§ 136.18     Secured Priority Claims before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 136.18, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

In Chapter 13 cases filed before October 22, 1994, all of the prepetition claims entitled to priority under § 507 and to full payment under § 1322(a)(2) are unsecured claims.1 In Chapter 13 cases filed after October 22, 1994, all prepetition claims entitled to priority and full payment under § 1322(a)(2) must be unsecured claims except alimony, maintenance or support described in § 507(a)(7).2

[2]

Sometimes the holder of a claim that would otherwise be entitled to priority under § 507 has a lien or security interest that entitles the claim holder to an allowed secured claim under § 506(a). This would be true, for example, when the IRS has a claim for prepetition taxes, but some or all of that claim is secured by a tax lien.3 With the occasional exception of secured claims for alimony, maintenance or support in cases filed after October 22, 1994,4 to the extent that a prepetition claim is also an allowed secured claim, the claim cannot be a priority claim and is not entitled to the full-payment treatment in § 1322(a)(2).

[3]

In Chapter 13 cases filed after October 22, 1994, there will be a narrow class of prepetition claims that are entitled to priority and are secured claims. The Bankruptcy Reform Act of 1994 created the possibility of a prepetition secured priority claim by amending § 507(a)(7) to grant a seventh priority to “allowed claims for debts to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child.”5 The prepetition claims entitled to this new seventh priority are not limited to “unsecured” claims, unlike the other priorities in § 507(a).

[4]

A debt described in § 507(a)(7) is a priority claim entitled to full payment under § 1322(a)(2).6 If the debt is also a secured claim under § 506(a), it would be entitled to the rights reserved for secured claims at confirmation under § 1325(a)(5).7 Section 1322(a)(2) requires the full payment of a priority claim, permits deferred payments and does not require the payment of postpetition interest to preserve present value.8 Section 1325(a)(5) preserves the liens of secured claim holders,9 requires full payment of the allowed secured claim and requires present value in the form of postpetition interest. Claims entitled to priority under § 507(a)(7) that are also secured claims are probably entitled to full payment, in deferred payments through the plan with present value interest. In other words, in cases filed after October 22, 1994, Chapter 13 debtors may have to satisfy both §§ 1322(a)(2) and 1325(a)(5) with respect to claims for alimony, maintenance or support described in § 507(a)(7) that are also secured claims under § 506(a).

[5]

Except for alimony, maintenance or support in Chapter 13 cases filed after October 22, 1994, the secured portion of a creditor’s prepetition claim cannot also be a priority claim; however, all is hardly lost—that secured claim is protected at confirmation by § 1325(a)(5).10 To the extent a putative priority claim holder has a lien, the debtor must either surrender the collateral or get the claim holder’s acceptance of the plan or the plan must retain the lien and pay the “present value” of the allowed secured claim.11 Without regard to when the Chapter 13 case was filed, secured claim holders are generally better off than priority claim holders because secured claim holders get present value interest in the form of postpetition interest under § 1325(a)(5).

[6]

Some of the same things can be said about the narrow class of postpetition claims that may be both secured and entitled to priority in a Chapter 13 case. A postpetition tax “incurred by the estate” could be an expense of administration under § 503(b)(1)(B) entitled to first priority under § 507(a)(1).12 If that postpetition tax is secured by a lien—for example, the statutory lien for property taxes in many jurisdictions—the postpetition tax might also be a secured claim.13 A postpetition tax incurred by a Chapter 13 estate and secured by a lien could be entitled to priority, would be secured and may also be a postpetition claim under § 1305(a).14 The management of this multifaceted secured priority postpetition claim through the Chapter 13 plan is problematic because postpetition claim holders under § 1305 cannot be required to file proofs of claim and can hold the debtor hostage for favorable treatment through the plan.15

[7]

Other postpetition debts entitled to administrative expense status under § 503(b)(1) can also be secured. A mechanic’s lien on the debtor’s car securing postpetition repair might satisfy § 503(b)(1)(A) and require treatment as a secured claim. A postpetition borrowing to put a new roof on the debtor’s home might be a secured debt, an expense of administration under § 503(b)(1)(A) and entitled to priority under § 507(a)(1). Such debts might be entitled to payment in full during the life of the plan with postpetition interest. But if treated under § 1305, the lender could decline to file a proof of claim, receive no payment through the plan and survive discharge altogether.

