Chapter 22 BANKRUPTCY AND FAMILY LAW

Transcription

1 Chapter 22 BANKRUPTCY AND FAMILY LAW TODD TRIERWEILER, B.A., University of Wisconsin Milwaukee, (1978); J.D., Lewis & Clark Law School (1985); member of the Oregon State Bar since 1985; owner, Todd Trierweiler & Associates, Portland. MICHELLE FREED, B.A., Western Washington University, (2000); J.D., Lewis & Clark Law School (2004); member of the Oregon State Bar since 2004; partner, Eblen Freed LLP, Portland. ROSEMARY E. ZOOK, B.A., Nipissing University, (2003); J.D., Western New England University School of Law (2008); member of the Oregon State Bar since 2008; attorney, Todd Trierweiler & Associates, Portland. CHRISTOPHER J. MERTENS, B.A., Macalester College, (2001); J.D., University of Washington School of Law (2006); member of the Oregon State Bar since 2009; attorney, Todd Trierweiler & Associates, Portland INTRODUCTION Scope Where to Find the Law Creditor s Checklist of Issues CLASSIFICATION OF FAMILY LAW CLAIMS IN BANKRUPTCY Secured Claims (a) Security Agreement (a)(1) Definition (a)(2) Debtor and Trustee Powers Against Security Agreements (a)(3) Undersecured Claims (a)(4) Preferences and Fraudulent Conveyances (b) Statutory Liens (c) Judicial Liens (c)(1) Definition (c)(2) Judicial Liens Against Exempt Property (c)(3) Nonrenewed Judgments

2 Chapter 16 / Bankruptcy and Family Law (d) Unperfected Secured Claims (e) Unusual Secured Claims Defenses to Avoidance of Judicial Liens Unsecured Claims (a) Claims and Nonclaims (a)(1) Contingent and Unliquidated Claims (a)(2) Court-Ordered Conduct (a)(3) Marital Status, Visitation, and Custody (a)(4) Contempt (a)(5) Criminal Law (b) Executory Contracts (c) Dischargeability General Test (c)(1) Claim of a Spouse, Former Spouse, or Child (c)(2) The Proper Source (c)(3) Nonassignment (c)(4) In the Nature of Support (d) Dischargeability Particular Kinds of Claims (d)(1) Attorney Fees (d)(2) Claims for Payment of Third Parties (d)(3) Miscellaneous Claims (e) Fraud and Other Grounds for Nondischargeability (f) Procedure (g) Postpetition Claims TREATMENT OF FAMILY LAW CLAIMS IN BANKRUPTCY Secured Claims Nondischargeable Unsecured Claims (a) Chapter (b) Chapter

3 Bankruptcy and Family Law / Chapter EFFECT OF BANKRUPTCY ON STATE COURT PROCEEDINGS Effect of the Automatic Stay (a) Exception for Alimony, Maintenance, or Support (a)(1) Collection (a)(2) Property of the Estate Generally (a)(3) Pension Assets (b) Relief from the Stay Generally (c) Relief for Cause (d) Abstention and Withdrawal of Reference Effect of Confirmation of a Plan Effect of Discharge PLANNING CONSIDERATIONS FOR DEBTORS Joint Cases (a) Who Can File a Joint Case (b) Joint Case Defined (c) Exemptions in Joint Cases (d) Ethical Problems Separate Cases (a) The Codebtor Stay (b) Assets of the Estate (b)(1) Jointly Owned Property (b)(2) Involuntary Sale of Jointly Owned Property (b)(3) Express Trusts (b)(4) After-Acquired Property Marital Claims as Assets of the Estate (a) Third-Party Claims to Set Aside the Judgment (a)(1) Preferences (a)(2) Fraudulent Conveyances (b) Taxation

