Velma Levingston

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
United States Bankruptcy Court
Northern District of California
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
In re Velma Levingston, 	)
) 	Case No. 10-48479
) 	Chapter 13
Debtor. 	)
___________________________________)
MEMORANDUM OF DECISION SUSTAINING OBJECTION TO CONFIRMATION
AND ORDER DISMISSING CASE WITH 14 DAY STAY
This matter came on for a continued hearing on November 10,
2011 regarding Creditor Bayview Loan Servicing, LLC’s (“Bayview”)
objection to confirmation of debtor Velma Levingston’s (the
“Debtor”) Third Amended Chapter 13 Plan. 	Appearances were as noted
on the record. 	Bayview objects to confirmation based Bayview’s
assertion that the Debtor is in violation of the § 109(e) debt
limits for Chapter 13 eligibility. 	For the reasons that follow,
the Court will sustain Bayview’s objection to confirmation of the
Debtor’s Third Amended Chapter 13 Plan and dismiss this case,
1
The following constitutes
the order of the court. Signed December 29, 2011
________________________________________
William J. Lafferty, III
U.S. Bankruptcy Judge
Entered on Docket
December 29, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 1 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
effective in fourteen (14) days, unless the Debtor moves to convert
her case to one under Chapter 7 or Chapter 11.
Statement of Facts and Positions of the Parties
The Debtor filed her petition under Chapter 13 on July 27,
2010. 	The Debtor’s Amended Schedule A, filed September 15, 2011,
indicates that she owns four parcels of real property. 	The Debtor
owns her residence located at 1726 Benedict Dr., San Leandro, CA
(the “Residence”). 	The Debtor also owns three parcels of rental
property: (1) 6904 Geyer Springs Rd., Little Rock, AR (the “Geyer
Springs Property”); (2) 215 East 22 nd St., Little Rock, AR (the “22 nd
Street Property”); and (3) 1400 South Battery St., Bldgs. A & B,
Little Rock, AR (the “Battery Street Properties”)(collectively, the
“Rental Properties”).
According to Amended Schedule D, filed September 15, 2011, the
Debtor’s Residence is worth $500,000 and is encumbered by two deeds
of trust—a BAC Home Loans Servicing, LP (“BAC Home Loans”) first
position lien in the amount of $739,459.95 and a BAC Home Loans
second position lien in the amount of $142,173.74. 	The Debtor
concedes that the first position lien on her Residence is a
recourse loan.
The Debtor values the Geyser Springs Property at $160,000 and
indicates that it is encumbered by a first position lien held by
Bayview Loan Servicing in the amount of $178,026.64 and a second
position lien held by Jerrial W. Rice in the amount of $33,000.
The 22 nd Street Property is valued at $50,000, and it is encumbered
by a first position lien held by Iberia Bank in the amount of
$104,785 and a property tax lien in the amount of $5,450.57. 	Last,
2
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 2 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Amended Schedule D values the Battery Street Properties at $200,000
and lists two liens secured by the property—a first priority lien
held by Wells Fargo Home Mortgage in the amount of $96,658.05 and
second position lien held by Wells Fargo Home Mortgage in the
amount of $110,549.58.
The Debtor lists noncontingent, liquidated, secured debt of
$1,444,457.53 in Amended Schedule D. 1 	After subtracting the
“unsecured” portions of the liens on the Residence and the Rental
Properties from the secured debt calculation, the Debtor asserts
that she has secured claims of only $958,952. 	In Schedules E and
F, the Debtor lists a total of $106,437.20 in noncontingent,
liquidated, unsecured debt. 	After adding the “unsecured” portions
of the liens on the Rental Properties to the unsecured debt, the
Debtor claims that she owes $352,473.13 in total unsecured debt.
In calculating the amount of secured and unsecured debt at the time
of filing, the Debtor does not include the undersecured portion of
the first position lien on her Residence in the secured or
unsecured debt categories. 	This omission leaves $239,459.95
unaccounted for (the “Unaccounted For Amount”).
Bayview argues that the Unaccounted For Amount must either be
added to the Debtor’s total secured debt or unsecured debt.
Bayview asserts that, if the Unaccounted For Amount is added to
either category, the Debtor will exceed the secured debt limit or
1 The 	Debtor’s 	Memorandum 	and 	Points 	of 	Authorities 	in 	Support 	of
Confirmation of Chapter 13 Plan asserts that her schedules, as amended, reflect
secured debt of $958,952. 	This is not the case. 	The Debtor’s Amended Schedule D
reflects the same amount of secured debt reflected in her original Schedule D.
Nonetheless, based on the brief, the Debtor’s position regarding the Section 109(e)
debt calculation is clear to the Court.
3
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 3 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
the unsecured debt limit, respectively. 	The Debtor does not
dispute this contention in the abstract. 	Thus, the only question
before the Court is whether the Debtor must count the undersecured
portion of the first position lien on the Residence toward the §
109(e) debt limits.