[8]

A recurring problem with lienholders that may also have priority claims is that the creditor rarely understands Chapter 13 practice well enough to know what kinds of claims it has, how to file each kind and how to get paid. In an ideal world, taxing authorities and others that regularly have priority claims would know to file one proof of claim that clearly indicates the portion of the debt that is secured, the portion that is unsecured and the portion entitled to priority. All too often, the claim holder files a proof of claim (mistakenly) asserting priority status for the whole debt, or asserting secured status for the whole debt, to the neglect of the portion that is entitled to priority. Official Bankruptcy Form 10 instructs the holders of claims that are partially secured and partially priority to file a single proof of claim indicating the portion that is secured, the portion that is priority and the statutory basis for the priority portion.

[9]

In Chapter 13 cases filed after October 22, 1994, the holder of a debt for alimony, maintenance or support that is both a priority claim under § 507(a)(7) and a secured claim under § 506(a) will have to modify Official Bankruptcy Form 10 to file an accurate claim.16 The claim holder should check the box for “secured claim” and also check the box for “priority claim,” striking out the “unsecured” modifier and substituting “secured” in the priority claim section. The secured priority claim holder should indicate § 507(a)(7) as the source for priority. If the claim holder also has an ordinary (unsecured) priority claim, then a fourth box needs to be created and checked.

[10]

When the postpetition debt is an administrative expense, the Code requires the timely filing of a “request” for payment.17 Filing an ordinary proof of claim is not the same and typically won’t get payment of the administrative expense. Characterization of the debt as a priority claim, a secured claim, an administrative expense and/or a postpetition claim makes a difference how the creditor has to act to ensure payment.18

[11]

When the creditor gets it right and files a single proof of claim indicating a priority claim and a secured claim, the claim holder is entitled to the confirmation standards for both a priority claim and a secured claim.19 On the priority portion, the claim holder gets full payment in deferred payments (without interest) consistent with § 1322(a)(2); on the secured portion, the creditor is entitled to the present value of the allowed amount of its secured claim under § 1325(a)(5). If the Chapter 13 plan fails to propose to pay interest on the secured portion of the priority claim holder’s claim, the plan cannot be confirmed.20 The secured portion is entitled to the confirmation rate of interest applicable under § 1325(a)(5).21

[12]

The strategies get complicated because it may be in the debtor’s best interests that the entire claim be treated as a priority claim even though part of the claim would be allowable as a secured claim. Prepetition priority claims (except secured claims for alimony, maintenance or support in cases filed after October 22, 1994) are not entitled to postpetition interest in Chapter 13 cases under § 1322(a)(2).22 Allowed secured claims are entitled to present value under § 1325(a)(5)(B)(ii), usually provided by paying interest through the plan.23 There is no incentive for the debtor to object to treatment of the whole claim as a priority claim when part of the claim is a secured claim. Priority claim holders too often make the mistake of thinking they are better off with a completely priority claim. The priority claim holder will almost always be better off maximizing the portion of its claim that is treated as secured to receive full payment with postpetition interest.

[13]

For example, in Jacobs v. IRS (In re Jacobs),24 the IRS asserted priority claims for tax years 1985 and 1986 in a Chapter 13 case filed in 1991. The court concluded that the 1985 and 1986 tax claims did not meet the technical time requirements for priority status under § 507(a)(7)(A). However, because the IRS had liens to secure the 1985 and 1986 taxes, it was entitled to secured status under § 1325(a)(5).25

[14]

The order of payments required by a confirmed plan and the characterization of tax claims conspired to help the IRS at the expense of other creditors in United States v. Richman (In re Talbot).26 In Talbot the confirmed plan provided, “Allowed claims will be paid in the following order: administrative/attorney, priority, secured, unsecured.”27 The confirmed plan trifurcated the IRS’s claim into a priority claim of $15,875, a secured claim of $18,674, and a general unsecured claim of $3,111. Twenty months after confirmation, the debtors sold the residence that partially secured the IRS’s claims, and the IRS held its lien hostage for payment of $38,646. The Chapter 13 trustee sought disgorgement of the sale proceeds extracted by the IRS. The trustee argued that she had already paid $11,703 plus interest toward the IRS’s secured claim and thus the IRS was overpaid from the sale proceeds.

