Cite as: Keith M. Lundin, Lundin On Chapter 13, § 87.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
BAPCPA did not change the general rule in § 1322(b)(1) that a Chapter 13 plan may designate classes of unsecured claims so long as the plan does not “discriminate unfairly” against any designated class.1 But within that general rule, BAPCPA meddled with the details of separate classification with respect to some specific claims and postpetition interest. Directly and indirectly, these changes will impact the classification of unsecured claims in Chapter 13 cases.
There is a new mandatory (misplaced?) plan provision in § 1322(a)(4) that the plan may pay less than all of a domestic support obligation (DSO) assigned to the government.2 Because of its placement in subsection (a) of § 1322, this new provision probably authorizes separate classification of a DSO assigned to the government that is not subject to the unfair discrimination standard if the plan pays all of the debtor’s projected disposable income for five years.
BAPCPA added a new § 1322(b)(10) that permits payment of postpetition interest on account of nondischargeable claims if the plan otherwise provides full payment of allowed claims.3 This raises interesting classification questions, especially for DSOs that already include postpetition interest.
There are new priority claims—such as claims for death or personal injury resulting from the operation of a motor vehicle or vessel when the debtor was intoxicated—that create separate classification opportunities and perhaps interesting conflicts with the new power to pay postpetition interest on nondischargeable claims.4 BAPCPA created a new statutory mandate that a Chapter 13 plan cannot materially alter pension loan repayment described in § 362(b)(19).5 Most pension loans will be unsecured debts and BAPCPA may not have closed the loop with respect to the separate classification of pension loans and the unfair discrimination test.
Finally, there is the infamous hanging sentence at the end of § 1325(a) that may be interpreted to require full payment with present value interest of some undersecured claims in Chapter 13 cases.6 The hanging sentence may create a separate classification of unsecured claims without cross-reference or exception to the anti-discrimination provision in § 1322(b)(1). This could be a problem for Chapter 13 debtors at confirmation after BAPCPA.
1 11 U.S.C. § 1322(b)(1), discussed in § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
2 11 U.S.C. § 1322(a)(4), discussed in § 458.1 [ Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) ] § 88.5 Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) after BAPCPA.
3 11 U.S.C. § 1322(b)(10), discussed in § 459.1 [ Postpetition Interest on Nondischargeable Claims: § 1322(b)(10) ] § 88.3 Postpetition Interest on Nondischargeable Claims after BAPCPA: § 1322(b)(10).
4 See §§ 459.1 [ Postpetition Interest on Nondischargeable Claims: § 1322(b)(10) ] § 88.3 Postpetition Interest on Nondischargeable Claims after BAPCPA: § 1322(b)(10) and 460.1 [ New Priority Claims ] § 87.5 Priority Claims after BAPCPA.
5 11 U.S.C. § 1322(f), discussed in § 461.1 [ Pension Loan Repayment: New § 1322(f) ] § 87.6 Pension Loan Repayment: § 1322(f) after BAPCPA.
6 See the hanging sentence in 11 U.S.C. § 1325(a), discussed beginning at § 75.1 In General: Modification Without § 506.