counted, the Debtor is below the limit." [Doc. 48 at ¶ 4.]

Debtor argues that because she does not meet the means test under § 707(b)² (i.e., Debtor is an above-median debtor with disposable income of $1,857.80 [Doc. 6] ), the Court should exercise discretion and overrule the Trustee's Objection to Confirmation.³ [Doc. 48 at pp. 3-4.] In support, Debtor argues that "the statutory ceiling is not jurisdictional and therefore the Bankruptcy Court can proceed with the case as filed despite the schedule [sic ] debts exceeding the statutory debt ceiling." [Doc. 48 at p. 5.]

As the Supreme Court made clear, "[t]he Bankruptcy Code standardizes an expansive (and sometimes unruly) area of law, and it is [the court's] obligation to interpret the Code clearly and predictably using well established principles of statutory construction." RadLAX Gateway Hotel, LLC v. Amalgamated Bank , 566 U.S. 639, 649, 132 S.Ct. 2065, 182 L.Ed.2d 967 (2012). Accordingly, "courts must give effect to the clear meaning of statutes as written." Star Athletica, L.L.C. v. Varsity Brands, Inc. , ––– U.S. ––––, 137 S. Ct. 1002, 1010, 197 L.Ed.2d 354 (2017).

The Bankruptcy Code expressly limits eligibility of debtors who seek to proceed under Chapter 13, providing that "[o]nly an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $419,275.00 ... may be a debtor under chapter 13 of this title." 11 U.S.C. § 109(e) ; see also Glance v. Carroll (In re Glance) , 487 F.3d 317, 321 (6th Cir. 2007) ("[T]he eligibility requirements of § 109(e) create a gateway into the bankruptcy process, not an ongoing limitation on the jurisdiction of the bankruptcy courts."). Eligibility is determined as of the petition date by the filing of the debtor's schedules in good faith. See Comprehensive Accounting Corp. v. Pearson (In re Pearson) , 773 F.2d 751, 754 (6th Cir. 1985) (" ‘Claim’ refers to a creditor's demand for payment regardless of the existence or validity of the underlying obligation; ‘debt’ refers ‘not to the creditor's claim, but either to (1) the actual obligation to pay as it exists in the contemplation of applicable law, or (2) to the obligation to pay as asserted by the debtor in the bankruptcy schedules.’ " (quoting In re Lambert , 43 B.R. 913, 918 (Bankr. D. Utah 1984) )). That is, "postpetition events may not be taken into account in determining chapter 13 eligibility." In re Ash , 539 B.R. 807, 811 (Bankr. E.D. Tenn. 2015). Additionally, based on the unambiguous language of § 109(e), which "[b]eyond specifying that the debt subject to this limit must be noncontingent [and] liquidated ..., contains no reference to specific types of debt or any indication that the type of debt would affect a debtor's eligibility to file a petition under Chapter 13," all unsecured debt is treated the same when determining whether a debtor falls within the debt limit. Stearns v. Pratola (In re Pratola) , 589 B.R. 779, 788 (N.D. Ill. 2018) (reversing the bankruptcy court's finding that student loan debt could be excepted from the § 109(e) eligibility analysis).

The Code defines "debt" as "liability on a claim." 11 U.S.C. § 101(12). "Claim" is defined as the "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured."

11 U.S.C. § 101(5)(A). Thus, § 109(e) precludes an individual from seeking relief under Chapter 13 if "on the date of filing of the petition," the individual has liability on rights to payment that are noncontingent, liquidated, and unsecured if the total amount owed exceeds $419,275.00. In the Sixth Circuit, a debt is noncontingent "when all of the events giving rise to liability for the debt occurred prior to the debtor's filing for bankruptcy." In re Glance , 487 F.3d at 322 (quoting Mazzeo v. United States (In re Mazzeo) , 131 F.3d 295, 303 (2d Cir. 1997) ). To decide if a debt is liquidated, a majority of courts, including the Sixth Circuit, follow decisions under the Bankruptcy Act that defined liquidated to mean the amount is "readily ascertainable." In re Pearson , 773 F.2d at 754 ; see also In re Dow Corning Corp. , 215 B.R. 346, 359 (Bankr. E.D. Mich. 1997) (holding that "a claim is liquidated when its value is capable of ready ascertainment, irrespective of whether the validity of the claim is in dispute").

In In re Glance , the Sixth Circuit examined whether courts may treat "debts" and "claims" the same with respect to the Chapter 13 debt limits.⁴ The court stated, "In the final analysis, just as a debtor may seek protection from a bank's foreclosure on a lien because it is a ‘claim’ under the Code, ... so a debtor must treat the same lien as a ‘debt’ in determining whether he has exceeded the debt limitations for filing a Chapter 13 petition." In re Glance , 487 F.3d at 321 (internal citation omitted). The court acknowledged that "Chapter 13 provides one avenue for obtaining relief, allowing a relatively small debtor to reschedule his payment obligations to his creditors, ‘retain his property and avoid the stigma of a straight bankruptcy.’ " Id. at 319 (quo...