[15]

The U.S. Court of Appeals for the Tenth Circuit concluded that the trustee could recover some of the sale proceeds, but the court disagreed with the trustee’s calculations. The Tenth Circuit read the confirmed plan to say that payments by the trustee between confirmation and sale of the residence were first credited toward the IRS’s priority claim with the result that “the entire secured claim of $18,674.08 plus interest remained to be paid.”28

[16]

Talbot is scary for Chapter 13 debtors and trustees for several reasons. The Chapter 13 trustee in Talbot thought she was making payments to the IRS on account of its allowed secured claim. Paying the secured portion of the tax claim first makes financial sense because only the secured tax claim accrues postpetition interest. But it is not unusual for the boilerplate in a Chapter 13 plan to provide that priority claims are paid in advance of other claims.29 When the debtor owes both priority and secured tax claims, the standard form plan in the district may disadvantage the debtor and other creditors.

[17]

It should be noted that tax liens are especially powerful liens that make secured status even more attractive than priority status under § 507. For example, several reported Chapter 13 decisions recognize that a prepetition tax lien secures the IRS for the full value of the debtor’s property, including any portion that might otherwise be exempt from attachment.30 There is controversy whether an IRS lien on the debtor’s interest in an ERISA-qualified retirement account or pension plan is a secured claim;31 if such a claim is not secured, the IRS may then argue for priority and payment in full under § 1322(a)(1), but without postpetition interest.

[18]

The priority claim holder that fails to object to confirmation of a plan that treats its claim as only a priority (unsecured) claim may find itself bound to receive full payment, but without postpetition interest, even if it has a lien.32 One court concluded that the failure of the IRS to object to confirmation of a plan that paid its priority claim in full without interest constituted an “agreement” to be paid without interest under § 1322(a)(2), notwithstanding that the IRS would have been entitled to an allowed secured claim and present value interest had it timely asserted its secured status.33 When the taxing authority filed a timely secured claim, it was held that the debtor could not convert that claim into an unsecured claim simply by treating it as an unsecured claim in the plan.34 This is a variation on the difficult question whether the confirmed plan is binding on a creditor that has filed a contrary proof of claim.35 If notice of the plan clearly informs the claim holder that the extent of its priority claim is at issue at confirmation, the creditor that fails to object to confirmation risks being bound by the order of confirmation, notwithstanding the filing of an inconsistent proof of claim.

[19]

Some courts seem predisposed to protect taxing authorities from the folly of their own misunderstanding of priority claims in Chapter 13 cases. For example, in Fawcett v. United States,36 the U.S. Court of Appeals for the Eleventh Circuit concluded that the IRS was entitled to postpetition interest when the value of property subject to a tax levy exceeded the amount of the claim, notwithstanding confirmation of a plan that did not provide for postpetition interest. The IRS had notice of the plan and neglected to object to confirmation, but the Eleventh Circuit concluded that it was sufficient for the government to demand postpetition interest on the face of its proof of claim. A proof of claim is not an objection to confirmation. Priority creditors that also have secured claims must assert their rights in a timely and appropriate manner, the same as other creditors. A taxing authority with notice that fails to object to confirmation is bound by the plan even if a timely objection would have entitled it to different treatment.37


 

1  See § 73.1  Plan Must Provide Full Payment§ 73.10  Filing Fees, § 136.1  Treatment of Priority Claims, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA. See, e.g., [the citations in this note are to § 507(a) prior to amendment in 1994] 11 U.S.C. § 507(a)(2) (“unsecured claims allowed under § 502(f)”) (emphasis added); 11 U.S.C. § 507(a)(3) (“allowed unsecured claims for wages, salaries or commissions”) (emphasis added); 11 U.S.C. § 507(a)(4) (“allowed unsecured claims for contributions to an employee benefit plan”) (emphasis added); 11 U.S.C. § 507(a)(5) (“allowed unsecured claims of persons . . . engaged in the production or raising of grain . . . [or] engaged as a United States fisherman”) (emphasis added); 11 U.S.C. § 507(a)(6) (“allowed unsecured claims of individuals . . . arising from the deposit . . . of money”) (emphasis added); 11 U.S.C. § 507(a)(7) (“allowed unsecured claims of governmental units”) (emphasis added). BAPCPA amended § 507(a0 to change and redefine the priority of certain claims. See § 73.3  Priority Claims Added or Changed by BAPCPA§ 73.6  Treatment of Priority Claims Changed by BAPCPA§ 136.19  Secured Priority Claims after BAPCPA§ 136.21  Domestic Support Obligations after BAPCPA and § 136.22  The Driving or Boating while Intoxicated Priority after BAPCPA.

