Contact: John Hartgen
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(703) 739-0800
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href='mailto:jhartgen@abiworld.org'>
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BANKRUPTCY
COURT DOES NOT HAVE DISCRETION TO CONFIRM CHAPTER 13 PLAN THAT VIOLATES
“HANGING PARAGRAPH,” ACCORDING TO LATEST ABI QUICK
POLL
size='3'>March 23, 2009, Alexandria, Va.
size='3'>— A majority of respondents (53 percent) in a recent ABI
Quick Poll agreed that a bankruptcy court does not have the discretion
to confirm a proposed chapter 13 plan that violates the “hanging
paragraph” of 11 U.S.C. §1325(a).
size='3'> The “hanging
paragraph,” added by the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005, prohibits decreasing the secured portion of a
creditor’s claim to the collateral’s value if the collateral
is a motor vehicle that the debtor acquired for personal use and
financed with a purchase money security interest within the 910-day
period before filing for bankruptcy. Thirty-two percent strongly agreed
and 21 percent “somewhat agreed” that a bankruptcy court
cannot confirm a chapter 13 plan that violates this provision by
bifurcating the creditor’s claim into a secured claim equal to the
collateral’s value and an unsecured claim for the
remainder.
Twenty-eight percent of
respondents did think that a bankruptcy court has the authority to
confirm a chapter 13 plan that violates the “hanging
paragraph.” Twenty percent “disagreed strongly” and 8
percent “somewhat disagreed” that a bankruptcy court does
not have such discretion. Sixteen percent of respondents did not know or
had no opinion on the issue.
The Quick Poll question was
based on a Sixth Circuit decision denying confirmation to a chapter 13
debtor who wanted to restructure the payments on her vehicle to reflect
what the vehicle was worth, rather than the actual amount she owed. In
this case, the chapter 13 debtor had purchased her vehicle within 910
days of filing her bankruptcy petition and argued that the bankruptcy
court had discretion not to enforce the “hanging paragraph,”
but the court ruled that the statute’s provisions are mandatory
and not subject to the discretion of the courts.
ABI members and members
of the public were welcome to submit their response to the statement:
“A bankruptcy court does not have the discretion to confirm a
proposed chapter 13 plan that violates the ‘hanging
paragraph.’” (
size='3'>Shaw v. Aurgroup Financial Credit Union,
size='3'>2009 WL 48214 (6th Cir. Jan. 9,
2009)).”
ABI’s Quick Poll is
posted on ABI’s home page,
href='http://www.abiworld.org/'>
size='3'>www.abiworld.org
size='3'>. ABI members and the public are invited to respond to a
question on a timely bankruptcy or insolvency issue. Visit
href='http://www.abiworld.net/quickpoll/'>
color='#0000ff' size='3'>http://www.abiworld.net/quickpoll/
to access the results of previous
ABI Quick Polls.
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ABI is the largest
multi-disciplinary, nonpartisan organization dedicated to research and
education on matters related to insolvency. ABI was founded in 1982 to
provide Congress and the public with unbiased analysis of bankruptcy
issues. The ABI membership includes nearly 12,000 attorneys,
accountants, bankers, judges, professors, lenders, turnaround
specialists and other bankruptcy professionals, providing a forum for
the exchange of ideas and information. For additional information on
ABI, visit www.abiworld.org. For additional conference information,
visit
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