Court Opinion

ID: 9688125
Source: CourtListenerOpinion
Date Created: 2023-08-24 17:32:54.78118+00
Date Added: 2024-06-11T12:05:08.667479
License: Public Domain

JAROSLOVSKY, Bankruptcy Judge, concurring:
The decision of my brethren is a proper application of binding case law, and I accordingly concur. I write separately only to point out that the confluence of new circumstances and old cases has created a perfect Catch-228 for the Smiths and the Hamburgs: they are ineligible for chapter 13 because they need the relief afforded by chapter 13, and would be eligible if they did not need the relief.
I begin by noting that we are declaring ineligible debtors who were clearly intended by Congress to be eligible for chapter 13 relief. They are solid middle-class wage earners. When Congress fashioned the debt limits set forth in § 109(e) of the Bankruptcy Code, it had in mind debtors who owned a middle-class residence with, typically, a first and second mortgage, a vehicle loan or two, and a significant but not excessive amount of unsecured debt, typically credit card obligations.9 I quite agree that courts cannot create eligibility where none has been intended by Congress. Quintana v. Internal Revenue Service (In re Quintana), 107 B.R. 234, 241 (9th Cir. BAP 1989). However, in this case we are taking away eligibility which Congress intended. Eligibility for chapter 13 should be liberally interpreted so as not to unnecessarily obstruct the eligibility of debtors desiring relief. In re Lambert, 43 B.R. 913, 919 (Bankr.D.Utah 1984). This is especially the case when the debtors seeking relief are exactly the kind of debtors Congress had in mind when fashioning eligibility.
The only meaningful relief under the Bankruptcy Code for debtors caught in the mortgage crisis is the ability, in some chapter 13 cases, to remove junior encumbrances from their home. For most of these debtors, the complexity and expense *650of a chapter 11 case is beyond their means. My sense of fairness and the depth of the crisis lead me to look for a way to make chapter 13 available to debtors like the Smiths and the Hamburgs.
We are expected by the Court of Appeals to follow the decisions of other circuits in most instances. United States v. Battley (In re Berg), 188 B.R. 615, 620 (9th Cir.BAP1995). This direction requires my concurrence. However, the Court of Appeals has the power to distinguish its prior decisions and consider whether it should follow those of other circuits. I believe that such an approach to the issue of chapter 13 eligibility would be wise.
The Smiths and Hamburgs have been declared ineligible because Scovis v. Henrichsen (In re Scovis), 249 F.3d 975 (9th Cir.2001) and Miller v. United States (In re Miller), 907 F.2d 80 (8th Cir.1990), require the court to add some debt secured by a mortgage to the unsecured debt total. These two cases, combined with an unforeseen and unprecedented drop in home values, have created an impediment to chapter 13 relief certainly not within the contemplation of Congress in 1978.
Scovis is readily distinguishable on its facts. That case found that a debt: (1) which began as unsecured, (2) became secured by legal process, and (3) was readily returnable by operation of law to unsecured status, should be treated as unsecured for eligibility purposes. In that case, the intent of Congress was clearly honored; an unsecured debt was treated as such notwithstanding its fleeting status as technically secured. If Scovis were the only applicable case, I would urge that it be distinguished on that ground. However, Miller represents a more serious hurdle, as the Smiths and Hamburgs cannot prevail unless a conflict between the circuits is created.
In most instances, revisiting a more or less settled issue of law is not sound policy. However, this instance is the exception because application of Miller to the current situation creates losers without any winners. In the Smiths’ case, it was the chapter 13 trustee who sought dismissal. In the Hamburgs’ case, the court apparently raised the issue on its own. In neither case did the junior deed of trust holder object to avoidance of its lien; economic circumstance, not bankruptcy law, has rendered the liens worthless. It is purposeless to the point of cruelty to maintain a rule of law which benefits nobody, does only harm and severely limits the availability of a salutary law.
If I were free to visit the issue anew, I would hold that for chapter 13 eligibility purposes ordinary residential mortgage debt is properly treated as secured notwithstanding the current value of the collateral. Because I feel bound by Miller, I must concur in a different result.

. The term "Catch-22” is familiar to those of a certain age who remember the 1961 black satire of that title by Joseph Heller. Set in World War II, it described army regulations which purported to allow a bomber pilot driven to insanity by the dangers of combat to request relief, but also specified that concern for one’s safety in the face of dangerous combat was the process of a rational mind. Thus, anyone who asked to be relieved was by definition sane and not eligible to be relieved.

. A review of the legislative history of § 109(e) makes it clear that the dollar amounts were deemed necessary by Congress because chapter 13 was being opened to small businesses, a major change from old chapter XIII which was limited to wage earners. The limitations were deemed necessary to keep businesses out of chapter 13 which were more properly reorganized in chapter 11. 9 Bkr.L.Ed, Legislative History § 82:4. Congress clearly did not intend the limits to keep ordinary middle class wage earners out of chapter 13.