Judge Berger

07-20106 McClay (Doc. # 49)

In re McClay, 07-20106 (Bankr. D. Kan. Oct. 10, 2008) Doc. # 49

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Case: 07-20106 Doc #: 49

The relief described hereinbelow is SO ORDERED.

Signed October 10, 2008.

United States Bankruptcy Judge


In re:

HEATHER DAWN MCCLAY, Case No. 07-20106
Debtor. Chapter 13

Filed: 10/10/2008 Page 1 of 3


Ford Motor Credit Company (“FMCC”) objects to confirmation based on the plan’s
treatment of its 910-car claim.1 This matter constitutes a core proceeding2 over which this Court
has jurisdiction.3 Based on the parties’ stipulation of facts and arguments of counsel, the Court
sustains FMCC’s Objection to Confirmation.

Factual Background

Debtor purchased a 2005 Mercury Monterey for her personal use during the 910 days
preceding her January 22, 2007, bankruptcy filing. At the time of filing, the contract balance
was $22,807.62. Debtor scheduled $18,000.00 as the vehicle’s value.


Doc. No. 25.

2 28 U.S.C. § 157(b)(2)(L).

3 28 U.S.C. § 1334.

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Debtor’s plan proposes to pay FMCC the contract balance as of the petition date, but the
plan does not provide for postpetition interest. The plan also provides Debtor may, at her option,
surrender the vehicle post-confirmation in full satisfaction of FMCC’s claim. FMCC objects to
the plan pursuant to the last sentence of 11 U.S.C. § 1325(a) commonly referred to as the
hanging paragraph4 and argues Debtor must pay the contract balance plus postpetition interest.
FMCC further argues that upon surrender of its collateral, 11 U.S.C. § 1325(a)(5)(C) requires the
sale proceeds be applied as a payment toward the contract debt under state law with any
remaining deficiency being an allowed unsecured claim. Debtor responds that FMCC’s claim
may not be valued into secured and unsecured components; thus, surrender of the collateral
under §1325(a)(5)(C) satisfies the claim in full.


Pursuant to Jones, FMCC is entitled to postpetition interest.5 Pursuant to Ballard, the
Debtor must provide for any deficiency if the vehicle is surrendered.6 Since Debtor’s plan does
not provide for either, the plan cannot be confirmed.

Further, Debtor’s proposed plan seeks both to retain the collateral at confirmation and
reserve a unilateral right to surrender the collateral post-confirmation without a motion to
modify. Debtor offers no authority to maintain the threshold option throughout the plan either to
retain and pay for the vehicle or surrender the vehicle. Debtor may not preemptively obtain
§1329 plan modification approval at her initial §1324 confirmation hearing. If a debtor needs to

4 The last sentence of § 1325(a) reads: “ For purposes of paragraph (5), section 506 shall not apply to a
claim described in that paragraph if the creditor has a purchase money security interest securing the debt that is the
subject of the claim, the debt was incurred within the 910-day preceding the date of the filing of the petition, and the
collateral for that debt consists of a motor vehicle (as defined in section 30102 of title 49) acquired for the personal
use of the debtor, or if collateral for that debt consists of any other thing of value, if the debt was incurred during the
1-year period preceding that filing.”

5 In re Jones, 530 F.3d 1284 (10th Cir. 2008).

6 In re Ballard, 526 F.3d 634 (10th Cir. 2008).

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deviate from a confirmed plan, the Code and Rules require the debtor to file a request to modify
a plan pursuant to §1329.7 Section 1329 permits a debtor to propose a modified plan after
confirmation. However, approval under §1329 is often predicated upon an unanticipated,
substantial change in circumstance affecting the debtor’s ability to pay and the debtor’s good
faith in proposing the modification.8 Regardless, to include in effect a future modification in the
initial plan asks the Court to preemptively approve the Debtor’s post-confirmation modification
of her plan. Such a maneuver bypasses the proper motion and notice procedure required by the
Code and relieves the Debtor from her burden to obtain the modification.

In this case, Debtor offers no explanation as to why she may want to keep the vehicle for
an undisclosed period of time and then surrender it to FMCC. Debtor does not suggest a time
line as to when or if this contingency might occur. In fact, the Debtor may not even invoke the
option to surrender the vehicle. Under these circumstances, the matter is not a justiciable


FMCC’s Objection to Confirmation is SUSTAINED. The Debtor shall have 20 days to
file an amended plan in conformity with this Order.

7 Fed. R. Bankr. P. 3015(g).

8 See, e.g., In re Knappen, 281 B.R. 714, 716 (Bankr. D.N.M. 2002); In re Belcher, 369 B.R. 465, 467-68
(Bankr. E.D. Ark. 2007); In re Lane, 374 B.R. 830 (Bankr. D. Kan. 2007); In re Arnold, 869 F.2d 240, 241 (4th Cir.
1989); In re Murphy, 474 F.3d 143 (4th Cir. 2007); In re Welch, slip op., 1998 WL 773999 (6th Cir. 1998); but see
Barbosa v. Soloman, 235 F.3d 31 (1st Cir. 2000) (substantial and unanticipated change not required).

9 See, e.g., In re Quick, 360 B.R. 722, 727, n.8 (Bankr. N.D. Okla. 2007) (questioning the ripeness of the
surrender in full satisfaction issue when the record did not reflect a deficiency yet existed).

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