                                                          FILED
                                                             2/19/2014
 1
                                                       SUSAN M. SPRAUL, CLERK
 2                                                       U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No. AZ-13-1215-PaKuD
                                   )
 6   CYNTHIA L. MESSER,            )      Bankr. No. 11-03007-RTB
                                   )
 7                  Debtor.        )
     ______________________________)
 8                                 )
     CYNTHIA L. MESSER,            )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      M E M O R A N D U M1
11                                 )
     EDWARD J. MANEY, Chapter 13   )
12   Trustee,                      )
                                   )
13                  Appellee.      )
     ______________________________)
14
                    Argued and Submitted on January 23, 2014
15                              at Tempe, Arizona
16                         Filed - February 19, 2014
17            Appeal from the United States Bankruptcy Court
                        for the District of Arizona
18
       Honorable Redfield T. Baum Sr., Bankruptcy Judge, Presiding2
19
20   Appearances:     David Allegrucci argued for appellant Cynthia L.
                      Messer; Andrew M. Dudley argued for appellee
21                    Edward J. Maney, Chapter 13 Trustee.
22
     Before: PAPPAS, KURTZ, and DUNN, Bankruptcy Judges.
23
24        1
             This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
26   See 9th Cir. BAP Rule 8013-1.
27        2
             Judge Baum entered the order in this appeal before his
28   retirement. The case was thereafter assigned to the Honorable
     Eddward P. Ballinger Jr.
 1        Chapter 133 debtor Cynthia L. Messer (“Debtor”) appeals the
 2   bankruptcy court’s decision declining to confirm her proposed
 3   chapter 13 plan.   Based on that ruling, Debtor proposed another
 4   plan, which was confirmed, and she appeals that confirmation
 5   order.   We AFFIRM the decision of the bankruptcy court, albeit
 6   for different reasons than relied upon by the court.
 7                                  FACTS
 8        On February 7, 2011, Debtor filed a chapter 7 petition.      In
 9   her schedule B, she disclosed her interest in an annuity, which
10   she valued at $2,000, and which she claimed as fully exempt in
11   schedule C.4   The chapter 7 trustee objected to Debtor’s claim of
12   exemption, that objection was sustained, and the exemption was
13   disallowed by the bankruptcy court.
14        On September 14, 2011, Debtor converted the case to
15   chapter 13; Edward J. Maney was appointed to serve as chapter 13
16   trustee (“Trustee”).5   On October 10, 2011, Debtor filed her
17
18        3
             Unless otherwise indicated, all chapter and section
19   references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all
     Rule references are to the Federal Rules of Bankruptcy Procedure,
20   Rules 1001–9037, and all Civil Rule references are to the Federal
21   Rules of Civil Procedure 1–86.
          4
22           Debtor’s schedules are not included in the record on
     appeal. However, we have exercised our discretion to take
23   judicial notice of the pleadings and other papers filed in the
24   bankruptcy court’s docket. Fed. R. Evid. 201; O'Rourke v.
     Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58
25   (9th Cir. 1989).
26        5
             Debtor appealed the bankruptcy court’s ruling denying the
27   annuity exemption. The Panel affirmed in an unpublished
     decision. Messer v. Maney (In re Messer), 2012 WL 762828 (9th
28                                                      (continued...)

                                     -2-
 1   proposed “Chapter 13 Plan and Application for Payment of
 2   Administrative Expense.”   The plan proposed that she would make
 3   forty-eight monthly payments to Trustee of $355 each.
 4        On January 23, 2012, Debtor filed a “Motion for Court to
 5   Value Annuity Stream of Income,” to which Trustee objected.   The
 6   bankruptcy court conducted an evidentiary hearing concerning the
 7   value of Debtor’s interest in the annuity on February 28, 2012.
 8   At the hearing, Debtor called Kirk Hughes, a representative of
 9   Settlement Capital, to testify.    He indicated that his company
10   would purchase twenty-five of Debtor’s future annuity payments
11   for a total of $33,041.6   Trustee called Sebastian W. Manera, an
12   Arizona chapter 7 trustee, to testify.   It is unclear whether
13   Mr. Manera offered any opinion of the liquidation value of the
14   annuity.   However, he opined that, if he were to be the trustee
15   in a hypothetical chapter 7 case in which Debtor’s annuity was an
16   asset, he would simply hold the chapter 7 case open long enough
17   to collect annuity payments in an amount sufficient to pay all of
18   Debtor’s creditors in full.7
19
20        5
           (...continued)
21   Cir. BAP Mar. 9, 2012).
          6
22           The record includes scant information about the annuity.
     However, from the bankruptcy court’s Minute Entry/Order following
23   the valuation hearing, we can surmise that Debtor was entitled to
24   receive $1,950 per month from the annuity, and that there
     remained at least five more years of monthly payments due to her
25   as of March 2, 2012.
26        7
             While the value of the annuity discussed at the hearing
27   is critical to resolution of the issues, regrettably, the parties
     did not provide a transcript of the evidentiary hearing.
28                                                      (continued...)

