§ 74.5     Surrender or Sale of Collateral before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 74.5, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Several sections of the Bankruptcy Code work together to permit Chapter 13 debtors to provide for a secured claim holder by surrendering or selling the collateral. The Chapter 13 debtor’s exclusive powers to use, sell or lease property of the Chapter 13 estate under § 363(b), (d), (e), (f) and (l)1 include the power to sell property of the estate out of the ordinary course of business.2 11 U.S.C. § 1322(b)(8) permits a Chapter 13 debtor to “provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor.” 11 U.S.C. § 1322(b)(9) permits a Chapter 13 plan to “provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity.” Also, 11 U.S.C. § 1325(a)(5)(C) permits a Chapter 13 debtor to deal with an allowed secured claim by a plan provision that “surrenders the property securing such claim to such holder.” Read together, these sections appear to grant Chapter 13 debtors flexibility to surrender or sell all or part of the property that secures a claim in full or partial satisfaction of the secured claim. The reported cases are less receptive to the surrender or sale of collateral by Chapter 13 debtors.

[2]

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)3 did not directly change any of the Code provisions that allow Chapter 13 debtors to resolve the secured claims by surrender or sale of collateral. But other amendments by BAPCPA impact the use of plan provisions that surrender collateral.

[3]

In particular, BAPCPA dangled a new sentence at the end of § 1325(a) that insulates from valuation under § 506(a) any claim secured by a purchase money security interest in a motor vehicle acquired for personal use of the debtor within 910 days of the petition and any claim secured by any other thing of value when the debt was incurred within a year of the petition.4 The courts have concluded that hanging-sentence claims are fully secured without regard to the value of the collateral.5 This disconnect creates strong incentives for Chapter 13 debtors to consider the surrender of hanging-sentence collateral whenever the actual value is significantly less than the amount of the debt.6 To date, the appellate courts have rejected the possibility that a Chapter 13 debtor can surrender hanging-sentence collateral “in full satisfaction” of a debt that is greater than the value of the collateral.7

[4]

The surrender of collateral through a Chapter 13 plan would seem easily accomplished by simply stating in the plan that the collateral securing a claim is surrendered to the creditor upon confirmation (or at some identified other time). There is nothing in § 1322(b)(8) or (b)(9) or in § 1325(a)(5)(C) requiring any magic words or suggesting other conditions. For example, it has been held that a first mortgage holder is bound by the provision of a confirmed plan surrendering real property subject to junior liens in lieu of a foreclosure.8 The first lienholder took the property subject to liens notwithstanding that under state law, the creditor lost its right to “foreclose out” the junior lienors.9 Such a plan would also, depending on state law, extinguish any deficiency claim of the first lienholder.10 The secured claim holder’s best defense to this outcome was to object to confirmation and insist on its right of foreclosure as part of the surrender of its collateral.

[5]

A plan provision for surrender of property is binding on the debtor. One court granted a motion to vacate a confirmation order when the confirmed plan required the debtor to abandon or surrender real property in satisfaction of a secured claim under § 1325(a)(5)(C), but the debtor continued to live on the real property and refused to make payments for its use.11 This same court in a different case found the debtor in contempt and imposed sanctions when the confirmed plan required the surrender of property to a first mortgage holder, but instead the debtor sold the property and mortgaged the property.12 The debtor’s failure to comply with an agreement to surrender or sell property subject to a lien puts good faith at issue—for example, affecting the debtor’s right to dismiss the case.13 When the plan surrendered a car to a bank with the proviso that the value of the car would be “applied to the debt” to “reduce the [bank’s] claims,” the debtor was bound by the plan and the bank’s deficiency was reduced but not eliminated by surrender of the car.14

[6]

But there is a line of cases holding that surrender requires more than just words in a plan and may even be impossible without the consent and participation of the secured claim holder.

[7]

The first case to suggest problems with the simple route to surrender was In re Robertson.15 The plan in Robertson surrendered a car to a secured claim holder. The car had been awarded to the debtor’s former spouse in a state court divorce decree. The former spouse had possession of the car and had “departed for parts unknown and so has the car.”16 The court held that the debtor could not accomplish a surrender sufficient to satisfy the secured claim holder under § 1325(a)(5)(C) because the debtor was not in possession of the property to be surrendered.17

[8]

The notion in Robertson that a Chapter 13 debtor’s proposal to surrender property must be coupled with ability to do so was taken a step further in In re Service.18 In Service, the plan proposed to surrender real property in full satisfaction of a mortgage holder’s claim. The mortgage holder had been granted relief from the stay to foreclose. The plan was confirmed without objection. After confirmation, the mortgage holder refused to accept surrender and refused to foreclose. The debtor moved the bankruptcy court to enforce the terms of the plan by ordering abandonment or by requiring the mortgage holder to accept surrender. Both motions were denied:

The Code nowhere defines or elaborates on the meaning of “surrender” as it is used in Chapter 13. However, in explaining the distinction between “abandonment” and “surrender” . . . one Court explained that surrender of collateral requires a mutual agreement between the parties. In re Robertson, 72 B.R. 2, 4 (Bankr. D. Colo. 1985). . . . This Court adopts Robertson’s understanding of “surrender.” . . . Security Pacific is unwilling to accept title to the realty in its name. Thus, although the Debtors have provided for satisfaction of Security Pacific’s secured claim by surrendering its collateral, absent Security Pacific’s consent, Debtors may not compel this creditor to accept surrender nor enforce its rights and take title to the realty. In this case, Security Pacific has been given the remedy of receiving its collateral in satisfaction of its secured claim pursuant to § 1325(a)(5)(C). Additionally, Security Pacific has obtained relief from the automatic stay to pursue any other remedies it has under its note and deed of trust. Whether to proceed with its remedies is within the sole discretion of Security Pacific, and Debtors may not compel Security Pacific [to] enforce its rights. . . . Alternatively, even if Debtors contend they are surrendering the collateral by “abandoning” it to the creditor, the Court cannot grant Debtors the order they seek. . . . [Section] 554(a) . . . authorizes abandonment to “any party with a possessory interest in the property abandoned.” . . . Security Pacific, however, is not in possession of the property and thus, abandonment to [ ] Security Pacific is not permissible.19
[9]

Service interprets Robertson to limit the power of a Chapter 13 debtor to surrender property by requiring that the debtor physically deliver possession of the property and by requiring that the secured claim holder consent to receiving the surrender.20 The Bankruptcy Code does not define or condition the surrender of collateral that the debtor must physically deliver the property or that the creditor must joyfully accept possession.

