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Southern Discount Co. of Georgia v. Kelley (In re Kelley)
Citation: 22 B.R. 150Docket: Adv. No. 82-0272
Court: United States Bankruptcy Court, M.D. Alabama; July 12, 1982; Us Bankruptcy; United States Bankruptcy Court
The case involves a Chapter 13 bankruptcy filed by debtor Larry S. Kelley on February 17, 1982, with the creditor Southern Discount Company of Georgia seeking relief from the automatic stays under Sections 362 and 1301 of the Bankruptcy Code, specifically regarding Kelley’s mother, Agnes Kelley. During a trial held on May 28, 1982, it was established that Larry Kelley had explored obtaining a loan from Southern Discount but did not apply due to concerns about his credit history. Instead, his mother applied for the loan and was treated as the primary borrower, obtaining $1,500, which was intended for Larry’s use. Despite being the primary borrower, Agnes Kelley’s name was included on the loan note at Larry's mother's request, aiming to instill responsibility in Larry. The loan proceeds were deposited into Larry's account, and he made one payment on the loan. The court determined that the automatic stay under Section 362 does not apply to Agnes Kelley, as she is not the debtor. The critical issue was whether Agnes Kelley qualifies for the protections under Section 1301 as a co-debtor. The court concluded that since Larry Kelley received the entire loan benefit and intends to repay Southern Discount fully in his Chapter 13 plan, the exceptions under Section 1301(c) do not apply. The court found that Agnes Kelley was essentially the primary borrower, not a co-debtor in the traditional sense, and that the loan was made directly to her, with the understanding that she would give the funds to her son. The ruling stated that no new liability for Agnes Kelley was created by Larry's bankruptcy filing, and thus the protections of Section 1301 do not apply. Consequently, the court ordered that Southern Discount is permitted to collect the debt from Agnes Kelley as per the law.