Case Summary:
The Chapter 12 standing trustee objected to confirmation of the debtor’s amended plan on the grounds that it impermissibly provided for direct payment of an impaired secured claim. The Court recognized a split of authority among the circuits, and no Seventh Circuit authority directly on point. After evaluating the two most prominent approaches—one which categorically prohibited the direct payment of impaired secured claims and the other that permitted direct payments under certain circumstances—the Court overruled the Trustee’s objection and confirmed the amended plan. The Court endorsed the thirteen-factor test set forth in In re Pianowski, 92 B.R. 225 (Bankr. W.D. Mich. 1988), and concluded that proposals to make direct payments should be evaluated on a case-by-case basis.

Statute/Rule References:
11 U.S.C. § 1226(c) -- Payments

Key Terms:
Direct Payments