Liquidated Debt Limits Under § 109(e)

A Guide To The Bramble Bush

Morgan D. King

of the California Bar

This article originally appeared in Norton's Bankruptcy Law Advisor

In principal, the idea of debt limits for eligibility in Chapter 13 should not be too difficult to apply. However, courts as well as practitioners have stumbled over a number of issues that emerge in the context of 11 U.S.C. 109(e).

There are, in a sense, debt limits for eligibility, but these limits only apply to claims that satisfy three criteria. To be included in the count for eligibility under 109(e), first, the claim must be liquidated; and second, it must be liquidated as of the date the Chapter 13 petition is filed. Third, the claim in question must be capable of being characterized as either secured, or unsecured. See 11 U.S.C. § 109(e).

Each of these elements must exist, or the claim is excluded from the count. These three criteria, as simple as they may seem, present problems of almost a metaphysical nature. And, the very obviousness of these criteria conceal traps for the unwary.

Why have debt limits in Chapter 13 at all? Congressional intent was to make Chapter 13 available to sole proprietors who were relatively small, and not available to a really large business, even if a sole proprietorship. However, there is scant evidence of the rationale for this debt limitation. Without knowing why Congress believes it is desirable to keep Chapter 13 business entities small, it is difficult in some cases to tell which sole proprietor businesses should or should not be eligible for Chapter 13.

One clue is found in the Congressional literature -

"The bill places dollar limitations on the amount of debts of the proprietor who may use Chapter 13, in order to prevent sole proprietors with large businesses from abusing creditors by avoiding Chapter 11."

As opposed to Chapter 11, Chapter 13 avoids having to obtain creditor approval for confirmation of the plan. The premise here appears to be that larger enterprises should be required to obtain creditor approval, while the smaller "mom and pop" enterprise should get a break from such a burden; letting a big business slip into Chapter 13 protection would let them avoid this requirement. The snippet of Congressional "intent" seems to suggest that avoiding Chapter 11 and going into Chapter 13 instead, where the debtor is not required to obtain creditor approval, is a form of "abuse" of creditors that only a small business should be privileged to do. The unstated premise, then, is that Chapter 11 is not an abuse of the creditors, a notion that almost everyone familiar with the system would probably disagree with. In fact, a general consensus could be found that Chapter 11 abuses everybody, including creditors, the debtor, and the patience of the Court.

Whatever the rationale for debt limitations in Chapter 13, however, the trouble comes when trying to identify whether the intent is to exclude a business from Chapter 13 eligibility if it actually owes debts that exceed the limit, or rather is merely alleged to owe debts that exceed the limit. This ambiguity in congressional intent has resulted in many small businesses that in fact do not owe debts over the limit, from qualifying for Chapter 13 protection because the creditors, and in some cases the taxing entities, have simply asserted invalid claims, or asserted inflated claims that exceed the § 109(e) limits, and such debts have been included in the debt limit count regardless of their validity. Hence, the majority rule is that a debt that the debtor merely "disputes" must still be included in the eligibility count, even though the dispute may be valid and the debtor may in fact not owe the claim. This result hardly seems in keeping with any rational justification for the debt limits. Furthermore, it may invite creditor puffery when filing proofs of claim in an attempt to force the debtor out of Chapter 13 eligibility. Howeve, it is also fair to say that a debtor acting in bad faith should not be allowed to "shoehorn" himself into Chapter 13 by fabricating a bogus dispute.

The following sections discuss some of the ramifications of this problem.


Individuals are eligible to file Chapter 13 only if as of the date of filing the petition their liquidated, non-contingent secured debts are under $807,750 and liquidated, non-contingent unsecured debts are under $269,250. 11 U.S.C. §109(e).


The first potential stumbling block is over the definition of liquidated.

The majority rule defines a liquidated claim for purposes of § 109(e) as a claim that, as of the date of filing the petition, is capable of ready and precise determination, or, is capable of ready and precise determination by simple mathematical computation. In re Mazzeo, 131 F.3d 295 (2nd Cir. 1997) (claim was liquidated when amount could be readily determined from actual tax returns with agreed-upon amounts); In re Pearson, 773 F.2d 751, 754 (6th Cir. 1985); In re Audre, Inc. 202 B.R. 490 (Bkrtcy.S.D.Cal. 1998); In re Nicholes, 184 B.R. 82, 91 (9th Cir. BAP 1995); In re Wenberg, 94 B.R. 631, 634 (9th Cir. BAP 1988); In re Fostvedt, 823 F.2d 305, 306 (9th Cir. 1987).