[10]

One court has held that surrender of property subject to more than one lien can’t be accomplished by delivery to just one lienholder. In In re Stone,21 the plan proposed that the debtor would “abandon, vacate and surrender”22 her homestead to the IRS in payment of its secured claim. The IRS was not the first lienholder on the property, but the plan anticipated that other lienholders would “be paid out of the sale proceeds once the IRS sells the home.”23 The bankruptcy court denied confirmation, reasoning as follows:

[T]he Debtor is attempting to surrender the property solely to the IRS and not to the other lienholders. . . . It is preferable for property which is subject to the claims of several lienholders to be surrendered to all the various lienholders at once and for foreclosure of all liens concurrently. . . . The term “surrender” was contemplated by Congress to be a return of property in a relinquishing of possession or control to the holder of the claim. . . . A debtor can not surrender collateral in a confirmed plan absent consent of the secured creditor or approval of the court. . . . [T]he plan does not adequately comply with § 1325(a)(5)(C) and thus is not confirmable.24
[11]

Stone and Service demonstrate that not all bankruptcy courts allow Chapter 13 debtors to surrender collateral, notwithstanding the plain language of § 1325(a)(5)(C). The problem in Stone might be solved by always wording the surrender of collateral to include all creditors with liens against the property. The predicament in Service is not easily resolved by any change in the language of the plan. The logic of Service is that if the creditor refuses to accept surrender, the debtor is required to continue to wage war.

[12]

Surrender of personal property to the Internal Revenue Service presents unique issues. For example, in IRS v. White (In re White)25 the Fourth Circuit held that surrender of personal property to the IRS did not satisfy § 1325(a)(5)(C) because the IRS would be unable to levy on the surrendered property without first obtaining a judgment that would allow it to take physical possession. The Fourth Circuit reasoned that § 1325(a)(5)(C) requires completion of the act of surrender before or at the time of confirmation. Because the IRS must obtain a judgment to actually take physical possession of personal property, the plan did not effect surrender at or before confirmation. Without deciding whether partial surrender is allowed under § 1325(a)(5)(C), the White court stated that surrender means “the relinquishment of all rights in property, including the possessory right, even if such relinquishment does not always require immediate physical delivery of the property to another.”26

[13]

Other courts have adopted less rigorous notions of surrendering collateral. In stark contrast to Robertson, the debtor in In re Alexander27 surrendered a truck through a Chapter 13 plan without physically delivering possession when the debtor’s husband, whereabouts unknown, “absconded with the truck.” Quite reasonably, the court in Alexander explained:

The debtor in this case is entitled to her fresh start. She has complied with the Bankruptcy Code by surrendering the collateral. The fact that she, through no fault of her own, cannot physically drive the vehicle to the creditor’s place of business does not obviate surrender of the vehicle. . . . [T]he creditor has a remedy . . . . [I]t retains its lien on the collateral as well as its right to pursue the codebtor.28
[14]

Similarly, in In re Mattera,29 the court concluded that a Chapter 13 plan provision for surrender of a time share condominium discharged the debtor’s obligations notwithstanding that the time share interest remained titled in the debtor and no one took any action to implement the plan other than that the debtor did not use the condominium. When there is no evidence of bad faith or misconduct by the debtor, several reported decisions allow surrender of even damaged collateral without the consent of the lienholder.30 Other courts have imposed modest requirements on Chapter 13 debtors to assist the lienholder in accomplishing a plan provision for the surrender of property.31 One reported decision upholds a Chapter 13 debtor’s right to surrender real property with or without consent of a lienholder, but the plan cannot restrict the lienholder’s discretion to dispose of the property after surrender.32

[15]

Even when the debtor can physically deliver the collateral to the right lienholder and the creditor’s arms are open to receive its used waterbed, some courts say that surrender is an all or nothing deal: If the plan proposes to surrender collateral, it must surrender all of the collateral that secures a creditor’s claim; the debtor cannot surrender part of the collateral and pay for the other part with payments through the plan. In In re Covington,33 Security Pacific had a single retail installment contract and security agreement covering the debtor’s mobile home, furnishings and appliances. The debtor proposed to surrender all of Security Pacific’s collateral except a stove and refrigerator that would be paid for through the plan. The court held that the debtor could not surrender part of the collateral for a secured claim and pay for part through the plan:

The debtor cannot have it both ways. Security Pacific is the holder of a single allowed secured claim. If the debtor’s plan is to be confirmed, she has two alternatives: surrender the Mobile Home and its furnishings and appliances to Security Pacific in compliance with § 1325(a)(5)(C) or cram down Security Pacific’s secured claim in its entirety in the manner required by § 1325(a)(5)(B). . . . To hold otherwise, would be tantamount to a finding that a creditor in a Chapter 13 case who has a single claim may, at the whim of the debtor, be compelled to bifurcate the secured portion of its claim into as many individual claims as it has items of property securing its claim. Clearly, this interpretation would be inconsistent with §§ 506(a) and 1325(a)(5).34
[16]

Although there is logic to the literal reading of § 1325(a)(5)(C) in Covington, the outcome is inconsistent with the power of a Chapter 13 debtor in § 1322(b)(8) to “provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor.”35 It is easy to imagine Chapter 13 cases in which the all or nothing approach to surrender in Covington has discomforting results. Any creditor with a “dragnet” clause could insist that the debtor pay for all collateral that secures all debts to the creditor or surrender all such property—a debtor with a car loan and a home mortgage held by the same creditor would be prohibited from surrendering the car and keeping the house if there is a cross-collateralization clause in either security instrument.

[17]

In re McCommons36 makes the case for rejecting the outcome in Covington. The bank in McCommons was secured by several items of industrial equipment. The debtor used some of the equipment in his business and had no use for the rest. The plan proposed to surrender part of the collateral and to retain a pickup and a welder. Rejecting the Covington line of cases,37 the bankruptcy court explained that § 102(5) requires that the word “or” in § 1325(a) be interpreted as nonexclusive; thus, a Chapter 13 debtor can use § 1325(a)(5)(B) or (C) or both in the same plan:

Debtor in this case requires the truck and the welder for his employment. To force surrender of those items could torpedo Debtor’s efforts to reorganize. On the other hand, to require Debtor to retain unneeded collateral would reduce the 40 percent dividend Debtor has proposed to pay the unsecured creditors. . . . [T]he alternatives in Section 1325(a)(5) are mutually not exclusive . . . . [T]he debtor may use a combination of Sections 1325(a)(5)(B) and 1325(a)(5)(C) in its treatment of the secured claim.38
[18]

A strategic offer or threat to surrender property can be a strong negotiating tool. Many institutional lenders are more interested in cash payments through the plan (with interest) than the return of (depreciated) collateral. A threat to surrender a used automobile can often encourage negotiation toward a favorable valuation or interest rate in the plan. Some creditors are hungry for a return of their collateral and will agree to accept collateral in full satisfaction of claims even when the value of the collateral is less than the amount of the debt, thus eliminating any unsecured deficiency claim in the case.

