The Hanging Paragraph – Hanging on Every Word Part 4 of 4

By Anthony J. Gomez, CPA, former extern to the Honorable John P. Gustafson, Northern District of Ohio at Toledo

V. The Good Faith Requirement

The hanging paragraph was enacted to protect creditors. It accomplishes this by prohibiting the bifurcation of certain secured debts that were acquired shortly before the time of filing. Despite a Chapter 13 debtor’s inability to bifurcate those claims, under the majority rule, debtors are still able reduce the interest on newly acquired debt by utilizing the Till approach. This exposes creditors to the risk that a debtor will file a bankruptcy . . .

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