UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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m 99-50500

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IN THE MATTER OF:

TRAVIS J. MATSON, DEBTOR.

TRAVIS J. MATSON,

Appellant,

VERSUS

PHYLLIS BRACHER, TRUSTEE,

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 the denial and

dismissalof his chapter 13 reorganization plan.

Concluding that his proposal to pay all

cosigned consumer debt before any general

unsecured debt is without justification, we

affirm.

I.

Matson filed a petition for relief under

chapter 13. Under the proposed

reorganization plan, an unsecured, cosigned

consumer debt was scheduled to be paid upfront, in full, with interest, before payment of

other general unsecured debts; the trustee

objected. The bankruptcy court, after a

hearing, denied confirmation because the plan

proposed to pay the cosigned debt ahead of

the general unsecured claims and, as a result,

“discriminated unfairly” against the other

unsecured creditors in violation of 11 U.S.C.

§ 1322(b)(1). Accordingly, the case was

dismissed for failure to obtain confirmation of

the plan.

Matson appealed to the district court,

arguing that the requirement that any

classification of unsecured debts not unfairly

discriminate against general unsecured debts

was not applicable to the special category of

cosigned consumer debt. The district court

affirmed.

II.

At the time of briefing, this case presented

an issue of first impression in the courts of

 

* Circuit Judge of the Ninth Circuit, sitting by

designation.

 

** Pursuant to 5TH CIR. R. 47.5, the court has

determined that this opinion should not be

published and is not precedent except under the

limited circumstances set forth in 5TH CIR. R.

47.5.4.
2

appeals: 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

this title, but may not discriminate

unfairly against any classso designated;

however, such plan may treat claims for

a consumer 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) (emphasis 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 if it unfairly

discriminates against other unsecured debt.1

That split 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), which originated

from the same bankruptcy proceeding as the

instant case. In Chacon, we interpreted

§ 1322(b)(1)’s “however” clause as 

clarify[ing] that [differential] treatment

of cosigned consumer debt is usually not

unfairly discriminatory. Differences in

treatment are not discriminatory if they

rationally further a legitimate interest of

the debtor and do not disproportionately

benefit the cosigner, e.g. by reimbursing

interest where none is 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 consumer debt set up a

presumption that such classification was not

unfairly discriminatory. Nevertheless, we

affirmed the dismissal, opining that where the

plan proposed to pay the cosigned debt in full,

with 12% interest, there was no justification

for the “high and preferential interest rate.”

Id.

Here, the bankruptcy 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

bankruptcycourt’s conclusion remains correct

under the test articulated in Chacon, and the

judgment of the district 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).