KSB

Judge Karlin

08-41727 Horn (Doc. # 34)

In Re Horn, 08-41727 (Bankr. D. Kan. Jun. 26, 2009) Doc. # 34

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Case 08-41727 Doc# 34 Filed 06/26/09

SO ORDERED.
SIGNED this 26 day of June, 2009.


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________________________________________
JANICE MILLER KARLIN
UNITED STATES BANKRUPTCY JUDGE
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re: )
)
BARBARA LYNN HORN, ) Case No. 08-41727-13
)
Debtor. )

______________________________)
In re: )
)
BILLIE LEROY JONES, ) Case No. 09-40015-13
)

Debtor. )
______________________________)
In re: )

)
CODY LYNN MOORE, ) Case No. 09-40128-13

)
Debtor. )
______________________________)


ORDER SUSTAINING TRUSTEE’S OBJECTIONS TO CONFIRMATION

The issue in each of these cases is whether the Court can confirm these plans, each of

which call for the Debtor to obtain a discharge, after completion of a plan calling for payment of


Case 08-41727 Doc# 34 Filed 06/26/09 Page 2 of 5


less than the full amount of the pre-petition arrearage they owe on domestic support obligations
(“DSO”). In other words, none of the plans propose to repay 100% of the amount they owe on
their DSO as of the date of filing, either through the plan, or otherwise, even though they admit
they owe, respectively, $25,000, $36,000 and $17,750, to DSO recipients. They nevertheless
seek to discharge all other debts so long as they make what they contend is their best effort to
repay the pre-petition DSO while the case is pending.

After review of all the briefs filed (by the Trustee and by two of the three Debtors), the
Court announced its decision on the Trustee’s Objections to Confirmation1 at a hearing
conducted June 24, 2009. For the reasons stated on the record, which are incorporated herein by
reference, the Court sustains the Trustee’s objection in each case. The result is mandated by a
review of 11 U.S.C. § 1322(a)(2), which provides that a “plan shall — (2) provide for the full
payment, in deferred cash payments, of all claims entitled to priority under section 507 of this
title, unless the holder of a particular claim agrees to a different treatment of such claim,”2

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coupled with a review of §§1322(a)(4), 507(a)(1), and 1328(a). The objections are sustained

1Docs. 18, 14, and 17, respectively,

2Emphasis added.

3Section 1322(a)(4) provides that “a plan may provide for less than full payment of allamounts owed for a claim
entitled to priority under § 507(a)(1)(B) only if the plan provides that all of the debtor’s projected disposable income
for a 5-year period beginning on the date that the first payment is due under the plan will be applied to make payments
under the plan.” As an aside, below median income debtors need to clarify in their schedules or plan whether the DSO
is a § 507(a)(1)(A) or a § 507(a)(1)(B) obligation so the Trustee and creditors will know whether the plan needs to be
a five year plan. Above median income debtors are already required to remain in a plan for 5 years.

4Section 507(a)(1)(A) provides a first priority claim for allowed unsecured claims for a DSO that is owed to
or recoverable by a spouse, former spouse, or child of the debtor, or such child’s parent, legal guardian, or responsible
relative, without regard to whether the claim is filed by such person or a governmental unit on behalf of the person.
Section 507(a)(1)(B) provides a second priority claim for the same DSO obligations that are assigned to a governmental
unit (unless assigned for the purpose of allowing that unit to collect the debt) or are owed directly to or recoverable by
a governmental unit under non-bankruptcy law.

5Section 1328(a) provides that a debtor required to pay a DSO has to certify that all amounts due before or after
the petition is filed must be paid “but only to the extent provided for by the plan.”


Case 08-41727 Doc# 34 Filed 06/26/09 Page 3 of 5


not because, conceptually, a debtor with a pre-petition DSO cannot provide for lesser treatment
in certain circumstances, but because each of the plans fails to do so in a clear and concise
manner under all the circumstances. As explained on the record, more times than not, the DSO
recipient will be a less-than-sophisticated creditor, oftentimes without counsel. In light of the
Code’s clear preference for DSO recipients to receive full payment before a debtor can receive a
discharge, that recipient deserves to be clearly informed that his or her rights are being modified,
and how the claim will be treated.

