Source: https://lundinonchapter13.com/Content/Section/88.4
Timestamp: 2019-08-22 13:41:15
Document Index: 318403983

Matched Legal Cases: ['§ 88', '§ 88', '§ 523', '§ 523', '§ 507', '§ 1322', '§ 507', '§ 507', '§ 523', '§ 1322', '§ 1322', '§ 1322', '§ 1322', '§ 507', '§ 507', '§ 1322', '§ 507', '§ 507', '§ 1322', '§ 1322', '§ 1322', '§ 1322', '§ 1322', '§ 507', '§ 507', '§ 507', '§ 523', '§ 507', '§ 523', '§ 507', '§ 502', '§ 507', '§ 1322', '§ 502', '§ 502', '§ 1322', '§ 1322', '§ 1322', '§ 507', '§ 507', '§ 523', '§ 1328', '§ 345', '§ 158', '§ 303', '§ 138', '§ 507', '§ 304', '§ 98', '§ 73', '§ 73', '§ 87', '§ 136', '§ 136', '§ 507', '§ 523', '§ 507', '§ 507', '§ 523', '§ 507', '§ 523', '§ 507', '§ 1122', '§ 1322', '§ 523', '§ 1325', '§ 1328', '§ 345', '§ 158', '§ 507', '§ 507', '§ 523', '§ 523', '§ 507', '§ 523', '§ 507', '§ 523', '§ 507', '§ 1322', '§ 118', '§ 1322', '§ 79', '§ 1322', 'art, 52', '§ 507', 'art, 52', '§1322', '§ 1122', '§ 149', '§ 87', '§ 507', '§ 507', '§ 304', '§ 1322', '§ 98', '§ 73', '§ 136', '§ 507', '§ 1322', '§ 99', '§ 73', '§ 136', '§ 507', '§ 304', '§ 99', '§ 73', '§ 136', '§ 101', '§ 303', '§ 138', '§ 523', '§ 362', '§ 1328', '§ 523', '§ 507', '§ 304', '§ 1322', '§ 523', '§ 304', '§ 547', '§ 304', '§ 522', '§ 304', '§ 362', '§ 304', '§ 99', '§ 73', '§ 136', '§ 136', '§ 1322', '§ 73', '§ 136', '§ 151', '§ 87', '§ 507', '§ 345', '§ 158', '§ 99', '§ 73', '§ 136', '§ 523', '§ 507', '§ 1322', '§ 507', '§ 523', '§ 523', '§ 507', '§ 523', '§ 507', '§ 523', '§ 507', '§ 507', '§ 523', '§ 523', '§ 153', '§ 88', '§ 158', '§ 100', '§ 73', '§ 136', '§ 153', '§ 88', '§ 158', '§ 69', '§ 58', '§ 136', '§ 138', '§ 155', '§ 88', '§ 101', '§ 136', '§ 138', '§ 35', '§ 36', '§ 153', '§ 88', '§ 88', '§ 507', '§ 304', '§ 523', '§ 507', '§ 507', '§ 523', '§ 523', '§ 507', '§ 523', '§ 507', '§ 523', '§ 507', '§ 507', '§ 523', '§ 149', '§ 87', '§ 149', '§ 87', '§ 88', '§ 88', '§ 88', '§ 88', '§ 68', '§ 58', '§ 58', '§ 124', '§ 248', '§ 125']

§ 88.4 Alimony, Maintenance and Support
Cite as: Keith M. Lundin, Lundin On Chapter 13, § 88.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
In Chapter 13 cases filed before October 22, 1994, debts for alimony, maintenance or support described in § 523(a)(5)1 are nondischargeable.2 In Chapter 13 cases filed after October 22, 1994, debts for alimony, maintenance or support described in § 523(a)(5) are nondischargeable, and debts for alimony, maintenance or support described in § 507(a)(7)3 are priority claims entitled to payment in full through the plan under § 1322(a)(2).4
The debts for alimony, maintenance or support that are entitled to priority under § 507(a)(7) in cases filed after October 22, 1994, are a slightly smaller class than the debts for alimony, maintenance or support that are nondischargeable in all Chapter 13 cases. The principal difference is that alimony or support debts that have been assigned are not entitled to the new seventh priority in § 507(a)(7);5 but alimony or support remains nondischargeable under § 523(a)(5) if assigned pursuant to the Social Security Act or assigned to the government.6 In other words, in Chapter 13 cases filed after October 22, 1994, there are debts for alimony, maintenance or support that are entitled to priority and full payment and are nondischargeable, and there are debts for alimony, maintenance or support that are assigned to state or federal governments or assigned pursuant to the Social Security Act that are not entitled to priority or to full payment but are nondischargeable.
These distinctions are important to the classification of claims because the fairness of discrimination for purposes of § 1322(b)(1) may turn on whether the alimony, maintenance or support debt is nondischargeable, is a priority claim or is both.7
In Chapter 13 cases filed before October 22, 1994, many courts concluded it was fair discrimination to favorably classify a claim for delinquent alimony or child support.8 Most of these decisions embrace the theory that separate classification of alimony or support is rationally based on the fact that such claims are not dischargeable in a Chapter 13 case.9 The U.S. Court of Appeals for the Eighth Circuit insightfully observed, “‘[I]t is doubtful that a Chapter 13 plan could be confirmed in most instances without a separate classification of child support, absent the relatively rare 100% payout plan.’”10 Another court explained that “[d]iscrimination between child support arrearage claims and other unsecured claims in terms of the period of repayment and percent of dividend may be required to effect expedient payment in full of the support and alimony claims.”11
A few of the reported decisions constrain the separate classification of alimony or support by requiring that, without the consent of the recipient, treatment through the plan must be consistent with state court support orders.12 The source of this condition is not clear. It is certainly not anchored in consideration of fairness to the other unsecured claim holders treated less favorably under the plan. Permitting the separate classification of alimony and support claims only with the consent of the recipient is an unwarranted extension of the antimodification provisions of § 1322(b)(2)—protection that does not apply to unsecured claims.13 Nothing in the Bankruptcy Code prohibits a Chapter 13 plan from modifying the rights of an unsecured support claim holder. As a practical matter, the debtor might choose to separately classify support for the most favorable treatment financially possible to convince the claim holder to accept payment through the Chapter 13 plan. However, nothing in the Code requires consent of the support claim holder to modification or to classification in a Chapter 13 plan. The Code measures the propriety of the classification of alimony and support against the unfair-discrimination standard in § 1322(b)(1); consistency with the state law rights of the claim holder is not required.
