Filed: Mar. 03, 2015
Latest Update: Mar. 03, 2015
Summary: CORRECTED 1 ORDER: (1) DENYING OBJECTION TO CONFIRMATION; (2) REGARDING CONFIRMATION OF CHAPTER 13 PLAN; AND (3) VACATING HEARING A. BRUCE CAMPBELL , Bankruptcy Judge . Before the Court are the Debtors' Fourth Amended Plan ("Amended Plan") and the Objection thereto filed by Southcreek Master Homeowners Association ("HOA"). A hearing on Debtors' Amended Plan and the HOA's Objection to Fourth Amended Plan ("Objection") is set to commence on January 29, 2015, on the Law and Motion Calendar of
Summary: CORRECTED 1 ORDER: (1) DENYING OBJECTION TO CONFIRMATION; (2) REGARDING CONFIRMATION OF CHAPTER 13 PLAN; AND (3) VACATING HEARING A. BRUCE CAMPBELL , Bankruptcy Judge . Before the Court are the Debtors' Fourth Amended Plan ("Amended Plan") and the Objection thereto filed by Southcreek Master Homeowners Association ("HOA"). A hearing on Debtors' Amended Plan and the HOA's Objection to Fourth Amended Plan ("Objection") is set to commence on January 29, 2015, on the Law and Motion Calendar of ..
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CORRECTED1 ORDER: (1) DENYING OBJECTION TO CONFIRMATION; (2) REGARDING CONFIRMATION OF CHAPTER 13 PLAN; AND (3) VACATING HEARING
A. BRUCE CAMPBELL, Bankruptcy Judge.
Before the Court are the Debtors' Fourth Amended Plan ("Amended Plan") and the Objection thereto filed by Southcreek Master Homeowners Association ("HOA"). A hearing on Debtors' Amended Plan and the HOA's Objection to Fourth Amended Plan ("Objection") is set to commence on January 29, 2015, on the Law and Motion Calendar of the Honorable A. Bruce Campbell.
Debtors, who filed their case on April 14, 2014, have propounded a plan which proposes to surrender residential real property located at 7827 South Kalispell Circle, Englewood, CO 80112 ("Real Property") to the HOA and the lenders who hold deeds of trust against the Real Property, effective on June 1, 2014.2 When the Debtors filed this case they resided in the Real Property. On May 30, 2014, Debtors filed a document indicating that they had recently moved to Texas.
The HOA objects to Debtors' Amended Plan because Debtors have not included a term in their Amended Plan to pay the monthly assessments which arise postpetition and for which Debtors remain obligated as long as they hold an interest in the Real Property. The HOA asserts that:
its interest will be impaired if the Plan fails to provide for payment of the post-petition assessments. If Debtor (sic) fails to pay the post-petition assessment, the Association's likely remedies could be limited to requesting relief from the stay to foreclose, or to attempt to obtain and execute on a state court judgment against property of the Estate. If the post-petition assessments are provided for in the Plan, the Association would be entitled to move for a dismissal of the bankruptcy case for failure to make plan payments under 11 U.S.C. § 1307.
The HOA argues that the monthly postpetition assessments are both a personal obligation of the Debtors and a covenant running with the land arising from the terms of the HOA's Declaration of Covenants, Conditions and Restrictions ("Declarations") and Colorado Revised Statute 38-33.3-316. The HOA contends that the monthly assessments may not be discharged. On those grounds, the HOA objects to confirmation of Debtors' Amended Plan.
The issue presented by the HOA's objection is whether the Court can confirm Debtors' Amended Plan which surrenders the Real Property to the secured creditors who hold an interest in it. Does the Debtors' treatment of the HOA proposed in the Amended Plan meet the requirements of section 1325(a)(5)?3
The Bankruptcy Code at section 1325(a) prescribes that the court shall confirm a plan if—
. . .
(5) with respect to each allowed secured claim provided for by the plan —
(A) the holder of such claim has accepted the plan;
(B) (i) the plan provides that—
(I) the holder of such claim retain the lien securing such claim until the earlier of —
(aa) the payment of the underlying debt determined under nonbankruptcy law; or
(bb) discharge under section 1328; and
(II) if the case under this chapter is dismissed or converted without completion of the plan, such lien shall also be retained by such holder to the extent recognized by applicable nonbankruptcy law; and
(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; and
(iii) if —
(I) property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall be in equal monthly amounts; and
(II) the holder of the claim is secured by personal property, the amount of such payments shall not be less than an amount sufficient to provide to the holder of such claim adequate protection during the period of the plan; or
(C) the debtor surrenders the property securing such claim to the holder; . . .
Surrender of property to the holder of a secured claim is among the options available to debtors under section 1325(a)(5). Here, Debtors have elected that option and are treating the secured claim of the HOA by surrendering the Real Property to it and the other lenders secured by the Real Property. Thus, Debtors' Amended Plan meets the requirements of section 1325(a)(5)(C). In the absence of some other statutory impediment, none of which have been recited by the HOA, section 1325(a) compels confirmation of the plan.
The HOA contends that the Debtors' personal obligation cannot be discharged because the postpetition monthly assessments are a "covenant running with the land." If the Debtors' Amended Plan is confirmed, the Real Property will be surrendered and the HOA's lien rights are preserved. The HOA's concern that its interests are not protected is assuaged by the applicable provision of the Amended Plan. Upon confirmation of the Amended Plan, the HOA is granted relief from stay with respect to the Real Property and is free to foreclose its lien.4
Even if Debtors' personal obligation to make postpetition assessments is nondischargeable as the HOA argues,5 there is nothing in section 1325(a) to require as a condition precedent to confirmation that Debtors make those monthly payments when surrendering the Real Property. Accordingly, it is
ORDERED that the objection of the HOA is overruled and denied; and it is
FURTHER ORDERED that a separate order will enter confirming Debtors' Amended Plan; and it is
FURTHER ORDERED that the hearing on confirmation set for January 29, 2015 is VACATED.
