UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

__________________

No. 99-50597

__________________

In The Matter Of: SALOMON RAMIREZ; MARIA A. RAMIREZ,

Debtors

SALOMON RAMIREZ; MARIA A. RAMIREZ,

Appellants,

versus

PHYLLIS BRACHER, Chapter 13 TRUSTEE,

Appellee.

______________________________________________

Appeal from the United States District Court

for the Western District of Texas

______________________________________________

February 18, 2000

Before BARKSDALE, BENAVIDES and STEWART, Circuit Judges.

PER CURIAM:

This appeal is from a bankruptcy court’s order denying

confirmation of a proposed Chapter 13 plan of reorganization. We

affirm.

I. FACTUAL AND PROCEDURAL HISTORY

The facts of this appeal are not in dispute. The debtors,
2

Salomon and Maria A. Ramirez, filed a petition for relief under

Chapter 13 of Title 11 of the United States Code. Pursuant to 11

U.S.C. section 1321, the debtors filed a proposed bankruptcy plan.

After subtracting monthly expenses from their net income, the

debtors were left with $185 in disposable income each month. The

plan proposed that the debtors would pay the trustee $125 each

month for a period of sixty months. 

More specifically, the plan separated all unsecured debts into

classes and proposed a different level of repayment for each class.

“Class One” was comprised entirely of a debt in the amount of $844

to Mervyns Credit that had been co-signed by Maria Ramirez’s

sister. The plan proposed to pay the entire amount of this cosigned consumer debt plus twelve percent interest. After paying

off the entire debt to Mervyns, the plan proposed that the trustee

would begin to distribute payments to the debts in “Class Three,”

which consisted of general, unsecured debts. It was estimated that

it would take thirty-three months before funds would be available

for distribution to the class of general, unsecured claims. 

The overall estimated payout under the proposed plan to the

general, unsecured claims was twenty percent. However, if the

money designated to pay the Mervyns debt was diverted instead to

the class of general, unsecured claims, the percentage of repayment

to the class of general, unsecured claims would rise from twenty

percent to twenty-five percent. The trustee objected to the plan

on the basis that the proposed payments to the class of co-signed
1 As the district court stated, such a showing might take the

form of evidence that failure to give the proposed preferential

treatment to the co-signed debt would either cause financial

hardship on the co-debtor/sister or detrimentally impact the

debtors’ ability to perform on the plan. 

2 The text of § 1322(b)(1), as amended by Congress in 1984

and applicable to this appeal, provides as follows:

Subject to subsections (a) and (c) of this

section, the plan may--

designate a class or classes of unsecured

claims, . . . but may not discriminate

unfairly against any class so designated;

however, such plan may treat claims for a

consumer debt of the debtor if an individual

3

debt unfairly discriminated against the class of general, unsecured

claims. 

The bankruptcy judge held a hearing on the confirmation of the

plan. At that hearing, the debtors failed to offer any evidence

that the proposed discrimination favoring the co-signed debt over

other classes of unsecured debt was in fact fair.1 In a memorandum

opinion, the bankruptcy judge, holding that the debtors had failed

to meet their burden of showing that the separate classification of

co-signed debt did not unfairly discriminate against other

unsecured creditors, denied confirmation of the proposed plan. In

re Chacon, 223 B.R. 917 (Bankr.W.D.Tx. 1998). On appeal, the

district court affirmed. The debtors now appeal to this Court.

II. ANALYSIS

The debtors’ sole argument on appeal is that the bankruptcy

court erred in holding that 11 U.S.C. § 1322(b)(1)2 requires a
is liable on such consumer debt with the

debtor differently than other unsecured

claims[.]

4

debtor to demonstrate that a proposed payment plan that prefers cosigned, unsecured debt does not unfairly discriminate against other

unsecured debt. In a recently published opinion, we rejected this

contention and applied the unfair discrimination test to co-signed

consumer debt. In re Chacon, __ F.3d __, 1999 WL 1416496

(September 24, 1999). We explained that “[d]ifferences 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 co-signed

debt.” In re Chacon, 1999 WL 1416496, at *1. 