[19]

BAPCPA dramatically changed the strategic surrender of certain kinds of collateral in Chapter 13 cases. Mentioned above and detailed elsewhere,39 the hanging sentence at the end of § 1325(a) insulates from § 506(a) 910-day PMSI car claims and claims secured by other things of value purchased within a year of the petition. Courts have interpreted the hanging sentence to require that claims within its reach must be treated as fully secured through the plan without regard to the value of the collateral.40 Appellate courts have added the unbalanced conclusion that hanging-sentence collateral cannot be surrendered in full satisfaction of the debt when the debt is undersecured by the value of the collateral.41

[20]

The debtor decides which property to keep and which property to surrender. If the debtor has one piece of property that is subject to a lien that the debtor desires to keep and another piece of unencumbered property, the debtor can propose to surrender the unencumbered property to the creditor and thereby reduce or eliminate the creditor’s secured claim.42 If the debtor surrenders all of the collateral that secures a creditor’s claim, then the secured claim is satisfied in full under § 1325(a)(5)(C)43 and the claim need not be provided for further under § 1325(a)(5)(A) or (B), though the creditor may be entitled to an unsecured claim for the balance of its debt above the value of the collateral.44 This is a significant advantage to the debtor, especially in composition plans proposing to pay less than 100 percent of unsecured claims. By strategically surrendering collateral, the debtor can significantly reduce the secured debt that must be paid through the plan. The unsecured deficiency claim that remains after surrender, if any, can be classified with other unsecured claim holders and often paid less than in full.45 If the value of property surrendered to a secured claim holder is insufficient to retire the secured claim in full and the debtor retains other property that is collateral for the creditor’s claim, then the creditor is entitled to retain its lien for the balance, and the plan must provide for the remaining allowed secured claim consistent with § 1325(a)(5).46

[21]

Absent an agreement, surrendered property will be valued by the court on motion47 or at a contested confirmation hearing. Ordinarily, the surrender of property to a secured claim holder will reduce or eliminate the secured claim but will not discharge the underlying debt unless the value of the collateral equals or exceeds the amount of the creditor’s claim.48 On compelling facts, one court concluded that the depreciation in the value of a car between the petition and the date of surrender was recoverable by a lienholder as an administrative expense.49 In an unpublished decision, one bankruptcy court rejected Chapter 13 debtors’ “take dirt plan” when the value of real property the debtors proposed to surrender “in full satisfaction” was less than the allowed amount of the secured claim.50 However, delay by a creditor in taking possession of surrendered collateral may adversely affect the creditor’s deficiency claim.51

[22]

The surrender or sale of real property by a Chapter 13 debtor may be complicated by the antimodification provision of § 1322(b)(2) as interpreted by the Supreme Court in Nobelman v. American Savings Bank.52 As discussed in more detail elsewhere,53 in Nobelman the Supreme Court held that § 1322(b)(2) prohibits a Chapter 13 plan from splitting an undersecured claim into its secured and unsecured components if the claim is secured only by a security interest in real property that is the debtor’s principal residence. Although nothing in Nobelman prohibits a Chapter 13 debtor from surrendering real property or from selling real property and cashing out a lienholder, if the real property is protected from modification by § 1322(b)(2), Nobelman indicates that the creditor retains rights against the debtor that cannot be modified by the plan.

[23]

Unfortunately for Chapter 13 debtors, the Supreme Court in Nobelman did not focus on the “allowed secured claim” as the triggering condition for the protection from modification in § 1322(b)(2). Rather, Justice Thomas focused on “claims” secured by a lien on real property that is the debtor’s principal residence. If at the petition the creditor was secured by a lien on real property that is the debtor’s principal residence, then surrender will reduce the debt by the value of the property; however, after Nobelman, unless the mortgage contract or state law so provides, surrender will not permit the debtor to escape other obligations, including payment in full of the (now unsecured) debt. Prior to Nobelman, the Chapter 13 debtor with an undersecured home mortgage could surrender the real property and deal with the deficiency at whatever percentage was available for unsecured claim holders under the plan. After Nobelman, it can be argued that this option is not available because a plan that surrenders real property that is the debtor’s principal residence and treats the deficiency in any manner other than as required by the mortgage contract or state law would constitute a modification of the rights of the mortgage holder in violation of § 1322(b)(2).54 On unusual facts, one court has held that the surrender of an uninsured residence that was destroyed by fire would be an impermissible modification of the mortgage holder’s rights under § 1322(b)(2).55

[24]

A potential Chapter 13 debtor who needs to get rid of real property that is a principal residence should consider surrendering the property before filing the Chapter 13 case. If surrendered before the petition, the property would not be the debtor’s principal residence at the filing and the antimodification provision of § 1322(b)(2) would not apply. The debtor might have to physically move out of the property before the petition to ensure that § 1322(b)(2) and Nobelman would not protect the lienholder.56

[25]

Surrender of real property can have special importance for a Chapter 13 debtor when ownership of the property includes an obligation to pay “homeowners association” dues or similar charges. Fees or assessments of that sort are not dischargeable in a Chapter 7 case under § 523(a)(16).57 But they are dischargeable in a Chapter 13 case at the completion of payments under a plan.58 In Chapter 7 cases, mortgagees and homeowners associations are sometimes reluctant to “accept” surrender of collateral that is burdened by an obligation to pay homeowners association dues or assessments—at least in part because those dues or assessments continue to accrue as a nondischargeable obligation of the debtor in a Chapter 7 case until the debtor no longer has a “legal, equitable or possessory ownership interest” in the property.59

[26]

In a Chapter 13 case, the debtor can surrender property that includes an obligation to pay homeowners association dues or assessments, and the surrender cuts off all liability for future dues and assessments. For example, in In re Heflin,60 the plan proposed to surrender real property upon which a homeowners association claimed a lien for “HOA dues.” The plan did not provide for payment of ongoing property owner assessments with respect to the property being surrendered. The homeowners association objected to confirmation, contending that it was entitled to postpetition payments with respect to the dues on the property to be surrendered. The homeowners association found this requirement “implied” from § 523(a)(16) of the Code.

