In re McNabb, Case No. 2-05-07495-RJH, District of Arizona, June 23, 2005.  (pdf format)

In re Zimmer, 313 F.3d 1220 (C.A.9 (Cal.), 2002).

Chapter 13 debtor filed adversary complaint seeking to avoid a $39,000 second mortgage.  The value of property ($110,000) securing the mortgage was less than the balance of the first mortgage ($123,000) making the second position deed of trust wholly unsecured.   The Bankruptcy Court dismissed the complaint for failure to state a claim, and debtor appealed to the District Court which affirmed the lower court.  The 9th Circuit Court of Appeals reversed and remanded the case finding that the Bankruptcy Code's antimodification protection of §1322(b)(2) is only available to holders of secured claims, so a wholly unsecured lien on a primary residence may be avoided in a Chapter 13 proceeding.

§1322(b)(2) allows a debtor's plan to "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence."

In re Lam, 211 B.R. 36 9th Cir.BAP (Cal.),1997.

Chapter 13 debtors filed adversary proceeding against holder of a fourth position deed of trust on their residence (valued at $300,000, with first, second, and third deeds of trust of $164,222, $61,824, and $560,000, respectively) asking the court to "strip off" the wholly unsecured fourth lien.  The creditor failed to appear, and debtors moved a default judgment. The Bankruptcy Court, denied the motion based on Nobelman (below).  On appeal, the Bankruptcy Appellate Panel reversed the Bankruptcy Court holding that Bankruptcy Code's antimodification provision does not protect "secured" creditors holding completely unsecured claims.

Nobelman v. American Savings Bank, 508 U.S. 324, 113 S.Ct. 2106, 124 L.Ed.2d 228 (U.S. Supreme Ct. 1993).

Summary of Nobleman quoted from In re Zimmer (above):

In Nobelman, the Supreme Court considered the question of whether a partially-secured claim secured by a homestead lien could be bifurcated into its secured and unsecured components, and "stripped down" to the value of the secured claim. See id. at 326-27, 113 S.Ct. 2106. The debtors argued that, under § 506(a), the holder of an undersecured mortgage--for which the value of the claim exceeds the value of the property--only holds a "secured claim" to the extent of the value of the property, and holds an "unsecured claim" for the excess value of the mortgage. Id. at 328, 113 S.Ct. 2106. Because § 1322(b)(2) only protects the rights of "holders of secured claims," they maintained that only the secured portion of the mortgage was entitled to protection and, therefore, that the value of the mortgage could be effectively reduced to its secured value. Id."

The Supreme Court rejected this approach of bifurcation and stripping down, primarily because the debtors' argument failed to consider the fact that § 1322(b)(2) "focuses on the modification of the 'rights of holders,' " id., not the status of claims. Although the Court found that it was proper to look to § 506(a) "for a judicial valuation of the collateral to determine the status of the [creditor's] claim," id., because the creditor's claim was partially secured, the creditor was "still the 'holder' of a 'secured claim.' " Id. at 329, 113 S.Ct. 2106. Therefore, it was entitled to the protections of the antimodification clause."

In re Heath, 182 B.R. 557 (9th Cir.BAP 1995)

Bankruptcy court denied the trustee's request that debtors pay postpetition tax refunds to the trustee in addition to plan payments.  The court held that the amount of future income had to be subject to some showing of projected income.  The court noted that the trustee should have been able to determine whether the debtors were overwithholding by reviewing the tax forms prior to the deadline for objecting to the plan.

The Bankruptcy Appellate Panel agreed with the bankruptcy court.

In re Smith, 207 B.R. 888 (9th Cir.BAP 1996)

Bankruptcy court denied confirmation of a Chapter 13 Plan because the disposable income requirement was not met when the budget included payment of a $300 per month life insurance premium.  The bankruptcy court was applying a blanket rule disallowing life insurance premiums as a necessary expense.  Debtors argued that they were elderly and had two dependents, a mentally handicapped 21 year old son and a three year old granddaughter.  (No findings of fact had been made by the Bankruptcy court.)

In vacating the order of the bankruptcy court denying confirmation and remanding the case, the Bankruptcy Appellate Panel found that a blanket rule was inappropriate and whether such an expense would be allowed was for the exercise of discretion of the court.

