In re Lemming, BK 14-43080, Doc # 55

Order denying confirmation of Debtor’s Chapter 13 plan. Debtor’s previous case was dismissed for failure to comply with his own confirmed plan. That plan directed Debtor to auction a “Lake House” to pay judgment creditor Dwayne Richardson’s (“Creditor”) secured claim. In his second case, Debtor filed a plan that proposed to “pay” the secured claim of Creditor by surrendering the Lake House—only one of the properties encumbered by Creditor’s judgment lien. The plan proposed to judicially value the Lake House and pay any deficiency in monthly installments. Debtor repeatedly fell behind on his pre-confirmation plan payments and did not reliably keep Richardson’s collateral insured. Richardson filed several objections noting insurance deficiencies and Debtor’s failure to disclose several pieces of property. After a trial, the Court denied confirmation on two grounds: First, good faith based in part on Debtor’s failure to maintain insurance (the Lake House was uninsured as of the trial date) and lack of disclosure in the case. Second, the Court held that a plan cannot propose to give an objecting secured creditor only some of his collateral. This result is the same whether the plan couches the treatment as a “partial surrender” or as a “payment.” The surrender provision of Section 1325(a)(5) requires surrender of all property securing the secured creditor’s claim, and the word “payment” as used in the bankruptcy code does not contemplate a transfer of real property to an objecting judgment creditor.