[27]

The bankruptcy court appropriately rejected the homeowners association’s objection to confirmation. The court first noted that § 523(a)(16) “does not apply in chapter 13 except in the rare instances when a debtor who is unable to complete payments under a plan is granted a so-called ‘hardship discharge’ under § 1328(b).”61 To the extent the homeowners association was actually secured, the court noted that surrender of its collateral “fully comports with § 1325(a)(5)(C)”; and to the extent the value of the property was not sufficient to pay the homeowners association’s claim, its deficiency would be entitled to the same treatment as other unsecured claims.62 Accordingly, surrender satisfied all of the confirmation requirements with respect to the homeowners association.

[28]

The issue not before the court in Heflin is how can a Chapter 13 debtor surrender property that is subject to homeowners association dues or assessments in a way that ensures the end of those charges? Can the mortgagee or HOA “refuse” surrender in a Chapter 13 case? What does physical surrender look like, and how does a lienholder or HOA physically refuse surrender in a Chapter 13 case?

[29]

To avoid most of these issues, if the debtor is going to surrender property that has a dues or assessment feature, the plan should clearly provide for surrender and clearly provide that all such dues or assessments cease at a specific moment—for example, at tender of possession, delivery of the keys or, perhaps, “at confirmation.”

[30]

If there is a separate homeowners association agreement or rider to the mortgage, the debtor might consider “rejecting” that separate agreement on the possibility that it would be interpreted to be an executory contract.63 The debtor should vacate the property, deliver the keys to the homeowners association and act like surrender has physically happened.

[31]

Occasionally, a Chapter 13 debtor will realize some advantage by selling rather than surrendering collateral to a secured claim holder. This may be true, for example, when the debtor can’t or does not want to keep the property, but would have an exemption in the proceeds from a good sale. Or perhaps the debtor needs to protect a codebtor or the debtor needs to minimize the deficiency and wants time to find a buyer at fair market value. Sale of estate property is one of the exclusive powers of the debtor in a Chapter 13 case.64 Although sale of property is not listed as a permissible provision of the plan in 11 U.S.C. § 1322(b), under appropriate circumstances a sale of estate property is consistent with the § 1303 powers of the debtor and could be proposed under § 1322(b)(10)—the catchall power of Chapter 13 debtors to include in plans “any other appropriate provision.” In cases decided after Nobelman, several courts have held that the sale of a debtor’s residence does not violate the antimodification provisions of § 1322(b)(2).65

[32]

A sale of property as part of a Chapter 13 plan may have to be conducted consistent with 11 U.S.C. § 363. For example, if there is no equity in the property, 11 U.S.C. § 363(f) may be an obstacle to sale in the plan.66 A Chapter 13 debtor can use § 363(h) to partition and sell property that is subject to rights of a co-owner.67 There are also eligibility68 and feasibility69 problems when the debtor is dependent upon a sale of property to fund the Chapter 13 plan. Any sale of property pursuant to the plan should be quite specific, stating a deadline by which the property is to be sold, the manner in which the property will be sold and a detailed disposition of the proceeds from the sale.


 

1  11 U.S.C. § 1303. See § 44.1 [ Debtor Has Exclusive Control of Estate Property ] § 45.1  Debtor Has Exclusive Possession and Control of Estate Property.

 

2  11 U.S.C. § 363(b)(1) provides that the trustee, “after notice and a hearing, may . . . sell . . . other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 1303 grants a Chapter 13 debtor the rights and powers of a trustee under § 363(b).

 

3  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

4  See hanging sentence at the end of 11 U.S.C. § 1325(a), discussed beginning at § 75.1  In General: Modification Without § 506.

 

5  See § 451.1 [ In General: Modification Without § 506 ] § 75.1  In General: Modification Without § 506.

 

6  See §§ 446.1 [ Surrender of Collateral ] § 74.6  Surrender, Sale, Vesting in Lienholder and Payment with Property after BAPCPA and 451.5 [ Surrender in Full Satisfaction? ] § 75.5  Surrender in Full Satisfaction?.

 

7  See § 451.5 [ Surrender in Full Satisfaction? ] § 75.5  Surrender in Full Satisfaction?.

 

8  In re Toth, 61 B.R. 160 (Bankr. N.D. Ill. May 21, 1986) (Schmetterer).

 

9  In re Toth, 61 B.R. 160 (Bankr. N.D. Ill. May 21, 1986) (Schmetterer).

 

10  In re Toth, 61 B.R. 160 (Bankr. N.D. Ill. May 21, 1986) (Schmetterer).

 

11  In re Williams, 70 B.R. 441 (Bankr. D. Colo. Feb. 23, 1987) (Brumbaugh).

 

12  Providian Nat’l Bank v. Vitt (In re Vitt), 250 B.R. 711 (Bankr. D. Colo. May 31, 2000) (Books).

 

13  See In re Lane, No. 06-30803 TC, 2008 WL 4829912 (Bankr. N.D. Cal. Oct. 24, 2008) (unpublished) (Carlson) (Debtor failed to perform agreement with judgment lien creditor to sell art subject to lien; bad faith forfeited debtor’s right to dismiss. Debtor is restrained from disposing of art and creditor is allowed to seize art.).

 

14  Grubb v. Pittsburgh Nat’l Bank (In re Grubb), 169 B.R. 341 (Bankr. W.D. Pa. July 25, 1994) (Cosetti).

 

15  72 B.R. 2 (Bankr. D. Colo. Mar. 29, 1985) (Gueck).

 

16  72 B.R. at 3.

 

17  Accord In re Bond, No. 08-61720, 2008 WL 6178147 (Bankr. N.D. Ohio Nov. 10, 2008) (Kendig) (Debtor without possession or title to vehicle transferred to repair shop could not surrender vehicle in plan to another lienholder.); Hospital Auth. Credit Union v. Smith (In re Smith), 207 B.R. 26, 30 (Bankr. N.D. Ga. Feb. 24, 1997) (Massey) (At modification after confirmation, debtor cannot surrender car to lienholder by directing creditor to transmission repair shop that claims a possessory lien for repairs. “Assuming that the statute permitted her to [surrender the car], whether as a payment under section 1329(a)(3) or as a distribution or surrender under section 1325(a)(5)(B) or (C) . . . she does not have the vehicle to surrender. . . . She cannot pay, distribute or surrender something that she can neither deliver nor tender. She offered no proof that telling Hospital Authority where it could find the vehicle was a tender of possession or control. . . . Section 1325(a)(5)(C) would be redundant, a needless repetition of section 554, if the phrase ‘surrender of such property to such holder’ meant merely ‘abandonment.’ ‘Surrender’ must mean something more. . . . [A] debtor must at least tender possession or control of the collateral to the creditor, without regard to whether the creditor’s consent is a further condition. Merely telling the creditor where it can find the collateral is not a surrender ‘to such holder.’”).

