- Court: 9th Circuit Court of Appeals Archives
- Area(s) of Law: Bankruptcy Law
- Date Filed: 02-17-2015
- Case #: 12-60069
- Judge(s)/Court Below: Circuit Judge Graber for the Court; Circuit Judges Gould and Callahan
- Full Text Opinion
In 1997, Carolyn Davis began to establish a vineyard on one of the larger properties she owned of several parcels of real property in California, but her efforts failed in 2006 when she defaulted on three loans. In July 2010, Davis filed for chapter 7 bankruptcy, which released her from liability for unsecured debt related to the properties. In March 2011, Davis additionally filed for chapter 12 bankruptcy, which entailed special provisions for certain family farms whose aggregate amounts were not in excess of $3,792,650. At the time she filed the petition, Davis’ property was valued at $1.6 million, well below the statutory limit. However, the amount of liens attached to her properties had raised her debt values to $4.1 million. The bankruptcy court dismissed her initial claim because the total amount exceeded the statutory limit for chapter 12 bankruptcies. Davis appealed, arguing that because the unsecured debt of each creditor’s secured claims had been discharged in earlier chapter 7 proceedings, it should not be added to the “aggregate debts” and should not preclude chapter 12 eligibility. On review, the Ninth Circuit concluded that debtors must include liens on their reorganization plans after they file for bankruptcy. Specifically, the panel held that even after in personal liability has been discharged, a creditor nonetheless retains an enforceable in rem right to payment, which makes Davis’ “aggregate debts” comprise not only the secured but unsecured debt, which may not be enforceable against Davis personally but remains enforceable against her property. Thus, the panel concluded that a debtor’s obligations remain as “debt” if such obligation is enforceable against the debtor or the debtor’s property, including any discharged amounts prior to a chapter 7 proceeding. AFFIRMED.