                                       -3-
 1        In a Minute Entry/Order entered after the hearing, the
 2   bankruptcy court indicated that it accepted Debtor’s evidence
 3   concerning the value of 25 annuity payments, but expressed
 4   skepticism “about the significance of the cash out value of some
 5   portion of the annuity.”   The court suggested there was a
 6   “fundamental disconnect” between Debtor’s request to determine
 7   the value of the annuity in this fashion, and the § 1325(a) plan
 8   confirmation requirements, noting that the court “seriously
 9   doubt[ed] that evidence advances the debtor’s ability to confirm
10   a plan.”
11        On July 20, 2012, Debtor filed an Amended Chapter 13 Plan
12   and Application for Payment of Administrative Expenses (“Amended
13   Plan”).    The Amended Plan proposed payments of $355 per month for
14   months 1-10, and $1,225 per month for months 11-48, for a total
15   of $50,100.   As of October 4, 2012, a total of   $40,317.73 of
16   unsecured claims had been filed in Debtor’s case.8   As a result,
17   the Amended Plan payments were not sufficient to pay all creditor
18   claims and administrative expenses in full, and Trustee therefore
19   recommended to the bankruptcy court that the Amended Plan not be
20   confirmed.    A confirmation hearing was held on November 8, 2012.
21   On January 8, 2013, the bankruptcy court entered an order denying
22
23        7
           (...continued)
24   However, the parties to this appeal, as well as the bankruptcy
     court, appear to agree upon the substance of Mr. Hughes’ and
25   Mr. Manera’s testimony as summarized herein. We therefore rely
     upon their account of the testimony as accurate.
26
          8
27           As of May 8, 2013, the allowed creditor claims, excluding
     secured claims and chapter 13 trustee compensation, but including
28   chapter 7 trustee expenses, totaled $41,518.73.

                                      -4-
 1   confirmation of the Amended Plan.
 2        On March 22, 2013, Debtor filed a motion to reconvert the
 3   case to chapter 7, to which Trustee objected.   However, on
 4   April 19, 2013, the bankruptcy court entered a stipulated order
 5   confirming another amended plan (“Second Amended Plan”).   In the
 6   Second Amended Plan, Debtor proposed sixty months of payments
 7   rather than forty-eight, which increased the total to be paid in
 8   from the $50,100 proposed in the Amended Plan, to $67,350, an
 9   amount sufficient to pay all allowed claims in full.
10        On May 2, 2013, Debtor appealed this confirmation order.
11                             JURISDICTION
12        The bankruptcy court had jurisdiction under 28 U.S.C.
13   §§ 1334 and 157(b)(2)(A) and (L).    As explained below, we have
14   jurisdiction under 28 U.S.C. § 158.
15                                ISSUE9
16        Whether the bankruptcy court erred when it denied
17   confirmation of Debtor’s Amended Plan because, based on the value
18   of the annuity, that plan did not satisfy the “best interests of
19   the creditors” test under § 1325(a)(4).
20                          STANDARDS OF REVIEW
21        A bankruptcy court’s decision concerning confirmation of a
22   chapter 13 plan is reviewed for abuse of discretion.   Bank of Am.
23   Nat’l Trust and Sav. Ass’n (In re Slade), 15 B.R. 910, 913 (9th
24
          9
25           Debtor initially also appealed the bankruptcy court’s
     order denying her motion to compel Trustee to pay certain
26   court-approved attorneys fees and costs. However, in her reply
27   brief in this appeal, she concedes that any issues concerning
     that order are now moot, and requests the Panel not consider
28   them. We therefore do not review that order.