In re Hull, 251 B.R. 726 (9th Cir.BAP 2000)

Bankruptcy court excluded the income of the debtor's non-filing wife in calculating the debtor's disposable income.

The Bankruptcy Appellate Panel reversed and remanded for the court to include the debtor's interest in his wife's income, which was community property where debtors resided (Washington), in the calculation of the debtor's disposable income.  Possible exceptions to inclusion under Washington state law would include income while the spouses were living separated and apart, and a separation agreement--which might not be given effect as to claims which existed when the agreement was executed.

In re Anderson, 21 F.3d 355 (9th Cir. 1994)

Bankruptcy court denied confirmation of a Chapter 13 Plan because the debtors refused to sign a certification agreeing to pay all of their actual disposable income to the trustee during the period of the plan.

In reversing the bankruptcy court, the Court of Appeals followed the explicit language of § 1325(b)(1)(B) which "requires provision for 'payment of all projected disposable income' as calculated at the time of confirmation."  The court rejected "the Trustee's attempt to impose a different, more burdensome requirement on the debtors' plan as a prerequisite to confirmation.

The court sated that it was adopting the Fifth Circuit's interpretation stated in Matter of Killough, 900 F.2d 61(5th Cir. 1990).

In re Mendoza, 274 B.R. 522 (Bkrtcy.D.Ariz. 2002)

Bankruptcy Court, Eileen W. Hollowell, (Tucson) sustained the Trustee's objection to debtors' proposed Chapter 13 plan, because under it debtors would continuing making monthly retirement contributions postpetition and would not be devoting all of their disposable income to plan payments.  Judge Hollowel held that: (1) contributions to "mandatory
employee retirement plan had to be included in "disposable income," and (2) debtors could continuing to make such contributions postpetition if debtors elected to extend plan term.

In re Hoggle, 12 F.3d 1008 (11th Cir. 1994)

Mortgage company moved for relief from stay in Chapter 13 because of a default in post-confirmation mortgage payments.  Bankruptcy court denied motion and modified plan to include the curing of the post-confirmation default. 

Court of Appeals cited §1322(b) permitting a plan to:

(2) modify the rights of holders of secured claims other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;

(3) provide for the curing or waiving of any default;

(4) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due.

The court stated that the debtor may modify the plan at any time under § 1329 provided that the plan meets the requirements of §1322.

The court concluded:  "Accordingly, we conclude that a confirmed Chapter 13 plan may be modified to allow the Debtor to cure a postconfirmation default pursuant to § 1322(b)(5) with the postconfirmation arrearage to be paid under the modified plan."

In re Mendoza, 111 F.3d 1264 (5th Cir. 1997)

Bankruptcy court refused to modify the debtor's plan to include the curing of postpetition arrears in claim secured by debtors home, believing that it did not have the authority to do so.  The Court of Appeals noted a split in authority as to whether a debtor may cure such defaults and finds In re Hoggle "to be better reasoned and persuasive in holding that a Chapter 13 Plan may be modified to cure postpetition defaults through a plan of reorganization."  The Bankruptcy Court could therefore modify the plan to include such a default.

The court also determined that the Bankruptcy Court may also order payments to cure the payments directly to the mortgage company and may include a "drop dead" clause.

The Court of Appeals remanded the case to the Bankruptcy Court to determine whether to modify the plan, or to order the debtor to make direct payments to the mortgage holder.

In re Slyman, 234 F.3d 1081 (C.A . 9th Cir. 2000)

The elements of fraud which must be proved to deny discharge under 11 U.S.C. § 523(a)(2)(A) are:

(1) misrepresentation, fraudulent omission or deceptive conduct by the debtor;
(2) knowledge of the falsity or deceptiveness of his statement or conduct;
(3) an intent to deceive;
(4) justifiable reliance by the creditor on the debtor's statement or conduct; and
(5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct.

In re Kong, 239 B.R. 815 (9th Cir .BAP 1999)

Issuer of credit brought adversary proceeding to except credit card debt from discharge as money obtained by "false pretenses, false representation or actual fraud." Of five elements of fraud, only whether Debtor fraudulently failed to disclose his intent not to repay was at issue. While court found that "reckless disregard for the truth of a representation satisfies the element that the debtor has made an intentionally false representation in obtaining credit" the fact that that debtor took two cash advances from his Advanta account totaling $11,095.96 for gambling did not satisfy that element.