4 Chapter 16 / Bankruptcy and Family Law 22.1 INTRODUCTION Scope Bankruptcy often follows divorce, and bankruptcy can wreak havoc on the expectations of a family law lawyer. Outside of bankruptcy, the family law lawyer has a whole range of enhanced enforcement powers, such as continuing wage orders, contempt, and other rights. These rights lead to the expectation that family law claims have some priority over other claims. Bankruptcy, however, is governed by federal law, and when family law and bankruptcy law conflict, bankruptcy law prevails due to the supremacy clause. US CONST art VI, cl 2; see Perez v. Campbell, 402 US 637, 91 S Ct 1704, 29 L Ed2d 233 (1971) (case involved Arizona s financial responsibility laws for drivers); In re Edwards, 91 BR 95 (Bankr CD Cal 1988) (support modification enjoined). This chapter discusses how family law claims are treated differently from other claims in bankruptcy. For bankruptcy law generally, see the references cited in The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) moved away from terms such as alimony and child support, instead substituting the term domestic support obligation. This new term, defined below, encompasses the former definition of alimony or maintenance, but is somewhat broader. A domestic support obligation is: [A] debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is (A) owed to or recoverable by 22-4

5 Bankruptcy and Family Law / Chapter 16 (i) a spouse, former spouse, or child of the debtor or such child s parent, legal guardian, or responsible relative; or (ii) a governmental unit. 11 USC 101(14A). The new domestic support definition is broader in that it: (1) Covers support obligations due after a case is filed. This is particularly important in Chapter 13 cases when a debtor does not receive a discharge unless all postfiling domestic support obligations have been paid current. (2) Allows for the accrual of interest if interest is provided for under applicable nonbankruptcy law. (3) Clarifies that a domestic support obligation includes a debt owed to legal guardians, responsible relatives, or a governmental unit. (4) Clarifies that a voluntary assignment to a nongovernment entity for collections does not change the classification from a support obligation to a dischargeable type of debt. The Bankruptcy Code (the Code ) has some limited provisions for family law. Except for the express provisions set forth below, family law claims are generally treated the same as other claims in bankruptcy. (1) Married persons may file joint bankruptcy cases. 11 USC 302(a). (2) Collection of support claims is partially exempt from the automatic stay. 11 USC 362(b)(2). (3) The Code defines the extent to which family law claims are assets of a debtor s estate. 11 USC 541(a)(5)(B). (4) The sale of jointly owned property is regulated free from the claims of the nondebtor spouse. 11 USC 363(h) (j). 22-5

6 Chapter 16 / Bankruptcy and Family Law 22-6 (5) The power of a debtor to avoid a judicial lien securing alimony, maintenance, or support obligations is eliminated. See (c). (6) Certain obligations incurred incident to property settlements are excepted from discharge. See (c). (7) Alimony, maintenance, or support has priority ahead of taxes. See (8) Exceptions to the automatic stay allow the commencement or continuation of proceedings to establish paternity and to establish or modify an order of alimony, maintenance, or support. See (a). (9) A domestic support obligation can attach property through the bankruptcy process that would normally have been exempt from collection under Oregon state law. A debtor is still entitled to claim his exemptions in property, and the trustee therefore may not liquidate exempt property to satisfy a DSO; however, property exempted by the debtor will still be subject to the DSO. See In re Waters, 2007 Bankr. LEXIS 2184, 2007 WL (Bankr. N.D. Ala. 2007); In re Vandeventer, 368 B.R. 50 (Bankr. C.D. Ill. 2007); In re Quezada, 368 B.R. 44 (Bankr. S.D. Fla. 2007); In re Covington, 368 B.R. 38 (Bankr. E.D. Cal. 2006); In re Bozeman, 376 B.R. 813 (Bankr W.D. Ky. 2007). (10) The bankruptcy trustee cannot avoid and recover preferential transfers to a debtor s spouse, former spouse, or child in payment of alimony, maintenance, or support. See (11) Trustees in every bankruptcy chapter must now provide additional notices to holders of a domestic support obligation during the pendency of the bankruptcy case as well as an additional notice when the case is discharged. 11 USC 704(c)(1)(A)(i).