Like the instant case, that case involved a bankruptcy plan

that proposed to pay a co-signed debt in full, with twelve percent

interest, prior to any distributions to the general unsecured class

of debt. There, we stated that no justification appeared for such

a high and preferential interest rate. We therefore affirmed the

judgment of the bankruptcy court denying confirmation of the plan.

Because the relevant facts in that case are identical to the

case at bar, In re Chacon is controlling. Accordingly, applying

the holding of In re Chacon to the case at bar, we AFFIRM the

judgment of the bankruptcy court denying confirmation of the

bankruptcy plan.
5
3 As in the instant case, in In re Chacon, 1999 WL 1416496,

there was no appellee’s brief filed. Therefore, we had no

assistance from the trustee in either case. 

BENAVIDES, Circuit Judge, specially concurring:

I join the per curiam opinion because it is apparent that it

is controlled by our disposition in In re Chacon, __ F.3d __, 1999

WL 1416496 (5th Cir. Sept. 24, 1999), a published summary calendar

opinion.3 I write only to express my concern with the reasoning

set forth therein.

As articulated in the instant per curiam opinion, the debtors’

sole argument on appeal is that the bankruptcy court erred in

holding that 11 U.S.C. § 1322(b)(1) requires a debtor to

demonstrate that a proposed payment plan that prefers co-signed,

unsecured debt does not unfairly discriminate against other

unsecured debt. The instant question, therefore, is one of

statutory construction.

The original version of § 1322(b)(1) provided, in pertinent

part, that a bankruptcy plan may “designate a class or classes of

unsecured claims, . . . but may not discriminate unfairly against

any class so designated.” In 1984, Congress amended the statute by

adding the following phrase: “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 other unsecured

claims.” Bankruptcy Amendments and Federal Judgeship Act of 1984,

Pub.L. No. 98-353, 98 Stat. 333 (1984) (BAFJA). 
7

In In re Chacon, after recognizing the split among bankruptcy

courts regarding whether the amended clause should be interpreted

to exempt co-signed consumer debt from the unfair discrimination

test, this Court opined, in part, as follows:

The argument for applying the unfair

discrimination test even to a cosigned

consumer debt is that the word “differently”

must be given a meaning different from unfair

discrimination, and reading the however clause

as an exception would not do so. See, e.g.,

[In re Easley, 72 B.R. 948, 956

(Bankr.M.D.Tenn. 1987)]. This rationale is

wholly unconvincing. In its desire not to

give any two distinct words or phrases the

same meaning, it reads out the however clause.

If a cosigned debt could be prioritized only

if it does not discriminate, then the however

clause serves no purpose whatsoever. 

In re Chacon, 1999 WL 1416496, at *1 (quotation marks added).

I fully agree with the analysis of In re Chacon up to this

point. It is at this juncture, however, I part ways with our prior

reasoning. As explained in more detail below, only one result

follows once one accepts the premise that the “however clause”

serves no purpose if the statute is interpreted to allow co-signed

debt to be prioritized only if it does not discriminate: co-signed

debt is not subject to the unfair discrimination test. 

In other words, treatment that is “unfair discrimination” and

being treated “differently” cannot constitute the same type of

treatment. Because all unfairly discriminatory treatments, by any

definition, are different, the set of treatments that comprise

unfair discrimination is subsumed within the larger set of
8

different treatments. Therefore, the set of different treatments

consists of both fair and unfair discrimination. Different

treatments, which the statute expressly authorizes for co-signed

debts, sometimes result in unfair discrimination. 

Contrary to my preceding analysis, the previous panel next

opined as follows:

Moreover, the however clause can be read

without creating any unnecessary use of

synonyms simply by interpreting it to clarify

that such 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.

In re Chacon, 1999 WL 1416496, at *1.

The first excerpt from the previous panel’s opinion recognizes

that retaining the unfair discrimination test for co-signed debt

would leave the “however clause” bereft of meaning in violation of

established principles of statutory construction. Notwithstanding

that realization, the second excerpt from the previous panel’s

opinion apparently resurrects the unfair discrimination test.