Discussion
Section 109(e) of the Bankruptcy Code provides, in pertinent
part, that “[o]nly an individual with regular income that owes, on
the date of the filing of the petition, noncontingent, liquidated,
unsecured debt of less than $360,475 and non-contingent,
liquidated, secured debts, of less than $1,081,400 . . . may be a
debtor under this title.” 2 	11 U.S.C. § 109(e). 	Section 506(a) is
the starting point for defining what constitutes secured and
unsecured debt for purposes of § 109(e). 	Scovis v. Henrichsen (In
re Scovis), 249 F.3d 975, 978 (9th Cir. 2001). 	Thus, the general
rule is that the unsecured portion of “secured debt” is treated as
“unsecured debt” for purposes of § 109(e). 	Id.
Despite this general rule, Courts have excluded the
undersecured portion of “secured” debt from the total unsecured
debt for § 109(e) purposes in some circumstances. 	Where §
1322(b)(2) prevents bifurcation of the debt, some courts have found
that the entire amount of an undersecured debt must be treated as
“secured” for § 109(e) purposes. 	See e.g. In re Smith, 419 B.R.
826, 832 (Bankr. C.D. Cal. 2009) (“Where a debtor is partially
2 The amounts of the § 109(e) debt limits are subject to periodic adjustment
as authorized by § 104 of the Bankruptcy Code. 	The amounts indicated are the
amounts in effect as of the date of the petition date in this case.
4
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 4 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
secured on a debtor’s primary residence, that debt will be counted
as secured debt for § 109(e) purposes”). 	And where an undersecured
claim is non-recourse debt and therefore not collectible under
state law, at least one court has held that the undersecured
portion of a non-recourse loan should be omitted from a debtor’s
total unsecured debt limit for § 109(e) purposes. 	See In re
Tolentino, 2010 WL 1462772, at *2 (Bankr. N.D. Cal. 2010).
Although the exceptions described above remove the
undersecured portion of a “secured” debt from the § 109(e)
unsecured debt calculation, these exceptions do not remove the
undersecured portion of the debt from the § 109(e) debt
calculation. 	Instead, under these exceptions, such undersecured
debts are treated as secured in their entirety. 	Nevertheless, in
this case, the Debtor urges the Court to go one step further; i.e.,
to conclude that the undersecured portion of the first position
lien on her Residence should not count toward the § 109(e) debt
limits at all. 	The Debtor presents three arguments in support of
this proposition.
1.) Is the undersecured portion of the first position lien on the
Residence a “debt”?
First, the Debtor argues that the undersecured portion of the
first position lien on her residence is not a “debt” as defined by
the Bankruptcy Code, because the lender holds only a possible
deficiency, which is not a “debt” as of the petition date. 	In
California, a lender holding a recourse loan on real property must
first waive its right to non-judicial foreclosure and follow the
procedures for obtaining a deficiency judgment through judicial
5
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 5 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
foreclosure to be entitled to enforce a deficiency. 	The Debtor
therefore argues that under California law the undersecured portion
of a recourse loan only becomes a “debt” if a judicial sale of the
property results in a deficiency. 3
The Court disagrees with the Debtor’s analysis of the
definition of “debt” and finds the reasoning of In re Silva, 2011
WL 5593040, at 2* (Bankr. N.D. Cal. 2011), which was decided by
another court in this District, persuasive. 	“The term debt means
liability on a claim.” 	11 U.S.C. § 101(12). 	The Code defines a
“claim” liberally as a “right to payment, whether or not such right
is reduced to judgment, liquidated, unliquidated, fixed contingent,
matured, unmatured, disputed, undisputed, legal equitable, secured,
or unsecured . . . .” 	11 U.S.C. § 101(5)(A). 	When a debtor signs
a note, the lender obtains a “right to payment” on the note, and a
debt is created. 	In re Silva, 2011 WL 5593040, at *2. 	Whether
state law may preclude a lender from enforcing the entire amount of
a debt is different from the question of whether a “debt” exists.
Id. 	There is no question that, when the Debtor executed and
delivered the note secured by the first position lien on her
Residence, a debt was created for the full amount due under the
note. 	The Court therefore rejects this argument.
2.) Is the undersecured portion of the first position lien on the
Residence a contingent debt?
In the alternative, the Debtor argues that the undersecured
3 The Court notes that the Debtor’s argument is premised on the fact that the
lender is the foreclosing entity. 	In California, if the holder of a recourse loan
is not the foreclosing lender, then § 580d of the California Code of Civil Procedure
does not preclude the lender from pursuing a debtor personally for any deficiency.
