The second sentence in Part 1.5 of this district’s form Chapter 13 plan (E.D.N.C. Local Form 113A (07/18)) lists an estimated dollar amount “that would be paid to holders of allowed unsecured claims if the estate of the debtor were liquidated in a Chapter 7 bankruptcy case (known as the ‘liquidation test’).” (Emphasis added). This language makes no distinction between unsecured priority claims under § 507, and unsecured non-priority claims.
The Court has concluded that a plain reading of this language has resulted in varying approaches to drafting Chapter 13 plans. Some plans are listing a dollar amount intended to satisfy the liquidation test without regard to whether holders of unsecured non-priority claims can anticipate receiving any distribution. Other plans are listing a dollar amount intended to indicate only what would be paid to holders of unsecured non-priority claims (having first subtracted any unsecured priority claims and administrative expenses qualifying for priority status under § 507).
The local subcommittee charged with updating this district’s form Chapter 13 plan will be amending the language in Part 1.5 to clarify that the dollar amount listed in the second sentence is referring to only the amount to be paid to holders of unsecured non-priority claims.
Until an updated form plan is released, it is necessary to give notice of the Court’s interpretation of the language in Part 1.5, and establish a uniform practice among debtors for drafting plans. The Court hereby gives notice that the amount listed in Part 1.5 of the form plan for the liquidation test analysis refers to the amount that is estimated to be paid to holders of non-priority unsecured claims, and the Court and Chapter 13 Trustees will interpret those amounts as such. The amount described under the liquidation test of Part 1.5 of the form plan should not include any amounts owing to claims entitled to priority status under § 507.