The traditional notion that a claim is liquidated if based on contract and unliquidated if based on a tort claim has been largely discarded; the majority rule today is that regardless of whether it arises from contract, tort or other basis a dispute of such a nature that an extensive evidentiary hearing will be required to fix liability or the precise amount is an unliquidated claim and need not be counted under § 109(e).

This rule is often difficult to apply. The majority rule is that a claim is not excluded from the eligibility count under § 109(e) merely because the debtor "disputes" the amount of the claim. However, a disputed claim might be an unliquidated claim, and hence excluded, depending on the underlying nature of the dispute.

The Code makes it clear that "unliquidated" claims are not counted; the language does not include merely "disputed" claims in the not-counted group. Accordingly, a majority of courts have ruled unequivocally that claims for which the amounts are merely disputed must nevertheless be counted. Cases following the rule that disputed claims must be counted for eligibility include In re McMonagle, 30 B.R. 899 (Bankr.D.S.Dak. 1983); In re Blehm, 33 B.R. 678 (Bankr.D.Colo. 1983); In re Vaughan, 36 B.R. 935 (N.D.Ala. 1984); In re Crescenzi, 69 B.R. 64 (Bankr.S.D.N.Y. 1986); In re Sylvester, 19 B.R. 671, 673 (9th Cir. BAP 1982); In re Olick, 1996 U.S. Dist. LEXIS 3845; U.S. v. Verdunn, 187 B.R. 996, 1002 (D.M. D.Fla. 1995) ("The majority view is that the mere fact that the amount of or liability on a claim is disputed is not sufficient to render the claim 'unliquidated' in determining eligibility for relief under Chapter 13."). And see the tax case In re Hutchens, 69 B.R. 806 (Bankr.E.D.Tenn. 1987) following the same rule. And see lengthy opinion in In re Pulliam, 90 B.R. 241 (Bankr.N.D.Tex. 1988).

A small number of opinions have ruled just the opposite. Cases holding that disputed claims need not be included in the count for eligibility are In re King, 9 B.R. 376 (Bankr.D.Or. 1981); In re Lambert, 43 B.R. 913 (Bankr.D.Utah, 1984); In re Monaco, 36 B.R. 882 (Bankr.M.D.Fla 1983).

A careful reading of most of these cases, however, appears to support the proposition that while as a general rule a disputed claim must be counted, the court should at least make a determination as to whether and to what extent the dispute is complex or bona fide, and to the extent the dispute is bona fide, or the claim found to have no valid legal basis, or so complex as to require an extensive evidentiary hearing, it should be excluded from the count on the basis that such a claim is actually unliquidated. In some cases the courts have said basically the same thing by stating that the court should make an initial determination as to the extent that the disputed claim is liquidated (or in other words, the extent that the dispute appears unmeritorious).

Several cases have drawn a distinction between the requirement of § 109(e) that the debtor must not owe debts exceeding a certain amount, versus what the creditors have claimed is owed. For example, in the Chapter 13 tax claim case In re Lambert, 43 B.R. 913 (Bankr.D.Utah, 1984) the court stated "In reviewing the eligibility requirements for Chapter 13 debtors, it is important to emphasize that it is the debt and not the claim which must be noncontingent and liquidated. For Section 109(e) speaks of debts and not claims." This distinction is, however, clearly a minority position.


Notwithstanding the majority rule that a mere dispute over the amount of a claim does not remove it from the § 109(e) count, there is substantial authority for the proposition that a dispute may remove the claim from the liquidated total under § 109(e) if the nature of the dispute is such that an evidentiary trial would be necessary in order to determine the amount.

As a general rule, the liquidated nature of the claim turns on whether the claim is subject to "... ready determination and precision in computation of the amount due." In re Belt, III, 106 B.R. 553 (Bkrtcy.N.D.Ind. 1989) (non-tax case). A claim that requires an evidentiary hearing, including expert opinion or other subjective evidence and the exercise of judgment, is by definition not liquidated. A claim is unliquidated, for example, where the dispute involves a claim in tort, punitive damages, piercing the corporate veil, or quantum meruit "... which were disputed and where proof as to liability and damages is still to be produced ..." In re Clark, 91 B.R. 570 (Bankr.D.Colo. 1988).