In Chapter 13 cases filed before October 22, 1994, a minority of courts refused to allow the separate classification for favorable treatment of alimony and support claims.14 One of these cases concluded that a proper balancing of competing state and federal interests demonstrated that support claims must be treated the same as other unsecured claims in a Chapter 13 case.15 Another court found unfair discrimination because the 1984 amendment to § 1322(b)(1) authorized different treatment of co-signed claims but not of support claims.16 Though canons of statutory interpretation can be found to support this view, this interpretation of the 1984 amendment would prohibit all separate classifications other than the administrative convenience and cosigner classes specifically mentioned in the statute.17
One of the pre-1994 decisions rejected separate classification of alimony and support claims on the reasoning that separate classification violates § 507 of the Code by creating a nonstatutory priority.18 This view was somewhat odd. Every classification that includes disparate treatment tinkers with the priority of claims in the sense that claims end up being paid different amounts or in a different order than would be required by § 507 under other circumstances. But § 1322(b)(1) only prohibits discriminations that are unfair. Section 1322(a)(2) mandates that claims entitled to priority under § 507 must be paid in full to accomplish confirmation in a Chapter 13 case.19 The separate classification for more favorable treatment of an alimony or child support claim does not create a new § 507 priority for purposes of § 1322(a)(2); rather, separate classification permits a Chapter 13 debtor to provide a treatment for the alimony or support claim that is different from the treatment of other unsecured claims. Treatment through the plan might be full payment of the sort contemplated by § 1322(a)(2) for priority claims, but it need not be.20 Prior to the 1994 amendments, the plan could compromise the alimony or support claim at some amount less than full payment. The issue under § 1322(b)(1) remained the fairness of the discrimination proposed by the debtor. Sections 507 and 1322(a)(2) are implicated in the classification of alimony or support in Chapter 13 cases filed after October 22, 1994, because alimony, maintenance and support debts are usually priority claims entitled to full payment.21
Even before the Bankruptcy Reform Act of 1994, the majority view permitting separate classification for favorable treatment of alimony and support claims was well founded in logic and the Code. Alimony and support are debts that can be managed through a Chapter 13 plan.22 The Bankruptcy Code contains many congressional expressions of intent to favor the treatment of claims for alimony, maintenance and support.23 The fairness of separate classification of alimony or support is appropriately measured on a case-by-case basis. Included in the calculus should be the likelihood of disruptive action by a former spouse if classification and favorable treatment are not permitted.
After the 1994 amendments, most debtors have new arguments in support of the separate classification of alimony and support. Alimony, maintenance and support debts that have not been assigned are both nondischargeable and entitled to priority in cases filed after October 22, 1994.24 The debtor is required by § 1322(a)(2) to provide for the full payment of all priority claims, unless the holder agrees to a different treatment.25 Absent consent, a Chapter 13 debtor cannot confirm a plan that fails to pay in full alimony, maintenance or support that has not been assigned. If the debtor is financially unable to pay all unsecured claim holders in full, the debtor must separately classify the alimony or support debt for more favorable treatment. The unfair-discrimination standard in § 1322(b)(1) will apply. Debtors will argue that it is fair discrimination to separately classify the priority debt for full payment because it is impossible to confirm a plan otherwise. This argument has been persuasive with respect to separate classification of other priority debts,26 and it should be at least equally compelling of the separate classification of priority claims for alimony or support.
To be entitled to priority, debts described in § 507(a)(7) must be “actually in the nature of alimony, maintenance or support.”27 This condition has significance in Chapter 13 cases in which the debtor proposes to favorably classify a debt for alimony, maintenance or support. The fairness of the resulting discrimination depends on whether the separately classified debt is actually in the nature of alimony, maintenance or support. If the separately classified debt does not satisfy the condition, it will not be entitled to the priority in § 507(a)(7), and the debtor’s argument that priority status justifies the discrimination will evaporate.
The qualifying phrase “actually in the nature of alimony, maintenance or support” in § 507(a)(7)(B) is identical to the predicate for nondischargeability in 11 U.S.C. § 523(a)(5)(B).28 The courts have struggled since the enactment of the Bankruptcy Code to define and apply this phrase in dischargeability litigation. The use of the same words in § 507(a)(7)(B) is an invitation to the same difficult litigation at confirmation in Chapter 13 cases. It is likely that the bankruptcy courts will look to § 523(a)(5) cases for guidance in determining whether a separately classified debt is actually in the nature of alimony, maintenance or support and thus entitled to priority in a Chapter 13 case under § 507(a)(7).29 One of the darkest nightmares for the bankruptcy courts is the possibility that “changed circumstances” will be evidence relevant to whether a debt is actually in the nature of alimony, maintenance or support for purposes of priority, full payment and separate classification.30 In Chapter 13 cases, the debtor may be in the (unusual) position of bearing the burden to prove that a separately classified debt is “actually in the nature of alimony, maintenance or support.”
