In re Elrod, Bankruptcy No. 94-03378-C.
| Decision Date | 23 February 1995 |
| Docket Number | Bankruptcy No. 94-03378-C. |
| Citation | 178 BR 5 |
| Parties | In re Leroy Barnett ELROD and Mary Lou Elrod, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
Sheldon E. Morton, Tulsa, OK, for debtors.
Natalie B. Sherman, Trial Atty., Tax Div., U.S. Dept. of Justice, Washington, DC, for IRS.
This matter comes to be heard upon the motion of the IRS to dismiss Debtors petition for relief under Chapter 13 because Debtors owe in excess of $250,000.00 in noncontingent, liquidated, unsecured debt.
This Court having now considered the operative facts and the arguments of counsel finds as follows.
On September 27, 1994, the IRS seized business real property and furnishings belonging to Debtors. On that same day, Debtors filed a Chapter 13 petition with this Court. Debtors voluntarily dismissed their Chapter 13 petition on November 1, 1994, after learning that they did not qualify for relief under § 109(e) of the Bankruptcy Code because they had noncontingent liquidated unsecured debt in excess of $100,000.00. Debtors filed the present Chapter 13 petition on November 10, 1994, upon learning of the passage of the Bankruptcy Reform Act of 1994 ("Act") on October 22, 1994. The Act raised the allowable amount of a noncontingent liquidated unsecured debt for a Chapter 13 petition from $100,000.00 to $250,000.00.
Debtors on their bankruptcy schedules listed unsecured debt in the amount of $195,995.59. This amount included an unsecured debt to the IRS of $40,780.74.
On December 8, 1994, the IRS filed an amended proof of claim in the amount of $657,377.69, of which $648,977.69 was unsecured. Of the unsecured amount, $638,281.75 was listed as "estimated liability."1
On January 11, 1995, the IRS filed its motion to dismiss the case alleging that Debtors were ineligible to file because they have noncontingent, liquidated, and unsecured debt in excess of $250,000.
On January 15, 1995, Debtors filed an objection to the allowance of the claim and asked that this Court determine the proper amount of their debt due and owing to the IRS.
The issue before the Court is whether Debtors are eligible to file for relief under Chapter 13 of the Bankruptcy Code. Section 109(e) of the Bankruptcy Code sets forth the eligibility requirements. This section states in part as follows:
(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $250,000.00 . . . may be a debtor under chapter 13 of this title.
The parties agree that the claim of the IRS is noncontingent and unsecured but disagree as to whether it is liquidated or unliquidated. The IRS argues that its claim is disputed but liquidated and therefore Debtors are ineligible to file for relief under Chapter 13. Debtors argue that the claim of the IRS is admitted as to liability, but the amount due is contested and therefore the claim is unliquidated and not counted in determining eligibility.
In regard to the meaning of contingent, liquidated, and disputed debt, In re Lamar, 111 B.R. 327, 329 (D.Nev.1990) (quoting In re Sylvester, 19 B.R. 671, 672-73 (9th Cir. BAP 1982)) held that "the words disputed, contingent, and unliquidated have different meanings." (emphasis in original). "Contingent" refers to the happening of an event, while "liquidated" refers to the amount of debt. See Matter of McGovern, 122 B.R. 712, 715 (Bankr.N.D.Ind.1989) (). "Disputed," therefore, must refer to whether or not there is liability. Unliquidated refers to whether the amount is contested.
The IRS cites Matter of McGovern, 122 B.R. 712 (Bankr.N.D.Ind.1989) for the proposition that the court should not rely on Debtors' schedules to determine Chapter 13 eligibility because this would give Debtors "exclusive control over accessibility to Chapter 13 or be permitted to circumvent its debt ceilings by the artful manipulation of the information contained in the bankruptcy filings." This Court agrees with this reasoning, but finds that McGovern also states that:
In the same fashion, the court is not bound by the claims as creditors have chosen to assert them. Just as the debtor is not permitted to control its eligibility for relief under Chapter 13, that right should not be restricted by the demands of creditors. Instead, in each instance, the court is required to look beyond the information given and make an independent determination. Id. at 714.
Many cases have attempted to define the term liquidated. The generally accepted definition and the one adopted by this Court is that a claim is liquidated when the amount can be readily determined with precision and capable of ascertainment by reference to an agreement or simple mathematical computation. If a determination of the amount requires judgment, discretion or interpretation of applicable statutes, then it is unliquidated. See In re Sylvester, 19 B.R. 671 (9th Cir. BAP 1982); In re Bay Point Corp., 1 B.C.D. 1635 (D.N.J.1975); In re Lamar, 111 B.R. 327 (D.Nev.1990); In re Robertson, 143 B.R. 76 (Bankr.N.D.Tex.1992); Matter of McGovern, 122 B.R. 712 (Bankr.N.D.Ind.1989); In re Loya, 123 B.R. 338 (9th Cir. BAP 1991)...
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