 

18  155 B.R. 512 (Bankr. E.D. Mo. May 20, 1993) (Schermer).

 

19  155 B.R. at 514. Accord In re Stone, 166 B.R. 621 (Bankr. S.D. Tex. Dec. 14, 1993) (Letitia Clark) (Citing In re Robertson, 72 B.R. 2 (Bankr. D. Colo. Mar. 29, 1985) (Gueck), plan does not meet the requirements for surrender of property under § 1325(a)(5)(C) when the plan proposes to surrender a homestead to one of several lienholders without the creditor’s consent.).

 

20  See also In re Sneijder, 407 B.R. 46 (Bankr. S.D.N.Y. July 2, 2009) (Glenn) (Plan cannot surrender real property in full satisfaction of undersecured debt without consent of lienholders.).

 

21  166 B.R. 621 (Bankr. S.D. Tex. Dec. 14, 1993) (Letitia Clark).

 

22  166 B.R. at 623.

 

23  166 B.R. at 623.

 

24  166 B.R. at 623–24.

 

25  487 F.3d 199 (4th Cir. June 7, 2007) (Williams, Michael, Shedd), aff’g 340 B.R. 761, 766–67 (E.D.N.C. Mar. 6, 2006) (Boyle) (Partial surrender is permitted by § 1325(a)(5) but not when collateral is personal property that is exempt from levy by IRS. “[T]he Bankruptcy Court correctly concluded that under certain circumstances a debtor may bifurcate a secured claim and follow more than one option under Section 1325(a)(5). . . . However, the Bankruptcy Court incorrectly concluded that any surrender of personal property to the IRS was permissible under the circumstances of this case. Debtors proposed to surrender personal property that was exempt from administrative levy under the Tax Code. . . . [B]y statute the IRS can only accept money or its equivalent as payment for tax liabilities. . . . By the plain language of [§ 1325(a)(5)(C)], a surrendering debtor must ‘surrender[ ] the property securing such claim to such holder . . .’. If the debtor is prohibited from surrendering certain property by law, then the only remaining option under Section 1325(a)(5) is the cram down option of subsection (B). To treat a secured claim as unsecured once surrender has been proposed by the debtor is insufficient under the statute. . . . [T]he surrender must be accomplished before the plan is approved. Debtors here cannot be said to have ‘surrendered’ their property in any meaningful fashion, but instead will retain their personal property because of the IRS’s inability to collect. Accordingly, while partial surrender may ordinarily be permissible, under these circumstances the surrender of personalty as proposed by Debtors is unfeasible and prohibited by law.”), rev’g 320 B.R. 829, 830–31 (Bankr. E.D.N.C. Dec. 9, 2004) (Small) (Debtors can partially surrender personal property that secures IRS’s lien, and IRS’s refusal to accept surrender of personal property renders IRS unsecured. Bankruptcy court first determined that a “partial surrender is allowable.” Plan proposed to surrender a used car, some household goods, wearing apparel and jewelry partially securing IRS’s claim. IRS responded that partial surrender is not permitted and, in the alternative, that it did not have a mechanism for accepting the surrender of personal property nor was it permitted by federal law from levying on personal property. Bankruptcy court concluded that IRS must be unsecured because “its claim is secured by a lien on property that it cannot levy upon, cannot accept from the debtors as payment, and cannot otherwise use to satisfy its debt. . . . The effect of the IRS’s inability to enforce its lien and collect payment is that its claim is not a secured claim, but is an unsecured claim.”).

 

26  487 F.3d at 205.

 

27  225 B.R. 665 (Bankr. E.D. Ark. Aug. 20, 1998) (Scott).

 

28  225 B.R. at 667. See also In re Hernandez Sanchez, No. 01-3455 GAC, 2006 WL 3898310 (Bankr. D.P.R. Jan. 13, 2006) (unpublished) (Carlo) (When stipulated surrender acknowledged that truck was in possession of third party, GEC’s motion to dismiss for failure to complete surrender was denied. GEC knew that debtor did not have possession. Debtor admitted receipt of $6,000 from sale of truck and amended confirmed plan to “commit” that $6,000 to plan. Unclear whether that money would flow to GEC or to unsecured creditors.).

 

29  203 B.R. 565 (Bankr. D.N.J. Jan. 7, 1997) (Wizmur).

 

30  See, e.g., In re Ussery, 261 B.R. 227, 229 (Bankr. E.D. Ark. Apr. 12, 2001) (Scott) (Overrules creditor’s objection to surrender of car when one year before petition car insurance was canceled and two days after cancellation the car was damaged in an accident. Plan proposed to surrender the car, and car lender objected on good-faith grounds. “The only fact which may be argued indicating any bad faith is that the debtor felt compelled to drive her vehicle after unexpectedly receiving notice of insurance cancellation and before she had an opportunity to obtain replacement insurance. The Court does not believe that this fact, standing alone, is sufficient to make a finding of bad faith which would preclude confirmation of the original plan.” Court distinguishes Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. Oct. 24, 2000) (Krupansky, Norris, Suhrheinrich).); In re Harris, 244 B.R. 556, 557 (Bankr. D. Conn. Feb. 7, 2000) (Krechevsky) (Creditor need not consent to accomplish surrender under § 1325(a)(5)(C). Plan provided that property securing a nonresidential mortgage would be surrendered to the mortgage holder upon confirmation. Mortgage holder objected to confirmation on the ground that it did not consent to the surrender. “No court has held that § 1325(a)(5)(C) requires consent of the secured creditor to be effectual . . . . The court concludes a secured creditor’s lack of consent to a § 1325(a)(5)(C) provision, by itself, is no barrier to plan confirmation.”); In re Walton, 243 B.R. 793, 794 (Bankr. M.D. Ala. Oct. 5, 1999) (Steele) (Debtor can modify the plan before confirmation to surrender a car that was stolen and stripped between the filing of the petition and confirmation. The theft was substantiated by a police report and there was no showing that the debtor was guilty of fraud or improper conduct. The hulk of the car was recovered and was available for surrender, although probably of nominal value. Arguably in dicta, even if the carcass had not been recovered, because the debtor was not at fault in being unable to deliver possession and because the creditor “still had its remedies, though they might not have been worth much,” debtor could have modified plan to surrender the missing car.). Compare In re Bond, No. 08-61720, 2008 WL 6178147 (Bankr. N.D. Ohio Nov. 10, 2008) (Kendig) (Plan provision for surrender of vehicle lacks good faith when debtor does not have possession or title to vehicle transferred to repair shop.).