An issue likely to receive more attention is the separate classification of alimony, maintenance and support debts to receive postpetition interest. Under state law, judgments for alimony, maintenance or support typically accrue interest at a fixed statutory rate. The interest accruing on a nondischargeable claim for alimony or support will itself be a nondischargeable claim against the debtor. Chapter 13 debtors have obvious incentives to separately classify such claims to pay postpetition interest.
This is a variation of the problem faced by Chapter 13 debtors with nondischargeable student loans that continue to accrue nondischargeable postpetition interest.31 Separate classification of a nondischargeable alimony or support claim for payment in full with postpetition interest may be objectionable because postpetition (unmatured) interest on an unsecured claim is not allowable under § 502(b)(1). A nondischargeable alimony or support claim that is entitled to priority under § 507(a)(7) must be paid in full but without interest under § 1322(b)(1).32 Chapter 13 debtors can confirm plans that separately classify alimony or support for payment in full without interest notwithstanding that interest will accrue during the case and will remain a nondischargeable personal liability of the debtor at the completion of payments under the plan.33 For the same reasons that Chapter 13 debtors have been prohibited from separately classifying nondischargeable student loans for payment in full with interest,34 the courts may be disinclined to allow Chapter 13 debtors to separately classify nondischargeable alimony or support claims for payment with postpetition interest.35 Debtors can argue that § 502(b)(1) only prohibits allowance of a claim for unmatured interest; it does not prohibit a plan from paying postpetition interest on an allowed claim that does not already include unmatured interest.
Usually, there are two components to a support debt—delinquent support due before the petition and a continuing obligation to make future payments. Allowance of a support installment that matures postpetition is complicated by 11 U.S.C. § 502(b)(5).36 In some jurisdictions, debtors can schedule the ongoing obligation as a continuing debt under 11 U.S.C. § 1322(b)(5)37 or as a budget item in Schedule J to Official Bankruptcy Form 638 and cure the default by separately scheduling the delinquency for full payment through the plan. A classification of unsecured claim holders results. Separate classification of a long-term unsecured claim to cure default and maintain payments under § 1322(b)(5) has been accepted by some courts in the student loan context as a fair discrimination under § 1322(b)(1).39 Evidence that the debtor must cure support delinquencies and stay current with ongoing support or face plan-disrupting sanctions in state court will enhance the likelihood that bankruptcy courts will approve favorable classification of all components of the support claim.
Alimony, maintenance or support debts assigned to the federal government or to a state or assigned pursuant to the Social Security Act are nondischargeable in all Chapter 13 cases but are excluded from the new priority in § 507(a)(7).40 In Chapter 13 cases filed after October 22, 1994, the arguments for favorable classification of alimony, maintenance or support that has been assigned would be the same arguments available in Chapter 13 cases filed before October 22, 1994—in both situations, such debts are nondischargeable but not entitled to priority. As demonstrated above,41 prior to the 1994 amendments, a majority of courts held that nondischargeable alimony or support claims could be separately classified for more favorable treatment. Alimony or support claims assigned to a state or federal government or assigned pursuant to the Social Security Act in cases filed after the 1994 amendments, are in the same boat, and it can be anticipated that most courts will find it is fair discrimination to favorably classify such claims notwithstanding that the claims fail the test for priority in § 507(a)(7). It is also likely that the minority position in the pre-1994 cases will be represented: in some courts, debtors with assigned alimony or support claims will have to prove more than just nondischargeability to justify the fairness of separate classification.42
The case that makes the point is In re Crawford.43 The debtor owed $18,000 of delinquent child support to the county because the county had paid welfare to the mother of Crawford’s child and taken an assignment of her entitlement to child support. This debt was nondischargeable but not entitled to priority because of the assignment.
Crawford’s plan created two classes of unsecured debt: the nonpriority, nondischargeable debt to the county was separately classified to be paid two-thirds while other unsecured creditors would get nothing. Without the separate classification, unsecured claims in a single class could be paid 32 percent.
The district court in Crawford applied the traditional four-part test for the fairness of discrimination44 and concluded the plan lacked a reasonable basis and could not be confirmed.45 The district court acknowledged that the debt for child support “carries with it public policy considerations in favor of supporting children,”46 but because Crawford’s support was assigned, the public policy considerations “do not tip the scales in favor of debtor in this case.”47
The Seventh Circuit affirmed but applied an entirely new test for the fairness of the discrimination in favor of the assigned support claim. Reviewing the multifactor tests used by the district court and many other courts,48 the Seventh Circuit described these other tests as “empty” and inadequate to protect the “legitimate interests of creditors in repayment.”49 Circuit Judge Posner confessed that the panel was not able to “think of a good test ourselves”; but the opinion offers bookends within which bankruptcy judges exercise discretion in the search for a “result that is reasonable”:
[I]f 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. . . . At the other extreme is a nondischargeable debt consisting of a fine imposed, or restitution ordered, in respect of a criminal fraud that the Chapter 13 debtor committed, together with other unsecured debts, and he proposes a classification under which the nondischargeable debt will be paid in full and the other creditors will receive nothing at all. Approval of such a plan would be unreasonable. . . . The effect of the plan if approved in such a case would be to make the debtor’s other unsecured creditors pay his fine or restitution!50
