Chapter 13 confirmation; 11 USC § 1325(a)(5)(B)(i)(I); Whether the provisions of § 1325(a) are mandatory; Shaw v Aurgroup Fin Credit Union; Ineligibility for a discharge under chapter 13 due to a previous Chapter 7 discharge; § 1328(f); Carroll v Sanders (In re Sanders); The three options for dealing with allowed secured claims under § 1325(a)(5); Whether the secured creditor’s non-acceptance of the plan prevented the bankruptcy court from confirming it; Bankruptcy Appellate Panel (BAP)

The BAP held that absent a secured claim holder’s acceptance or the surrender of the secured property, the bankruptcy court could not confirm a chapter 13 plan that provided for the holder to “retain its lien until the earlier of payment in full of the underlying debt under applicable non-bankruptcy law or completion of plan payments.” Thus, it reversed the bankruptcy court’s confirmation of Debtor-Tucker’s chapter 13 plan, and remanded. After receiving a discharge under chapter 7, Tucker filed for chapter 13 bankruptcy. Appellant-secured creditor (Santander) had a lien on Tucker’s vehicle and objected to her proposed plan, which sought to modify the interest rate on their contract. Under § 1325(a)(5)(B)(i)(I), “unless a secured creditor accepts the plan, the secured creditor is entitled to retain its lien ‘until the earlier of . . . the payment of the underlying debt determined under nonbankruptcy law; or . . . discharge under’” § 1328. As § 1328(f) rendered Tucker “ineligible for a chapter 13 discharge, she could not technically satisfy” § 1325(a)(5)(B)(i)(I). Thus, she “proposed a creative alternative: Santander would retain its lien until the completion of all plan payments, not the entry of the chapter 13 discharge.” Santander objected, arguing that she was “rewriting” the statute, and that without its acceptance, the plan could not be confirmed. The bankruptcy court overruled the objection, and while acknowledging that Shaw held that § 1325(a) is “mandatory,” still confirmed the plan. The BAP held that § 1325(a)(5)(B)(i)(I) unambiguously “requires that a secured creditor either retain its lien until its allowed secured claim is paid in full under applicable non-bankruptcy law or the discharge is entered under” § 1328. These “are the only two possible events in the” statutory text that trigger “release of a secured creditor’s lien.” The BAP concluded that, “without Santander’s acceptance, the Debtor was not permitted” to modify § 1325(a)(5)(B)(i)(I)’s text “by essentially adding ‘(cc) completion of all payments under the plan,’ a non-existent provision.” Shaw, in which the “Sixth Circuit unequivocally stated that a bankruptcy court has ‘no discretion’ to depart from the mandatory provisions in” § 1325(a), was controlling.