 

31  See, e.g., In re Evans, No. 07-80922-13, 2007 WL 2491035 (Bankr. M.D.N.C. Aug. 27, 2007) (unpublished) (Carruthers) (In first case confirmed plan surrendered mobile home, but case was dismissed before completion of repossession by Green Tree. In second case, surrender to Green Tree must include relief from stay and codebtor stay to permit completion of repossession.); Miners Exch. Bank v. Woodruff (In re Woodruff), 213 B.R. 114 (Bankr. W.D. Va. Sept. 29, 1997) (Pearson) (To carry out plan requiring surrender of real property, debtors are ordered to execute documents to correct mistakes in deeds and title. Mutual mistakes of fact before the petition gave the debtor title to the wrong property and gave a bank a deed of trust on the wrong property. To effect surrender of correct property, debtor ordered to correct chain of title.).

 

32  In re White, 282 B.R. 418, 422 (Bankr. N.D. Ohio Aug. 2, 2002) (Shea-Stonum) (Plan can surrender real property with or without consent of taxing authority; plan cannot compel taxing authority to dispose of the property by strict foreclosure as opposed to some other manner. “Surrender . . . is perhaps best viewed as the relinquishing of any legal claim of the debtor and, once the plan is confirmed, of the debtor’s bankruptcy estate to the collateral. It functions as both the debtor’s consent to relief from stay and . . . estoppel of the right to defend in any foreclosure proceeding or a prospective confession of judgment in any such case. . . . ‘No court has held that § 1325(a)(5)(C) requires consent of the secured creditor to be effectual.’”).

 

33  176 B.R. 152 (Bankr. E.D. Tenn. Dec. 29, 1994) (Stair).

 

34  176 B.R. at 154–55. Accord Williams v. Tower Loan of Miss., Inc. (In re Williams), 168 F.3d 845, 847–48 (5th Cir. Mar. 11, 1999) (Davis, Duhé, Parker) (Debtor cannot surrender part of collateral for undersecured claim in partial satisfaction of lien while paying balance of secured claim through plan. Debtor had a single note secured by a non-purchase money security interest in law books, a camera, a saxophone, a videocassette recorder, two televisions and a gold chain. By modification before confirmation, debtor’s plan proposed to return the law books, one of the television sets and the gold chain and to pay the present value of the remaining collateral. Interpreting § 1325(a)(5), “[a]lthough 11 U.S.C. § 102(5) states that ‘’or’ is not exclusive,’ it does not follow that Congress intended the word ‘or’ to create a fourth alternative. We read the statute to permit the debtor the choice of adopting either the alternative allowed by subsection (B) or by subsection (C). The plain language of the statute does not give the debtor the right to adopt a combination of the options offered in (B) and (C). . . . Williams argues, alternatively, that 11 U.S.C. § 1325(a)(5)(B) should be read to permit her to transfer a portion of her property to the creditor. She argues that this section does not limit distribution of property to cash distributions and that she is merely trying to make a distribution to Tower Loan by transferring both goods and cash. Williams relies on cases which have considered non-cash distributions under Chapter 12 plans. . . . These cases are inapposite. While the language of 11 U.S.C. § 1325(a)(5)(B) and 11 U.S.C. § 1225(a)(5)(B) are identical, in all of the cases Williams relies upon, the courts permitted the transfer of a part of the collateral to oversecured creditors and not to undersecured creditors such as Tower. Also, in each of those cases, unlike today’s case, the partial transfer of collateral resulted in full satisfaction of the debt, thereby removing the lien imposed under subsection (B).”); see In re Cartwright, No. 06-40787, 2007 WL 913881 (Bankr. W.D. Ky. Mar. 23, 2007) (unpublished) (Stosberg) (Debtor’s proposal to surrender tract containing residence and retain .425-acre tract is not confirmable. State court had reformed mortgage to correct scrivener’s error in legal description to reflect that two tracts were included in mortgage, which could not be modified by partial surrender.); In re Elkins, No. 04-67961, 2005 WL 4030041, at *3 (Bankr. S.D. Ohio Aug. 16, 2005) (unpublished) (Hoffman) (Section 1325(a)(5) is worded in the alternative and does not permit Chapter 13 plan to surrender part of the collateral while keeping the rest. Plan surrendered mobile home in partial satisfaction of bank’s claim while debtors kept the real property that also secured bank’s claim and paid for it through the plan. “[Section] 1325(a)(5) sets forth mutually exclusive options for the treatment of secured claims, not alternatives that may be combined to form a composite remedy. . . . [H]ad Congress intended § 1325(a)(5) to permit partial surrender of collateral it could have done so by drafting part (C) to permit a debtor to surrender all or part of the property securing a claim.”); In re Graham, 123 B.R. 330 (Bankr. W.D. Mo. Nov. 7, 1990) (Federman) (Plan does not comply with § 1325(a)(5)(C) where debtor proposes to surrender a portion of collateral in full satisfaction of the creditor’s claim. Debtor’s ex-spouse was awarded $311,582 secured by closely held corporate stock valued by a state court at $778,955. Debtor proposed to transfer 23% of the stock in satisfaction of ex-spouse’s claim. No evidence of value of this minority interest was submitted. Plan did not propose to surrender “the property” securing the debtor’s ex-spouse’s claim; it proposed to surrender only a portion of that property. Debtor’s choices under § 1325 are to surrender all of the property securing the claim or to pay the creditor the value of that collateral over time with interest up to the allowed amount of the creditor’s claim. If the debtor chooses to surrender collateral, it is the debtor’s burden to prove that the interest to be transferred has a present value equal to the allowed amount of the creditor’s claim.). Contra In re McCommons, 288 B.R. 594 (Bankr. M.D. Ga. Nov. 26, 2002) (Walker) (Debtor can surrender part of the collateral and keep part to satisfy § 1325(a)(5).); In re Donahue, 221 B.R. 105, 112 (Bankr. D. Vt. May 27, 1998) (Conrad) (Debtor can surrender three 10-acre parcels in partial satisfaction of lien and pay for remaining 10-acre parcel with interest through confirmed plan. Claim was originally secured by 50-acre parcel. Before the petition, 10 acres were sold and proceeds paid to creditor. Remaining 40 acres were subdivided into four lots. Debtor occupied one lot with a mobile home, a well and an outhouse. Three lots were undeveloped. Plan proposed to surrender the three undeveloped lots and to pay the value of the fourth lot with interest. Describing this as an “eat dirt” plan, the court first found that the three lots to be surrendered were easily partitioned, fronted on a road, were not occupied by the debtor and could be easily valued. Claim could be modified under § 1322(b)(2). “Debtor may distribute property to satisfy Creditor’s debt . . . [W]e are left with deciding the fair market value of [the lot the debtor proposes to retain].”), rev’d on other grounds, 232 B.R. 610, 615 (D. Vt. Apr. 8, 1999) (Sessions).

