In addition to its nonconformity with other similar Chapter 11 cases, the Garvin decision is further intriguing when compared to a Tenth Circuit case involving a Chapter 13 plan, In Re Arenas. In that 2015 case, the court held that a bankruptcy court did not abuse its discretion in dismissing a debtor’s Chapter 13 plan, because the underlying marijuana business was illegal under federal law and would therefore be in violation of 11 U.S.C.A. § 1325(a)(3). Section 1325(a)(3) of the Bankruptcy Code has similar language to § 1129(a)(3) and states that “a court shall confirm a plan if… the plan has been proposed in good faith and not by any means forbidden by law.”

Specifically, the permissibility of arrearage balloon payments in chapter 13 turns on the requirement that plan payments to a secured creditor “must be in equal monthly amounts.” 11 U.S.C. § 1325(a)(5)(B)(iii)(I). Most courts have held that this statutory language bars a final balloon payment, which by its very nature is in a different amount than the prior regular monthly payments.

[1] This alert details these modifications as follows:Certain Federal Payments Excluded From Definition of “Income”For cases under chapter 7 and 13, the CARES Act modifies the definition of “current monthly income” in 11 U.S.C. § 101(10A)(B)(ii) to expressly exclude payments made under federal law relating to the national emergency declared by the President under the National Emergencies Act with respect to COVID-19. Similarly, the Act provides that any payments made to individuals under federal law relating to the COVID-19 pandemic do not constitute “disposable income” required to be committed to a chapter 13 debtor’s plan pursuant to 11 U.S.C. § 1325(b)(2). The amended definition of “disposable income” will benefit both current chapter 13 debtors who did not have confirmed plans as of the date of enactment of the CARES Act, as well as future chapter 13 debtors.Modifications and Plan Period Extensions for Chapter 13 Debtors with Confirmed PlansThe CARES Act also permits chapter 13 debtors with plans that were confirmed as of the date of enactment of the CARES Act to seek modifications of their plan due to COVID-19-related hardships.

The recent Eleventh Circuit case of In re Brown, 746 F.3d 1236 (2014) held that 11 U.S.C. § 506(a)(2)'s replacement value standard applies even when a Chapter 7 or 13 debtor surrenders collateral under 11 U.S.C. § 1325(a)(5)(C). The Eleventh Circuit's decision in In re Brown has an important role in how personal property collateral will be valued in Chapter 7 and 13 cases in the Eleventh Circuit and thus its reasoning is important for creditors to understand.

Id. The Supreme Court was charged with determining which approach was the best method for calculating a debtor’s disposable monthly income.First, the Court reviewed the plain language of BAPCPA. 11 USC § 1325(b)(1) does not specifically define “projected disposable income”, but 11 USC § 1325(b)(2) defines “disposable income” as the following:(2) For purposes of this subsection, the term “disposable income” means current monthly income received by the debtor (other than child support payments, foster care payments, or disability payments for a dependent child made in accordance with applicable non-bankruptcy law to the extent reasonably necessary to be expended for such child) less amounts reasonably necessary to be expended—(A)(i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and(ii) for charitable contributions (that meet the definition of “charitable contribution” under section 548(d)(3)) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year i

In a chapter 13 case, the debtor typically may not use bankruptcy to cramdown a secured personal motor vehicle loan incurred within 910 days prior to the filing of the bankruptcy.29See 11 U.S.C. §1325(a) (2019) (hanging paragraph). These limitations do not apply in new Subchapter V.30See 11 U.S.C. §§1190, 1191, 1123 (2019).II.

