Bankruptcy Appellate Panel affirms Court's Orders confirming Chapter 13 Plan and denying creditor's motion to dismiss on eligiblity grounds

Asset Management Holdings, LLC v. Aleli A. Hernandez, BAP No. CC-16-1228
(BAP 9th Cir. Apr. 11, 2017)

Salvato Law Offices successfully defended an appeal by a lienholder attacking the debtor's Chapter 13 plan confirmation for lack of good faith and seeking dismissal of the Chapter 13 case on eligibility grounds under Bankruptcy Code Section 109(e). The Bankruptcy Court denied the creditor's motion to dismiss and confirmed the Chapter 13 plan. The Bankruptcy Appellate Panel affirmed.


Debtor filed a chapter 7 case in 2010 and obtained a discharge, including a discharge of her personal liability on two debts secured by deeds of trust against her residence. More than four years later, Debtor filed a subsequent chapter 13 case. On her schedules, Debtor listed her residence and the two debts secured by that residence. Because the amount of the senior lien exceeded the value of the residence, Debtor indicated her intent to avoid the junior lien held by Appellant’s predecessor-in-interest pursuant to § 506(a). She listed the debt to the junior lienholder on Schedule D as a secured debt of $0, and again on Schedule F as an unsecured debt of $278,396.71.

Appellant Asset Management Holdings, LLC (“AMH”) objected to confirmation for lack of good faith and moved to dismiss the chapter 13 case on eligibility grounds. The bankruptcy court ruled that Debtor’s debts did not place her over the eligibility limits because the debt to AMH did not need to be included in the eligibility calculation. The court found that the debt should not be treated as secured because the lien was avoidable under § 506(a), nor should it be treated as unsecured because Debtor’s personal liability on the debt had been discharged in her prior chapter 7 case. The bankruptcy court also found that the plan was filed in good faith. Accordingly, the court denied the motion to dismiss and confirmed the plan, and AMH appealed.