Wayne E. Layton and Tina M. Layton

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: 	WAYNE LAYTON and 	No. 13-08-10105 MA
TINA LAYTON,
Debtors.
ORDER DETERMINING THAT DEBTORS’ ELIGIBILITY
UNDER 11 U.S.C. § 727(a)(9) TO RECEIVE A DISCHARGE IN SUBSEQUENT
CHAPTER 7 PROCEEDING CANNOT BE ESTABLISHED IN AN ORDER
CONFIRMING DEBTORS’ CHAPTER 13 PLAN
THIS MATTER is before the Court on confirmation of Debtors’ Chapter 13 plan.
Debtors want to include a provision in the confirmation order that establishes Debtors’ eligibility
under 11 U.S.C. § 727(a)(9) to receive a discharge in a subsequent Chapter 7 proceeding.
Debtors argue that including such a provision provides them with an incentive to complete the
Chapter 13 plan as proposed. 	The Chapter 13 Trustee counters that the provision constitutes a
presumptive finding on an issue that cannot be adjudicated until it arises in a subsequent Chapter
7 proceeding. This Court agrees with the Chapter 13 Trustee and will, therefore, sustain her
objection. 	There are no other objections to the Debtors’ Chapter 13 plan.
DISCUSSION
Section 727(a) governs the discharge in Chapter 7 proceedings. Subsection (9) provides,
in relevant part:
The court shall grant the debtor a discharge, unless --
(9) the debtor has been granted a discharge under section 1228 or 1328 of
this title . . . in a case commenced within six years before the date of the
filing of the petition, unless payments under the plan in such case totaled
at least --
(A) 100 percent of the allowed unsecured claims in such case; or
(B)(I) 70 percent of such claims; and
(ii) the plan was proposed by the debtor in good faith, and was
the debtor’s best effort[.]
11 U.S.C. § 727(a)(9).
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1 In Parr, the debtor received a discharge in a prior chapter 13 proceeding commenced
within six years of the debtor’s filing of a subsequent Chapter 7 proceeding, and the United
States Trustee filed an adversary proceeding against the debtor seeking a denial of the debtor’s
discharge under 11 U.S.C. § 727(a)(9). Parr, 222 B.R. at 338. Parr focused on whether the
debtor was, in fact, “granted a discharge” in the prior Chapter 13 proceeding, since the debtor’s
only debts in the Chapter 13 proceeding were non-dischargeable. Id. at 339. Parr is inapposite
to the matter before this Court inasmuch as neither of the minimum-performance exceptions
contained in 11 U.S.C. § 727(a)(9)(A) or (B) were directly at issue in Parr. Id. at 339 (“The
exceptions of § 727(a)(9)(A)–(B) do not protect the Defendant from the moratorium, because she
did not meet either of the minimum-performance criteria in them.”).
2
Debtors seek to include a provision in the order confirming their Chapter 13 plan stating that the
plan was proposed in good faith, provides for payment totaling 70 percent of the allowed
unsecured claims, and constitutes the Debtors’ best effort. 	In support of their position, Debtors
cite Stuart v. Parr (In re Parr), 222 B.R. 337 (Bankr.D.Minn. 1998).1
The Parr court noted generally that the effect of a discharge may not be self-evident at
the time of its entry, and that further litigation may later be required to establish which debts are
excepted from discharge. Id. at 339. Debtors assert that including a provision as to 11 U.S.C. §
727(a)(9) in the order confirming chapter 13 plan merely eliminates the uncertainty of further
litigation on this issue. But it is precisely because the inclusion of such a provision could serve
to preclude further litigation in a subsequent Chapter 7 proceeding that it cannot be included in
an order confirming a debtor’s chapter 13 plan. 	Unless and until a debtor completes his or her
chapter 13 plan and receives a discharge, the Court cannot determine whether 100% of allowed
unsecured claims have been paid in full, or whether the payments made under the plan totaled at
least 70% of the allowed unsecured claims and that such payments constituted the debtor’s best
effort. The Debtors’ circumstances may change over the course of a plan repayment period
which could affect the Court’s determination of whether the Debtors made their best effort at
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2The Court notes that Collier’s suggests that “[t]he debtor should be able to obtain a
ruling on whether the plan is the debtor’s best effort in the initial chapter 13 case, perhaps by
inclusion of a provision constituting a finding of best effort in either the plan or the order
confirming the plan.” Collier on Bankruptcy ¶ 727.11[1][b] (Alan N. Resnick and Henry J.
Sommer, eds. 15 th ed. rev. 2007). 	Collier’s references the legislative history, found at 124 Cong.
Rec. H11,098 (Sept. 28, 1978), which includes the following statement:
It is expected that the Rules of Bankruptcy Procedure will contain a provision permitting
the debtor to request a determination of whether a plan is the debtor’s ‘best effort’ prior
to confirmation of a plan in a case under Chapter 13 of title 11.
H.R. Rep. No. 95-595, at 6460 (1977).
But the Federal Rules of Bankruptcy Procedure do not include a rule that allows for Chapter 13
debtors to request at the time of confirmation a determination as to whether the plan constitutes
the debtor’s best effort at repayment.
3Historically, courts have determined that a finding that the proposed plan payments
constitute the debtor’s “best effort” is not a requisite to confirmation under 11 U.S.C. § 1325.
See In re Hurd, 4 B.R. 551, 552 (Bankr. Mich. 1980)(noting within the context of confirmation
in a second chapter 13 case that “11 U.S.C. Section 727(a)(9) is not specifically applicable to a
Chapter 13 confirmation.”); Thompson Supply Co., Inc. v. Roy (In re Roy), 5 B.R. 611, 613
(Bankr.Ala. 1980)(stating that standard for determining eligibility to receive a discharge under §
727(a)(9) is not applicable to confirmation in a chapter 13 proceeding, so that confirmation of a
debtor’s chapter 13 plan is not contingent upon a finding that the payment constitutes the
debtor’s best effort, though the parties stipulated that the payment constituted the debtor’s best
effort). See also, In re Burrell, 6 B.R. 360, 366 (D.C.Cal. 1980), appeal after remand, 25 B.R.
717 (N.D.Cal. 1982)(“[Section] 727(a)(9) should not preclude the confirmation under § 1325(a)
of a plan that provides for the payment of less than 70% of unsecured claims.”).
3
repayment. Whether the Debtors have made their best efforts in executing their Chapter 13 plan
is a question of fact that should be determined when, and if, the Debtors file a subsequent
Chapter 7 proceeding within six years of the granting of a discharge in this proceeding. 2 At the
time of confirmation of a debtor’s chapter 13 plan, 11 U.S.C. § 727(a)(9) has no application:
the debtor has yet to complete the chapter 13 plan payments or receive a discharge, and the
debtor has not filed a subsequent Chapter 7 proceeding within six years of the commencement
date of the instant Chapter 13 case.3
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4
WHEREFORE, IT IS HEREBY ORDERED that Debtors may not include a provision
regarding 11 U.S.C. § 727(a)(9) in the order confirming their Chapter 13 plan.
__________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
Date entered on docket: December 10, 2008
COPY TO:
Christopher Trammell
Mike Lash
Attorneys for Debtors
Kelley L. Skehen
Chapter 13 Trustee
625 Silver Ave. SW, Suite 350
Albuquerque, NM 87102
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