Citing In re Wenberg, 94 B.R. 631 (9th Cir. BAP 1988) the court said:

"The definition of 'ready determination' turns on the distinction between a simple hearing to determine the amount of a certain debt, and an extensive and contested evidentiary hearing in which substantial evidence may be necessary to establish amounts or liability."

Same rule, In re Nicholes, 184 B.R. 82, 90 (9th Cir. BAP 1995);

"[T]he bankruptcy court must determine whether the debts in question are subject to ready determination and whether computation of the amount due is a simple matter. If the court determines that such debts are readily determinable, then they are liquidated and included in the debtor's eligibility tally. If they are not readily determinable, then they are unliquidated and excluded from the eligibilitytally."

Concluded the Nicholes court, at page 90,

"... if the dispute itself makes the claim difficult to ascertain or prevents the ready determination of the amount due, the debt is unliquidated and excluded from the 109(e) count."

Following the same rule, In re Pearson, 773 F.2d 751, 756 (6th Cir. 1985);

"...the fact that evidence must be taken to determine the amount of the claim indi cates that, until then, the claim was unliquidated."

See also In re Hustwaite, 136 B.R. 853, 855 (D.Or. 1991); In re Johnson, 191 B.R. 179, 180-181 (Bkrtcy.D.Az. 1995) ("The definition of ready determination turns on the distinction between a simple hearing to determine the amount of a certain debt, and an extensive and contested evidentiary hearing in which substantial evidence may be necessary to establish amounts ...").

There are virtually no opinions contrary to the rule propounded above that a claim is unliquidated if it is not capable of ready or precise determination without a substantial evidentiary hearing. One somewhat confusing opinion which appears to be contrary is In re Brooks, 216 B.R. 838 (Bkrtcy. N.D. Okla. 1998). The case cites the correct rule, but somehow arrives at a totally backwards conclusion. This opinion, dealing with a disputed tax claim, acknowledges the debtor's argument that since it would require an evidentiary hearing to adjudicate the amount of the claim it is by definition unliquidated. It then proceeds to ignore the argument entirely and simply parrot the general rule that merely disputing a claim does not render the claim unliquidated, totally missing the distinction between a mere dispute and a dispute requiring an extensive hearing to resolve. Said the court:

"Brooks also contends that extensive evidentiary hearings will be necessary to determine his liability, if any, for the IRS claim. Brooks cannot "shoehorn" himself into eligibility under Chapter 13 merely by disputing a debt owed to the IRS."

The court in In re Knize discussed the possible significant difference between mere personal tax claims, that may be easily calculable, from business-related taxes. The court held a debt is liquidated if the amount of debt has been ascertained or can be readily calculated; when a debt to the IRS can be ascertained or readily calculated, it is liquidated for purposes of § 109(e). "Computation of taxes due from an ongoing business could well be a much more complex task, one warranting an opportunity to a debtor to offer evidence of actual operations and taxes due in an amount less than the government claims. If the government's theory is that it need only file a claim in excess of Chapter 13 limits and the debtors can never contest it in Chapter 13, it reaches too far and is not supported by ... authority." In re Knize, 210 B.R. 773 (Bkrtcy. N.D.Ill. 1997).

The court in In re Loya, 123 B.R. 338 (9th Cir. BAP 1991), a non-tax case, stated:

"Therefore, whether a debt is liquidated or not for purposes of 11 U.S.C. § 109(e) does not depend strictly on whether the claim sounds in tort or in contract, but whether it is capable of ready computation.

"... Thus, a disputed debt which is capable of ready determination is liquidated."


Another important distinction is that between a disputed liability, as opposed to a disputed amount. The parties may agree as to liability, but disagree as to the amount of the liability. Or, the parties may agree that if the debtor is liable at all, the amount is "X," but the dispute is over the threshold question of liability.

The majority rule appears to be that a dispute over the liability, as distinct from the amount, even if evidence is required, does not make the claim unliquidated. See, for example, In re Mazzeo, 131 F.3d 295 (2nd Cir. 1997); In re Verdunn, 89 F.3d 799, 802 (M.D.Fla. 1995); In re Madison, 168 B.R. 986, 989 (D.Hawaii 1994); In re McGovern, 122 B.R. 712, 715 (Bkrtcy.N.D.Ind. 1989).

