IN RE MOUTON, (Bankr.D.Wyo. 1996)

PETER McNIFF, United States Bankruptcy Judge.

The Amended Chapter 13 Plan of the debtors, Michael and Dana Mouton, came before the court for hearing on September 19, 1996. The chapter 13 standing trustee, who filed a response to the plan, also appeared. The court, having considered the arguments of the parties and the applicable law, and being fully advised, finds that the plan cannot be confirmed.

In their amended chapter 13 plan, Mr. and Mrs. Mouton propose to pay their general unsecured creditors 10% of the allowed claims prorata under Class 4. They propose to pay the nondischargeable student loan claims 100% over the term of the plan in Class 9 and to pay the nondischargeable past-due child support 100% over the term of the plan in Class 10.

The question raised by the trustee is whether the debtors' proposed treatment of nondischargeable unsecured claims unfairly discriminates against the other unsecured creditors. Mr. and Mrs. Mouton contend that although discriminatory, the proposed treatment is not unfair and is necessary to a successful chapter 13. The trustee's response also raised questions concerning what alternatives are available to these debtors.

Section 1322(b)(1) states that a chapter 13 plan may "designate a class or classes of unsecured claims, . . . but may not discriminate unfairly against any class so designated." The section specifically allows debtors to treat claims for a consumer debt upon which there is a codebtor differently than other unsecured claims, but does not specifically permit the treatment proposed here.

Numerous courts have addressed this issue, and with different results. By far the majority rule, with which this court agrees, is that a chapter 13 plan which proposes to pay nondischargeable unsecured claims in full and dischargeable unsecured claims at a significantly lesser percentage unfairly discriminates in violation of 11 U.S.C. § 1322(b)(1).

This court finds persuasive the reasoning expressed in In re Willis, 197 B.R. 912 (N.D.Okla. 1996), citing McCullough v. Brown, 162 B.R. 506 (N.D.Ill. 1993). First, absent bankruptcy, the legal rights of the unsecured claimants are the same and to the extent possible, they should be treated the same. Second, Congress explicitly permits preferential treatment of some types of claims under the Code but has not granted priority status to student loan claims, which would effectively allow the treatment proposed here. Having excepted the student loans from discharge, Congress has also expressed its intention that payment on these claims might well extend beyond the time period of the chapter 13 case.

Additionally, chapter 13 expressly provides for an ability to fairly deal with these nondischargeable claims. Yet, the Moutons have not proposed a claim treatment alternative which may be permissible under the Code. The debtors have not indicated why they cannot treat an arrearage on these claims under their chapter 13 plan, while maintaining the payments directly to the creditors as permitted by § 1322(3) (5). Apparently, the Class 9 and 10 claims were in default at the time the chapter 13 case was filed, preventing the debtors from paying the claims directly under Class 8.

Finally, this court believes that the interest of the debtors in these circumstances does not outweigh the rights of the general unsecured creditors or justify the discrimination. As the court in In re Colfer, 159 B.R. 602, 609 (Bankr.D.Me. 1993) stated, "The courts should not approve as `fair' discriminatory classification schemes `needed' only for the purpose of mitigating the consequences of statutory discharge exceptions."

At the conclusion of the hearing, the debtors pointed out that the consent of the nondischargeable creditor may be necessary before the claim can be treated in the chapter 13 plan. In re Harris, 132 B.R. 166 (Bankr.S.D.Iowa 1989). Nonetheless, the concurrence of creditors holding nondischargeable claims is not determinative of the issue before the court, although it may be an issue which goes to the good faith of the proposed plan or to its likely success.

In conclusion, this court adopts the majority rule and holds that the Moutons' proposed treatment of the three classes of unsecured creditors unfairly discriminates against the general unsecured creditors, and the plan cannot be confirmed.

Accordingly, for the reasons stated on the record at the hearing and in this order, the motion to confirm the amended chapter 13 plan is denied.