The 11th Circuit apparently wants to make a firm stand on the "hanging paragraph" after 11 U.S.C. §1325(a)(9), with two published opinions in two days (see the first case).
Nuvell Credit Company, LLC v. Dean (In re Dean), No. 07-14163 (11th Cir. August 7, 2008) (click here for link to pdf. of opinion). The issue in this case is "whether a claim that falls within the “hanging paragraph” at the end of Title 11, United States Code, Section 1325(a)(9), is an allowed secured claim entitling the Creditor to payment in full, plus post-petition interest."
The answer is yes.
Prior to 2005, a Chapter 13 debtor could use [§506] to bifurcate the claim and have the bankruptcy court “cramdown” his or her debt by treating the present value of the collateral as a secured claim, while leaving the remaining portion as an unsecured claim and shared, pro rata, with other unsecured creditors. It seems to be undisputed that Congress viewed this use of “cramdown” as abusive and unfair to car lenders and other lienholders, so it sought to protect “910-claims” by adding the hanging paragraph to section 1325(a)… It provides that “[f]or purposes of paragraph (5), section 506shall not apply to a claim described in that paragraph if the creditor has a [910-claim].” See 11 U.S.C. § 1325(a)(*) (emphasis added). The hanging paragraph’s reference to “paragraph (5)” is to section 1325(a)(5), which describes the treatment of an “allowed secured claim” provided for by the plan. Section 1325(a)(5) provides three possible options for treatment of such a secured claim….
We are concerned only with the third option of when a debtor elects to retain the vehicle and pay the secured creditor through the Chapter 13 plan. Specifically, we are being called upon to decide if the language “section 506 shall not apply” means, as the bankruptcy court ultimately held, that the Creditor’s 910-claim is not a secured claim in all respects and, therefore, is not entitled to post-petition interest. …
Indeed, virtually all reported decisions have held the hanging paragraph means only that 910-claims cannot be bifurcated into secured and unsecured portions under section 506 and that such claims must be treated as fully secured… The issue presented in this case, as just noted, has been litigated extensively in bankruptcy and appellate courts, with those courts uniformly disagreeing with the conclusion reached by the bankruptcy judge. We agree with the majority view.
Applying this reasoning, the bankruptcy court’s Order Confirming Chapter 13 Plan is at odds with the result reached by [In re Jones, 530 F.3d 1284 (10th Cir. 2008). and nearly all other courts] because it does not provide for payment of interest on the Creditor’s 910-claim