Cite as: Keith M. Lundin, Lundin On Chapter 13, § 88.7, at ¶ ____, LundinOnChapter13.com (last visited __________).
Prior to the 1990 bankruptcy amendments, Chapter 13 debtors fared poorly with plans that favorably classified debts resulting from prepetition criminal misconduct. In one case, the court denied confirmation of a plan that classified a criminal restitution judgment for better treatment, finding that the general creditors were unfairly being asked to “suffer the consequences of the debtors’ own misdeeds.”1 Other courts held that the possibility of criminal prosecution for an insufficient funds check did not justify favorable classification of the payee of the check.2 It was held to be unfair discrimination to pay 50 percent of a claim for the settlement of criminal fraud charges and only 3 percent of other unsecured claims, when the debtor failed to prove he could not confirm a plan without the discrimination and the debtor did not show that unequal treatment was necessary to protect any relationship that the debtor needed to reorganize; the possibility of criminal sanctions if the debtor failed to pay the victim was insufficient to justify the discrimination.3
Prior to 1990, restitution claims were nondischargeable in Chapter 7 cases because of the Supreme Court’s 1986 decision in Kelly v. Robinson.4 In 1990, in Pennsylvania Department of Public Welfare v. Davenport,5 the U.S. Supreme Court held that criminal restitution was a dischargeable debt in Chapter 13 cases at completion of plan payments. Davenport confirmed that separate classification of restitution for more favorable treatment in a Chapter 13 case was a species of the more general question whether a Chapter 13 debtor could separately classify claims that would be nondischargeable only in a case under another chapter.6
Congress responded immediately to Davenport with amendments to § 1328(a) to render criminal restitution nondischargeable in Chapter 13 cases. In 1990, Congress twice enacted an exception to discharge upon completion of payments in a Chapter 13 case for “restitution included in a sentence on the debtor’s conviction of a crime.”7
Debtors will argue that the 1990 amendments evidence congressional intent to favor restitution claim holders with respect to payments under plans. The holder of a restitution claim will argue that Chapter 13 debtors should be required to pay nondischargeable restitution in full. The legislative history of the 1990 amendments fully supports neither position.
The House and Senate versions of the 1990 legislation that became the exception to discharge for restitution were quite different.8 The House version, eventually enacted by Congress, created a new exception to discharge in § 1328(a) for “restitution included in a sentence on the debtor’s conviction of a crime.”9 The Senate version would have amended § 1322(a) to add a new mandatory requirement that all Chapter 13 plans “provide for the full payment, in deferred cash payments, of all claims which would be nondischargeable under § 523(a)(11).”10 The Senate version then added a new § 523(a)(11) that would have excepted from discharge debts “from a proceeding brought by a governmental unit to recover civil or criminal restitution.”11 Congress rejected the Senate’s full-payment approach in favor of the House view that (criminal) restitution should be nondischargeable upon completion of payments to other creditors. The House Report confirms this outcome:
A criminal restitution victim will participate fully as a creditor in a Chapter 13 plan. Following completion of the plan, any remaining portion of the restitution obligation will remain owed to the victim until fully paid.12
This legislative history indicates that restitution described in § 1328(a)(3) is nondischargeable in a Chapter 13 case, but Congress contemplated that debtors would confirm plans that pay less than 100 percent of such claims during the life of the plan. Nothing in the 1990 amendments or in the legislative history either requires or prohibits the favorable classification of a nondischargeable restitution claim. The separate classification of restitution remains subject to the unfair-discrimination standard in § 1322(b)(1).