In Madison, the debtor not only disputed the tax and penalty assessments but asserted that they were "... subject to protracted and extensive evidentiary hearings in his pending Tax Court proceedings." The court held they had to be included in the § 109(e) count notwithstanding the assertion of protracted hearings because "... as a matter of fact the appellant's tax liability and the amounts of the deficiencies have already been determined by the IRS."

Held, merely disputing the liability for the tax claim does not remove it from the § 109(e) count. (In re Tritt, 1995 WL 237380 (Bankr.N.D.Ga. 1995)). In Tritt the court stated -

"The debt owed by the debtors to the IRS is liquidated because it is readily ascertainable, notwithstanding the fact that the debtors may dispute liability or the amount of the claim. [cites] Merely be cause it may be disputed does not make it unliquidated. [cite] Were it otherwise, no debtor would be ineligible for Chapter 13, because a debtor with excessive debts would simply dispute debts that caused him or her to exceed the statutory limit."

An example of a case that invoked the majority rule, almost by rote, without apparently thinking through the reasoning is In re Slack, 187 F.3d 1070 (9th Cir. 1999). In that case the debtor and the creditor had entered into a prepetition stipulation as to the amount of the claim, but the debtor disputed his threshold liability for the claim. Given the particular facts in this case the ultimate ruling, that the debtor's dispute did not remove the claim from the 109(e) count, was probably correct. However, the court tripped over itself trying to articulate the rule. Said the court,

"According to Black's Law Dictionary, a liquidated debt is one in which ' ... it is certain what is due and how much is due.' [cites] 'Therefore, the concept of a liquidated debt relates to the amount of liability, not the existence of liability.' "[citing In re Verdunn].

This statement strikes the author as a non sequitur. The language quoted from Black's Law Dictionary draws a distinction between "what" is due, and "how much" is due. We know what "how much" means. The "what" seems to refer to the threshold issue of whether anything at all is owed; in other words, liability. Thus, yet another muddled analysis. And, like so many of the other opinions that have uncritically recited the rule in connection with disputed liability, there is virtually no attempt to discern Congressional intent, or even a logical reason given as to why a debtor should be bounced out of Chapter 13 on account of a claim that may be utterly bogus. These courts may raise their hands and object, saying, well, if it is bogus of course it shouldn't be deemed liquidated." The problem is, how does a debtor draw the court's attention to the fact that the claim is bogus, without "disputing" it?

Notwithstanding the above, where the "dispute" is that the claim is totally invalid, frivolous or unprovable there is some authority that the debtor should not be knocked out of eligibility for Chapter 13 protection merely on the say-so of a creditor who lists a big number. Some, while basing their rulings on the rule that a dispute does not take the claim out of the 109(e) count, at least recognize in dicta that some disputed claims should not be counted. Said the court in In re Berenato, 226 B.R. 819 (Bkrtcy.E.D.Pa. 1998). "... a claim [that is] frivolous or could be proven to be contingent or unliquidated should not be counted for § 109(e) purposes."

Held, where there was a bona fide dispute as to liability for abusive trust fraud penalties, the tax claim was unliquidated. Said the court in In re Robertson, 143 B.R. 76 (Bkrtcy.N.D.Tex. 1992) -

"In the case at hand, the tax claims asserted by the IRS against Debtor are similar to tort claims, in that the IRS has the burden of proving by a preponderance of the evidence the factual predicate for statutory damages based on violations of sections 6700 and 6701 of the Tax Code [cite]. Claims for civil tax penalties under sections 6700 and 6701 of the Tax Code are unlike any other tax claims of the IRS in that the burden of proof, normally on the taxpayer, is on the United States to prove penalty violations as mandated by Congress."

