§ 136.19     Secured Priority Claims after BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 136.19, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Under pre-BAPCPA law, there were claims for alimony, maintenance or support that were secured by liens that were entitled to priority under § 507(a)(7) and were secured debts for purposes of § 1325(a)(5).1 BAPCPA amended § 507(a) to change and redefine the priority for domestic support obligations (DSOs) in § 507(a)(1).2 In that process, first priority now extends to only “unsecured claims for domestic support obligations.”3

[2]

The definition of DSO in § 101(14A) more broadly includes secured debts actually in the nature of alimony, maintenance and support.4 But a secured DSO cannot also be a first priority claim under § 507(a)(1). The duality for DSOs possible under pre-BAPCPA law has been eliminated.

[3]

Ironically, BAPCPA created a new priority debt that can also be a secured claim. BAPCPA added a new tenth priority in § 507(a)(10): “allowed claims for death or personal injury resulting from the operation of a motor vehicle or vessel if such operation was unlawful because the debtor was intoxicated from using alcohol, a drug or another substance.”5 Unlike all of the other paragraphs and subparagraphs of § 507(a), the personal injury and death claims entitled to this new tenth priority are simply “allowed claims.” An allowed claim can be either secured or unsecured. A claim for death or personal injury resulting from unlawful operation of a vehicle or vessel when the debtor was intoxicated that has been reduced to judgment and become a lien on estate property would be both a priority and a secured claim in a Chapter 13 case.

[4]

The Bankruptcy Code is no more instructive today than it was before BAPCPA with respect to how such a dual-natured claim must be treated at confirmation.6 Because the debt is entitled to priority under § 507(a)(10), it must be paid in full as a condition for confirmation under § 1322(a)(2).7 Because it is a secured claim, it would be entitled to present value interest under § 1325(a)(5).

[5]

There is substantial similarity but an important difference between DSO claims and most DWI debts. After BAPCPA, an unsecured DSO is a first priority claim under § 507(a)(1) that is entitled to payment in full under § 1322(a)(2) and is nondischargeable under § 1328. Because the definition of DSO in new § 101(14A) includes interest that accrues after the petition, a Chapter 13 debtor has a substantial argument in favor of separate classification of DSO debt for payment in full with postpetition interest through the Chapter 13 plan notwithstanding that § 502(b)(2) would otherwise disallow postpetition interest as part of an unsecured debt.

[6]

A claim for death or personal injury resulting from the operation of a motor vehicle or vessel that was unlawful because the debtor was intoxicated would be a priority claim under § 507(a)(10) entitled to full payment in a Chapter 13 case under § 1322(a)(2). That debt would probably8 be nondischargeable in a Chapter 13 case by the incorporation of § 523(a)(9) into § 1328(a)(2).9 If the DWI debt is secured by a lien, it might also be entitled to present value interest after confirmation under § 1325(a)(5). The prohibition on payment of postpetition interest to an unsecured claim holder in § 502(b)(2) would not be implicated, and this secured priority claim could be paid with postconfirmation present value interest based on the different treatment of secured claims in § 1325(a)(5).


 

1  See § 300.1 [ Secured Priority Claims? ] § 136.18  Secured Priority Claims before BAPCPA.

 

2  See §§ 440.1 [ New and Changed Priority Claims ] § 73.3  Priority Claims Added or Changed by BAPCPA and 519.1 [ Domestic Support Obligations ] § 136.21  Domestic Support Obligations after BAPCPA.

 

3  11 U.S.C. § 507(a)(1)(A) and (B) (emphasis added), discussed in § 519.1 [ Domestic Support Obligations ] § 136.21  Domestic Support Obligations after BAPCPA.

 

4  See 11 U.S.C. § 101(14A), discussed in §§ 519.1 [ Domestic Support Obligations ] § 136.21  Domestic Support Obligations after BAPCPA and 552.1 [ Domestic Support Obligations: § 523(a)(5) ] § 159.5  Domestic Support Obligations: § 523(a)(5).

 

5  11 U.S.C. § 507(a)(10), discussed in § 522.1 [ The New DWI Priority ] § 136.22  The Driving or Boating while Intoxicated Priority after BAPCPA.

 

6  See § 300.1 [ Secured Priority Claims? ] § 136.18  Secured Priority Claims before BAPCPA.

 

7  See § 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

8  See discussion of “resulting from” and “caused by” in § 555.1 [ Boating or Flying while Intoxicated: § 523(a)(9) ] § 159.8  Boating or Flying while Intoxicated: § 523(a)(9).

 

9  See 11 U.S.C. § 1328(a)(2), discussed in § 555.1 [ Boating or Flying while Intoxicated: § 523(a)(9) ] § 159.8  Boating or Flying while Intoxicated: § 523(a)(9).