After the 1990 amendments, the reported decisions show no less resistence to classification of restitution for more favorable treatment in Chapter 13 plans. Debtors have tried but failed to convince courts that restitution must be paid in full to prevent probation revocation and incarceration that will defeat the Chapter 13 plan.13 One court, applying the four-part test,14 held that the exception to discharge for restitution included in a sentence on the debtor’s conviction of a crime could be a basis for separate classification under § 1322(b)(1), but the debtor failed to prove that claims for insufficient funds checks fell within the exception.15 On unusual facts, another court rejected a plan that paid 100 percent of a criminal fine and only 3 percent of the restitution claim resulting from the same criminal conviction; the court observed that it was odd for the debtor to pay 100 percent of the (then) dischargeable fine while discriminating against the victim’s nondischargeable restitution claim.16 One court found it was unfair discrimination to separately classify criminal restitution for payment in full when the debtors were financially unable to pay all unsecured claims in full because the plan was a bad-faith effort to require “innocent unsecured creditors to subsidize” the criminal sanctions imposed by the state court.17
Over the years, Congress has enacted a patchwork of statutory provisions, some in Title 11 and some not, dealing with the dischargeability of state and federal criminal fines. As detailed elsewhere,18 most federal criminal fines have been nondischargeable in bankruptcy cases since 1984 pursuant to 18 U.S.C. § 3613(f).19 In 1994, Congress added “criminal fine” included in a sentence on the debtor’s conviction of a crime to the exceptions to discharge upon completion of payments in a Chapter 13 case.20 11 U.S.C. § 523(a)(7) contains an exception applicable at hardship discharge in a Chapter 13 case for noncompensatory fines and penalties payable to or for the benefit of a governmental unit. 11 U.S.C. § 523(a)(13), also applicable only at hardship discharge, excepts from discharge any “order of restitution under title 18, United States Code.” Some of these provisions deal with fines arising from state criminal proceedings; some deal with only federal criminal fines; some deal with both; some of the provisions overlap. Figuring out exactly what fines are nondischargeable under what chapters and under what circumstances is not simple.21
The result for Chapter 13 debtors is that the arguments for and against the separate classification of fines (or restitution) will vary depending on whether the debt is dischargeable only upon completion of payments in a Chapter 13 case or only at hardship discharge, dischargeable only in a Chapter 7 case or nondischargeable under all chapters and all kinds of discharges.
For all the contortions in the statutes, the reported decisions are almost universally unreceptive to the favorable classification of criminal fines. Chapter 13 debtors have made all the right arguments; the bankruptcy courts are just not enamored with the idea that other unsecured creditors end up sharing the consequences of the debtor’s prepetition criminal misconduct.
For example, in In re Alicea,22 the bankruptcy court rejected separate classification of parking fines. That other unsecured creditors without priority would receive nothing in a Chapter 7 case was “an insufficient reason for the proposed discrimination. . . . [W]hile it is not per se bad faith under Code section 1325(a)(3) to propose that unsecured creditors will receive nothing under a Chapter 13 plan, it may very well be impermissible discrimination under Code section 1322(b)(1).”23 One court refused confirmation of a plan that separately classified criminal traffic fines for payment in full and no payment to other unsecured claims notwithstanding evidence that the state would not reinstate the debtor’s driving privileges unless he proposed payment in full of the fines and the debtor’s “ability to support his spouse and five children and pay his current and back child support depends on the success of his Chapter 13 plan.”24 Another court defiantly refused separate classification of criminal fines for payment directly by the debtor notwithstanding an order from another court requiring the payment of fines directly by the debtor to that court.25
One of the few reported decisions allowing separate classification of a criminal fine concluded that not all criminal fines are created equally. In In re Gallipo,26 the debtor had been busy and came into the Chapter 13 case with criminal traffic fines and criminal fines for shoplifting. The Chapter 13 plan proposed to pay the traffic fines in full to reinstate the debtor’s drivers license and to pay the shoplifting fines 13.7 percent. Other unsecured debts were to receive no payment. The bankruptcy court found it was fair discrimination to pay the traffic fines in full because the debtor needed to drive to repay any of her debts; the 13.7 percent payment of the criminal fines for shoplifting was rejected for lack of evidence that the proposed discrimination was necessary:
[D]iscrimination in this plan arises because the general unsecured creditors will receive nothing while the criminal traffic fines will be paid in full. The discrimination in Debtor’s proposed plan is based on the debtor’s need to have her driving privileges permanently reinstated. This will insure her continued ability to earn a living, which in turn is essential to her ability to repay any of her obligations. This discrimination in favor of the criminal traffic fines is reasonable and necessary and thus is not unduly burdensome on the debtor’s other creditors and is made in good faith. However, the debtor’s proposed discrimination in favor of the criminal shoplifting fines is not necessary to assure Debtor’s ability to earn a living, given the unlikelihood that these fines will be enforced by incarceration. Therefore, there is no necessity for this discrimination against the other unsecured creditors. As a result it is unduly burdensome on the other unsecured creditors in the case and accordingly the court finds this discrimination in favor of the shoplifting fines not in good faith and therefore impermissible.27
Separate classification of the traffic fines in Gallipo resembles the example Judge Posner gave in In re Crawford28 of an acceptable separate classification: “Suppose the debtor is a truck driver and one of his creditors is the state drivers’ license bureau which unless paid in full will yank his license with the consequence that he won’t have earnings out of which to make the payments called for in his plan.”29 Judge Posner used this hypothetical to illustrate classification without which the debtor would be unlikely to complete a Chapter 13 plan to the detriment of the entire creditor body. The bankruptcy court in Gallipo was convinced that reinstatement of the driver’s license was necessary to fund the plan. Perhaps testimony that nonpayment of the shoplifting fines would result in incarceration would have carried the day for separate classification of the shoplifting fines as well.