There is other authority supporting this notion, often in the form of dicta. See, for ex ample, In re Nicholes, 184 B.R. 82 (9th Cir. BAP 1995); In re Wenberg, 94 B.R. 631, 634 (9th Cir. BAP 1988), aff'd 902 F.2d 768 (9th Cir. 1990). And, held, notwithstanding IRS claim of $465,427, the claim was unliquidated and Chapter 13 plan could be confirmed even though the liability or amount of the claim would not be determined until a trial on an adversary proceeding to determine validity of the claim, which, with appeals, could take at considerable amount of time. In re Deel, 213 B.R. 112 (Bkrtcy.W.D.Va. 1997). The court in In re Snell, 227 B.R. 127 (Bkrtcy.D.D.Ohio 1998) while holding that the debts in that case were liquidated, is one of the few opinions that acknowledge that "A debt is 'unliquidated' if there is a substantial dispute regarding liability or amount." Held, where the debtors do not admit to liability for the claim, and where it would require an evidentiary hearing to determine liability, the disputed amount should not be counted under 109(e); In re Harbaugh, 153 B.R. 54 (Bkrtcy.D.Idaho 1993). And the court in In re Snell, 227 B.R. 127 (Bkrtcy.D.D.Ohio 1998) while holding that the debts in that case were liquidated, is one of the few opinions that acknowledge that "A debt is 'unliquidated' if there is a substantial dis pute regarding liability or amount."

Part of the problem seems to be that while the rule that a mere dispute is irrelevant to §109(e) is repeated in case after case, in fact some courts appear to acknowledge, perhaps without realizing it (and certainly not explaining it) that a truly invalid claim should not be deemed liquidated.

For example, in In re Donohoo, 243 B.R. 139 (Bkrtcy.M.D.Fla. 1999) (Hon. Alexander Paskay, judge) an objection was made as to the debtor's eligibility on 109(e) debt limit grounds. In response, the debtor disputed the validity of the government claim on the basis that the statute of limitations for such a claim had expired. If the court in that case had simply followed the majority rule that a mere dispute had no bearing on whether the claim was liquidated, the court would have simply dismissed the case based on excessive debt. However, in fact most of the opinion is devoted to a discussion of the merits of the debtor's arguments (i.e., the debtor's dispute) regarding whether or not the statute of limitations applied in that case. Ultimately the court held that the statute did not apply, the debt was valid, and the amount exceeded the 109(e) limit. But the entire discussion clearly assumes the premise that if, in fact, the debtor was right and the statute of limitations did apply, the debt would be invalid and the debtor would be within the 109(e) limits. In other words, this court, without articulating it, discerned that the dispute in this case might be valid, with the result, presumable, that the debt would be excluded from the count.

In the author's view, there are problems with the cases holding that a dispute as to liability does not render the claim unliquidated. These problems arise partly because in the opinions holding that a mere dispute has no effect on the liquidated nature of the claim contain virtually no reasoned explanation for why this should be so, and virtually no attention is given to the differences in the nature of "disputes." Other than Berenato, there are no cases that clearly draw a distinction between a merely disputed claim, and a disputed claim for which it can be shown that the claim is totally invalid. Intuitively the rule makes no sense ... did Congress really intend that a debtor should be found ineligible because a frivolous claim exceeds the 109(e) limit?

It would seem to the author that the better rule is that where, upon the debtor's offer of proof made in good faith, it would appear to require evidence to determine liability, and where the court is able to discern that the debtor's position has reasonable merit, the claim should not be deemed liquidated. Otherwise, a claim asserted against a debtor that is totally without merit as to liability could knock the debtor out of eli gibility for Chapter 13; such a result could have no justification in public policy or legislative intent, and is not required by the language of the code. Have the courts that have held that evidentiary disputes over liability must be counted in § 109(e) merely taken the easy way out, instead of scheduling hearings, taking evidence, and giving the debtor a fair opportunity to es tablish that his bona fide debts are within the eligibility limits?

The Berenato opinion acknowl edges, however, that "In certain circum stances it may even be necessary to decide the valid ity of a claim prior to making a § 109(e) determination." And, this is one of the very few opinions that add to the list of claims that need not be counted under § 109(e); the court stated "It is only a claim which is frivolous or could be proven to be contingent or unliquidated that should not be counted under § 109(e)." Thus, in addi tion to contingent or unliquidated, a claim that is "frivolous"is not included un der § 109(e). This opinion, however, does not explain how the debtor is to assert that a claim is frivolous , since the only way to do it on the schedules is to indicated it is "disputed," and most judges will have a knee-jerk reaction that a mere "dispute" does not take a claim out of § 109(e).


Is a claim for an estimated amount unliquidated? The answer to this question may depend on the context in which the estimate is made. It may also depend on the manner in which the creditor calculated the estimate.