 

35  11 U.S.C. § 1322(b)(8) (emphasis added).

 

36  288 B.R. 594 (Bankr. M.D. Ga. Nov. 26, 2002) (Walker).

 

37  See also Williams v. Tower Loan of Miss., Inc. (In re Williams), 168 F.3d 845 (5th Cir. Mar. 11, 1999) (Davis, Duhé, Parker).

 

38  288 B.R. at 597.

 

39  See above in this section, and see discussion beginning at § 75.1  In General: Modification Without § 506.

 

40  See § 451.1 [ In General: Modification Without § 506 ] § 75.1  In General: Modification Without § 506.

 

41  See § 451.5 [ Surrender in Full Satisfaction? ] § 75.5  Surrender in Full Satisfaction?.

 

42  See In re Rice, 42 B.R. 838 (Bankr. D.S.D. Aug. 31, 1984) (Ecker) (Sections 1322(b)(8) and 1325(a)(5) permit the debtor to redeem real property that has been subject to foreclosure by proposing to surrender other real estate to the creditor.).

 

43  11 U.S.C. § 506(a) provides that an allowed claim of a creditor secured by a lien on property of the estate “is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property.” If all the property securing a creditor’s claim is surrendered, the estate no longer has an interest in any property on which the creditor has a lien and the creditor cannot have an allowed secured claim under § 506(a).

 

44  See In re Finley, 408 B.R. 111 (Bankr. E.D. Mich. July 21, 2009) (McIvor) (The power to modify in § 1322(b)(2) does not include surrender in full satisfaction when real property is not protected from modification but property is not worth as much as balance on mortgage; § 506(a) applies to real property that is not protected from modification, and after surrender, mortgagee is entitled to an unsecured deficiency claim.); In re Sneijder, 407 B.R. 46 (Bankr. S.D.N.Y. July 2, 2009) (Glenn) (Plan cannot surrender real property in full satisfaction of undersecured debt without consent of lienholders.); In re Harris, 293 B.R. 438 (Bankr. N.D. Ohio Apr. 10, 2003) (Speer) (Plan boldly surrendering car “in full satisfaction” of debt does not preclude deficiency claim when preconfirmation order for relief from the stay allowed creditor 60 days to file a deficiency claim.); In re Lutterbein, 145 B.R. 232 (Bankr. N.D. Ohio July 21, 1992) (Speer) (After surrender of the “floor covering” collateral that is properly subject to a security interest, the creditor is entitled to file an unsecured deficiency claim to the extent its debt exceeds the value of the collateral surrendered.).

 

45  See §§ 103.3 [ Partially Secured Claims ] § 74.10  Partially Secured Claims, 148.2 [ What Claims Are Unsecured Claims? ] § 86.3  What Claims Are Unsecured Claims? and 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination.

 

46  In re Spohn, 61 B.R. 264 (Bankr. W.D. Wis. June 5, 1986) (Martin).

 

47  See Fed. R. Bankr. P. 3012.

 

48  See, e.g., Grubb v. Pittsburgh Nat’l Bank (In re Grubb), 169 B.R. 341, 344 (Bankr. W.D. Pa. July 25, 1994) (Cosetti) (Surrender of debtors’ 1990 Cadillac did not discharge the underlying debt because the plan provided that the value of the Cadillac “will be applied to the debt owed to PNB and will reduce the Class 4 claims by at least $10,000.00.” This language indicates that the surrender of the debtors’ Cadillac would reduce the bank’s anticipated deficiency but would not necessarily discharge the bank’s entire claim.).

 

49  In re Allen, 240 B.R. 231 (Bankr. W.D. Va. Sept. 9, 1999) (Stone) (At confirmation 16 months after filing, when amended plan surrenders car, it is appropriate to value the car at net fair liquidation value as of the date of the petition and if liquidation of the car after surrender produces less than that amount, the lender is entitled to an administrative expense for the difference.). See § 297.1 [ Failed Adequate Protection ] § 136.12  Failed Adequate Protection before BAPCPA for further discussion of failed adequate protection.

 

50  In re Atwood, No. 00-11382, 2001 WL 34050701 (Bankr. D. Vt. July 24, 2001) (unpublished) (Brown).

 

51  See In re Engebregtsen, 337 B.R. 677, 678 (Bankr. E.D. Wis. Feb. 17, 2006) (McGarity) (Lender has secured claim for liquidation value at the petition when plan surrendered pickup truck, trustee terminated insurance because of proposed surrender, but vehicle was destroyed in postpetition accident. “The debtors had informed the creditor of their intent to surrender the vehicle and the creditor took its sweet time in retrieving the truck, indirectly contributing to the drastic reduction in value.”).

 

52  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 288 (June 1, 1993).

 

53  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

54  See also In re Hale, 359 B.R. 310 (Bankr. E.D. Wash. Jan. 24, 2007) (Williams) (Surrender of residence could not create right to deficiency that did not exist under state law. Plan that surrendered residence to Origen Financial could be interpreted as providing bifurcation of Origen’s claim, but under Nobelman neither the debtors nor Origen could bifurcate home mortgage. Notwithstanding surrender, Origen didn’t foreclose for more than one year, then filed unsecured claim for approximately $30,000, to which debtors didn’t object for 3½ years. In the meantime, trustee distributed $18,801.46 on Origen’s unsecured claim. Laches was not applied since it would result in prejudice to other creditors who received benefit from ordering Origen’s return of $18,801.46 to the trustee.). For further discussion of this harsh outcome, see § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

55  In re Starnes, 208 B.R. 688, 689–90 (Bankr. E.D. Ark. Apr. 16, 1997) (Mixon) (“Although section 1325(a)(5)(C) permits the satisfaction of a secured creditor’s claim by surrendering the collateral, section 1322(b)(2) prohibits the Debtors’ proposal to surrender the collateral because the modification alters the rights of a holder of a secured claim secured only by a security interest in real property that is the Debtors’ principal residence. . . . The modification provides that the Debtors [sic] will surrender their ‘former’ residence in satisfaction of HUD’s claim and treat any deficiency remaining after disposition of the collateral as a general unsecured claim to be paid pro rata with other general unsecured claims. Such a modification is unquestionably an alteration of HUD’s rights under the note and mortgage and is clearly prohibited by § 1322(b)(2).”).

 

56  See discussion of timing and § 1322(b)(2) in § 121.2 [ Timing Issues: Prepetition Changes in Collateral or Use ] § 80.5  Timing Issues: Prepetition Changes in Collateral or Use.