The expanding nondischargeability of claims for criminal misconduct has not helped Chapter 13 debtors deal with petty property crimes such as insufficient funds checks. As explained by the Bankruptcy Court for the Western District of Tennessee in In re Brigance,30 fear of criminal prosecution for an insufficient funds check has been broadly rejected as a basis for separate classification in a Chapter 13 plan:
The Court has located four cases that address the question of whether it is appropriate to separately classify and preferentially treat claims for debts arising from insufficient funds checks. Each of these cases concludes that it is not. . . . It is not at all clear that these claims would be nondischargeable in Chapter 7, but assuming for the sake of argument that they were, that fact alone would not create a reasonable basis for preferential treatment of these claims over those of other unsecured creditors.31
In an unreported opinion after Brigance, one bankruptcy court permitted a Chapter 13 debtor to separately classify bad check claims. In In re Etheridge,32 the debtor had two kinds of bad check claims—some that were subject to a pretrial diversion program and others that were not. Not unlike the plan in Gallipo, the plan in Etheridge proposed to pay in full the bad check claims that were part of the pretrial diversion program and to pay 70 percent of other worthless check claims. The debtor convinced the court of the fairness of this discrimination based on the probability of conviction and incarceration:
The classification is based on the consequences of the debtor’s failure to comply with the pretrial diversion contract. Failure to comply would bring conviction and possible incarceration. Checkcare argues that incarceration is unlikely. However true that may be, conviction is not unlikely. Conviction would likely result in the loss of her employment, and loss of the debtor’s employment would dramatically reduce the chances that any of the debtor’s creditors would be repaid. . . . [A] rational basis exists for the discrimination which is necessary for the debtor’s rehabilitation . . . . [T]he debtor has proposed a meaningful payment to the discriminated class—70% of their claims, which is more than they would receive in a case under chapter 7.33
Etheridge is not unlike one of the hypotheticals from the Seventh Circuit in Crawford.34 Judge Posner in Crawford posited the “extreme” case in which a Chapter 13 debtor separately classified a criminal fine or restitution for payment in full when other unsecured creditors would receive nothing: “approval of such a plan would be unreasonable.”35 At the other extreme, as stated by Judge Posner: “If without classification the debtor is unlikely to be able to fulfill a Chapter 13 plan and the result will be to make his creditors as a whole worse off than they would be with classification, then classification will be a win-win outcome.”36 The bankruptcy court in Etheridge may have been convinced that full payment of the checks subject to the pretrial diversion program was the only hope for all creditors.
Debts other than fines and restitution resulting from prepetition criminal misconduct will often be nondischargeable in a Chapter 7 case but dischargeable in a Chapter 13 case upon completion of payments under the plan.37 Except for fear of incarceration, it is difficult for debtors to explain why dischargeable claims that arise from prepetition misdeeds should be favorably classified. General unsecured claim holders have good arguments that separate classification of such claims is not fair.
1 In re Bowles, 48 B.R. 502 (Bankr. E.D. Va. 1985).
2 In re Stanley, 82 B.R. 858 (Bankr. S.D. Ohio 1987); In re Gay, 3 B.R. 336 (Bankr. D. Colo. 1980).
3 In re Rivera Echevarria, 129 B.R. 11 (Bankr. D.P.R. 1991).
4 479 U.S. 36, 107 S. Ct. 353, 93 L. Ed. 2d 216 (1986).