Although I am not necessarily questioning the proposition in In re

Chacon that “such treatment of cosigned consumer debt is usually

not unfairly discriminatory,” I do not see how that proposition
4 The Bankruptcy Code does not define “unfair

discrimination.” Bankruptcy courts generally use the following

four-part test to determine whether the plan unfairly

discriminates:

(1) whether the discrimination has a

reasonable basis; 

(2) whether the debtor can carry out a plan

without the discrimination; 

(3) whether the discrimination is proposed in

good faith; and 

(4) whether the degree of discrimination is

directly related to the basis or rationale for

the discrimination. 

In re Leser, 939 F.2d 669, 671-72 (8th Cir. 1991); accord In re

Thompson, 191 B.R. 967, 971 (Bankr.S.D.Ga. 1996). 

9

supports the resuscitation of the unfair discrimination test.4

That said, I now attempt to glean Congress’s intent in amending §

1322(b)(1). 

As set forth previously, the debtors contend that the added

clause carves out an exception allowing co-signed debts to be

treated differently from other unsecured debts, regardless of

whether it results in unfair discrimination against another class

of unsecured debts. The plain language of section 1322(b)(1), the

debtors argue, expressly allows this special treatment of co-signed

debts. I disagree with the debtors’ argument to the extent that

they are asserting that the language of this provision is clear.

Although the bankruptcy courts have split on the question of

“whether the `however’ clause is a carve-out from the unfair
5 In re Battista, 180 B.R. 355, 357 (Bankr.D.N.H. 1995).

6 See also In re Battista, 180 B.R. at 357 (citing In re

Easley); In re Whitelock, 122 B.R. 582, 591 n. 19 (Bankr.D.Utah

1990) (quoting In re Easley).

10

discrimination test,”5 courts generally agree that the amended

statute is awkwardly worded. In re Easley, 72 B.R. 948, 956

(Bankr.M.D.Tenn. 1987); accord In re Applegarth, 221 B.R. 914, 915

(Bankr.M.D.Fla. 1998); In re Strausser, 206 B.R. 58, 60

(Bankr.W.D.N.Y. 1997); In re Martin, 189 B.R. 619, 627

(Bankr.E.D.Va. 1995); In re Gonzales, 172 B.R. 320, 328 (E.D.Wash.

1994); In re Cheak, 171 B.R. 55, 57 (Bankr.S.D.Ill. 1994);6 but see

In re Dornon, 103 B.R. 61, 64 (Bankr.N.D.N.Y. 1989) (opining that

the “plain statutory language of the amendment . . . constitutes a

`carve out’ to the `unfair discrimination’ standard”). Because the

language of the provision is somewhat awkward and, thus,

susceptible to varying interpretations, I apply the appropriate

canons of statutory interpretation and look to its legislative

history to determine Congress’s intent. 

The debtors contend that Congress’s choice of the word

“however” to begin the clause that was added to section 1322(b)(1)

evidences its intent to “carve out” an exception to the unfair

discrimination test for co-signed debt. The debtors’ position is

the one chosen by a minority of bankruptcy courts. See In re

Riggel, 142 B.R. at 204, In re Dornon, 103 B.R. at 64-65. The
7 Our research indicates that no other Circuit has decided

this issue.

11

court below and a majority of bankruptcy courts have interpreted

the “however clause” as serving to specifically allow debtors to

designate a class of co-signed debt, separate from other classes of

unsecured debt, with no consequence to the requirement that

discrimination among the separate classes must be fair. See e.g.,

In re McKown, 227 B.R. 487, 491-92 (Bankr.N.D.Ohio 1998); In re

Applegarth, 221 B.R. 914, 915-16 (Bankr.M.D.Fla. 1998); In re

Battista, 180 B.R. at 357; In re Easley, 72 B.R. at 956.7

In matters of statutory construction, we begin by looking to

the literal meaning of the words chosen by Congress. Flora v.

United States, 357 U.S. 63, 65, 78 S.Ct. 1079, 1081 (1958).

“However” is defined as “in spite of that; on the other hand; BUT.”

Webster’s Third International Dictionary 1097 (1981)

(capitalization indicates synonymous cross-reference). It is well

established “that a statute must, if possible, be construed in such

fashion that every word has some operative effect.” United States

v. Village, Inc., 503 U.S. 30, 112 S.Ct. 1011, 1015 (1992).

