Central District Consumer Bankruptcy Attorney's Association

Ford Motor Credit Company v. Parmenter (In re Parmenter)
--- F.3d
Issue: When the chapter 13 plan provides that the debtor will assume a
vehicle lease and pay it outside the plan, does the lessor have the
right to an administrative claim when the debtor fails to make the
payments?
Holding: No.
Appeal from District Court
Counsel for Ford is Ricardo Kilpatrick
In their chapter 13 plan, the debtors "agreed to assume the Ford
lease and to pay the remaining lease payments directly to Ford."
There were no objections and the plan was confirmed. Post-confirmation,
the debtors defaulted on the lease, Ford obtained relief from stay,
repossessed the vehicle and sold it. Ford then "filed a motion for
administrative expenses of $5,919.28, which included the deficiency
balance on the lease and attorney fees." The bankruptcy court
denied the motion and the District Court affirmed.
The 6th Circuit Court of Appeals also affirmed in a per curiam opinion
with a dissent. The opinion says that the confirmed plan was res
judicata as to these issues, Section 1327(a). Ford was a class three
creditor in the plan and now wants to "jump to class one."
"The plan says nothing about permitting the estate to make lease
payments to Ford. Yet Ford's motion, if granted, would allow the
company to impose an obligation on the estate where none existed and
indeed would give that claim the highest priority permitted. Well
before the [debtors] defaulted, Ford had made its own bed outside the
plan and now must lie in it: If the car company wishes to obtain any
additional relief against the [debtors], it must do so outside the
plan." The opinion does not even suggest what this relief
"outside the plan" means. Modification of the plan does not
apply, according to the court, because the allowance of an
administrative claim would be "the creation of a new obligation on
the estate." "If Ford wanted the security of receiving payments
directly from the Trustee, it should have objected to the proposed
plan."
The opinion distinguishes chapter 11 cases where this administrative
expense clearly would be allowed and chapter 13 cases. "Whereas a
Chapter 11 debtor-in-possession acts on behalf of the estate when it
assumes a lease and thus creates a legal obligation on the estate, a
Chapter 13 debtor who assumes and pays for a lease outside of the plan
does not." It does not explain how it reached that conclusion.
The dissent begins with "First, I see no convincing reason for
treating creditors dealing with a Chapter 13 debtor differently from
creditors dealing with a Chapter 11 debtor-in-possession. The Code
offers no basis for treating the two scenarios differently."
"[S]econd, . . . I see no basis for drawing a line between Chapter
13 creditors who receive lease payments directly from the debtor and
those who receive them indirectly through a trustee." As to res
judicata, the dissent disagrees. The plan did not deal with and
therefore resolve any issues about the right to administrative claims
for post-confirmation defaults.
Ford Motor Credit Company v. Parmenter (In re Parmenter) --- F.3d --, 2008 WL 2219839 (6th Cir., May, 2008)
Issue: When the chapter 13 plan provides that the debtor will assume a vehicle lease and pay it outside the plan, does the lessor have the right to an administrative claim when the debtor fails to make the paym
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