The Seventh Circuit found that Crawford’s plan “lies in between our examples, but it is closer to the second and close enough to require us to affirm its rejection.”51 With respect to the nondischargeable character of the debt, “the retributive and deterrent interests are weaker than in the case of a deliberate criminal act since nonpayment can be involuntary as well voluntary; but no reason has been shown for allowing Crawford to shift two-thirds of this debt to his other unsecured creditors.”52 Judge Posner then gave this example of a separate classification that might have worked for Crawford:
Had he proposed to carve-down his nondischargeable debt to the principal owed on it (roughly $12,000), and had he shown that without such a carve-down he would be staggering under such a crushing load of undischarged debt as to make it inevitable or nearly so that he would soon be back in bankruptcy court, this time under Chapter 7, the bankruptcy court might deem such a plan reasonable and we presumably would affirm—especially if the unsecured creditors would do worse in Chapter 7 than they would do under Crawford’s revised Chapter 13 plan.53
Summing up, the Seventh Circuit denied separate classification but with plenty of wiggle room for the next case:
We do not hold that child-support debts, or, as in this case, a debt arising from the assignment of the right to child support, cannot be classified. Nor do we hold that Crawford cannot formulate an acceptable plan that would involve an element of classification. We hold only that the bankruptcy court did not abuse its discretion in rejecting, as an unfair discrimination against his other creditors, the plan he proposed, which would if approved have shifted two-thirds of his nondischargeable debt to his other creditors, leaving them with nothing.54
Crawford is refreshing, but on close reading perhaps it offers little hope for separate classification in Chapter 13 cases, beyond the specific examples in the text. The economic test outlined by Judge Posner is not realistic: there are very few Chapter 13 cases in which conversion to Chapter 7 would produce any dividend for unsecured creditors. It will almost always be true that any dividend offered to unsecured creditors by the Chapter 13 plan is more than unsecured creditors would realize in Chapter 7. But it is also almost always true that in any Chapter 13 case in which the debtor separately classifies a nondischargeable debt for more favorable treatment, there is an alternative plan that would pay all unsecured creditors pro rata that produces a higher dividend for dischargeable unsecured claims. The circumstances when the debtor will be “unable” to complete any Chapter 13 plan without favorable separate classification of the nondischargeable claim will be even rarer than Judge Posner’s examples suggest.55
From the debtor’s standpoint, a separate classification for full payment of child support or alimony is the best defense to postpetition collection action by a former spouse.56 Former spouses are often persuaded to delay state court action when the debtor proposes to pay the delinquency in full with a preferential classification through the Chapter 13 plan, especially when there is a payroll deduction order57 in effect. It is a long shot, but perhaps evidence that the assignee of support has a criminal remedy that would torpedo any Chapter 13 plan would satisfy the test for fair discrimination in Crawford.
Upon objection to separate classification of a child support or alimony claim, the debtor has the burden to prove the negative: “not unfair discrimination.” Counsel may need to demonstrate the likelihood of disruptive collection action in another court if the debtor fails to favorably classify the claim. A former spouse’s commitment to refrain from collection action in exchange for payment through the plan, coupled with evidence that the debtor cannot retire all unsecured claims in full, would be relevant. In states in which support orders have priority for garnishment of the debtor’s wages, other creditors are less unfairly disadvantaged by favorable classification of support in the Chapter 13 plan.
1 11 U.S.C. § 523(a)(5) states:
2 11 U.S.C. § 1328(a)(2); (c)(2). See § 345.1 [ Alimony, Maintenance or Support ] § 158.1 Alimony, Maintenance or Support. See also § 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1 Alimony, Maintenance and Support in Cases Filed before October 22, 1994.
3 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994), states:
4 See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1 Plan Must Provide Full Payment, 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims?, 151.1 [ Priority Claims ] § 87.4 Priority Claims, 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994.
5 11 U.S.C. § 507(a)(7).
6 11 U.S.C. § 523(a)(5)(A).
7 But see In re Beverly, 196 B.R. 128, 132 (Bankr. W.D. Mo. 1996) (In a jurisdiction that permitted, if not required, the separate classification of nondischargeable child support for payment in full in Chapter 13 cases prior to the 1994 amendments, the omission of the “assignment” exception to the exception in § 507(a)(7) is not meaningful because even an assigned child support claim that fails the test for priority in § 507(a)(7) will still be nondischargeable under § 523(a)(5) and must be separately classified for payment in full else the creditor will be entitled to relief from the automatic stay. “[T]he omission of the exception to the exception from § 507(a)(7) is, in its effect, meaningless when it is read harmoniously with § 523(a)(5)(A) and the judicial interpretation of that section. Section 523(a)(5)(A) still mandates that claims for child support which were assigned to a government agency are nondischargeable. And as several courts . . . found prior to the addition of § 507(a)(7) to the Act, those claims are to be given preferential treatment in a Chapter 13 plan. If they are not, the automatic stay may be lifted as to the child support arrearages and the claimant may pursue other remedies. . . . Such a claim should not be classified with other general unsecured debts receiving only a percentage of the claim. As such, a debt for child support which has been assigned to a government agency should be treated as though it is a priority debt in a Chapter 13 plan: it should be paid in full.”).