7 Bankruptcy and Family Law / Chapter 16 (12) To receive a discharge, a chapter 13 debtor who has completed all plan payments must certify that all domestic support obligations due as of that time have been paid. 11 USC 1328(a).. In re Vandeventer, 368 BR 50 (Bankr CD Ill 2007); In re Vandeventer, 368 BR 50 (Bankr CD Ill 2007); In re Quezada, 368 BR 44 (Bankr SD Fla 2007); In re Quezada, 368 BR 44 (Bankr SD Fla 2007); In re Covington, 368 B.R. 38 (Bankr ED Cal 2006); In re Covington, 368 BR 38 (Bankr ED Cal 2006) Where to Find the Law The Bankruptcy Code was created in 1978 and is set forth in USC title 11 (11 USC ). Jurisdictional provisions are set forth in USC title 28. An extensive set of federal bankruptcy rules (FRBP), local rules (LBR), and official forms (LBF) dictate procedures in bankruptcy. The Federal Rules of Civil Procedure (FRCP), Federal Rules of Evidence (FRE), and Federal Rules of Appellate Procedure (FRAP) also apply. The local rules of the United States District Court (LR) govern withdrawal, abstention, and appeals. CAVEAT: The Code superseded the Bankruptcy Act of 1898, commonly referred to as the Act. Cases arising under the Act are an uncertain guide to interpreting the Code. Interpretation of the Code tends toward the literal, and away from policy concerns. See, e.g., United States v. Ron Pair Enterprises, Inc., 489 US 235, 109 S Ct 1026, 103 L Ed2d 290 (1989). For bankruptcy practice in Oregon, see BANKRUPTCY LAW (Oregon CLE 2007). The standard national treatise is COLLIER ON 22-7

8 Chapter 16 / Bankruptcy and Family Law BANKRUPTCY (Lawrence P. King ed., 15th ed rev 1996) (supplemented periodically) Two West Publishing Company books (updated annually) contain, between them, all the statutes and rules: OREGON RULES OF COURT and BANKRUPTCY CODE, RULES AND FORMS. Reported cases from bankruptcy judges, district court judges, the Bankruptcy Appellate Panel (BAP), the Circuit Courts of Appeal, and the United States Supreme Court can be found in West s Bankruptcy Reporter. Ninth Circuit and Ninth Circuit BAP cases are authoritative, but many of the issues in this chapter have not been resolved at that level, and reference is made to the voluminous circuit court and lower court precedent from other parts of the country. CAVEAT: The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was signed into law April 20, 2005, with most of the provisions taking effect on October 17, Unfortunately, in many cases, BAPCPA raised more questions than it answered. For example, see Olsen v. Gonzales, 350 BR 906, 916 (Bankr D Or 2006), aff d, 368 BR 886 (D Or 2007), which held that a portion of BAPCPA that prohibited lawyers from advising clients to incur debt before filing a bankruptcy was an unconstitutional violation of the First Amendment. Olsen v. Gonzales has now been reversed. See Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S Ct 1324, 1339, 176 L Ed2d 79 (2010). PRACTICE TIP: Many of the major provisions of BAPCPA have not been resolved by circuit courts, therefore, the reader is strongly advised to further research issues relating to family law.

9 Bankruptcy and Family Law / Chapter Creditor s Checklist of Issues When the client s spouse or former spouse has filed a bankruptcy petition, determine the effect on the client. First, determine whether the automatic stay stops the client from doing anything. Next, translate the client s rights and duties into bankruptcy terms. Then refer to the Code to determine the client s rights against the debtor, in the bankruptcy proceeding and after it is over. Consider the following checklist of issues that may arise: (1) Establishing, collecting, or modifying child support and alimony that is in the nature of support. See (c) to (d)(3). (a) The client can collect past-due support from property that is not property of the estate. Exempt property may not be property of the estate. After-acquired property, including wages, are not property of the estate, except, perhaps, under Chapters 12 and 13. See (a)(2). (b) The client can collect support accruing postpetition directly from the debtor without worrying about the bankruptcy proceeding. See (g). (c) Unless the bankruptcy is a no asset Chapter 7 case, file a proof of claim. Failure to file a proof of claim may be malpractice. (d) The client might file an adversary proceeding for a declaration that the support is nondischargeable. The Code definition of support applies, and it differs from the definition in the dissolution judgment. See (c) to (d)(3). (e) The client may collect nondischargeable support without worrying about the bankruptcy after the debtor s discharge is entered. (2) Collection of any other prepetition unsecured money claim. 22-9