te dealings with a state-legal cannabis business could taint that person’s entire income with illegality, and bar the bankruptcy court door.[1] In re Blumsack, 2023 WL 214293, 2023 Bankr. LEXIS 108 (Bankr.D.Mass. Jan. 17, 2023).[2] Bud’s Buds was a fictional marijuana dispensary on the television show “Last Man Standing.” See https://lastmanstanding.fandom.com/wiki/Bud%27s_Buds[3] See, e.g., In re Burton, 610 B.R. 633, 637-38(9th Cir. BAP 2020); In re Basrah Custom Design, Inc., 600 B.R. 368, 382-83 (Bankr. E.D. Mich. 2019; cf.Garvin v. Cook Investments NW, SPNWY, LLC, 922 F.3d 1031 (9th. Cir. 2019)..[4] Heidi Urness and Timothy Byrd, Pot Cos. Can Rely on State Law for Bankruptcy Safeguards (available at https://www.law360.com/articles/1531461/pot-cos-can-rely-on-state-law-for-bankruptcy-safeguards)[5] 2023 WL 214293 at *5-7.[6] See, e.g., Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6 (2000); U.S. v. Ron Pair Enterprises, Inc., 489 U.S, 235, 242 (1989).[7] 11 U.S.C. § 1325(a)(3).[8] 11 U.S.C. § 1307(c).[9] 11 U.S.C. § 105(a). These holdings imply that cases under chapter 7 also would be denied.The issue will be left to future cases to decide.

c., 679 F.3d 132 (3d Cir. 2012), the legislative history of section 506(a) suggests that Congress's silence on this point was intentional, to enable bankruptcy courts to "choose the standard that best fits the circumstances of a particular case." Id. at 141 (citing H.R. Rep. No. 95–595, at 356 (1977)). Even so, the court wrote, the valuation method should be chosen in light of the proposed disposition or use of the collateral, as set forth in section 506(a)(1) in language that is "of paramount importance to the valuation question." Id. (citation and internal quotation marks omitted).In Associates Commercial Corp. v. Rash, 520 U.S. 953 (1997), the U.S. Supreme Court provided some guidance on this issue. In Rash, chapter 13 debtors proposed a plan under which they sought to retain the use of a vehicle encumbered by a lender's security interest instead of surrendering the vehicle to the creditor. Because the secured creditor did not consent to the proposed treatment of its secured claim, section 1325(a)(5) of the Bankruptcy Code obligated the debtors to make payments to the secured creditor under their chapter 13 plan equal to at least the present value of the amount of the creditor's secured claim. Thus, the value of the collateral had to be determined so that the debtors could confirm their cramdown plan and retain the use and possession of the vehicle.The debtors argued that the lower foreclosure value (i.e., the amount the secured creditor would realize if it repossessed the truck and sold it at public auction) should apply, whereas the secured creditor argued for the higher replacement value—what it would cost the debtors to replace the vehicle in the open market. The bankruptcy court, the district court, and the Fifth Circuit (on rehearing en banc) sided with the debtors.The Supreme Court reversed. The 8–1 majority explained that section 506(a) of the Bankruptcy Code mandates that the value of collateral "be determined in light of the purpose of the valuation and of the proposed disposition or use of su

Appellants argued that the Bankruptcy Court erred in creating the required Confirmation Language because bankruptcy courts do not have the authority to add additional confirmation requirements not created by statute. The District Court agreed, holding that a bankruptcy court cannot impose local chapter 13 confirmation requirements that are not contained in 11 U.S.C. § 1325 (the statute that lays out the requirements for chapter 13 confirmation). The District Court reasoned that the Confirmation Language’s requirements that a debtor amend the schedules every time she/he acquires any property of more than nominal value, and either pay that property to the trustee in cash or pay it into the plan, were more than “menial tasks of reporting.”

In a similar vein, the debtor in In re McGinnis, 453 B.R. 770 (Bankr. D. Or. 2011), filed a chapter 13 plan that proposed plan payments to come from three sources: 1) a warehouse that would be leased to medical marijuana growers; 2) profits the debtor hoped to obtain from his own medical marijuana operation, and 3) rental income from a commercial property in Arizona, housing a number of tattoo artists. Because the debtor’s plan depended on income that violated federal law, the court determined that the plan could not meet the requirements of 11 U.S.C. § 1325(a)(3). However, rather than immediately dismissing the case outright, the court gave the debtor an opportunity to submit a compliant plan within 28 days or face dismissal or conversion to chapter 7.