 

2  See § 73.7  Secured Priority Claims?, § 136.1  Treatment of Priority Claims, § 136.16  Postpetition Interest on Priority Claims before BAPCPA§ 136.17  Postpetition Interest on Priority Claims after BAPCPA§ 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and § 136.21  Domestic Support Obligations after BAPCPA.

 

3  See, e.g., In re Murphy, 279 B.R. 163 (Bankr. M.D. Pa. 2002) (IRS claim for prepetition tax penalties became a lien on the debtors’ real property and is allowable as part of the secured claim without regard to whether the claim is entitled to priority and notwithstanding the absence of an agreement for purposes of § 506(b).).

 

4  See below in this section, and see § 73.7  Secured Priority Claims?§ 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and § 136.21  Domestic Support Obligations after BAPCPA.

 

5  11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994). See § 73.2  What Claims Are Priority Claims?, § 73.3  Priority Claims Added or Changed by BAPCPA, § 73.7  Secured Priority Claims?, § 136.16  Postpetition Interest on Priority Claims before BAPCPA§ 136.17  Postpetition Interest on Priority Claims after BAPCPA, § 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and § 136.21  Domestic Support Obligations after BAPCPA.

 

6  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment and 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims.

 

7  See discussion of providing for secured claims before and after BAPCPA beginning at § 74.4  Acceptance of Plan after BAPCPA through § 85.1  Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994.

 

8  See § 73.1  Plan Must Provide Full Payment, § 73.4  Deferred Payments Are Permitted, § 73.5  Interest Not Required, with Exceptions, § 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.1  Treatment of Priority Claims, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

9  Or requires surrender of all collateral securing the lien. See § 74.1  General Rules before BAPCPA, § 74.2  General Rules Changed by BAPCPA§ 74.5  Surrender or Sale of Collateral before BAPCPA§ 74.6  Surrender, Sale, Vesting in Lienholder and Payment with Property after BAPCPA, § 74.12  Lien Retention before BAPCPA and § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

10  See § 74.1  General Rules before BAPCPA, § 74.2  General Rules Changed by BAPCPA§ 74.12  Lien Retention before BAPCPA, § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases§ 77.1  “Value, As of the Effective Date of the Plan” Means Interest and § 78.1  Full Payment of Allowed Secured Claim.

 

11  See 11 U.S.C. § 1325(a)(5).

 

12  See § 73.2  What Claims Are Priority Claims?§ 73.3  Priority Claims Added or Changed by BAPCPA, § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

13  The new exception to the automatic stay in 11 U.S.C. § 362(b)(18) acknowledges that a statutory lien for an ad valorem property tax can be created and perfected after the filing of a Chapter 13 petition without violating the automatic stay.

 

14  See § 137.1  Postpetition Claims before BAPCPA and § 137.2  Postpetition Claims after BAPCPA.

 

15  See § 132.9  Postpetition Claims, § 137.1  Postpetition Claims before BAPCPA§ 137.2  Postpetition Claims after BAPCPA, § 158.6  Postpetition Claims§ 159.1  Taxes and § 159.9  Chapter 7 Trustee Compensation: § 1326(d).

 

16  See § 131.1  Official Bankruptcy Form 410 and Variations and § 131.2  Official Form 410 after BAPCPA.

 

17  11 U.S.C. § 503(b). See § 275.2 [ In General: Filing is Required for Allowance ] § 132.2  In General: Filing is Required for Allowance.

 

18  See § 132.2  In General: Filing is Required for Allowance, § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses, § 132.9  Postpetition Claims§ 136.21  Domestic Support Obligations after BAPCPA and § 137.1  Postpetition Claims before BAPCPA.