10 Chapter 16 / Bankruptcy and Family Law (a) The client cannot take any steps to collect the claim, except through the bankruptcy court. Any other effort to collect violates the automatic stay. See (b) Unless the bankruptcy is a no asset Chapter 7 case, file a proof of claim. Failure to file a proof of claim may be malpractice. (c) The client may file an adversary proceeding in the bankruptcy court seeking a declaration that the claim should be excepted from the discharge, or that the discharge should be denied. The grounds, generally, are fraud or other misconduct. See (e) to (f). However, property division obligations are also an exception to discharge. To have such a debt determined to be nondischargeable, the creditor spouse must commence an adversary proceeding within the time limit imposed by the statute and the court must make certain findings. See (c). (d) The client (or the lawyer) may participate as a general creditor in the bankruptcy case. Participation typically involves attending the first meeting of creditors, participating on a creditors committee if there is one, notifying the trustee of assets that the debtor has not disclosed or accurately described, or urging the trustee to undertake preference or fraudulent conveyance litigation on behalf of unsecured creditors. In a reorganization case under Chapter 11, 12, or 13, a creditor may object to the plan or, under Chapter 11, object to the disclosure statement. Generally, the client bears the fees incurred in any of this participation. (3) Collection on secured claims. (a) Collection is stayed. The client cannot foreclose, repossess, or sue the debtor in the debtor s personal capacity. 11 USC 362(a).

11 Bankruptcy and Family Law / Chapter 16 (b) The client is entitled to adequate protection. 11 USC 362(d)(1); United Savings Assn. v. Timbers of Inwood Forest, 484 US 365, 370, 108 S Ct 626, 98 L Ed2d 740 (1988). If the collateral is depreciating so much that the feasibility of payment in full from the collateral is at risk, if accruing property taxes are not being paid, or if the collateral is uninsured, the client is entitled to interim payments or some other indubitable equivalent. 11 USC 361. If the client is not receiving adequate protection, or if the debtor has no equity in the property and it is not necessary for reorganization, move to modify the automatic stay to permit foreclosure or repossession. 11 USC 362(d). A creditor whose claim is secured by an interest in real property of a Chapter 7 debtor is entitled to payment in full on its secured claim before it can be compelled to relinquish its security interest. Dewsnup v. Timm, 502 US 410, 417, 112 S Ct 773, 116 L Ed2d 903 (1992). See (a)(3). The rights of a creditor whose claim is secured solely by an interest in a Chapter 11 or Chapter 13 debtor s principal residence cannot be modified in a Chapter 11 or Chapter 13 plan. 11 USC 1123(b)(5), 1322(b)(2). PRACTICE TIP: However, if the client fails to object to a plan that eliminates the client s lien, the lien may be extinguished. 11 USC (c) In any plan, or after the case is closed, the client is entitled to recognition of the security, either by receiving the property back or by receiving an amount related to the lesser of the present value of the collateral and the present value of the claim. 11 USC 1129(b)(2)(A), 1225(a)(5), 1325(a)(5)

12 Chapter 16 / Bankruptcy and Family Law (d) The security interest may be attacked as (i) a judicial lien against exempt property (see (c)(1) to (c)(2)); (ii) a preference or fraudulent conveyance (see (a)(4)); or (iii) improperly perfected or expired (see (c)(3) to (d)). The debtor may not avoid a judicial lien if it became fixed simultaneously with the creation of the debtor s interest. Farrey v. Sanderfoot, 500 US 291, 296, 111 S Ct 1825, 114 L Ed2d 337 (1991). See (c)(2). Furthermore, the debtor cannot avoid a judicial lien securing the debtor s obligation to pay alimony, maintenance, or support to a spouse, former spouse, or child of the debtor. 11 USC 522(f)(1)(A). See (c)(2). (e) If the security is worth less than the claim, the secured portion of the claim may be reduced to equal the security. See (a)(3). (4) Commencing or continuing dissolution proceedings, establishing or modifying a judgment, or other litigation; liquidation of unliquidated or contingent claims. (a) A proceeding to establish or modify an order for alimony, maintenance, or support may be commenced or continued notwithstanding the debtor s bankruptcy. 11 USC 362(b)(2)(A)(ii). See (a). (b) However, the client may not commence or continue state court litigation that seeks other money, or seeks to punish the debtor for not paying money, without relief from the automatic stay. Noneconomic issues such as marital status, custody, and visitation are not stayed. See (c) The automatic stay imposed by 11 USC 362(a) for acts affecting property of the estate is not lifted until the property is no longer