 

57  See 11 U.S.C. § 523(a)(16), which provides:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
* * * *
(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership, in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.

 

58  See 11 U.S.C. § 1328(a).

 

59  11 U.S.C. § 523(a)(16), quoted above.

 

60  No. 09-18642-SSM, 2010 WL 1417776 (Bankr. E.D. Va. Apr. 1, 2010) (Mitchell).

 

61  2010 WL 1417776, at *1.

 

62  2010 WL 1417776, at *1.

 

63  See discussion of executory contracts beginning at § 102.1  Debtor Can Assume, Assign or Reject Executory Contracts.

 

64  11 U.S.C. §§ 1303, 363(b). See § 44.1 [ Debtor Has Exclusive Control of Estate Property ] § 45.1  Debtor Has Exclusive Possession and Control of Estate Property. See, e.g., In re Birch, No. 06-23273, 2007 WL 2916198 (Bankr. D. Utah Feb. 23, 2007) (unpublished) (Thurman) (Debtor may sell real estate in Chapter 13 plan to pay creditors.).

 

65  See In re Mastel, No. 09-60784-13, 2010 WL 234971 (Bankr. D. Mont. Jan. 15, 2010) (Kirscher) (Plan can “cure by sale” by paying lienholder in full from proceeds of sale of ranch after partition of interest of co-owner.); In re Bassett, 413 B.R. 778 (Bankr. D. Mont. Feb. 26, 2009) (Kirscher) (Plan that would satisfy secured claim by sale of real estate on or before October 29, 2010, was confirmable, notwithstanding current poor market conditions, when equity cushion protected creditor and relatively short sale period before stay relief was reasonable.); Moulton v. Deutsche Bank Nat’l Trust Co. (In re Moulton), 393 B.R. 752 (Bankr. N.D. Ala. Sept. 15, 2008) (Cohen) (On unusual facts, debtor’s motion to sell property and satisfy liens within 180 days is granted over objections of lienholders. Debtor transferred property to brother, who obtained loan commitment to satisfy debtor’s mortgage. Closing attorney absconded with funds, and brother’s mortgage was void under Alabama law. Brother transferred property back to debtor. Creditor holding void mortgage has no standing to object to sale and failed to demonstrate that debtor filed case in bad faith.); In re Hayes, No. 07-60316-13, 2007 WL 3037258 (Bankr. D. Mont. Oct. 12, 2007) (unpublished) (Peterson) (100% plan funded by sale of real estate is confirmed over objections of secured creditors; if additional interest accrues, creditors may amend their claims.); In re Valdez, No. 13-06-12431 MA, 2007 WL 1464439, at *3–*4 (Bankr. D.N.M. May 17, 2007) (unpublished) (McFeeley) (Plan that would sell real property in four to six months and pay mortgage holder in full does not violate antimodification provision in § 1322(b)(2), and debtors need not make regular monthly payments pending the sale. Stipulated value of property was $186,000, and first mortgage holder was owed $120,000. “[A] plan which proposes to cure by selling property and paying the secured creditor in full with the proceeds from the sale can ‘pass muster’ if it includes the specific terms under which the debtor proposes to market and sell the property, including the listing price and the length of the listing agreement, as well as a default remedy to relieve affected secured creditors from the automatic stay if the sale fails to close within the proposed term. . . . Based on the fact that 11 U.S.C. § 1322(b)(8) contemplates a debtor’s sale of property to ‘provide for the payment of all or a part of a claim against the debtor’, . . . that the Debtors requested a limited time period within which to effectuate the sale, . . . that the Debtors have already taken steps to employ a broker and market the property, and . . . that there is sufficient equity in the Property to protect Citifinancial’s security interest, the Court finds that the Amended Plan can be confirmed . . . . [F]our months from the date of entry of this Order is a reasonable period within which Debtors should be allowed to complete a sale of the Property.”); In re Erickson, 176 B.R. 753, 757 (Bankr. E.D. Pa. Jan. 25, 1995) (Scholl) (“Sale plans generally do not per se modify secured creditors’ rights; they merely delay immediate payment to creditors in consideration for what is often accelerated full payment. We agree with the holding of [In re Ratmansky, 7 B.R. 829 (Bankr. E.D. Pa. Dec. 23, 1980) (Goldhaber),] that § 1322(b)(8), appearing as it does directly after §§ 1322(b)(2) and (b)(5), clarifies that a sale plan is not contrary to the limitations and modifications of mortgages addressed elsewhere in § 1322(b).”). But see In re Casse, 219 B.R. 657, 660 (Bankr. E.D.N.Y. Apr. 21, 1998) (Feller) (In dicta, plan violates antimodification provisions of § 1322(b)(2) where debtor proposes to sell mortgaged property to his father and pay mortgage holder the appraised value on account of its allowed secured claim. Property appraised for $135,000. Plan proposed to sell property to the debtor’s father for $160,000 and pay the $160,000 to the mortgage holder. Mortgage holder’s debt exceeded $160,000, and difference would be “deemed unsecured debt” to be paid pro rata. Plan would “cause an impairment of a home mortgage” in violation of § 1322(b) and Nobelman.).

 

66  See, e.g., In re Canonigo, 276 B.R. 257, 262–65 (Bankr. N.D. Cal. Apr. 2, 2002) (Tchaikovsky) (Chapter 13 debtor cannot sell residence under § 363(f)(3) when net proceeds will be less than face amount of debt; debtor cannot sell residence under § 363(f)(5) because “interest” does not include “lien.” “Although the word ‘value’ is ambiguous, as used in section 363(f)(3), the word ‘greater’ is not. . . . The only way the sale price could be greater than the aggregate economic value of the liens is if the sale price also exceeded the face amount of the claims secured by the liens. . . . As a consequence, the Court has no choice but to adopt the minority view: i.e., that the phrase ‘the aggregate value of the liens’ means the full face amount of the claims secured by the liens. . . . The Court concludes that section 363(f)(5) was not intended to apply to liens at all, only to other types of interests and property.”).

 

67  See In re Mastel, No. 09-60784-13, 2010 WL 234971 (Bankr. D. Mont. Jan. 15, 2010) (Kirscher) (Co-owner of ranch cannot prevent Chapter 13 debtors’ partition sale of property under § 363(h) when Montana statute gives co-tenant right of partition.).

 

68  See § 9.11 [ Income from Leasing, Selling or Liquidating Assets ] § 12.11  Income from Leasing, Selling or Liquidating Assets.

 

69  See § 198.1 [ Able to Make Payments and Comply with Plan ] § 111.1  Able to Make Payments and Comply with Plan.