                                    -5-
 1   Cir. BAP 1981).   This standard has two parts.   First, we consider
 2   whether the bankruptcy court applied the correct legal standard;
 3   and second, we must decide whether the court’s factual findings
 4   supporting the legal analysis were clearly erroneous.   United
 5   States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir. 2009) (en
 6   banc).
 7        Rulings concerning confirmation of a chapter 13 plan present
 8   mixed questions of fact and law.   The bankruptcy court’s factual
 9   determinations are reviewed under the clearly erroneous standard,
10   while its legal determinations are reviewed de novo.    Meyer v.
11   Lepe (In re Lepe), 470 B.R. 851, 855 (9th Cir. BAP 2012) (citing
12   Andrews v. Loheit (In re Andrews), 155 B.R. 769, 770 (9th Cir.
13   BAP 1993)).
14        The liquidation value of a debtor’s assets for purposes of
15   the best interests of creditors test presents a question of fact.
16   United States v. Arnold and Baker Farms (In re Arnold and Baker
17   Farms), 177 B.R. 648, 653 (9th Cir. BAP 1994).    As such, we
18   review the bankruptcy court’s value findings under the clearly
19   erroneous standard.   Varela v. Dynamic Brokers, Inc. (In re
20   Dynamic Brokers, Inc.), 293 B.R. 489, 493 (9th Cir. BAP 2003);
21   In re Arnold and Baker Farms, 177 B.R. at 653; Rule 8013.       Such
22   review is “significantly deferential, requiring a ‘definite and
23   firm conviction that a mistake has been committed.’”    McDonald v.
24   Metz (In re Metz), 225 B.R. 173, 175 (9th Cir. BAP 1998) (quoting
25   Granite State Ins. Co. v. Smart Modular Tech., Inc., 76 F.3d
26   1023, 1028 (9th Cir. 1996), which in turn quoted from Concrete
27   Pipe & Prods. of Cal., Inc. v. Constr. Laborers Pension Trust for
28   S. Cal., 508 U.S. 602, 623 (1993)).

                                     -6-
 1                               DISCUSSION
 2   A.   Procedural Considerations
 3        Because an order denying confirmation of a chapter 13 plan
 4   is not a final, appealable order, Debtor in this case chose to
 5   amend her plan to propose terms which satisfied the concerns of
 6   the bankruptcy court, and to stipulate with Trustee to confirm
 7   that plan.   While Debtor consented to confirmation of the Second
 8   Amended Plan, through this procedure, a final order was entered
 9   which provided Debtor a vehicle to argue on appeal that the
10   Amended Plan should have been confirmed by the bankruptcy court.
11        The Panel has endorsed this approach to establish our
12   jurisdiction to review issues involving denial of plan
13   confirmation.   Parks v. Drummond (In re Parks), 475 B.R. 703, 706
14   (9th Cir. BAP 2012); Giesbrecht v. Fitzgerald (In re Giesbrecht),
15   429 B.R. 682, 687 (9th Cir. BAP 2010) (noting that an
16   interlocutory order denying confirmation “merged into the court’s
17   final confirmation order, and is sufficient to support appellate
18   jurisdiction of the earlier interlocutory order.”).   In essence,
19   then, in this appeal, Debtor does not argue that confirmation of
20   the Second Amended Plan by the bankruptcy court was improper, but
21   rather, that the court erred when it refused to confirm her
22   Amended Plan.   It is that decision we now review.
23   B.   Confirmation and the Best Interests of Creditors Test
24        Debtor’s exclusive argument on appeal is that the bankruptcy
25   court improperly valued her interest in the annuity for purposes
26   of determining whether the Amended Plan satisfied the best
27   interests of creditors test under § 1325(a)(4).   Section 1325
28   governs chapter 13 plan confirmation, and in order for a