Accordingly, if Congress’s only intention in amending the provision

was to expressly allow co-signed debt to constitute a separate

class, it seems inappropriate to have begun the clause with the

word “however.” To give the word “however” operative effect, we

must interpret it as indicating that the second clause is somehow
8 If co-signed debts were subject to the unfair

discrimination test, the amended version simply could have provided

in relevant part that a bankruptcy plan may “designate a class or

classes of unsecured claims, including co-signed unsecured debt, .

. . but may not discriminate unfairly against any class so

designated.”

9 In re Strausser, 206 B.R. at 60; In re Battista, 180 B.R.

at 357; In re Whitelock, 122 B.R. at 591 n. 19.

12

in contrast to the first clause. 

Further, there was no need for Congress to separately address

the manner in which co-signed debts are treated (“differently”) if

it intended such debts to receive the same treatment as other

unsecured debts, i.e., subject to the unfair discrimination test.8

It appears to me that this Court’s reading of the statute (cosigned debts are subject to the unfair discrimination test)

interprets the word “differently” to mean the same as the phrase

“unfair discrimination.” Such an interpretation violates a “well

settled rule of statutory construction that where different

language is used in the same connection in different parts of a

statute it is presumed that the Legislature intended a different

meaning and effect.” Quarles v. St. Clair, 711 F.2d 691, 701 n.31

(5th Cir. 1983) (internal quotations marks and citations omitted).

Several courts have relied on the following analysis to hold

that co-signed debts are not exempt from the discrimination test:9

The 1984 amendment is awkwardly worded. To

give meaning to all words in the amended

section, it must be true that a debtor’s power

to treat co-signed consumer debts

“differently” has content separate from the
10 It has been opined that if Congress wanted to delete the

unfair discrimination test in regard to co-signed consumer debt, it

could have plainly stated that it was doing so. In re Strausser,

206 B.R. at 59; In re Battista, 180 B.R. at 357. I find that

statement offers little assistance in interpreting the statute.

While it is of course true that Congress could have drafted the

amendment such that it was perfectly clear, as previously set

forth, the language of the provision is awkward. We must interpret

the provision as drafted.

11 This Court, however, construed the earlier version of

section 1322(b)(1) to allow co-signed debts to be classified

separately from other unsecured debts. Public Finance Corporation

v. Freeman, 712 F.2d 219, 222 (5th Cir. 1983). 

13

proscription against unfair discrimination.

The awkward language is resolved by holding

that all different treatments are not

necessarily fair discrimination.

In re Easley, 72 B.R. at 956. I, like certain bankruptcy courts,

find the above-quoted analysis quite persuasive; however, it leads

me to draw the opposite conclusion. If all different treatments

are not necessarily fair discrimination, then implicit in that

statement (or the corollary to it) is that different treatments

sometime result in unfair discrimination.10 

Additionally, prior to the 1984 amendment, several courts

prohibited debtors from classifying co-signed consumer debt as a

separate class under section 1322(b)(1). See e.g., In re Montano,

4 B.R. 535 (Bankr.D.D.C. 1980); In re Utter, 3 B.R. 369

(Bankr.W.D.N.Y. 1980).11 In response to these decisions, Congress

amended the statute by expressly allowing plans to treat such

claims “differently than other unsecured claims.” § 1322(b)(1). 

The following excerpt from a Senate Report illustrates at
12 The Senate and House reports for BAFJA do not contain any

reference to section 1322(b)(1). In re McKown, 227 B.R. at 491.

However, there was an earlier bill containing language that was

partially incorporated into BAFJA. Id. Therefore, the only

relevant legislative history is found in the above-quoted Senate

report for the earlier bill, the Omnibus Bankruptcy Improvements

Act of 1983, S.445, 98th Cong., 1st Sess. (1983) (OBIA). Id.

Although these statements were not made contemporaneously with the

enactment of BAFJA and, thus, are entitled to less weight, it would

be remiss not to consider them. See Resolution Trust Corp. v.

Miramon, 22 F.3d 1357, 1363 (5th Cir. 1994); see also Paula Aiello

14

least some of the impetus behind Congress’s amendment of section

1322(b)(1) to allow co-signed, unsecured debt to be classified

separately from other unsecured debt:

A number of cases have considered whether

claims involving co-debtors may be classified

separately from other claims. Thus far, the

majority of cases have refused to permit such

classification on the ground that codebtor

claims are not different than other claims.