13 Bankruptcy and Family Law / Chapter 16 property of the estate. 11 USC 362(c). Property of the estate ceases to be so when it is abandoned by order of the bankruptcy court, 11 USC 554(c), or when the case is closed, 11 USC 554(d). (d) If the debtor filed under Chapter 7 and time is not of the essence, choose to wait the case out. Otherwise, move for relief from stay. See (b) to (c). Relief may be allowed to determine the amount of support obligations. Relief to litigate a property settlement is more problematical. Relief to collect against assets of the estate is unlikely. (e) The stay is lifted when the discharge is entered. The stay is lifted on confirmation for some purposes in Chapter 13. See to (5) Nonclaims. Although the term claims is inclusive, it is possible to have rights against the debtor that are in no way reducible to money claims and so are unaffected by bankruptcy. See (a) to (a)(5). Marital status, custody, and visitation litigation may not be claims. See (a)(3). Criminal prosecution is probably not a claim. For the status of restitution and monetary conditions of probation, see (a)(5). (6) What the trustee can do to the client. (a) Payments to the client within 90 days (a year if the client is an insider ) may be a preferential transfer that the trustee can recover. A former spouse can be an insider. See (a)(1). It is not clear whether support can be a preference. Payments of joint debts, on account of a property settlement, and even the judgment itself, can be a preference. However, the trustee s power is limited in avoiding preferential transfers for the bona fide payment of a debt to the debtor s spouse, former spouse, 22-13

14 Chapter 16 / Bankruptcy and Family Law or child in the nature of alimony, maintenance, or support. 11 USC 547(c)(7). See (a)(1). (b) A payment or the divorce judgment itself can be a fraudulent conveyance if it has the effect of diverting resources away from thirdparty creditors. See (a)(2). (c) If the debtor is a joint owner of the home or other real property, the trustee may be able to sell it over the client s objections. See (b)(2). The 2002 text referencing the checklist of issues in checklist item (2)(c) has been modified under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). 11 USC 523(a)(15) has been modified so that in Chapter 7 cases, a debt that is not in the nature of a domestic support obligation is nonetheless nondischargeable if the debtor incurred the debt in the course of a divorce, separation, or in connection with a separation agreement, divorce judgment, or other court order, and if the debt is owed to the spouse, former spouse, or child of the debtor. Before October 17, 2005, in Chapter 7 cases, a creditor was required to bring an action within 60 days of the meeting of creditors to determine whether such property division obligation was exempted from discharge. These debts are now automatically nondischargeable in Chapter 7 cases, but are still dischargeable in Chapter 13 reorganizations (see (c)). The 2002 text referencing the checklist provided in item (4) concerning the automatic stay has been significantly modified under BAPCPA. Checklist item (4)(b) indicates that a domestic support creditor may not seek to punish a debtor for nonpayment without relief from stay. This provision has been modified to allow certain types of punishment

15 Bankruptcy and Family Law / Chapter 16 under state law such as the withholding, suspension, or restriction of a driver license, professional occupation license, or recreational license. 11 USC 362(b)(2)(D). Checklist item (4)(c) has been modified so that the automatic stay of bankruptcy does not preclude a domestic support creditor from the commencement or continuation of a proceeding to withhold income that is property of the estate or property of the debtor for payment of a domestic support obligation under a judicial or administrative order or a statute. 11 USC 362(b)(2)(C). CAVEAT: Domestic support creditors are no longer prohibited from the collection of current support obligations in a Chapter 7 or Chapter 13 case. In Chapter 7 cases, the automatic stay does not prohibit the collection of domestic support arrearage claims. However, a domestic support obligation creditor would be prohibited from collection of prepetition support arrears when a Chapter 13 plan proposes to pay those obligations in full, and the debtor is performing under the plan. Checklist item (6)(a) has been clarified to protect all legitimate domestic support obligation payments from preference actions. This has also been expanded to preclude preference actions against parties who may have received payments on the assigned domestic support obligations such as private collection companies and governmental units. 11 USC 547(c)(7)