8 Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991) (Child support arrearage claims assigned to a county agency can be separately classified for 100% payment, notwithstanding 8% dividend to other unsecured claim holders. Separate classification does not violate § 1122, and the discrimination is fair because child support arrearage claims are nondischargeable in the Chapter 13 case. Court cites with approval the four-part test of AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), In re Storberg, 94 B.R. 144 (Bankr. D. Minn. 1988), and In re Dziedzic, 9 B.R. 424 (Bankr. S.D. Tex. 1981).); Spokane Ry. Credit Union v. Gonzales (In re Gonzales), 172 B.R. 320, 327–28 (E.D. Wash. 1994) (Disapproving of Caswell v. Lang, 757 F.2d 608 (4th Cir. 1985), Pacana v. Pacana-Siler (In re Pacana), 125 B.R. 19 (B.A.P. 9th Cir. 1991), In re Warner, 115 B.R. 233 (Bankr. C.D. Cal. 1989) and In re McCray, 62 B.R. 11 (Bankr. D. Colo. 1986), and citing Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991), with approval, plan can separately classify child support arrearage for payment in full. “Separate classification for child support is not unfair in light of the non-dischargeability of child support, society’s strong interest in having child support paid in full, and a debtor’s need to start fresh upon completion of the plan. . . . Given that Debtor is in arrears some $18,000 since 1980, this court does not believe that Debtor is now using bankruptcy as a means to evade his familial responsibilities, although he may previously have ignored those responsibilities. . . . Including 100% repayment of outstanding child support in the Chapter 13 plan will help assure that Debtor finally meets this obligation. Although child support is typically a matter of state concern, this court sees no harm in facilitating payment of the arrearage at this late date.”); James v. Moore (In re James), 150 B.R. 479, 485 (Bankr. M.D. Ga. 1993) (“A debtor in a Chapter 13 case must be able to deal with the arrearages on support obligations that are nondischargeable. It would be virtually impossible to propose a successful Chapter 13 plan that does not provide for payment in full of such obligations. . . . [S]eparate classification does not unfairly discriminate against other unsecured creditors. . . . Debtor can classify the support arrearage and pay it in full.”); In re Benner, 146 B.R. 265 (Bankr. D. Mont. 1992) (Chapter 13 plan can separately classify maintenance arrearage for payment in full with payment of nothing to other unsecured claim holders without violating the proscription against unfair discrimination in § 1322(b)(1). Distinguishing Pacana v. Pacana-Siler (In re Pacana), 125 B.R. 19 (B.A.P. 9th Cir. 1991), no unsecured creditor objected. The debtor’s ex-spouse accepted. In a Chapter 7 case unsecured claim holders would receive no distribution. The debtor voluntarily extended the plan to five years to accomplish full payment of the nondischargeable maintenance claim. Applying four-part test, “there is a rational basis for discrimination between the claim for maintenance and the other unsecured claims. . . . As noted by the Eighth Circuit in [Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991),] Congress anticipated some discrimination by allowing for separate classes. . . . The mere fact that the maintenance debt, a nondischargeable obligation, is paid in full while other unsecured claims receive nothing is not sufficient for a finding of unfair discrimination.”); In re Husted, 142 B.R. 72, 74, 74–75 (Bankr. W.D.N.Y. 1992) (Court confirms plan separately classifying delinquent child support for payment in full while paying other unsecured creditors 25%. Court discusses four-part test, adding fifth factor, “the difference between what the creditors discriminated against will receive as the plan is proposed and the amount they would receive if there was no separate classification.” However, “because of the uncertainty in the application of this four-part test this court is prepared, in the absence of a showing of bad faith or specific valid objections by creditors or the trustee, to confirm Chapter 13 plans which propose to separately classify unsecured claims and provide different treatment for the separate classes when it is clearly demonstrated that: (1) there is a good faith rational basis for the separate classification . . . especially if the debts being separately classified would otherwise be nondischargeable under §§ 523 or 1328; and (2) the class being discriminated against is receiving a meaningful distribution. . . . The separate classification of nondischargeable debts . . . will enable the debtor to meet Congress’ clear policy of having these claims paid in full, and will allow the debtor to obtain a true ‘fresh start.’”); In re Harris, 132 B.R. 166 (Bankr. S.D. Iowa 1991) (Applying four-factor test, separate classification of child support for payment in full and nothing to other unsecured claim holders is not unfairly discriminatory. However, past-due child support payments cannot be included in a Chapter 13 plan absent written consent of the recipient. In the absence of consent, it is bad faith under § 1325(a)(3) to propose a plan that defers back child support payments.); In re Santa Maria, 128 B.R. 32, 37 (Bankr. N.D.N.Y. 1991); (“Discrimination between child support arrearage claims and other unsecured claims in terms of the period of repayment and percent of dividend may be required to effect expedient payment in full of the support and alimony claims.”); In re Whittaker, 113 B.R. 531 (Bankr. D. Minn. 1990) (Approving In re Davidson, 72 B.R. 384 (Bankr. D. Colo. 1987), and applying four-part test from In re Dziedzic, 9 B.R. 424 (Bankr. S.D. Tex. 1981), and other cases, court confirms plan separately classifying child support arrearage for 100% payment while compromising other unsecured debts at 10%.); In re Herkenhoff, 101 B.R. 585 (Bankr. E.D. Mo. 1989) (A Chapter 13 debtor can separately classify a child support claim for more favorable treatment than other unsecured claims; however, plan cannot be confirmed that alters the rights of the recipient of the child support, absent consent.); In re Storberg, 94 B.R. 144 (Bankr. D. Minn. 1988); In re Davidson, 72 B.R. 384 (Bankr. D. Colo. 1987); In re Haag, 3 B.R. 649 (Bankr. D. Or. 1980); In re Curtis, 2 B.R. 43 (Bankr. W.D. Mo. 1979).
9 11 U.S.C. § 1328(a)(2); see § 345.1 [ Alimony, Maintenance or Support ] § 158.1 Alimony, Maintenance or Support.
10 Mickelson v. Leser (In re Leser), 939 F.2d 669, 672 (8th Cir. 1991). Accord In re Beverly, 196 B.R. 128, 131–32 (Bankr. W.D. Mo. 1996) (Classification of $33,239.15 of child support arrearages as a general unsecured claim is inappropriate—the claim is either a priority claim under new § 507(a)(7) that must be paid in full or the claim is nondischargeable and should be separately classified and paid in full or the stay lifted. In either case, separate classification for full payment is appropriate. Debtor listed child support arrearages as a nonpriority unsecured claim on the theory that it was assigned to the Child Support Enforcement Unit of the State of Missouri and thus excepted from the new priority in § 507(a)(7). “Section 507(a)(7) is nearly identical to § 523(a)(5), except that § 523(a)(5) provides two exceptions to the exception as to the assignments, whereas § 507(a)(7) does not. . . . In other words, under § 523(a)(5)(A), if the debt for child support was assigned to a governmental unit it cannot be discharged in bankruptcy. . . . If, on the other hand, it was assigned to a non-governmental agency, it would be dischargeable. . . . [T]he omission of the exception to the exception from § 507(a)(7) is, in its effect, meaningless when it is read harmoniously with § 523(a)(5)(A) and the judicial interpretation of that section. Section 523(a)(5)(A) still mandates that claims for child support which were assigned to a government agency are nondischargeable. And as several courts . . . found prior to the addition of § 507(a)(7) to the Act, those claims are to be given preferential treatment in a Chapter 13 plan. If they are not, the automatic stay may be lifted as to the child support arrearages and the claimant may pursue other remedies. . . . Such a claim should not be classified with other general unsecured debts receiving only a percentage of the claim.”).