                                      -7-
 1   chapter 13 plan to be confirmed, “each of the requirements of
 2   section 1325 must be present and the debtor has the burden of
 3   proving that each element has been met.”   Barnes v. Barnes
 4   (In re Barnes), 32 F.3d 405, 407 (9th Cir. 1994); Drummond v.
 5   Welsh (In re Welsh), 465 B.R. 843, 847 (9th Cir. BAP 2012).
 6   Debtor contends that the Amended Plan satisfied all requirements
 7   for confirmation listed in § 1325(a).
 8        Trustee does not dispute that the Amended Plan satisfied the
 9   confirmation standards, except that set forth in § 1325(a)(4).
10   That section of the Code provides:
11        (a) Except as provided in subsection (b), the court
          shall confirm a plan if —
12
          * * * * *
13
               (4) the value, as of the effective date of the
14        plan, of property to be distributed under the plan on
          account of each allowed unsecured claim is not less
15        than the amount that would be paid on such claim if the
          estate of the debtor were liquidated under chapter 7 of
16        this title on such date[.]
17   § 1325(a)(4).
18        Two separate calculations must be performed in order to
19   determine whether a debtor’s proposed plan satisfies the best
20   interest of creditors test under § 1325(a)(4).   First, the
21   bankruptcy court must measure “the value, as of the effective
22   date of the plan, of property to be distributed under the plan on
23   account of each allowed unsecured claim . . . .”   § 1325(a)(4);
24   Jensen v. Dunivent (In re Dewey), 237 B.R. 783, 788 (10th Cir.
25   BAP 1999).   Since plans usually involve monthly payments to be
26   made over time, the bankruptcy court must determine the present
27   value of the property to be distributed to unsecured creditors
28   through the plan – the stream of plan payments to creditors – as

                                     -8-
 1   of the effective date of the plan.     In re Gibson, 415 B.R. 735,
 2   737 (Bankr. D. Ariz. 2009); see also United States v. Camino Real
 3   Landscape Maint. Contractors, Inc. (In re Camino Real Landscape
 4   Maint. Contractors, Inc.), 818 F.2d 1503, 1505 (9th Cir. 1987)
 5   (stating “‘value, as of the effective date of the plan,’ as used
 6   in § 1129(a)(9)(C) and several other sections of the Bankruptcy
 7   Code, ‘indicates that the promised payment under the plan must be
 8   discounted to present value as of the effective date of the
 9   plan.’”) (quoting H.R.Rep. No. 595, 95th Cong., 1st Sess. 408,
10   reprinted in 1978 U.S. Code Cong. & Admin. News 5963, 6364).
11   While there is no indication in the record that the bankruptcy
12   court considered anything other than the total amount of payments
13   Debtor proposed under her Amended Plan, as opposed to the present
14   value of those payments, Debtor has not challenged the bankruptcy
15   court’s calculation in this appeal.
16        The second calculation under § 1325(a)(4) focuses on “the
17   amount that would be paid on such claim if the estate of the
18   debtor were liquidated under chapter 7 of this title on such
19   date.”   § 1325(a)(4); In re Dewey, 237 B.R. at 788.    This
20   measurement computes the sum that would be available to each
21   unsecured creditor if a hypothetical chapter 7 liquidation of the
22   debtor’s assets were completed on the effective date of the plan.
23   In re Gibson, 415 B.R. at 737.   This sum is then compared to the
24   first calculation.   In order for the plan to be confirmed, the
25   second sum must be at least as much as the first calculation, as
26   to each specific unsecured creditor.    This methodology insures
27   the unsecured creditors will fare no worse under chapter 13 than
28   under chapter 7.   It is this second figure the parties dispute in

                                      -9-
 1   this appeal.
 2        Trustee contends, under the facts of Debtor’s case, and as
 3   his witness so testified, in a hypothetical chapter 7 case
 4   involving Debtor, a trustee would not sell Debtor’s right to
 5   receive payments under the annuity, but would simply collect the
 6   future payments until enough funds had been received to fully
 7   satisfy all unsecured creditor claims.   Since the amount of
 8   payments to be received by Debtor under the annuity greatly
 9   exceeded to total amount she owed to her creditors, Trustee
10   argues, to be confirmed, any plan proposed by Debtor in this case
11   must pay her unsecured creditors in full.
12        In contrast, Debtor argues that in determining the
13   hypothetical liquidation value of the annuity, the bankruptcy
14   court should have adopted a cash-out, present day value of
15   twenty-five of the annuity payments.   Because the Amended Plan
16   proposed payments in excess of this value, Debtor argues it met
17   the best interests test.
18        To support her argument, Debtor points to the term
19   “liquidated” in § 1325(a)(4).   She contends that because
20   chapter 7 does not require liquidation on a specific date, and
21   would indeed permit a case to be held open while annuity payments
22   are collected by the chapter 7 trustee, then the court must
23   employ the term “liquidated” in its chapter 13 analysis in a way
24   chapter 7 does not.   Debtor contends that § 1325(a)(4) requires
25   the bankruptcy court to compare creditor treatment under the
26   chapter 13 plan with the present value of the assets available
27   for liquidation in a hypothetical chapter 7 case on a specific
28   date - the effective date of the debtor’s plan - rather than how