16 Chapter 16 / Bankruptcy and Family Law 22.2 CLASSIFICATION OF FAMILY LAW CLAIMS IN BANKRUPTCY Secured Claims Secured claims are placed into one of several categories: (1) Liens by agreement, called security interests in the Code; (2) Statutory liens; or (3) Judicial liens. 2 Collier on Bankruptcy (Lawrence P. King ed., 15th ed rev 1996) (supplemented periodically).sometimes the courts have strained these categories or created others not expressly described in the Code, such as an equitable mortgage or a constructive trust. COMMENT: A judicial lien can be avoided in some cases under 11 USC 522(f)(1)(A). A creditor would prefer to have a secured claim classified as anything but a judicial lien (a) Security Agreement (a)(1) Definition A judicial lien on jointly owned property that was created by the entry of a divorce judgment is not avoidable under 11 USC 522(f)(1)(A). Farrey v. Sanderfoot, 500 US 291, , 111 S Ct 1825, 114 L Ed2d 337 (1991). See (c)(2). In In re Catli, 999 F2d 1405, 1408 (9th Cir 1993), the Ninth Circuit held that the critical issue in determining whether a debtor may avoid a lien under 11 USC 522(f)(1) is whether the debtor ever possessed the interest to which the lien fixed, before it fixed.... If not, the debtor may not avail himself or herself of 522(f)(1) to avoid the fixing of the lien

17 Bankruptcy and Family Law / Chapter 16 A debtor has no power to avoid a judicial lien securing the debtor s obligation to pay alimony, maintenance, or support to his or her spouse, former spouse, or child. 11 USC 522(f)(1)(A). See (c)(2).. QUERY: Can a voluntary security agreement be perfected by an involuntary judicial lien? Even if the answer is yes, can the judicial lien still be avoided pursuant to 11 USC 522(f)(1)? (Yes.) Suppose the agreement is dictated by the divorce judgment and perfected by a trust deed, mortgage, or the like. Is the encumbrance a judicial lien despite its form? (Yes.) What if both the property settlement agreement and the mortgage are voluntary? (a)(2) Debtor and Trustee Powers Against Security Agreements The two basic attacks on perfected security agreements are that: (1) There is no equity to support the security agreement, hence the claim is in part, or wholly, unsecured; or conveyance. (2) The security agreement is a preference or a fraudulent (a)(3) Undersecured Claims Under the Code, claims are treated as secured only to the extent that there is value in collateral to support them. The undersecured portion is treated as an unsecured claim. 11 USC 506(a). Even when a secured claim cannot be modified, a claim can be divided into secured and unsecured portions, and the unsecured portion modified. 11 USC 1322(b)(2). However, it is not permissible to reduce the amount of a secured claim in the collateral to the amount that is secured by value in the 22-17

18 Chapter 16 / Bankruptcy and Family Law collateral. This type of lien-stripping was expressly prohibited by the United States Supreme Court in Dewsnup v. Timm, 502 US 410, , 112 S Ct 773, 116 L Ed2d 903 (1992). Although a claim may still be divided into a secured portion and an unsecured portion under 11 USC 506(a), the Ninth Circuit has ruled that if the asset appreciates in value after the case commences, the appreciation inures to the benefit of the secured creditor, not to the benefit of the debtor. In re Chabot, 992 F2d 891, (9th Cir 1993). (Another holding in Chabot regarding the manner of determining whether a lien impaired the debtor s exemption has been overruled by Congress s enactment of 11 USC 522(f)(2)(A) as part of the Bankruptcy Reform Act of 1994, which sets forth a mathematical formula for determining impairment.) See (b)(4) A creditor whose claim has been divided into secured and unsecured portions may participate as an unsecured creditor and as a secured creditor. Because a claim may be divided, it is more accurate to speak of secured and unsecured claims, rather than secured and unsecured creditors. CAVEAT: An undersecured Chapter 11 creditor can elect different, but rarely more favorable, treatment. See 11 USC 1111(b). However, in certain circumstances in a Chapter 13 case, an undersecured creditor who retains a purchase money security interest may no longer have its claim divided into secured and unsecured portions. The first circumstance is when a creditor has a debt incurred within 910 days before filing a bankruptcy petition if the collateral securing the debt consists of a motor vehicle acquired for the personal use of the debtor. See Bankruptcy Law Supp 18.59A (2007); paragraph