11 In re Santa Maria, 128 B.R. 32, 37 (Bankr. N.D.N.Y. 1991). Accord In re Bunn, 170 B.R. 670, 675 (Bankr. D. Minn. 1994) (On a motion for relief from the stay, citing Leser with approval, “[p]ublic policy favors preferential treatment of child support debts in chapter 13 cases. Such treatment at a minimum entails separate classification of the child support debt. If a debtor does not propose a plan that separately classifies the child support arrearage, it may be inferred that the debtor proposes the plan in bad faith for the purpose of circumventing child support obligations.”).
12 See In re Harris, 132 B.R. 166 (Bankr. S.D. Iowa 1991) (Separate classification of child support for payment in full and nothing to other unsecured claim holders is not unfairly discriminatory. However, past-due child support payments cannot be included in a Chapter 13 plan absent written consent of the recipient.); In re Herkenhoff, 101 B.R. 585 (Bankr. E.D. Mo. 1989) (A Chapter 13 debtor can separately classify a child support claim for more favorable treatment than other unsecured claims; however, plan cannot be confirmed that alters the rights of the recipient of the child support, absent consent.).
13 See 11 U.S.C. § 1322(b)(2), discussed in § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1 Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.
14 See In re Warner, 115 B.R. 233 (Bankr. C.D. Cal. 1989) (It is unfair discrimination to pay child support arrearages in full and other unsecured claim holders nothing. After analysis of competing state and federal interests, court seems to hold that support claims must be treated the same as other unsecured claims. However, support arrearages must be paid “outside” the plan if a state court has entered prebankruptcy orders fixing the amount of payments.); In re Stewart, 52 B.R. 281 (Bankr. W.D.N.Y. 1985) (It is unfair discrimination to separately classify nondischargeable child support claims for more favorable treatment. 1984 amendment permitting classification of co-signed claims indicates congressional intent to exclude other classifications of unsecured claim holders.). See also Lawson v. Lackey (In re Lackey), 148 B.R. 626 (Bankr. N.D. Ala. 1992) (In dicta, although generally approving of Mickelson v. Leser (In re Leser), 939 F.2d 669 (8th Cir. 1991), it is unfair discrimination to separately classify child support arrearage for more favorable treatment. Such a separate classification violates § 507 by creating a new priority. Congress otherwise protected child support arrearage by making it nondischargeable. Because neither the trustee nor the holder of a general unsecured claim objected, confirmed plan separately classified child support arrearage for 9% payment with no payment to other unsecured claim holders. This plan would not have been confirmed had a party adversely affected by the classification objected.).
15 In re Warner, 115 B.R. 233 (Bankr. C.D. Cal. 1989).
16 In re Stewart, 52 B.R. 281 (Bankr. W.D.N.Y. 1985).
17 See 11 U.S.C. §1322(b)(1) and its cross-reference to § 1122, discussed in § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
18 Lawson v. Lackey (In re Lackey), 148 B.R. 626 (Bankr. N.D. Ala. 1992). Lackey was decided two years before Congress amended § 507(a) to give debts for alimony, maintenance and support a seventh priority. See 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994).
19 11 U.S.C. § 1322(a)(2). See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1 Plan Must Provide Full Payment and 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims. In Chapter 13 cases filed after October 22, 1994, debts for alimony, maintenance or support described in 11 U.S.C. § 507(a)(7), are priority claims entitled to full payment under § 1322(a)(2). See §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims? and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994.
20 See In re Slater, 188 B.R. 852 (Bankr. E.D. Wash. 1995) (Chapter 13 plan that separately classifies a judgment for child support for payment in full without interest can be confirmed notwithstanding that the nondischargeable claim will accrue nondischargeable interest under state law because there is “no requirement” in Chapter 13 that a nondischargeable claim for child support be paid in full in a Chapter 13 case filed before October 22, 1994.).
21 See 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994), discussed in this section and in §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims? and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994.
22 See 11 U.S.C. § 101(5); (12). This facially indisputable statement has been finessed by some courts. See § 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1 Alimony, Maintenance and Support in Cases Filed before October 22, 1994.
23 See 11 U.S.C. § 523(a)(5) (excepting from discharge claims for alimony, maintenance or support of a spouse or child); 11 U.S.C. § 362(b)(2) (excepting from the operation of the automatic stay “the collection of alimony, maintenance, or support from property that is not property of the estate”); 11 U.S.C. § 1328(a)(2) (excepting from discharge after completion of payments in a Chapter 13 case any debt for alimony, maintenance or support described in § 523(a)(5)). The Bankruptcy Reform Act of 1994 added and amended several sections of the Code in ways that demonstrate congressional intent to pay and to protect alimony, maintenance and support debts in bankruptcy cases. See, e.g., 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994) (giving most alimony, maintenance and support claims a seventh priority for distribution and entitling such claims under § 1322(a)(2) to full payment in all Chapter 13 cases filed after October 22, 1994); 11 U.S.C. § 523[(a)](15), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994) (creating a new exception to discharge for debts incurred through a divorce or separation agreement); 11 U.S.C. § 547(c)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994) (creating a new exception to the preference avoidance power for transfers to a spouse, former spouse or child for alimony, maintenance or support); 11 U.S.C. § 522(f)(1)(A), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994) (prohibiting the avoidance of “divorce liens” in bankruptcy cases); 11 U.S.C. § 362(b)(2), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994) (creating new exceptions to the automatic stay for actions to establish or modify an order for alimony, maintenance or support).
