## Facts

- Fannie L. Shaw bought a 2005 Dodge Caravan for personal use in March 2005, financing the purchase through Aurgroup Financial Credit Union at 12.13% APR.
- Aurgroup held a purchase-money security interest in the vehicle.
- Shaw filed a Chapter 13 petition on July 21, 2006, within 910 days of the purchase, owing $23,606.20 on the vehicle loan.
- Shaw’s proposed plan retained the vehicle but sought to pay only the vehicle’s then-current value ($14,890) with 7.5% interest, rather than the full claim amount.
- Aurgroup and the Chapter 13 trustee objected, asserting that the plan violated 11 U.S.C. § 1325(a)(5) and the post-§ 1325(a)(9) “hanging paragraph” applicable to qualifying 910-day purchase-money vehicle claims.
- Shaw conceded her plan did not satisfy § 1325(a)(5) and that the hanging paragraph applied, but argued the bankruptcy court could still confirm a noncompliant plan as “fair and equitable.”
- The bankruptcy court denied confirmation; the district court affirmed; Shaw appealed.

## Issues

1. Whether 11 U.S.C. § 1325(a) sets mandatory prerequisites to confirmation of a Chapter 13 plan, or instead permits a bankruptcy court to confirm a plan that does not meet § 1325(a) if the court deems it fair and equitable.

## Decision

- The Sixth Circuit affirmed the denial of confirmation.
- The court held that § 1325(a) is mandatory: a bankruptcy court has no discretion to confirm a Chapter 13 plan that does not satisfy § 1325(a)’s requirements.
- Because Shaw’s plan did not comply with § 1325(a)(5) and impermissibly attempted to treat a qualifying 910-day vehicle claim as partially unsecured, confirmation was properly denied.

## Legal Principles

- Under 11 U.S.C. § 1325(a), the court “shall” confirm a Chapter 13 plan only if the plan satisfies the statutory conditions; failure to meet any required condition bars confirmation.
- For a qualifying 910-day purchase-money motor vehicle claim for personal use, the hanging paragraph following § 1325(a)(9) renders § 506 inapplicable, preventing bifurcation of the creditor’s claim into secured and unsecured portions for plan treatment under § 1325(a)(5).
- Statutory structure supports mandatory application of § 1325(a), including its incorporation into modification standards under 11 U.S.C. § 1329(b)(1).

## Conclusion

The Sixth Circuit ruled that § 1325(a) imposes binding confirmation requirements, leaving bankruptcy courts no authority to approve Chapter 13 plans that do not comply, including plans that attempt to reduce qualifying 910-day vehicle claims to collateral value rather than treating the full claim as secured.


Shaw v. Aurgroup Fin. Credit Union, 552 F.3d 447 (6th Cir. 2009)