                                     -10-
 1   the assets might be liquidated in the course of an actual
 2   chapter 7 case.
 3        Here, the bankruptcy court denied confirmation of Debtor’s
 4   Amended Plan, presumably deciding that it did not satisfy the
 5   best interests of creditors test.       We believe the bankruptcy
 6   court’s conclusion was correct.    However, we decline to endorse
 7   either Trustee’s or Debtor’s positions concerning the application
 8   of the test.
 9        1.      The Effective Date of the Plan
10        The starting point for a bankruptcy court’s value
11   calculation for purposes of the best interest test is well
12   established in this circuit.    Though the Code employs the phrase
13   “effective date of the plan” in several places, it does not
14   define it.    However, the phrase has been interpreted to mean the
15   date the plan becomes binding on the parties.      Countrywide Home
16   Loans, Inc. v. Hoopai (In re Hoopai), 581 F.3d 1090, 1100-01 (9th
17   Cir. 2009); Pak v. eCast Settlement Corp. (In re Pak), 378 B.R.
18   257, 265 (9th Cir. BAP 2007) (“[T]he most logical interpretation
19   of the ‘effective date of the plan’ is the date of plan
20   confirmation, as a chapter 13 plan is not binding on the debtor
21   and other interested parties until it is confirmed.”) (subsequent
22   history omitted).    Generally, a plan becomes binding on the
23   parties upon confirmation, although the plan may provide for a
24   specific date on which it becomes effective.      In re Hoopai,
25   581 F.3d at 1101.
26        Because Debtor’s Amended Plan did not include a specific
27   effective date, the “effective date of the plan” in this case is
28   the confirmation date.    As a result, we consider whether the

                                      -11-
 1   amount Debtor proposed for payments in the Amended Plan to the
 2   holders of allowed unsecured claims is at least equal to the
 3   amount which would be paid on each claim if Debtor’s estate were
 4   liquidated under chapter 7, as of the date of the hearing on
 5   confirmation of the Amended Plan.
 6        2.    Property of the Estate
 7        Section 541(a)(1) provides that the commencement of a
 8   bankruptcy case creates an estate comprised of “all legal or
 9   equitable interests of the debtor in property[.]”   As the Code is
10   applied here, then, all of Debtor’s rights under the annuity,
11   including its payment stream, are property of the bankruptcy
12   estate.   Put another way, the estate’s interest in the stream of
13   payments from the annuity is not limited solely to the next
14   payment, or even to the payments which will be disbursed during
15   the pendency of the chapter 13 plan.   See In re Myers, 200 B.R.
16   155, 159 (Bankr. N.D. Ohio 1996) (under § 541(a), all payments to
17   be received under the terms of a structured settlement were
18   property of the estate); Turner v. Dees (In re Dees), 155 B.R.
19   238, 240 (Bankr. S.D. Ala. 1992) (structured annuity benefits
20   from a wrongful death settlement accruing before and after the
21   filing of the bankruptcy petition are estate property);
22   In re Hartman, 115 B.R. 171, 175 (W.D. Ark. 1990) (full value of
23   debtor’s vested interest in retirement plan is property of his
24   chapter 13 estate and must be considered in complying with the
25   requirements of § 1325).   Moreover, the fact that assignment of
26   an annuity may be restricted by its terms does not prevent its
27   inclusion in Debtor’s bankruptcy estate, nor does it render the
28   annuity valueless.   See § 541(c); Shackleford v. United States,

