Court Opinion

ID: 9735051
Source: CourtListenerOpinion
Date Created: 2023-08-26 17:58:48.874251+00
Date Added: 2024-06-11T18:26:54.843574
License: Public Domain

PAPPAS, Bankruptcy Judge,
Concurring.
In this appeal, the Panel wrestles with a common task: interpreting a provision of the Bankruptcy Code containing what some consider to be “awkward” language, § 1322(b)(1). The issue: whether, after *849the 1984 addition of the “however clause” to § 1322(b)(1), the “different” treatment proposed in a debtor’s chapter 13 plan for a consumer debt on which another individual is liable must be “fair.” What is unusual here, however, is that the challenge of achieving consensus about the meaning of this statute has proved to be too much for the Panel. While all members of the Panel agree about the result of this appeal, we propose three different approaches for disposing of the issue.
The majority Opinion prefers to affirm the bankruptcy court’s decision based on the facts. While providing a comprehensive justification for a possible interpretation of § 1322(b)(1), this Opinion stops short of adopting its solution to the underlying statutory mystery for now, suggesting that the Panel must wait for better facts before taking a firm stand.
My concurring colleague would also affirm, but in contrast to the majority, does so by confidently concluding that, in adopting the however clause, “Congress wanted to make crystal clear ... that a chapter 13 debtor has the right to classify separately unsecured claims with co-obligors from other unsecured claims without eliminating the prohibition [in the pre-1984 language of § 1322(b)(1) ] on unfair discrimination.” While this opinion is certainly definitive, in my view, I respectfully disagree with the conclusion it reaches.
As for me, I also think we should announce a clear rule in our ruling today disposing of this issue. However, in my opinion, we should hold that since the addition of the however clause to § 1322(b)(1), different chapter 13 debtor plan treatments accorded consumer debts eo-signed by another individual are no longer subject to the unfair discrimination rule. In arriving at my conclusion, I am tempted to join those bankruptcy courts, including the bankruptcy court in this case, that hold that in adding the however clause to § 1322(b)(1), Congress plainly created an unambiguous exception to the prohibition against unfair discrimination in plan claim treatment for a limited, defined class of creditors: those individual creditors that were liable with the debtor on consumer debt. See, e.g., In re Hill, 255 B.R. at 581 (Bankr.N.D.Cal.2000) (describing 1984 amendment as “simple and unambiguous” and holding that the however clause “does not mean that in all cases a plan which separately classifies co-signed [consumer] debt must be confirmed, but only that the basis of denial of confirmation may not be unfairness to the other unsecured debt.”); and In re Dornon, 103 B.R. at 64. If that is the case, then our task here is to apply the exception as written. United States v. Ron Pair Enters. Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (instructing that when the language of the Bankruptcy Code is plain, the sole function of the courts is to enforce it according to its terms.).
However, I acknowledge that more than a few courts have, like my two colleagues, considered the amended language of § 1322(b)(1) to be ambiguous, requiring application of statutory construction techniques to unravel. But see Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) (cautioning that, in construing the Bankruptcy Code, that the statute’s language may be awkward, does not make it ambiguous). While I agree a case can be made that the meaning of the statute is not clear, when I look outside its language, I nonetheless reach the same conclusion as the “plain language” courts do. In my view, given the context in which the 1984 amendment was enacted, Congress intended to exempt cosigned consumer debts from the unfair discrimination restrictions in § 1322(b)(1) applicable to other kinds of debt.
I will not attempt an extended justification for my construction of § 1322(b)(1). *850Instead, an excellent defense of this interpretation is found in the Judge Benevides’ concurring opinion in Ramirez v. Bracher (In re Ramirez), 204 F.3d 595, 596-601 (5th Cir.2000). In that opinion, the author notes that, to give appropriate effect to the however clause, it must refer to claim treatment that constitutes something other than unfair discrimination, as referenced in the prior clause of § 1322(b)(1). In other words, “there was no need for Congress to separately address the manner in which co-signed [consumer] 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.” Id. at 599. Therefore, the judge explains, “[t]o give meaning to all words in the amended section, it must be true that a debtor’s power to treat cosigned consumer debts ‘differently’ has content separate from the proscription against unfair discrimination. The awkward language is resolved by holding that all different treatments are not necessarily fair discrimination.” Id. (quoting Nelson v. Easley (In re Easley), 72 B.R. 948, 956 (Bankr.M.D.Tenn.1987)). In reconciling the legislative history cited in the majority Opinion, above, with his view of the meaning of the Code, Judge Benevides opines:
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 policy 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 cosigned debt from the unfair discrimination test would be an invitation to abuse. Nevertheless, I believe that the good faith requirement under section 1325(a)(3) remains a safeguard against abuse.
Id. at 600 (citations omitted).
I would hold that, because Congress authorized it, a chapter 13 plan may treat cosigned consumer claims differently, even though that treatment may, in some cases, be unfair when compared to that given the claims of other creditors.14 This is so because, it was apparently the opinion of Congress that it is more likely that debtors will propose realistic, feasible chapter 13 plans if they can prefer claims on which, in many cases, a family member is also liable. While other creditors may think *851this approach is unfair, receipt of even a modest distribution on their claims (as will result in the case on appeal) will exceed what they would receive were the debtor to seek chapter 7 relief. Moreover, allowing different treatment of co-signed consumer debts may prevent the codebtor from also having to seek bankruptcy relief. And while different treatment of co-signed consumer debts is allowed, every chapter 13 debtor must prove the proposed plan has been filed in good faith under § 1325(a)(3), a Code provision that is adequate to the task of policing any debtor mischief.
I acknowledge that my interpretation of § 1322(b)(1) potentially sanctions the unfairness inherent in unequal treatment of creditors. But even if the solution to the problem it perceived is an overly broad one, any criticisms must be directed to Congress to remedy, not to the courts. Simply put, I would therefore affirm the decision of the bankruptcy court because the unfair discrimination restriction in § 1322(b)(1) does not apply to plan provisions treating co-signed consumer debts.

. Like beauty, the "fairness” of plan treatment is in the eye of the creditor. In addition to conferring beneficial treatment, § 1322(b)(1) also plainly authorizes a debtor to separately classify and treat a co-signed consumer claim less favorably than other unsecured creditors. Such plan treatment may be necessary and appropriate, for example, when the codebtor received the consideration for the original debt {e.g., the debtor cosigned a relative's car loan), or where there may have been a change in the relationship of the debtor and codebtor since the debt was incurred (e.g., claim was co-signed by a former spouse who was later ordered to pay the debt in a divorce decree). Presumably, in such cases, the general body of unsecured creditors would consider the "different” treatment of the co-signed claim “fair,” though the impacted creditor may disagree.