Meyer v. Renteria (In re Renteria)

Citation:
Meyer v. Renteria (In re Renteria), -- B.R.-- (9th Cir.B.A.P. May 4, 2012)
Tag(s):
Ruling:
The Bankruptcy Appellate Panel for the Ninth Circuit held that a Chapter 13 plan does not "unfairly discriminate" between classes of creditors within the meaning of Bankruptcy Code Section 1322(b)(1), even if it separately classifies a general unsecured consumer debt for which there is co-liability with a third party and pays that debt in full but provides that all other general unsecured claims receive little to no distribution. The B.A.P. stopped short of finding that the "unfair discrimination rule" does not apply to such co-debtor consumer claims in all circumstances and limited the ruling to the facts of the case; the dissent would find that the "unfair discrimination" prohibition of Bankruptcy Code Section 1322(b)(1) has no application to co-debtor consumer claims.
Procedural context:
Appeal from the United States Bankruptcy Court for the Eastern District of California (J. Lee) confirming the Debtor's Chapter 13 plan, reviewed de novo.
Facts:
Amanda Kay Renteria (the "Debtor") proposed a Chapter 13 plan that classified the general unsecured claim of approximately $20,000 to her former family law attorney, James Preston, in its own class to be paid in full with 10% interest. The remaining unsecured creditors holding claims totalling approximately $80,000 were classified separately and were to get nothing. On the record, Ms. Renteria revealed that she was preferring Mr. Preston over her other creditors, because her mother was a co-debtor on that debt and not the others. Michael Hugh Meyer, the Chapter 13 Trustee, objected on the ground that the Debtor's Plan could not be confirmed, because it unfairly discriminated between classes of creditors in violation of Bankrutpcy Code Section 1322(b)(1). The Bankruptcy Court overruled the Trustee's objection and confirmed the Debtor's Chapter 13 plan, holding that the plain meaning of the "unfair discrimination rule" found in Section 1322(b)(1) does not apply to co-debtor consumer debts. The Ninth Circuit B.A.P. affirmed the Bankruptcy Court's decision. Although it declined to issue a blanket prohibition against the application of the "unfair discrimination rule" to any co-debtor consumer debt, the Court, in a decision written by Judge Markell, examined the legislative history of the "however clause" of 1322(b)(1) and determined that the circumstances of the Debtor's case fell squarely within its intended application. The Debtor's separate classification of a co-debtor consumer claim and widely disparate treatment between her general unsecured creditors in her Chapter 13 plan did not constitute "unfair discrimination" under 1322.
Judge(s):
Markell, Pappas and Dunn, Bankruptcy Judges

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