Opinion ID: 410407
Heading Depth: 1
Heading Rank: 2

Heading: the appropriate procedure to follow in a secured claim case

Text: 13 Although there are as yet few court of appeals and district court cases touching on the new Chapter 13, there are already many bankruptcy court cases. A reading of those cases suggests a composite set of procedures followed implicitly by most bankruptcy courts in secured claim cases: 14 1. Determine the present value of the collateral under the secured claim provisions of 1325. 15 2. Determine the amount allowable under applicable law to the creditor by virtue of the debtor's default including unpaid principal, finance charges, interest earned prior to filing but unpaid, etc. 16 3. Subtract the amount of the secured claim determined in Step 1 from the amount calculated in Step 2. This represents the unsecured claim. 17 4. Determine the appropriate interest rate to be applied the the secured claim, as more fully discussed below. Add the secured claim and the interest to be paid. 18 5. Determine based on the debtor's ability to pay and his conduct how much of the allowed unsecured claim should be paid, provided this amount is not less than the value the creditor would receive in straight bankruptcy. 19 6. Determine whether the debtor's proposed plan, based on his ability to pay and conduct, is reasonable and in good faith. 20 7. Confirm, deny confirmation or suggest modifications in the plan depending on the outcome of step 6. 21 This procedure seems to fit well with the statutory framework and statutory purpose in Chapter 13 cases. It eliminates the confusion under the old law and had the Bankruptcy Court followed it, we would not have the present confusion about what it intended to do in this case. We reverse and remand the case to the Bankruptcy Court with instructions to follow this procedure. 22