5 495 U.S. 552, 110 S. Ct. 2126, 109 L. Ed. 2d 588 (1990). See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
6 See § 156.1 [ Claims That Are or Might Be Nondischargeable Only in a Chapter 7 (Chapter 12, or Individual Chapter 11) Case ] § 88.10 Claims That Are or Might Be Nondischargeable Only in a Chapter 7 (Chapter 12, or Individual Chapter 11) Case.
7 Pub. L. No. 101-581, 104 Stat. 2865, at 2865 (Nov. 15, 1990), reenacted as § 3103 of Pub. L. No. 101-647, 104 Stat. 4789, at 4916 (Nov. 29, 1990). In 1994, apparently in an attempt to delete one of the twice-enacted exceptions to discharge for restitution, Congress deleted the “last” § 1328(a)(3). See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 501(d)(38)(B), 108 Stat. 4106 (1994), discussed in § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
8 See also § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
9 See H.R. Rep. No. 5269, 101st Cong., § 1902 (1990).
10 See S. 1931, 101st Cong., § 6 (1990).
11 See S. 1931, 101st Cong., § 5 (1990).
12 H.R. Rep. No. 101-681, at 165 (1990).
13 See In re Williams, 231 B.R. 280, 281–82 (Bankr. S.D. Ohio 1999) (Unproven threat of incarceration is not sufficient basis for classification of restitution for 100% payment and 5% to general unsecureds. “[T]he debtor has failed to provide any evidence that he will be incarcerated if he fails to make $100 monthly restitution payments to the Xenia Municipal Court . . . . [E]ven if sufficient evidence of possible incarceration had been provided by the debtor, these facts do not support the unfair discriminatory treatment . . . . The nondischargeability of a debt alone is not sufficient justification to treat a debt more favorably than other unsecured claims, at least during the initial 36 months of a plan. . . . [C]ourts have generally held that the possibility of incarceration does not provide a sufficient basis for favorable treatment of a restitution claim. These courts have noted that the nature of these debts is punishment of the criminal ‘and not the criminal’s creditors.’” Court would consider plan that pays unsecured claim holders pro rata during the first 36 months with some discrimination in favor of the restitution claim after 36 months.); In re Limbaugh, 194 B.R. 488, 492 (Bankr. D. Or. 1996) (“The debtors have raised the possibility that Ms. Limbaugh might be incarcerated if they discontinued paying $300 per month to Multnomah County. . . . They have presented no evidence to support this assertion. . . . Even if the debtors presented evidence . . . this court would not allow the debtor to separately classify the restitution debt.”); In re Smallberger, 157 B.R. 472, 477 (Bankr. D. Or. 1993) (In dicta, “[I]t might be appropriate to prefer a claim for restitution . . . if the alternative is that the debtor will be sent to jail and the plan will therefore fail.”).
14 See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
15 In re Riggel, 142 B.R. 199 (Bankr. S.D. Ohio 1992).
16 In re Edwards, 132 B.R. 400 (Bankr. E.D. Ark. 1991).
17 In re Limbaugh, 194 B.R. 488, 492–94 (Bankr. D. Or. 1996) (Plan proposed to pay restitution resulting from criminal conviction for aggravated theft in full at $300-per-month rate ordered by the state criminal court. General unsecured claims would receive no distribution. Applying four-factor test from AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), “this court would not allow the debtor to separately classify the restitution debt. . . . [T]he debtors might satisfy the second factor of the four-part Wolff test, if Ms. Limbaugh was prevented by her incarceration from assisting in the funding of the debtors’ plan. However, the Wolff test imposes conjunctive requirements. . . . This court would still find the proposed discrimination to be unfair for failure to satisfy the ‘reasonable basis’ and the ‘good faith of proposed discrimination’ requirements of the four-factor Wolff test. . . . By allowing debtors to separately classify the restitution debt this court would reduce the impact of the criminal sanctions imposed by the state court by requiring debtors’ innocent unsecured creditors to subsidize Ms. Limbaugh’s criminal sanctions. Two purposes of criminal sanctions are to deter and to punish the wrongdoer. Both of these purposes are undermined when innocent creditors are required to help pay for a debtor’s criminal sanctions. . . . Allowing the debtors to repay the restitution debt preferentially further prejudices the rights of the general unsecured claim holders who already are disadvantaged vis-a-vis holders of any nondischargeable claim by virtue of the extinction of their claims upon entry of an order of discharge. This court finds that such discrimination manipulates the bankruptcy system and thereby abuses the purpose and spirit of Chapter 13. The discrimination thus fails the ‘good faith’ portion of the four-part Wolff test.”).
