Case Summary:
Bank objected to confirmation of chapter 13 plan where the debtors proposed to pay the bank only what was owed on a mortgage loan on their home.  The bank contended that the home constituted collateral for a business note as well, and that the home loan was secured by the guaranty of certain third parties.  The court found that the effect of the co-debtor stay of 11 U.S.C. § 1301 permitted the debtors to pay obligations guaranteed by third parties under a chapter 13 plan; it was only if the plan did not provide for full payment of the guaranteed obligation that the creditor would be permitted to pursue the guarantor.

Furthermore, given the bank’s lack of documentation, the only secured obligation was the home loan.  The business debt was not secured by the home, as the documents were ambiguous and those ambiguities would be construed against the bank as the drafter of the documents.  Accordingly, the bank’s objections to confirmation were overruled, and the plan was confirmed.

Statue/Rule References:
11 U.S.C. § 1301 -- Co-Debtor Stay

Key Terms:
Non-Debtors