Case Summary:
This matter came before the Court on the Trustee’s motion to dismiss Debtor’s Chapter 13 petition. The Department of Education filed an unsecured claim for a student loan that exceeded the statutory limit on unsecured debt in 11 U.S.C. §109(e). The Court addressed the questions (1) whether the cap on unsecured debt in section 109(e) is jurisdictional and (2) whether to convert the case to a Chapter 7.  The Court found section 109 is not jurisdictional. It further found the interests of creditors were best served by permitting Debtor’s Chapter 13 to proceed, even though her unsecured debt load exceeded the statutory cap. This Debtor was a true consumer debtor. It was undisputed that Debtor could make the proposed plan payments and the only real roadblock to confirmation was the alleged amount of the student loans, which in any case, were nondischargeable in bankruptcy. Literal interpretation of the section 109(e) would lead to an absurd result because it would lead Debtor to file either a Chapter 11—which she could not afford—or a Chapter 7—in which she would face the presumption of abuse. The Trustee’s motion was denied and the Court permitted Debtor’s Chapter 13 to proceed.

Statute/Rule References:
11 U.S.C. § 109(e) -- Who May be a Debtor Under Chapter 13
11 U.S.C. § 1307-- Conversion or Dismissal

Key Terms:
Conversion
Ineligible
Jurisdiction