Nonstandard Provision for Lien Retention

Section 1325(a)(5)(B)(i) requires a plan to include certain language regarding a secured creditor’s lien retention rights.  In the “national” plan form and the plan forms used in the EDKY and WDKY, the lien retention language is included in Section 3.2, valuation of secured claims.  It is NOT included in Section 3.3, where “910-claims” are listed.  The absence of the lien retention language for 910-claims has led to delays in confirmation when a secured creditor objects.

The Sixth Circuit BAP recently held that when a creditor objects to confirmation because of the absence of a lien retention provision for a 910-claim, the plan should include a nonstandard provision adding the statutorily required lien retention language in order for the plan to be confirmed.  In re Donnadio, 608 B.R. 507 (6th Cir. BAP 2019) (opinion by Judge Tracey N. Wise).

Debtors’ attorneys, please add the following language (which tracks the language of section 1325(a)(5)(B)(i)) as a standard nonstandard provision in the plan.

“The holder of any allowed secured claim provided for by the plan shall retain the lien securing such claim until the earlier of (1) the payment of the underlying debt determined under nonbankruptcy law; or (2) discharge under section 1328.  If the case 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.”

This is in addition to the standard nonstandard provision regarding allowance of secured claims.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s