[citations omitted]. 

Although there may be no theoretical

differences between codebtor claims and

others, there are important practical

differences. Often, the codebtor will be a

relative or friend, and the debtor feels

compelled to pay the claim. If the debtor is

going to pay the debt anyway, it is important

that this fact be considered in determining

the feasibility of the plan. Sometimes, the

codebtor will have posted collateral, and the

debtor will feel obligated to make the payment

to avoid repossession of the collateral. In

still other cases, the codebtor cannot make

the payment, and the effect of nonpayment will

be to trigger a chapter 7 or chapter 13

petition by the codebtor, which may have a

ripple effect on other parties as well. For

these reasons, separate classification is

often practically necessary.

S.Rep. No. 65, 98th Cong., 1st Sess., 17-18 (1983)[S.445].12
& Eric K. Behrens, Student Loans, Chapter 13 of the Bankruptcy

Code, and the 1984 Amendments, 13 J.C. & U.L. 1 (1986) (explaining

that the authors rely on the relevant legislative history of the

OBIA to interpret the BAFJA). 

15

Congress recognized that, as a practical matter, many debtors

will attempt to pay a co-signed debt regardless of whether the plan

that is confirmed allows for such a preferred distribution. After

acknowledging that many debtors are “going to pay the [co-signed]

debt anyway,” it would be a meaningless exercise to continue to

impose a burden of demonstrating that the classification did not

unfairly discriminate. By expressly accepting this reality, it

appears that Congress effectively relieved debtors of the burden of

proving that such classifications did not result in unfair

discrimination against other unsecured creditors. Congress

expressed no intent to better police the debtors’ behavior but

instead indicated an intent to allow for explicit acknowledgment of

such practical considerations within the context of the plan.

Indeed, Congress made clear that the overriding priority was to

determine that the proposed plan was feasible so it could be

successfully completed. 

I am mindful that some courts have expressed a concern that

exempting co-signed debt from the unfair discrimination test would

be an invitation to abuse. See e.g., In re Martin, 189 B.R. 619,

628 (Bankr.E.D.Va. 1995). Nevertheless, I believe that the good
13 Section 1325(a)(3) provides in pertinent part that “the

court shall confirm a plan if . . . the plan has been proposed in

good faith and not by any means forbidden by law.” 

14 One bankruptcy court has found the controversy regarding

whether co-signed, unsecured debts were subject to the unfair

discrimination test to be “largely a matter of semantics.” In re

Thompson, 191 B.R. 967, 971 (Bankr.S.D.Ga. 1996). The Thompson

court expounded that:

“Unfair discrimination” as defined does not

have any application independent of existing

confirmation requirements. Courts which hold

that unfair discrimination applies to codebtor

classifications often find unfair

discrimination by reference to a failure to

satisfy the other confirmation requirements of

section 1325.” 

Id. (other citations omitted).

16

faith requirement mandated under section 1325(a)(3)13 remains a

safeguard against abuse. See In the Matter of Chaffin, 816 F.2d

1070, 1073 (5th Cir. 1987) (explaining that good faith is viewed in

light of the "totality of the circumstances" test under which we

consider factors such as the reasonableness of the proposed

repayment plan and whether the plan indicates an attempt to abuse

the spirit of the Bankruptcy Code), modified on other grounds, 836

F.2d 215 (5th Cir. 1988).14

As previously stated, I recognize that the language of section

1322(b)(1) is not clear, hence the split in authority among the

bankruptcy courts. I also acknowledge my natural inclination to

follow the majority of bankruptcy courts that have held the unfair

discrimination test is applicable to co-signed debt. It is not,
17

however, our task to determine what we believe Congress should have

enacted. I am persuaded that my interpretation of this provision

is the best implementation of Congress’s intent. 

In sum, I concur in the judgment of the per curiam opinion

because it is controlled by our prior precedent. Nonetheless, I

write to set forth my concerns regarding the analysis contained in

that prior precedent. But for the existence of our prior opinion

in In re Chacon, 1999 WL 1416496, I would vacate the judgment of

the bankruptcy court and remand for further consideration of the

debtors’ plan.