## Facts

- In 2006, Leiann Fountain borrowed more than $1 million to refinance her home mortgage and signed a promissory note in connection with the loan.
- The note was associated with a securitization trust for which Deutsche Bank National Trust Company served as trustee, and Deutsche Bank asserted that it possessed the note.
- The mortgage securing the note was allegedly lost and never recorded.
- In 2015, Fountain sold the home without paying off the loan.
- After the sale, litigation proceeded in Hawaii state court. Deutsche Bank sought payment from Fountain based on the note while related issues about the right to enforce the note were disputed.
- In January 2019, while the state-court dispute was pending, Fountain filed a Chapter 13 petition and proposed plan.
- Fountain’s bankruptcy schedules listed total unsecured debt of $30,443 and listed Deutsche Bank as holding a $1,000 unsecured claim marked contingent, unliquidated, and disputed.
- Deutsche Bank objected to confirmation and moved to dismiss, arguing Fountain was ineligible for Chapter 13 under 11 U.S.C. § 109(e) because her unsecured debts exceeded the then-applicable cap of $394,725 for noncontingent, liquidated, unsecured debts.
- Deutsche Bank filed a proof of claim asserting an unsecured claim of $1,751,326.06, supported by Fountain’s signed note.
- Fountain argued the bankruptcy court had to determine § 109(e) eligibility solely from her schedules and could not consider Deutsche Bank’s proof of claim.
- Fountain also argued Deutsche Bank lacked an enforceable “claim” for eligibility purposes because its right to enforce the note was being contested in state court, and alternatively argued the debt was contingent and unliquidated.
- The bankruptcy court rejected Fountain’s arguments, counted Deutsche Bank’s claim in the § 109(e) calculation, and dismissed the Chapter 13 case. Fountain appealed.

## Issues

1. May a bankruptcy court consider evidence beyond the debtor’s schedules, including a filed proof of claim and loan documents, when determining Chapter 13 eligibility under 11 U.S.C. § 109(e)?
2. Does a creditor have a “claim” for § 109(e) eligibility purposes when the debtor disputes the creditor’s right to enforce the promissory note in pending state-court litigation?
3. Is a promissory-note obligation “contingent” under § 109(e) when the debtor disputes the creditor’s enforcement rights?
4. Is the debt “unliquidated” under § 109(e) when liability or enforceability is disputed and related litigation is pending?

## Decision

- The Ninth Circuit Bankruptcy Appellate Panel affirmed the dismissal of Fountain’s Chapter 13 case.
- The bankruptcy court was not confined to the face of Fountain’s schedules in evaluating § 109(e) eligibility and could consider other record evidence, including Deutsche Bank’s proof of claim.
- Deutsche Bank had a “claim” to be considered in the § 109(e) analysis even though Fountain disputed Deutsche Bank’s right to enforce the note in state court.
- The debt was noncontingent because Fountain’s liability arose from signing the promissory note; it did not depend on a future event that might not occur.
- The debt was liquidated because the amount was readily determinable from the note and the creditor’s calculation (principal, interest, and related charges), even though Fountain contested enforceability.
- Once Deutsche Bank’s $1,751,326.06 unsecured claim was included, Fountain’s noncontingent, liquidated, unsecured debts exceeded the statutory limit, making her ineligible for Chapter 13 relief; dismissal was therefore proper.

## Legal Principles

- Chapter 13 eligibility under 11 U.S.C. § 109(e) depends on the amount of the debtor’s noncontingent, liquidated, unsecured debts as of the petition date.
- The Bankruptcy Code defines “claim” broadly as a right to payment, including rights that are disputed or not reduced to judgment.
- A debt is noncontingent when the debtor’s obligation to pay is triggered by past events (such as executing a promissory note), not by a future event that must occur before liability arises.
- A debt is liquidated when its amount is readily calculable by reference to an agreement or straightforward computation; a dispute about liability or enforcement does not by itself make the amount unliquidated.
- In determining § 109(e) eligibility, bankruptcy courts may look beyond schedules when the schedules do not reliably state the debtor’s debts, and may consider proofs of claim and other record materials.

## Conclusion

The BAP affirmed dismissal because the bankruptcy court properly considered Deutsche Bank’s proof of claim and treated the note-based obligation as a noncontingent, liquidated unsecured debt for § 109(e) purposes; counting that debt put Fountain over the Chapter 13 unsecured-debt cap and made her ineligible for Chapter 13 relief.


Fountain v. Deutsche Bank National Trust Co. (In re Fountain), 612 B.R. 743 (2020)