19 Bankruptcy and Family Law / Chapter 16 following 11 USC 1325(a). The second circumstance is for a purchase money security interest for a debt incurred within one year before filing the bankruptcy petition. These would generally be household goods such as televisions, computers, furniture, etc., secured by a purchase money security agreement. See 11 USC 522(f)(4)(A). In these circumstances, a Chapter 13 plan must provide for full payment of the creditor s claim or surrender of the collateral without the opportunity for that creditor to file an unsecured claim for a deficiency balance (see In re Pool, 351 BR 747 (Bankr D Or 2006)). But c.f. In Slocum v. Americredit Fin. Serv. (In re Slocum), 2007 U.S. Dist. LEXIS 45719, 2007 WL (N.D. Ga., May 10, 2007), and Silvers v. Wells Fargo Auto Finance (In re Silvers), 2007 U.S. Dist. LEXIS 45718, 2007 WL (N.D. Ga. 2007); Wells Fargo Fin. Acceptance v. Rodriguez, 375 B.R. 535 (9th Circuit BAP 2007) (holding that 910 creditors are entitled to a deficiency balance for 1325(a)(5)(C) surrenders.) PRACTICE TIP: The Oregon Chapter 13 plan provides a provision in paragraph (2(b)(2)) that allows silence to equate to acceptance in cramming down a car purchased within the last 910 days or other collateral purchased within the last year unless a creditor files a timely objection before confirmation of the Chapter 13 plan. (The Oregon Chapter 13 plan is available at < Because confirmation generally occurs as quickly as a month and a half after a case is filed, failure to timely object to provisions of a Chapter 13 plan will often bind a secured creditor even in cases when a creditor clearly would have prevailed on his or her objection had it been timely made

20 Chapter 16 / Bankruptcy and Family Law Bifurcation of an undersecured creditor s claim secured solely by a Chapter 13 debtor s principal residence is prohibited by 11 USC 1322(b)(2). Nobelman v. American Savings Bank, 508 US 324, 332, 113 S Ct 2106, 124 L Ed2d 228 (1993). (Practitioners should note the limited application of Nobelman v. American Savings Bank, 508 US 324, 332, 113 S Ct 2106, 124 L Ed2d 228 (1993), as it was partially superseded by statute by 11 USC 1322(c)(2). In re Young, 199 B.R. 643, (Bankr E.D. Tenn. 1996).) Nevertheless, in a Chapter 13 case, a wholly unsecured claim (one in which the value of the property is less than the amount owed to the senior lienholder) can be stripped on the filing of an adversary complaint against the holder of the wholly unsecured claim. See In re Lam, 211 BR 36 (9th Cir BAP 1997); In re Zimmer, 313 F3d 1220 (9th Cir 2002). Moreover, when the final payment of a loan secured by the debtor s principal residence comes due before the final payment under the debtor s Chapter 13 plan is due, the loan may be modified in the Chapter 13 plan. See 11 USC 1322(c)(2); In re Eubanks, 219 BR 468 (6th Cir BAP 1998); In re Jones, 188 BR 281 (Bankr D Or 1995). The first circumstance is when a creditor has a debt incurred within 910 days before filing a bankruptcy petition if the collateral securing the debt consists of a motor vehicle acquired for the personal use of the debtor. See Bankruptcy Law Supp 18.59A (1999 & Supp 2007); paragraph following 11 USC 1325(a). The second type of claim is for a purchase money security interest for a debt incurred within one year before filing the bankruptcy petition. These claims would generally be household goods such as televisions, computers, furniture, etc., secured by a purchase money security agreement. See 11 USC 522(f)(4)(A). A Chapter 13 plan must provide for full payment of the creditor s claim