 

19  Still v. Tennessee Dep’t of Revenue (In re Rogers), 57 B.R. 170 (Bankr. E.D. Tenn. 1986).

 

20  In re Schenk, 67 B.R. 137 (Bankr. D. Mont. 1986).

 

21  In re Venable, 48 B.R. 853 (S.D.N.Y. 1985); In re Healis, 49 B.R. 939 (Bankr. M.D. Pa. 1985). See §§ 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest and 112.1 [ Interest Rate Anarchy: Present Value Before Till ] § 77.2  Interest Rate Anarchy: Present Value before Till.

 

22  See § 73.5  Interest Not Required, with Exceptions§ 73.6  Treatment of Priority Claims Changed by BAPCPA, § 136.16  Postpetition Interest on Priority Claims before BAPCPA and § 136.17  Postpetition Interest on Priority Claims after BAPCPA.

 

23  See § 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest.

 

24  147 B.R. 106 (Bankr. W.D. Pa. 1992).

 

25  Accord In re Wright, 301 B.R. 348 (Bankr. D. Kan. 2003) (Stale tax claims are not entitled to priority under § 507(a)(8), but IRS’s lien on household goods and wearing apparel is a secured claim notwithstanding that the IRS would have to seek enforcement by some method other than administrative levy to avoid the exemptions in § 6334 of the Internal Revenue Code.).

 

26  124 F.3d 1201 (10th Cir. 1997).

 

27  124 F.3d at 1210.

 

28  124 F.3d at 1210.

 

29  See § 113.7  Order of Payments to Creditors before BAPCPA and § 113.8  Order of Payments to Creditors after BAPCPA.

 