                                    -12-
 1   262 F.3d 1028 (9th Cir. 2001) (affirming the district court’s
 2   conclusion that a non-assignable lottery annuity had a marketable
 3   value, although it was considerably less than the Internal
 4   Revenue Code tables provided).
 5        Applying these principles to the facts, as property of the
 6   bankruptcy estate, the entire value of Debtor’s annuity was
 7   property of her bankruptcy estate and was subject to valuation
 8   for purposes of § 1325(a)(4).
 9        3.     Valuation
10        Of course, the value of Debtor’s interest in the annuity is
11   the crux of the § 1325(a)(4) issue in this appeal.   Trustee’s
12   position is that because a chapter 7 trustee could simply keep a
13   case open long enough to collect annuity payments sufficient to
14   ensure full payment to unsecured creditors, then full payment to
15   creditors is required for a confirmable chapter 13 plan.   Debtor
16   insists that the cash-out or present day value of the annuity, as
17   established by her expert, was equal to twenty-five annuity
18   payments.   We disagree with both arguments, and hold that the
19   value of an annuity for purposes of § 1325(a)(4) analysis was the
20   present day value of the entire annuity as of the confirmation
21   hearing date.
22        The language of § 1325(a)(4) is instructive.    The sum to be
23   compared with the value of Debtor’s payments under her Amended
24   Plan is the amount that would be distributed on each allowed
25   unsecured claim if, hypothetically, Debtor’s estate were
26   liquidated under chapter 7 “on such date.”   The inclusion of this
27   temporal designation – and its focus on a single date – requires
28   the bankruptcy court to fix the present value of Debtor’s assets,

                                      -13-
 1   including her right to receive future annuity payments, to
 2   complete the § 1325(a)(4) equation.10
 3           There is surprisingly little case law examining this issue.
 4   In In re Martin, 233 B.R. 436, 440 (Bankr. D. Ariz. 1999), the
 5   debtor proposed to pay the “present value of a non-exempt
 6   annuity” into her chapter 13 plan.         Because the plan provided for
 7   payments totaling more than debtor’s non-exempt assets would
 8   generate through a liquidation, the bankruptcy court found
 9   § 1325(a)(4) was satisfied.       The debtor determined the annuity’s
10   value after receiving a third-party estimate of its cash value,
11   along with an offer to purchase it.        It was this value she
12   utilized in preparing her schedules and plan.        While a creditor
13   challenged the value of the remaining annuity payments, the
14   creditor offered no evidence to place the offer in question and,
15   therefore, the bankruptcy court found debtor’s valuation to be
16   proper.
17           A case cited by Trustee supports this value approach as
18   well.        In In re Myers, supra, the debtor was the beneficiary of a
19   structured tort settlement.       In measuring the value of the
20   settlement for purposes of § 1325(a)(4), the debtor contended
21   that the present value of only the next periodic payment to be
22   made under the settlement should be considered.        The bankruptcy
23   court disagreed, noting that under § 541(a), all payments to be
24
25
             10
             The term “present value” is not defined in the Code.
26   Black’s defines it as: “the sum of money that, with compound
27   interest, would amount to a specified sum at a specified future
     date; future value discounted to its value today.” Black’s Law
28   Dictionary 1303-04 (9th ed. 2009) (emphasis added).

                                         -14-
 1   received by the debtor under the settlement were property of the
 2   estate.   As such, the court held that “the Chapter 7 liquidation
 3   value [of the settlement] is the present value of all of those
 4   payments, not merely the next one due.”         200 B.R. at 159.
 5        Finally, a leading bankruptcy treatise concurs with the
 6   authorities cited above:
 7        The best interests test under section 1325(a)(4)
          requires that the property offered the holder of each
 8        allowed unsecured claim have a present value, as of the
          effective date of the plan, not less than the amount
 9        that would be paid if the debtor’s estate were
          liquidated under chapter 7. The language of the
10        statute plainly means that the court is to ascribe a
          liquidation value to all nonexempt property of the
11        estate, as that term is defined under section 541.
12   Vol. 8 COLLIER   ON   BANKRUPTCY ¶ 1325.05(2)(d) (Alan N. Resnick & Henry
13   J. Sommer eds., 16th ed. 2013) (emphasis added); see also Vol. 7
14   William L. Norton, Jr., NORTON BANKRUPTCY LAW & PRACTICE, § 151:11, at
15   151-72 (3d ed. 2010) (“[l]iquidation in a chapter 7 case [for
16   purposes of the best interest of creditors test under
17   § 1325(a)(4)] involves the collection of all of the debtor’s
18   nonexempt property and the reduction of that property to cash”);
19   Hon. W. Homer Drake, Hon. Paul W. Bonapfel & Adam M. Goodman,
20   CHAPTER 13 PRACTICE & PROCEDURE § 9E:7, at 1017 (2012) (“the key
21   question is what the Chapter 7 trustee could obtain in a
22   liquidation sale.        Thus, fair market value of property, rather
23   than its forced sale, governs . . . .”).
24        Because § 1325(a)(4) requires a liquidation analysis of a
25   debtor’s assets as of the confirmation date (i.e., the “effective
26   date of the plan”), under these facts, the bankruptcy court
27   should have determined the present value of the stream of annuity
28   payments to be made in the future to Debtor.         In other words,