18 See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
19 18 U.S.C. § 3613(f) was enacted as part of the Comprehensive Crime Control Act of 1984, and it provides in part, “No discharge of debts pursuant to a bankruptcy proceeding shall . . . discharge liability to pay a fine.”
20 The exception to discharge for fines, added to § 1328(a)(3) by the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 302, 108 Stat. 4106 (1994), may have been deleted by § 501(d)(38)(B) of the Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 501(d)(38)(B), 108 Stat. 4106 (1994). See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
21 See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
22 199 B.R. 862 (Bankr. D.N.J. 1996).
23 199 B.R. at 866.
24 In re Games, 213 B.R. 773, 776–80 (Bankr. E.D. Wash. 1997) (Court refuses confirmation of plan that separately classifies criminal traffic fines for payment in full and no payment to other unsecured claim holders, finding that extension of plan to 49 months was not in good faith when 60-month extension would provide a dividend for all unsecured creditors. Applying the four-part test from AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), the nondischargeable nature of the criminal traffic fines is not by itself a reasonable basis for discrimination. Court accepted debtor’s explanation that “his ability to support his spouse and five children and pay his current and back child support depends on the success of his Chapter 13 plan. . . . The separate classification will enable the debtor to retain his driving privileges, which will in turn keep him employed so that he can support his family and pay his back support.” State licensing department would not be required to reinstate the debtor’s driving privileges unless he proposed payment in full of the criminal traffic claims. “Consequently, without the proposed discrimination, the plan cannot be effectuated.” With respect to the “good faith” prong of the four-part test, “the burden on a Chapter 13 debtor in establishing good faith is especially heavy, when ‘superdischarge’ or discharge of an otherwise nondischargeable debt is sought.” Debtor’s good faith was questionable because, “[t]he Debtors must be in the plan 49 months as a minimum to accomplish their purposes and to obtain the benefits of the super discharge. An additional eleven months in the plan would provide an additional $3,080.00 for distribution to the unsecured creditors. This is a sufficient amount as not to cause an administrative burden [for] the trustee. A refusal by the Debtors to go beyond the bare minimum effort is evidence of their intent to take advantage of the substantial benefits of Chapter 13 super discharge but avoid any detriment. . . . It does not appear from the record that it would cause any undue burden on the Debtors if they extended the term of their plan to the full five years . . . . [T]he Debtors seek the extraordinary benefit of the Chapter 13 super discharge—discharge of civil traffic infractions, reinstatement of driving privileges and repayment of nondischargeable and priority debt over an extended period of time—with no extraordinary sacrifice, all to the detriment of the general unsecureds. . . . The court concludes that the degree of discrimination proposed in the Debtors’ plan, one hundred percent for the criminal traffic fines and zero percent to the balance of the general unsecureds, is arbitrary and unfairly discriminatory and thus creates an unreasonable classification of claims. If the Debtors’ proposed to extend their plan to the full sixty month term, the court would be satisfied that the discrimination proposed would neither be arbitrary nor unfair but rather would be evidence of the Debtors good faith compelled by the facts, economics and applicable statutes.”). Accord In re Ponce, 218 B.R. 571, 575–79 (Bankr. E.D. Wash. 1998) (Applying four-factor test in AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), as required by McDonald v. Sperna (In re Sperna), 173 B.R. 654 (B.A.P. 9th Cir. 1994), unfair discrimination to pay 100% of criminal traffic fines and 15% to general unsecured claims in a 36-month plan. Citing Sperna, “a Chapter 13 debtor can not [sic] base discriminatory classification upon the fact that the claim favored is nondischargeable in a Chapter 13. . . . [C]riminal fines . . . are intended to punish the criminal, not the criminal’s creditors. The whole point of punishment would be avoided if the debtor could transfer the cost of this punishment to his other unsecured creditors. . . . [Spokane Railway Credit Union v. Gonzales (In re Gonzales), 172 B.R. 320 (E.D. Wash. 1994),] . . . is distinguishable . . . it is based on the strong policy in favor of child support obligations . . . . There does not appear to be any reason why the debtor can not [sic] carry out the plan without the proposed discrimination. . . . Without the preferred classification, all general unsecured creditors would receive 19% . . . . [T]he debtor has chosen to file a thirty-six month plan. This is the minimum plan duration which can be approved . . . . [T]he basis for the discrimination is the need for the debtor to obtain reinstatement of his driver’s license. This was accomplished when the debtor filed his Chapter 13 . . . . The debtor has options other than the one he has chosen which are less discriminatory as to the general unsecured claimants. The court in In re Strickland, 181 B.R. 598 (Bankr. N.D. Ala. 1995) describes this option. The debtor could propose a plan that would pay all unsecured claims at the same rate for thirty-six months. Thereafter, the debtor could devote all plan payments to the nondischargeable debt. . . . The court recognized in [In re Games, 213 B.R. 773 (Bankr. E.D. Wash. 1997),] as it does here that the court cannot force a debtor to extend its plan beyond the 36 month statutory term . . . . But as in Games, here too the court must balance the interests of the debtor against the unsecureds in determining whether the classification is proposed in good faith. . . . The debtor is left with the choice of dismissing the Chapter 13, converting to a Chapter 7 or extending the plan an additional period to pay the preferred claim.”).