30  See Pletz v. United States (In re Pletz), 221 F.3d 1114 (9th Cir. 2000) (Debtor’s interest as tenant by the entirety in real property subject to an IRS lien was properly valued using joint-life actuarial tables. When properly valued, the amount of the IRS lien exceeded the debtor’s ability to pay the IRS’s secured claim through the plan.); Tudisco v. United States (In re Tudisco), 183 F.3d 133 (2d Cir. 1999) (Chapter 13 debtor’s interest in an exempt pension plan is subject to the IRS’s tax lien under 26 U.S.C. § 6321.); Sills v. United States (In re Sills), 82 F.3d 111 (5th Cir. 1996) (Tax lien on debtor’s house is valid notwithstanding that house was purchased with workers’ compensation payments that would be exempt from levy.); Deel v. United States (In re Deel), No. 7-93-02602-HPB-13, 1995 WL 571997 (W.D. Va. June 21, 1995) (unpublished) (Oversecured tax lien accrues postpetition interest, notwithstanding the debtors’ claim of exemption in the “equity” in the property. Automatic stay prohibits lien enforcement by the IRS, notwithstanding the anti-injunction provisions of 26 U.S.C. § 7421(a).); Risley v. United States, 184 B.R. 826 (N.D. Okla. 1995) (To determine the allowed amount of the IRS’s secured claim, property subject to tax lien is valued, notwithstanding that it is exempt from levy. Exemption from levy does not prevent the tax lien from attaching for § 506(a) purposes.); United States v. Parmele, 171 B.R. 895 (N.D. Okla. 1994) (It is inappropriate to reduce the allowable amount of the IRS’s secured claim to reflect property exempt from levy under 28 U.S.C. § 6334. Section 6334 of the Internal Revenue Code exempts certain property from “levy” but does not limit the extent of the IRS’s lien.); In re Wright, 301 B.R. 348 (Bankr. D. Kan. 2003) (IRS lien on household goods and wearing apparel is a secured claim notwithstanding exemptions in § 6334 of the Internal Revenue Code because the IRS has option to enforce its lien by some method other than administrative levy.); In re Eschenbach, 267 B.R. 921 (Bankr. N.D. Tex. 2001) (IRS’s claim is secured (and not priority) based on lien filed in Florida to the extent of all personal property, whether acquired by the debtors before or after moving from Florida to Texas.); McCord v. Petland, Inc. (In re McCord), 264 B.R. 814 (Bankr. N.D. W. Va. 2001) (Applying IRS v. McDermott, 507 U.S. 447, 113 S. Ct. 1526, 123 L. Ed. 2d 128 (1993), secured lender has priority over the IRS liens on accounts, leasehold items and inventory acquired by the Chapter 13 debtor prior to recording of the IRS liens, but IRS has priority with respect to property acquired by the debtors after the recording of the IRS liens.); In re Martinez, 258 B.R. 364, 367 (Bankr. W.D. Tex. 2000) (“[T]his Court agrees with the analysis in [Runnels v. IRS (In re Runnels), 134 B.R. 562 (Bankr. E.D. Tex. 1991), and United States v. Luongo, 255 B.R. 424 (N.D. Tex. 2000),] that the IRS’s right of setoff is unaffected by the Debtors’ claim that their 1999 tax refund is exempt property.”); In re Pace, 257 B.R. 918, 921 (Bankr. W.D. Mo. 2000) (IRS is not a secured claim holder based on its right of setoff in debtors’ prepetition tax refund because that setoff is limited by the debtors’ claim of exemption under § 522(c). Debtors scheduled several prepetition tax claims, some entitled to priority and some as general unsecured claims. The debtors also claimed an exemption in a prepetition tax refund. The debtors did not dispute that the tax refunds could be set off by the IRS, but the debtors disputed whether the IRS could apply the overpayments to the general unsecured portion of its claim. The bankruptcy court held that property exempted under § 522(c) is not liable for any prepetition debt, including taxes, except taxes not discharged under § 523(a)(1). Thus, the prepetition tax refund could be set off by the IRS only against its priority claim. The IRS argued in the alternative that its general unsecured claim was really a secured claim because of its right to setoff. “[B]ecause the Court has already determined that the setoff rights in § 553 yield to the exemption rights in § 522, the ‘security’ provided in § 506, which is based on the setoff rights under § 553, must likewise yield. In other words, the IRS is only ‘secured’ to the extent that the setoff is not limited by the Debtors’ exemptions. Under the particular facts of this case, the overpayments are completely subsumed by the exemptions and so the IRS is not ‘secured’ at all.”); In re O’Gorman-Sykes, 245 B.R. 815 (Bankr. E.D. Va. 1999) (IRS has a secured claim in real property owned as tenants by the entirety and in other items of personal property notwithstanding the debtor’s claims of exemption.); In re Wesche, 193 B.R. 76, 79 (Bankr. M.D. Fla. 1996) (Federal tax lien attaches to all of a Chapter 13 debtor’s interest in Civil Service Retirement System pension, not just to the current monthly benefit. “IRS tax liens do attach to post-petition pension payments and are valued at the present actuarial value of the debtor’s future stream of payments.” IRS has secured claim in the full amount of its $101,339.92 claims.); Bernstein v. Pavich (In re Pavich), 191 B.R. 838 (Bankr. E.D. Cal. 1996) (Deceased debtor is entitled to homestead exemption in proceeds of sale of home; however, IRS lien attaches to homestead exemption.); In re Reed, 165 B.R. 959 (Bankr. N.D. Ga. 1993) (Debtor’s claim of exemptions does not affect the allowable amount of a secured tax claim because a federal tax lien is not trumped by a debtor’s state law exemptions.); In re Hall, 118 B.R. 671 (Bankr. S.D. Ind. 1990) (IRS has secured claim to the extent of the value of the collateral subject to its lien, notwithstanding the debtor’s claim of an exemption in that property.); In re Beard, 112 B.R. 951 (Bankr. N.D. Ind. 1990) (Extent of the secured claim of the IRS includes the value of property that would otherwise be exempt from levy.).

 