24 See above in this section and see §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims?, 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994.
25 See 11 U.S.C. § 1322(a)(2), discussed beginning at § 73.1 Plan Must Provide Full Payment and beginning at § 136.1 Treatment of Priority Claims.
26 See § 151.1 [ Priority Claims ] § 87.4 Priority Claims.
27 11 U.S.C. § 507(a)(7)(B).
28 See above in this section, and see § 345.1 [ Alimony, Maintenance or Support ] § 158.1 Alimony, Maintenance or Support.
29 See §§ 99.1 [ What Claims Are Priority Claims? ] § 73.2 What Claims Are Priority Claims? and 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994. See, e.g., Beaupied v. Doe (In re Doe), 193 B.R. 12, 15–19 (Bankr. N.D. Cal. 1996) (Fees for court-appointed attorney and neutral expert in paternity and custody litigation are actually in the nature of support for purposes of § 523(a)(5) and are entitled to priority under § 507(a)(7) and to full payment under § 1322(a)(2). “[T]he similarity in language between § 507(a)(7) and § 523(a)(5) invites the conclusion that the case law interpreting the latter should be considered in applying the former. . . . [P]ersuasive authority in the Ninth Circuit and other circuits indicates that attorneys fee for the attorney representing a child in a custody action should be nondischargeable in a § 523(a)(5) case, and thus should be entitled to priority under § 507(a)(7). . . . The neutral expert fees in question resulted from evaluating the respective abilities of Debtor and Father to provide adequate care and support for Child. . . . A finding of nondischargeability of the neutral experts’ fees is required under § 523(a)(5). . . . [T]he State Court’s order requiring Debtor to reimburse Father for paying ‘more than his share’ to these experts does not constitute an assignment of these debts that would take away priority status under § 507(a)(7)(A).”), rev’d sub nom. Beaupied v. Chang (In re Chang), 210 B.R. 578 (B.A.P. 9th Cir. 1997), rev’d, 163 F.3d 1138, 1141–42 (9th Cir. 1998) (Affirming bankruptcy court, fees and expenses owed to father and guardian ad litem for debtor’s child are nondischargeable under § 523(a)(5) and are priority claims under § 507(a)(7) entitled to full payment through Chapter 13 plan. “[T]he identity of the payee is less important than the nature of the debt. . . . We agree with the bankruptcy court’s holding that application of § 507(a)(7) should be coincidental with application of § 523(a)(5).”).
30 At least one court of appeals has considered changed circumstances of the debtor to determine whether a debt is actually in the nature of alimony, maintenance or support in dischargeability litigation under 11 U.S.C. § 523(a)(5). See Sorah v. Sorah (In re Sorah), 163 F.3d 397, 401 (6th Cir. 1998); Fitzgerald v. Fitzgerald (In re Fitzgerald), 9 F.3d 517 (6th Cir. 1993); Long v. Calhoun (In re Calhoun), 715 F.2d 1103 (6th Cir. 1983).
31 See §§ 153.1 [ Student Loans ] § 88.6 Student Loans and 346.1 [ Student Loans ] § 158.2 Student Loans.
32 See §§ 100.2 [ Interest Not Required, with Exceptions ] § 73.5 Interest Not Required, with Exceptions and 299.1 [ Postpetition Interest on Priority Claims ] § 136.16 Postpetition Interest on Priority Claims before BAPCPA.
33 See In re Slater, 188 B.R. 852, 855–56 (Bankr. E.D. Wash. 1995) (Citing Spokane Railway Credit Union v. Gonzales (In re Gonzales), 172 B.R. 320 (E.D. Wash. 1994), plan can separately classify judgment for child support for payment in full without interest notwithstanding that the claim is nondischargeable and will accrue interest under state law that will remain a nondischargeable liability of the debtor at completion of payments to other creditors. “[T]his Court concludes that it has the authority to include child support arrearages in a Chapter 13 plan. . . . [E]ven though the debtor’s plan does not provide for interest on the non-dischargeable child support debt, the plan is confirmable because the interest may continue to accrue against the debtor to be recovered from the debtor personally at the conclusion of the case. Furthermore, there is no requirement that the non-dischargeable debt—with or without interest—be paid in full during the pendency of the case.” Cites Bruning v. United States, 376 U.S. 358, 84 S. Ct. 906, 11 L. Ed. 2d 772 (1964), and Leeper v. Pennsylvania Higher Educ. Assistance Agency, 49 F.3d 98 (3d Cir. 1995).).
34 See §§ 153.1 [ Student Loans ] § 88.6 Student Loans and 346.1 [ Student Loans ] § 158.2 Student Loans.
35 See In re Burns, 216 B.R. 945 (Bankr. S.D. Cal. 1998) (Court denies confirmation of modified plan that would separately classify a nondischargeable, nonpriority support claim for payment in full with interest and no payment to other unsecured claim holders.).
36 See §§ 69.1 [ Alimony and Support Exception ] § 58.5 Alimony and Support Exception, 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1 Alimony, Maintenance and Support in Cases Filed before October 22, 1994.