If a claim is presumed to be actually unliquidated, the Bankruptcy Code requires that the claim be estimated for purposes of the schedules, if determining the actual amount of the claim would delay the prompt administration of the case. 11 U.S.C. § 502(c). Thus, for example, a tort claim that everyone agrees is unliquidated must be estimated on the schedules if adjudicating the correct amount of damages would unduly delay the confirmation process. This means that a specific number is going to appear on the schedules, but it should be understood that such a required estimate of an unliquidated claim should not be included in the 109(e) count, merely because the estimated figure is a specific dollar amount.

But there may be a different issue where the creditor files a proof of claim which purports to state the exact amount of the claim, albeit the claim is only an estimate. Here, the method used by the creditor to make the estimate may bear on whether the estimated amount is liquidated or not.

Held, a tax claim that is merely an esti mate is unliquidated for purposes of § 109(e); In re Elrod, 178 B.R. 5 (Bkrtcy. N. D.Okla. 1995); and a non-tax case, In re Lindell Drop Forge Company, 111 B.R. 137 (Bkrtcy. W.D.Mich. 1990). See also In re Belt, III, 106 B.R. 553 (Bkrtcy.N.D.Ind. 1989).

But contrary, see In re Ekeke, 1996 Bankr. LEXIS 812 (Bkrtcy.E.D.Miss. 1996) holding that esti mated taxes calculated on the basis of a tax payer's own tax returns are liquidated under § 109(e); also In re Wittreich, 1991 Bankr. LEXIS 762 (Bkrtcy.E.D.N.Y. 1991); In re Tritt, 1995 Bankr. LEXIS 170 (Bkrtcy.N.D.Ga. 1995) (precise IRS tax claim based on an IRS estimate is liquidated).

Held, where the process of calculating the claim is fixed, certain or otherwise de termined by a specific standard, the claim is liquidated, even if amount is esti mated. Bernal, supra.

For example, where tax assessments arose out of al legedly fraudulent tax returns, the fact that the taxpayer strenuously disputed the fraud allegations and a substantial evidentiary trial would be required to adjudicate the is sue did not render the taxes unliquidated because the tax claims asserted by the IRS were fixed and precise and "... the amount of Verdun's $297,000 deficiency was eas ily ascertainable, i.e., it was computed through the application of fixed legal standards set forth in the tax code." In re Verdunn, 89 F.3d 799 (11th Cir. 1996).

Held, tax claim was liquidated and made debtor ineligible for Chapter 13; even though both liability and amount were in dispute, because according to this opinion a dispute as to liability may not render a claim unliquidated, and in the case of taxes a dispute about the amount may be readily ascertained "... through the appli cation of fixed legal standards." In re Berenato, supra. This opinion does not acknowledge other opinions standing for proposition that a dispute requiring evidence to adjudicate is by definition unliquidated.


Continuing with the hypothetical claim of $567,000, sooner or later someone is going to have to determine exactly how much the relative secured and unsecured portions of the claim are worth. This will be necessary obviously to determine the amount of the monthly payment (assuming a composition plan), and ultimately the feasibility of the plan itself.

This means that there will have to be a trial, and at some point, well after the date of filing, the claims will become liquidated.

Let's assume that, after a full evidentiary trial, the court fixes the collateral value at $200,000, and finds that the unsecured balance is $367,000. Since the unsecured balance is well over the 109(e) limit, does this result in ineligibility? It is at this turn on the roller coaster that many a practitioner (and a few courts) have fallen off the car.

The answer is, no. Even though the amount of the unsecured debt exceeds the 109(e) limit for unsecured debt, it is totally irrelevant to considerations of eligibility, because a liquidated claim is only relevant if it was liquidated as of the date the petition is filed. This is the plain language of § 109(e). In other words, if the claim is not capable of ready and precise determination as of the date of filing, it is excluded forever from the eligibility count.

In one of the author's cases a sales tax claim that was hotly disputed on the date the petition was filed became liquidated several months later by stipulation of the parties. When the court was apprised of the stipulation it dismissed the case on the ground that the stipulated amount exceeded the 109(e) limits. On appeal, the 9th Cir. BAP, in an unpublished opinion (In re Corbett, BAP No. NC-91-1139-PJO, July 10, 1991), stated:

"The debtor's primary contention is that the bankruptcy court erred in relying upon the post-petition settlement of the debt to determine that the debt to the Board (of Equalization) was non-contin gent and liquidated in the amount of $149,000, when the debt was disputed and therefore unliquidated at the time the debtors filed their petition. We believe that the debtors' contention has merit. The language of section 109(e) concerns whether the debtor owes less than $100,000 in liquidated, non-contingent, unsecured debt 'on the date of the filing of the petition.' This language suggests that the court's inquiry is directed to the debts that are liquidated, non-contingent and unsecured on that date and that any liqui dation of a debt or removal of a contin gency that occurs after the petition will be irrelevant for purposes of section 109 (e)."