31  See § 106.1 [ Is Claim Secured, and By What? ] § 76.2  Is Claim Secured, and By What?. See, e.g., United States v. Snyder, 343 F.3d 1171 (9th Cir. 2003) (IRS lien is not a secured claim because ERISA-qualified pension plan is excluded from property of the estate by § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992).); IRS v. Wingfield (In re Wingfield), 284 B.R. 787, 790 (E.D. Va. 2002) (Applying § 541(c)(2) and Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992), although debtor’s 401(k) plan is subject to IRS lien, “[t]he debtor’s interest in his 401(k) plan is not property of the estate for the purposes of establishing the IRS’s secured claim.”); In re Robinson, 301 B.R. 461 (Bankr. E.D. Va. 2003) (Citing IRS v. Snyder, 343 F.3d 1171 (9th Cir. 2003), debtors’ interest in ERISA-qualified pension plan is not property of the estate, and the IRS does not have a secured claim.); In re McIver, 262 B.R. 362, 365 (Bankr. D. Md. 2001) (On remand, see 255 B.R. 281 (D. Md. 2000), IRS is a secured claim holder to the extent of the present value of debtor’s interest in TIAA/CREF annuities. “While this court respectfully disagrees with the learned District Court judge’s opinion, the court will nonetheless adhere to the law of the case and find that the IRS has an allowed secured claim against the TIAA/CREF annuities to the extent of their value. The value is to be fixed as the present value of the future stream of payments to be received by the Debtor with respect to the annuities. . . . Debtor’s Chapter 13 Plan will need to be modified to provide for payments sufficient to satisfy the IRS’ secured claim.”); In re Keyes, 255 B.R. 819, 822 (Bankr. E.D. Va. 2000) (Although IRS has a valid lien on the debtor’s ERISA-qualified employee stock ownership plan, the IRS is not a secured claim holder and is not entitled to distributions on account of its lien through the plan. “[T]he court is dealing with property that both parties agree is excluded from the bankruptcy estate under [Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992)]. While it is clear that an asset of the debtor is subject to the IRS lien as provided for by statute, there is simply no statutory authority for granting it a ‘split personality’ to include it in the bankruptcy estate simply for purposes of securing the IRS’s lien. The property pursued by the IRS is not property of the debtor’s estate and never came under the control of this Court, as mandated by 506(a) and Patterson, and the Court cannot exercise control over such property for the purpose of determining distributions to secured creditors. Only creditors who have liens on property of the estate are entitled to superior treatment in a Chapter 13 plan. . . . [T]he IRS’s claim cannot be treated as secured because it does not have a ‘lien on property in which the estate has an interest,’ as required by 506(a).”); In re Fink, 153 B.R. 883, 886 (Bankr. D. Neb. 1993) (Debtor’s TIAA retirement annuity is not ERISA-qualified but is excluded from the bankruptcy estate pursuant to § 541(c)(2) and the Supreme Court’s decision in Patterson v. Shumate, 504 U.S. 753, 112 S. Ct. 2242, 119 L. Ed. 2d 519 (1992). However, because the IRS registered a federal tax lien before the Chapter 13 petition, “from the Debtor’s standpoint, it arguably makes little difference whether the TIAA annuity is or is not property of the bankruptcy estate. In either case, the Internal Revenue Service’s claim will be secured by the annuity.”); Jacobs v. IRS (In re Jacobs), 147 B.R. 106 (Bankr. W.D. Pa. 1992) (Prepetition tax lien attaches to the debtor’s interest in an ERISA-qualified pension plan notwithstanding spendthrift provisions of Pennsylvania law.). See also McIntyre v. United States (In re McIntyre), 222 F.3d 655 (9th Cir. 2000) (Nothing in ERISA or in California community property law prevents the IRS from levying on all of a debtor’s pension benefits notwithstanding spouse’s claim of a one-half interest in those benefits.); In re Berry, 268 B.R. 819, 824–25 (Bankr. E.D. Tenn. 2001) (“Because of the far-reaching collection power granted by [26 U.S.C.] § 6321, the anti-assignment and anti-alienation provisions of the Master Trust Agreement, the Knoxville City Charter, and the Tennessee Code are not ‘restrictions enforceable under application nonbankruptcy law.’ . . . Under § 6321 of the Internal Revenue Code, the IRS has a lien on all of the Debtors’ property and property interests. . . . The shield of § 541(c)(2) is therefore unavailable to the Debtors, and Mr. Berry’s interest in the Retirement Plan is property of the estate pursuant to § 541(c)(1). Under § 506(a), the IRS has an allowed claim against the pension rights to the extent of their value. That value is fixed at the present value of the future stream of payments to be received.”).

 

32  See discussion of effects of confirmation under § 1327 beginning at § 120.1  11 U.S.C. § 1327: Overview.

 

33  In re Hebert, 61 B.R. 44 (Bankr. W.D. La. 1986). See § 73.1  Plan Must Provide Full Payment, § 74.3  Acceptance of Plan before BAPCPA§ 74.4  Acceptance of Plan after BAPCPA and § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

34  Still v. Tennessee Dep’t of Revenue (In re Rogers), 57 B.R. 170 (Bankr. E.D. Tenn. 1986).

 

35  See §§ 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

36  758 F.2d 588 (11th Cir. 1985).

 

37  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.