                                          -15-
 1   neither Debtor’s approach to determining the liquidation value of
 2   a discreet number of payments, nor Trustee’s approach of
 3   collecting future payments, properly valued Debtor’s annuity in
 4   this case.   Instead, the Code required the bankruptcy court to
 5   calculate the liquidation value of the entire annuity in order to
 6   determine the outcome of the best interests of creditors test.
 7        Trustee’s position promoting a hypothetical liquidation of
 8   Debtor’s assets over many months is contrary to the Code.11
 9   Moreover, while Debtor’s position on appeal is closer to correct,
10   her execution of the required methodology at the hearing was also
11   flawed.   Although she perhaps determined through her witness the
12   present day value of the stream of some payments, § 1325(a)(4)
13   required her to prove up the liquidation value of all remaining
14   annuity payments, since the whole annuity was an asset of her
15   bankruptcy estate.
16        It does not appear the bankruptcy court necessarily relied
17   upon either Debtor’s or Trustee’s valuation.   In valuing the
18   annuity, the bankruptcy court stated:
19        Even assuming that the debtor is correct in her
          assertion that her “actual” allowable claims are
20        approximately $30,000.00, her annuity alone will pay
          her about $117,000.00 over a 5 year period [the maximum
21        plan term]. Stated differently one apparent plan
          method to pay her “actual” creditors in full would be
22        to commit 25% of her annuity payments to her plan over
          a 5 year term. Considering the foregoing, the court is
23        skeptical about the significance of the cash out value
          of some portion of the annuity. Particularly
24
25
          11
             Of course, it was not Trustee’s burden to prove
26   valuation under § 1325(a)(4); the debtor bears the burden of
27   proving each element required for confirmation under § 1325(a),
     including value of the assets in the hypothetical chapter 7
28   liquidation. In re Welsh, 465 B.R. at 847.

                                    -16-
 1        considering that the debtor and/or the estate do much
          better economically by not cashing out the annuity and
 2        instead using the same payment stream to pay creditors
          and the debtor’s allowable monthly expenses.
 3
     Minute Entry/Order, March 2, 2012 at 2 (parenthetical in
 4
     original) (emphasis added).    And later, in denying confirmation
 5
     of the Amended Plan, the bankruptcy court referred to its prior
 6
     decision:
 7
          In that ruling, although the court accepted debtor’s
 8        evidence of value if the annuity were cashed out as
          asserted by the debtor, the court also found that the
 9        debtor had the ability in chapter 13 to “pay her actual
          creditors in full.” The court then noted that it
10        “seriously doubts that evidence advances the debtor’s
          ability to confirm a plan” referencing Section 1325
11        because of the ability to pay in full. Apparently,
          nothing has changed. Because the debtor can pay her
12        creditors in full her plan must so provide.
13
     Minute Entry/Order, December 20, 2012 at 1-2.
14
          Regardless of the bankruptcy court’s methodology, we
15
     conclude that it correctly decided that confirmation of Debtor’s
16
     Amended Plan should be denied, because Debtor did not satisfy her
17
     burden to show that the Amended Plan satisfied the § 1325(a)(4)
18
     best interest of creditors test.
19
                                   CONCLUSION
20
          We AFFIRM the decision of the bankruptcy court.
21
22
23
24
25
26
27
28

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