UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_______________



### m 99-50500

_______________



### I N THE 

### M ATTER 

### O F 

### :
T RAVIS 

### J. M ATSON



### , D EBTOR



### .

T RAVIS 

### J. M ATSON



### ,

Appellant,

VERSUS



### P HYLLIS 

### B RACHER



### , T RUSTEE



### ,

Appellee.

_________________________

Appeal from the United States District Court

for the Western District of Texas
(EP-99-CV-127-H)

_________________________ March 2, 2000

Before DAVIS, HALL * , and SMITH, Circuit Judges.

PER CURIAM: **

Travis Matson appeals t he denial and

dismissal of his chapter 13 reorganization plan.

Concludi ng that his proposal to pay all cosigned consume r debt before any general

unsecured debt is without justif ication, we

affirm.

I.

Matson filed a petition for relief under chapter 13. Under the proposed reorganization plan, an unsecu red, cosigned

consumer debt was schedule d to be pai d upfront, in full, with interest, before payment of

o t her general unsecured debts; the trustee object ed. The bankruptcy court, after a hearing, denied confirmation because the plan proposed to pay the cosigned debt ahead of

the general unsecured clai ms and, as a result, “discriminated unfairly” against the other

unsecured creditors i n violation of 11 U.S.C.

§ 1322(b)(1). Accordingly, t he case was

dismissed for failure to obtain confirmation of the plan.

Matson appealed to the dis trict court, arguing that the requirement that any classification o f unsecured debts not unfairly

discriminate against general unsecured debts

was not applicable to t he special category of cosigned consumer debt. The district court

affirmed.

II. At the time of briefing, this case presented

an iss ue of first impression in the courts of * Circuit Judge of the Ninth Circuit, sitting by designation.

* * Pursuant to 5 TH C IR

. R. 47.5, the c ourt has determined that this opinion should not be

p ublished and is not precedent except under th e limited circumstances set forth in 5 T H C IR

. R.

47.5.4.2

appeal s : whether the prohibition on unfair

discrimination in § 1322(b)(1) applies to cosigned debt. Section 1322(b)(1) provides that a reorganization plan may

designate a class or classes of unsecured
claims, as provided in section 1122 of

th i s title, but may not discriminate unfairly against any class so designated;

however

, such plan may treat claims for

a cons u mer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than

[ sic ] other unsecured claims.

11 U.S.C. § 1322(b)(1) (em p hasis added).

The ambiguously-worded “however” clause

led to a split among bankruptcy courts over whether a plan that gives priority to a cosigned

consumer debt is invalid i f it unfairly discriminates against other unsecured debt. 1

That s plit recently was resolved in this circuit by Chacon v. Bracher (In re Chacon)

, No. 99-50163, 1999 U.S. App. LEXIS 35624 (5th Cir. Sept. 24, 1999), whi ch o riginated

f rom the same bankruptcy proceeding as the

instant case. In Chacon, we interpreted § 1322(b)(1)’s “however” clause as

clarify[ing] that [different ial] treatment

of cosigned consumer debt is usually not unfairly discriminatory. Differences in

treatment are no t discriminatory if they rationally further a legitimate interest of

the debtor and do not disproportionately

benefit the cosigner, e.g. by reimbursing

in terest where none i s due or reimbursing more than the actual amount of the cosigned debt.

Id. at *2-*3. Thus, we opined that the exception carved

out for cosigned con sumer debt set up a presumption that such clas s ification was not unfairly discriminatory. Nevertheless, we affirmed the dismissal, opining that where the plan proposed to pay the cosigned debt in full,

with 1 2% interest, there was no justification

for the “hig h and preferential interest rate.”

Id.

Here, the bankru p tcy court rejected

Matson’s plan for the same reasons it rejected

Chacon’s: Both proposed to pay the cosigned

debt in full, with 12% interest, before any unsecured debts were paid. Accordingly, the bankruptcy court’s conclusion remains correct

under the t est articulated in C hacon

, and the judgment of the dist rict court, affirming the bankruptcy court and denying confirmation, is

AFFIRMED.

1 Compare, e.g., Nelson v . Easley (In re Easley) , 72 B.R. 948, 955-56 (Bankr. M.D.Tenn. 1987) (holding that consumer debts are subject to

the proscription on unfair discrimination) with In

re Dornon , 103 B.R. 61, 64 (Bankr. N.D.N.Y.
1989) (holding that a cosigned consumer debt is an exception to the general unfair discrimination rule).