25 In re Veasley, 204 B.R. 24, 26 (Bankr. E.D. Ark. 1996) (Municipal court order requiring the debtor to pay fines directly to the court or suffer incarceration does not justify postconfirmation modification to pay municipal fines “outside” the plan. “No creditor or other court has the power or authority to direct the debtor to act in contravention of the law or make particular provisions in a plan of reorganization.”).
26 282 B.R. 917 (Bankr. E.D. Wash. 2002).
27 282 B.R. at 923.
28 324 F.3d 539 (7th Cir. 2003). See § 152.2 [ Alimony, Maintenance and Support ] § 88.4 Alimony, Maintenance and Support for discussion of Crawford.
29 324 F.3d at 543.
30 219 B.R. 486 (Bankr. W.D. Tenn. 1998), aff’d, 234 B.R. 401 (W.D. Tenn. 1999).
31 219 B.R. at 495. Accord In re Tennis, 232 B.R. 403, 405 (Bankr. W.D. Mo. 1999) (Possibility of prosecution for insufficient funds checks is not reasonable basis for 100% payment when general unsecureds get only 15%. “It would be speculation for us to assume that criminal actions will be filed against the Debtor for issuing the insufficient funds checks, but even if they are, there is no evidence to indicate that this would prevent the Debtor from performing a nondiscriminatory plan. Moreover, this Court should not allow the bankruptcy proceedings to become entangled with the State’s criminal processes.”); In re Hiner, 161 B.R. 688, 689 (Bankr. D. Idaho 1993) (Denies confirmation of plan that separately classified insufficient funds checks for payment of all available funds in advance of distributions to general unsecured claim holders. “While there are varying interpretations of the effect of 11 U.S.C. § 1322(b)(1), the decision in In re Iacovoni, 2 B.R. 256 (Bankr. D. Utah 1980) makes the most sense. The Iacovoni decision takes the position chapter 13 prohibits all discrimination between unsecured creditors who have claims of equal legal status except where the statutes specifically authorize discrimination, as in 11 U.S.C. § 1112(b) and 11 U.S.C. § 1322(b)(1). In the instant case, discrimination between unsecured creditors to whom the debtor delivered insufficient fund checks and other creditors who were not delivered insufficient fund checks is not authorized by statute and is not fair discrimination. As holders of unsecured claims, all unsecured creditors hold the same legal rights against the debtors.”).
32 No. 02-32347-DHW, 2003 WL 22037715 (Bankr. M.D. Ala. Mar. 28, 2003) (unpublished).
33 2003 WL 22037715 at *5.
34 See also §§ 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination and 152.2 [ Alimony, Maintenance and Support ] § 88.4 Alimony, Maintenance and Support.
35 324 F.3d at 543.
36 324 F.3d at 543.
37 See § 156.1 [ Claims That Are or Might Be Nondischargeable Only in a Chapter 7 (Chapter 12, or Individual Chapter 11) Case ] § 88.10 Claims That Are or Might Be Nondischargeable Only in a Chapter 7 (Chapter 12, or Individual Chapter 11) Case.