IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-50163
Summary Calendar
In the Matter Of: OSCAR CHACON, JR; PATRICIA CHACON,
Debtors.
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OSCAR CHACON, JR; PATRICIA CHACON,
Appellants,
versus
PHYLLIS BRACHER,
Appellee.
Appeal from the United States District Court
for the Western District of Texas
September 24, 1999
Before HIGGINBOTHAM, JONES, and BARKSDALE, Circuit Judges.
PATRICK E. HIGGINBOTHAM, Circuit Judge:
This is an appeal of the bankruptcy court’s refusal, affirmed
by the district court, to confirm a Chapter 13 bankruptcy plan.
The bankruptcy plan gave a debt cosigned by the debtor’s father
priority over all other unsecured claims, so that the cosigned debt
would have to be paid in full before any other claims could be
paid. The relevant statutory provision allows a plan to “designate
a class or classes of unsecured claims, as provided in section 1122
of this title, but may not discriminate unfairly against any class
so designated; however, such plan may treat claims for a consumer
debt of the debtor if an individual is liable on such consumer debt
with the debtor differently than other unsecured claims.” 11 U.S.C.
§ 1322(b)(1).
There is a split among bankruptcy courts concerning whether a
plan that gives priority to a cosigned consumer debt should still
be struck down if it is found to “discriminate unfairly” against
any other class. Compare, e.g., Nelson v. Easley (In re Easley),
72 B.R. 948, 955-56 (Bankr. M.D. Tenn. 1987) (finding that even a
cosigned consumer debt is subject to the unfair discrimination
test), with In re Dornon, 103 B.R. 61, 64 (Bankr. N.D.N.Y. 1989)
(holding that a cosigned consumer debt is an exception to the
general unfair discrimination rule).
The argument for applying the unfair discrimination test even
to a cosigned consumer debt is that the word “differently” must be
given a meaning different from “unfair discrimination,” and reading
the “however” clause as an exception would not do so. See, e.g.,
Easley, 72 B.R. at 956. This rationale is wholly unconvincing. In
its desire not to give any two distinct words or phrases the same
meaning, it reads out the “however” clause. If a cosigned debt
could be prioritized only if it does not discriminate, then the
“however” clause serves no purpose whatsoever. Moreover, the
“however” clause can be read without creating any unnecessary use
of synonyms simply by interpreting it to clarify that such
treatment of cosigned consumer debt is usually not unfairly
discriminatory. Differences in treatment are not discriminatory if
they rationally further a legitimate interest of the debtor and do
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not disproportionately benefit the cosigner, e.g. by reimbursing
interest where none is due or reimbursing more than the actual
amount of the cosigned debt.
The bankruptcy court was saddled with the complications that
arise when courts create and propagate ambiguity even where there
is absolutely none in the original statute. While the court’s
analysis of this case was more cumbersome than needed, however, his
conclusion remains correct under the test we have articulated. The
debtor proposed to pay the cosigned debt in full, with 12%
interest, prior to any distributions to the general unsecured
class. No justification appears for a high and preferential
interest rate. Consequently, the judgment of the bankruptcy court
and district court, denying confirmation of this Chapter 13 plan,
is AFFIRMED.
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