“…we conclude that the trustee’s appeal here must fail. The record reflects that the trustee only objected to Renteria’s plan because she proposed to pay a 100% dividend to Preston and little or no money to her other unsecured creditors. There were no disputed facts, and Renteria’s explanation for why she needed to prefer Preston – to prevent Preston from collecting from her mother as the guarantor of Renteria’s debts – was uncontested. Renteria also represented that she had no additional net income to pay any greater dividend to her general unsecured creditors, and the trustee did not challenge that representation. Furthermore, the trustee waived or conceded all other confirmation issues. Whatever else the “however clause” may or may not do, a court may not deny confirmation of a plan under Section 1322(b)(1) solely because the plan prefers a co-debtor consumer claim over all other unsecured claims.”

Writing for the majority, Judge Markell acknowledged that the panel’s ruling did not resolve where to draw the line between the “however clause” and the unfair discrimination rule.”We intentionally have left unanswered the question of when (if ever) does the preferential treatment of a co-debtor consumer claim violate the unfair discrimination rule. We decline to answer that question until we receive an appeal with a record and issues squarely presenting that question for decision,” he said. So, chapter 13 plans may not be denied confirmation solely because the plan discriminates in favor of co-debtor obligations.

Lawrence Bautista Yang is a graduate of Georgetown University Law Center and has been in law practice for thirty years. He specializes in bankruptcy, business and civil litigation and has handled more than five thousand successful bankruptcy cases in California. He speaks Mandarin and Fujien and looks forward to discussing your case with you personally. Please call (626) 284-1142 for an appointment at 1000 S Fremont Ave Bldg A-1 Suite 1125 Unit 58 Alhambra, CA 91803.