Posted: Fri Mar 13, 2009 8:00 am
Not a good case
Debtors are not entitled to secured debt deduction for totally "under water" junior deed of trust debt.
In calculating the "projected disposable income" available for the payment of unsecured claims, above-median-income Chapter 13 debtors were not entitled to deduct, as an amount "scheduled as contractually due" to a secured creditor, the payments that they were contractually obligated to make on the petition date to a junior deed of trust creditor which was totally "under water," and whose lien was not supported by any equity in the deed of trust property. While such a deduction may have been warranted as part of a "means test" calculation performed in a Chapter 7 case, given that such calculations are performed as of the petition date, the court had to determine the Chapter 13 debtors' "projected disposable income" as of the effective date of their plan, when the plan would have created a new contract between the debtors and the junior deed of trust creditor based on the debtors' stated intent to strip off the junior deed of trust lien.
M. Erik Clark
Borowitz, Lozano & Clark, LLP
100 N. Barranca Avenue, Suite 250
West Covina, CA 91791
www.BLClaw.com
Office: (626) 332-8600
Fax: (626) 332-8644
Board Certified in Consumer Bankruptcy
American Board of Certification
Not a good case
Debtors are not entitled to secured debt deduction for totally "under
water" junior deed of trust debt.
In calculating the "projected disposable income" available for the
payment of unsecured claims, above-median-income Chapter 13 debtors were not
entitled to deduct, as an amount "scheduled as contractually due" to a secured
creditor, the payments that they were contractually obligated to make on the
petition date to a junior deed of trust creditor which was totally "under
water," and whose lien was not supported by any equity in the deed of trustproperty. While such a deduction may have been warranted as part of a "means
test" calculation performed in a Chapter 7 case, given that such calculations
are performed as of the petition date, the court had to determine the Chapter 13
debtors' "projected disposable income" as of the effective date of their plan,
when the plan would have created a new contract between the debtors and thejunior deed of trust creditor based on the debtors' stated intent to strip off
the junior deed of trust lien.
M.
Erik ClarkBorowitz, Lozano & Clark, LLP100 N. Barranca Avenue, Suite
250West Covina, CA 91791www.BLClaw.comOffice:
(626) 332-8600Fax: (626) 332-8644Board Certified in Consumer Bankruptcy
American Board of
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