The Court will not dismiss these cases, for unreasonable delay, but will instead allow the
Debtors to amend their plans (consistent with the typeface requirements found in D. Kan. LBR
9004.1(a)(1)) to provide the kind of clear and consistent language, with adequate disclosure,
orally outlined by the Court. Amended plans shall be filed by July 8, 2009 and shall be noticed
for confirmation on July 29, 2009 at 1:30 p.m. with an objection deadline of July 25, 2009. The
objection deadline is shortened, but is deemed adequate notice if the plans are filed within the
time ordered.

Although the Court does not mandate particular “clear and consistent language,” leaving
that for the lawyers to craft, the Court will provide, in attached Exhibit A, some language that
may be helpful and compliant.

IT IS, THEREFORE, ORDERED, that the Trustee’s Objection to Confirmation is
sustained in each case, that Debtors have until July 8, 2009 to amend their plans consistent with
this opinion, and if the plans are duly served with a notice of objection deadline of July 25, 2009,
such notice will be deemed adequate. Confirmation is continued to July 29, 2009 at 1:30 p.m.

# # #


Case 08-41727 Doc# 34 Filed 06/26/09 Page 4 of 5


EXHIBIT A

[Possible Compliant Language providing
lesser treatment of Domestic Support Obligations]


DOMESTIC SUPPORT OBLIGATIONS (for example, child support or alimony): Debtor
owes the following estimated amount(s), as of the date of the filing, to the following persons or
entities:

Creditor Amount (est.)

Jane Doe $100.00

GDebtor was making regular payments on this pre-petition support obligation when the
bankruptcy was filed, and will continue making payments directly on this debt rather than paying
the debt through the Chapter 13 plan. Debtor will also continue to pay any ongoing support
obligation outside the plan. If the Debtor continues to make direct regular payments on the pre-
petition arrearage, and also pays in full any post-petition support obligations, Debtor shall be
deemed “current” on all support payments, for the purpose of being eligible for discharge, upon
completion of the plan. Any amount of domestic support obligations that remains unpaid
following the completion of the Chapter 13 plan will not be discharged, but will remain
outstanding and collectible.

OR

GDebtor will pay the full amount owed on this pre-petition support obligation through the
Chapter 13 plan. Debtor will also continue to pay any ongoing support obligation outside the
plan. If the Debtor pays in full all support obligations, Debtor shall be deemed “current” on all
support payments, for the purpose of being eligible for discharge, upon completion of the plan.
Any amount of domestic support obligations that remains unpaid following the completion of the
Chapter 13 plan will not be discharged, but will remain outstanding and collectible.

OR

GThis plan pays administrative expenses and claims, and other creditors, before any payment
will go to a DSO recipient on any pre-petition support obligation. If funds remain available after
paying those other claims and expenses, which are set forth in this plan, any listed DSO recipient
would receive funds under this plan at that time. Debtor represents that this plan is his/her best
effort to repay this pre-petition support obligation, in light of his/her financial situation. Unless
specifically set forth below, however, IT IS UNLIKELY ANY DSO RECIPIENT WILL
RECEIVE ANY SIGNIFICANT PAYMENT UNDER THIS PLAN ON THAT PRE-PETITION
SUPPORT OBLIGATION.

If the Debtor makes the payments required by the plan, and also pays in full any ongoing
support obligation outside the plan, Debtor shall be “deemed” current on all support payments,
for the purpose of being eligible for discharge, upon completion of the plan. Any amount of
domestic support obligations that remains unpaid following the completion of the Chapter 13


Case 08-41727 Doc# 34 Filed 06/26/09 Page 5 of 5


plan will not be discharged, but will remain outstanding and collectible.

GOther treatment of DSO:

 Pursuant to the Bankruptcy Code, 11 U.S.C. § 1328(a), before a debtor may receive a
discharge, that debtor is required to pay, in full, any domestic support obligation (usually
child support or alimony) owed on or before the date debtor certifies [at the end of the
case] that all obligations are current (“including amounts due before the petition was filed,
but only to the extent provided for by the plan”). Debtor’s Chapter 13 plan cannot be
confirmed without that provision, unless the Debtor’s plan clearly proposes less than full
payment of domestic support obligations during the life of the plan to the creditor, AND
that creditor consents to the lesser treatment.

Unless a formal objection to this plan is filed with the Bankruptcy Court prior to
confirmation of this plan, the persons or entities to whom a Domestic Support Obligation is
owed will be deemed to have accepted the treatment of their claims through this plan and
will be bound by the terms of the confirmed plan.

 

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