37 See §§ 155.2 [ Long-Term Debts ] § 88.9 Long-Term Debts, 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4 Curing Default and Maintaining Payments on Unsecured Debt, 301.1 [ Alimony, Maintenance and Support in Cases Filed after October 22, 1994 ] § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and 303.1 [ Alimony, Maintenance and Support in Cases Filed before October 22, 1994 ] § 138.1 Alimony, Maintenance and Support in Cases Filed before October 22, 1994.
38 See § 35.10 [ Schedules I and J—Income and Expenditures ] § 36.16 Schedules I and J—Income and Expenditures.
39 See §§ 153.1 [ Student Loans ] § 88.6 Student Loans and 155.2 [ Long-Term Debts ] § 88.9 Long-Term Debts.
40 Compare 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994), with 11 U.S.C. § 523(a)(5). See above in this section.
41 See above in this section.
42 See In re Burns, 216 B.R. 945, 947–48 (Bankr. S.D. Cal. 1998) (At modification after confirmation, applying AMFAC Distribution Corp. v. Wolff (In re Wolff), 22 B.R. 510 (B.A.P. 9th Cir. 1982), denies confirmation of modified plan that would separately classify a nondischargeable, nonpriority support claim that had been assigned to a governmental unit. Original confirmed plan proposed payment in full of priority child support claim and no payment to general unsecured creditors. It turned out that the support claim had been assigned to a governmental unit that filed a general unsecured claim. When it appeared that confirmed plan would pay in full based on filed claims in only 11 months, Chapter 13 trustee moved to modify to require payment of 30% to general unsecured claims. Debtor responded with a proposed modification that would separately classify the assigned child support claim for payment in full with interest and no payment to other unsecured claim holders. Applying the four-part test in Wolff, and citing In re Sperna, 173 B.R. 654 (B.A.P. 9th Cir. 1994), “mere non-dischargeability is not a reasonable basis for discrimination between classes of unsecured Chapter 13 debt.” Court rejected argument that debtor could not confirm a plan without the discrimination based on fear of criminal prosecution for failing to pay the child support. “It appears the Wolff factors are expressed in the conjunctive—that is, a debtor proposing a discriminatory plan must satisfy each of them. Since the Debtors have not convinced the court that the plan cannot be carried out without discrimination, the Debtors’ modified plan must be denied confirmation.” The court confirmed the trustee’s proposed modification.). Compare In re Beverly, 196 B.R. 128, 131–32 (Bankr. W.D. Mo. 1996) (Classification of $33,239.15 of child support arrearages as a general unsecured claim is inappropriate—the claim is either a priority claim under new § 507(a)(7) that must be paid in full or the claim is nondischargeable and should be separately classified and paid in full or the stay lifted. In either case, separate classification for full payment is appropriate. Debtor listed child support arrearages as a nonpriority unsecured claim on the theory that it was assigned to the Child Support Enforcement Unit of the State of Missouri and thus excepted from the new priority in § 507(a)(7). “Section 507(a)(7) is nearly identical to § 523(a)(5), except that § 523(a)(5) provides two exceptions to the exception as to the assignments, whereas § 507(a)(7) does not. . . . In other words, under § 523(a)(5)(A), if the debt for child support was assigned to a governmental unit it cannot be discharged in bankruptcy. . . . If, on the other hand, it was assigned to a non-governmental agency, it would be dischargeable. . . . [T]he omission of the exception to the exception from § 507(a)(7) is, in its effect, meaningless when it is read harmoniously with § 523(a)(5)(A) and the judicial interpretation of that section. Section 523(a)(5)(A) still mandates that claims for child support which were assigned to a government agency are nondischargeable. And as several courts . . . found prior to the addition of § 507(a)(7) to the Act, those claims are to be given preferential treatment in a Chapter 13 plan. If they are not, the automatic stay may be lifted as to the child support arrearages and the claimant may pursue other remedies. . . . Such a claim should not be classified with other general unsecured debts receiving only a percentage of the claim. As such, a debt for child support which has been assigned to a government agency should be treated as though it is a priority debt in a Chapter 13 plan: it should be paid in full.” After calling the 800 number listed in the phone book for “Child Support Enforcement,” court determined that the claim was not actually “assigned” as contemplated in § 507(a)(7) because the Division of Child Support Enforcement “does not make payments to the mother in lieu of Debtor’s payments. Rather, it is a government agency which attempts to assist in administering and enforcing the payment of child support. . . . The debt is still owed to the mother but the payments are made through the agency, so no assignment has occurred.” Even if claim was assigned, Division of Child Support Enforcement was a government agency, and thus the claim was nondischargeable under § 523(a)(5)(A).).
43 324 F.3d 539 (7th Cir. 2003).
44 See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
45 Crawford v. Chatterton (In re Crawford), 268 B.R. 832 (W.D. Wis. 2001).
46 268 B.R. at 838.
47 268 B.R. at 838.
48 See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
49 324 F.3d at 542.
50 324 F.3d at 542–43.
51 324 F.3d at 543.
52 324 F.3d at 543.
53 324 F.3d at 543.
54 324 F.3d at 544.
55 See § 88.6 Student Loans, § 88.7 Restitution, Fines and Other Criminal Problems, § 88.8 Driving, Boating or Flying while Intoxicated and § 88.10 Claims That Are or Might Be Nondischargeable Only in a Chapter 7 (Chapter 12, or Individual Chapter 11) Case for cases rejecting classifications like the examples in Crawford.
56 See §§ 68.2 [ Additional Protection for Postpetition Property and Income ] § 58.3 Additional Protection for Postpetition Property and Income, 69.1 [ Alimony and Support Exception ] § 58.5 Alimony and Support Exception and 246.1 [ Alimony and Support Collection after Confirmation ] § 124.6 Alimony and Support Collection after Confirmation.
57 See § 248.1 [ Order to Debtor’s Employer ] § 125.1 Order to Debtor’s Employer.