This principle was recently clearly reaffirmed by the Ninth Circuit in In re Slack, at 1072; "The language of the statute clearly states that the amount of the debt is determined as of 'the date of the filing of the petition.' The courts that have considered this issue have narrowly construed the quoted portion of § 109(e). They hold that a bankruptcy court cannot look to post-petition events to determine the amount of the debt."

See, also, In re Hughes, 98 B.R. 784 (S.D. Ohio, 1989), In re Bush, 120 B.R. 403 (E.D. Tex. 1990), and In re Pearson, 773 F.2d 751 (6th Cir. 1985).

See also follow ing the same rule, In re Clark, 91 B.R. 570 (Col. 1988); U.S. v. Verdunn, 187 B.R. 996, 1003 (M.D.Fla. 1995); In re Robertson, 143 B.R. 76, 78 (Bkrtcy. N.D.Tex. 1992); Brockenbrough v. Commissioner IRS, 61 B.R. 685 (W.D. Va. 1986); Matter of Belt, 106 B.R. 553 (Bkrtcy.N.D.Ind. 1989).


In a situation where there is a large but undersecured claim, the question may arise, is the claim secured or unsecured for purposes of § 109(e)?

An undersecured claim is one where the value of the collateral securing the claim is less than the total amount of the claim. The analysis of this problem for purposes of § 109(e) eligibility begins with the is sue, how is such undersecured claim to be treated for purposes of the plan in Chapter 13? Is the entire amount of the claim deemed secured? Or is it bifurcated, with the value of the collateral equal to the se cured portion of the claim, and the unse cured balance treated as an unsecured claim in the plan?

The minority rule is that found in In re Morton, 43 B.R. 215 (Bkrtcy.E.D.N.Y. 1984). Under the Morton rule, the entire claim is deemed secured, notwithstanding that the collateral is worth less than the total amount of the claim.

The majority rule is that set forth in In re Day, 747 F.2d 405 (7th Cir. 1984) which holds that the claim is to be bifurcated, with the secured portion treated as a se cured claim, and the balance treated as an unsecured claim. In such a situation the total amount of the claim, although liqui dated, may not be relevant since the total amount of a claim does not render one ineligible under §109(e), only the total amount of secured or unsecured claims; the relevant question is, therefore, how much of the claim is a liquidated secured portion, and how much is a liquidated un secured portion?

See also, following the rule in Day, In re Crummie, 1996 Bankr. LEXIS 320 (Bkrtcy. N.D.Cal. 1996); In re Mitchell, 954 F.2d 557 (9th Cir. 1992); In re Mandrayar, 174 B.R. 289 (Bkrtcy.S.D.Cal. 1994); In re Lee, 156 B.R. 628 (Bkrtcy.D.Min. 1993); In re Pearson, supra.; In re Martin, 78 B.R. 928 (Bkrtcy.S.D.Iowa 1987); In re Johnson, 191 B.R. 179, 181 (Bkrtcy.D.AZ 1995); and dicta in In re Edmonston, 99 B.R. 995, 999 (D.E.D.Cal. 1989) ("... section 506 clearly indicates that the unsecured portion of a secured debt should be treated as an unsecured claim. The court is unconvinced that the section 506 approach will cause excessive delays in Chapter 13 proceedings.").

The unsecured portion of a secured claim is ordinarily counted in the limit for unsecured claims. In re Clark, 91 B.R. 570 (Bankr.D.Col. 1988); In re Flaherty, 10 B.R. 118 (Bankr.N.D.Ill. 1981). Where the amount of the claim exceeds the value of the collateral against which the claim is secured, the general rule is that the value of the collateral is the amount counted as secured debt, and the unse cured portion is counted with the other un secured claims. In re Ballard, 4 B.R. 271 (Bankr.E.D.VA. 1980). Held, an undersecured claim should be bifurcated into its respective secured and unsecured portions for purposes of § 109(e); In re Soderlund, 236 B.R. 271 (9th Cir. BAP 1999).