6
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 6 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
portion of the first position lien on her Residence is a contingent
debt, and therefore should not be included in the § 109(e) debt
calculation. 	Similar to the Debtor’s argument regarding the
definition of a “debt” under the Code, the Debtor asserts that the
debt is contingent due to the operation of California anti-
deficiency statutes. 	In California, § 580d of the California Code
of Civil Procedure precludes a lender from collecting a deficiency
on a recourse debt when the lender avails itself of its right to
foreclosure non-judicially on the property. 4 	Based on the
foregoing, the Debtor asserts that, in California, when a debtor
signs a note secured by real property, only a “possible deficiency”
exists and the debt is therefore contingent.
Once again, this Court finds the reasoning of the Silva Court,
which analyzed this same issue, persuasive. 	“A debt is contingent
if it does not become an obligation until the occurrence of a
future event which will trigger the liability of the debtor to the
creditor.” 	In re Silva, 2011 WL 5593040, at *3 (citing In re
Mazzeo, 131 f.3d 295, 303 (2d Cir. 1997)). 	The judicial
foreclosure process may enable the creditor to enforce a
deficiency, but it does not create the liability. 	See id.
The liability is created when the debtor signs the note secured by
4 Section 580d of the Code of Civil Procedure provides, in pertinent part,
that:
No judgement shall be rendered for any deficiency upon a note secured
by a deed of trust or mortgage upon real property or an estate for
years 	therein 	hereafter 	executed 	in 	any 	case 	in 	which 	the 	real
property or estate for years therein has been sold by the mortgagee
or trustee under the power of sale contained in the mortgage or deed
of trust. 	Cal. Civ. Proc. Code § 580d.
7
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 7 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
a deed of trust. 	Id. 	The fact that California’s anti-deficiency
statutes require a lender to follow certain statutory procedures to
enforce a deficiency does not make a debtor’s liability contingent.
Id. 	Thus, the undersecured portion of the first position lien on
the Debtor’s Residence is not contingent.
3.) Is the undersecured portion of the first position lien on the
Residence an unliquidated debt?
Last, the Debtor argues that the undersecured portion of the
first position lien on her Residence should not be included in the
§ 109(e) calculation because the amount is unliquidated. 	A debt is
liquidated if it is “readily determinable”. 	Slack v. Wilshire Ins.
Co. (In re Slack), 187 F.3d 1070, 1074 (9th Cir. 1999). 	Whether a
debt is “readily determinable” depends on whether the amount is
easily calculable. 	Id. 	The Debtor asserts that the debt is not
easily calculable because an extensive evidentiary hearing will be
needed to determine the amount of any deficiency.
This Court disagrees with the Debtor’s assertion that an
evidentiary hearing will be needed to determine the amount of the
unsecured deficiency. 	In the first place, as demonstrated above,
the relevant question under these facts is what is the total amount
of the debt, a matter not truly subject to any dispute. 	Moreover,
even were it necessary separately to establish for bankruptcy
valuation purposes under section 109(e) the undersureced portion of
the debt owed to the first position lien creditor against the
Residence, the Court disagrees that this amount could not be
determined absent a lengthy evidentiary proceeding before this
Court or a different court. 	Section 506(a) allows a bankruptcy
8
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 8 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
court to determine, for bankruptcy valuation purposes, the amount
of a secured debt, and by implication, the amount of any unsecured
deficiency. 	The determination of the amount of an unsecured
deficiency claim is not difficult and is a calculation performed by
bankruptcy courts on a daily basis. 	The amount of an unsecured
deficiency claim can be determined simply by looking at the
Debtor’s schedules and performing simple math (i.e., in this case,
by subtracting the value the collateral from the total amount of
the first position lien). 	In this case, the unsecured deficiency
is $239,459.95. 	The amount of the undersecured debt is “readily
determinable”, and therefore, a liquidated debt.
CONCLUSION
The undersecured portion of the first position lien on the
Residence is a noncontingent, liquidated, debt, and, therefore,
must be included in the § 109(e) debt calculation. 	As previously
conceded by the Debtor, if the Unaccounted for Amount is included
in the § 109(e) debt calculation, either in the “secured” or
“unsecured” column, the Debtor would exceed the debt limits for
Chapter 13 eligibility.
Based on the forgoing, the Court denies confirmation of the
Debtor’s Chapter 13 plan. 	The Debtor is ineligible for relief
under Chapter 13 of the Bankruptcy Code. 	The Debtor has fourteen
(14) days from the entry of this order to convert this case to one
under Chapter 7 or Chapter 11. 	If the Debtor fails to comply with
the foregoing, this case will be dismissed without further notice
or a hearing.
**END OF DOCUMENT**
9
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 9 of
10

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
COURT SERVICE LIST
Velma Levingston
1726 Benedict Drive
San Leandro, CA 94577
Saman Taherian
The Fuller Law Firm, PC
60 N. Keeble Ave.
San Jose, CA 95126
10
Case: 10-48479 Doc# 81 Filed: 12/29/11 Entered: 12/29/11 16:14:44 Page 10 of
10