(e) Only an individual with regular income that owes, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts of less than $ 100,000 and noncontingent, liquidated, secured debts of less than $ 350,000, or an individual with regular income and such individual's spouse, except a stockbroker or a commodity broker, that owe, on the date of the filing of the petition, noncontingent, liquidated, unsecured debts that aggregate less than $ 100,000 and noncontingent, liquidated, secured debts of less than $ 350,000 may be a debtor under chapter 13 of this title.

The court took the eligibility question under advisement to review the testimony, schedules, proofs of claims, and arguments of the parties. The court tentatively denies confirmation, but grants the debtors the right to seek further hearings on this issue.

The total unsecured debt indebtedness shown is $87,347.51, the combination of priority unsecured and general unsecured claims.

      "Transaction costs" are the estimated reasonable costs of foreclosure, any brokerage fees, closing costs, and other reasonable costs of sale necessary to arrive at the net recovery of a secured creditor who forecloses and resells the property. In a number of cases in which Richard Ullstrom represented the secured creditors in stripdown situations, his clients have stipulated that transaction costs of 7% of the present value of the property is approximately accurate, but dispute that such costs should be deducted in a stripdown situation. Thus, the value of the house would be $72,540.00 (that is, $78,000.00 less the $5,460.00 transaction costs) for purposes of valuing Cenlar's unsecured claim under 11 U.S.C. § 506(a), if it is appropriate to reduce that amount by 7% for transaction costs.

      Also, if the debtors could show that the undersecured portion of Cenlar's total claim should not be added to the unsecured claims for eligibility purposes under §109(e), this $27,928.79 reduction would reduce the claims to less than $100,000.00.

      Neither party submitted a copy of the Carr-Gottstein lease or any specifics, and based upon that, the court would exclude the $15,954.28. In re Sylvester, 19 B.R. 671 (9th Cir. BAP 1982) indicates that the court must first determine what amount is contingent or unliquidated in order to exclude it from the computation. While debtors merely scheduled the claim as "disputed" in part, it is clear they also feel the amount is "unliquidated" since the rental space may have been relet, mitigating damages. This would require a more extensive evidentiary hearing.

      In a chapter 12 case decided last month, involving farm property to be used as part of a plan, the Bankruptcy Appellate Panel in In re Case, 115 B.R. 666, ____, (9th Cir.BAP 1990) said:

      Accordingly, valuation for the different purposes of determining adequate protection under § 361, or to determine if the Debtor has met the "best interest of creditors" test under chapters 11, 12, or 13, may require the Court to employ different valuation criteria than for "cramdown" purposes under § 1225(a)(5), § 1325(a)(5) or § 1129(b). That is, the focus of inquiry as to any value determination must be made on the interests that a particular Code section is designed to protect and valuation must be made with regard to those purposes. 3 Collier on Bankruptcy, § 506.04 (15th Ed.1986). Thus, the treatment of secured creditors and the valuation of property subject to liens in a "cramdown" hearing to confirm a plan over the objections of a secured creditor under chapter 11, 12, and 13 must be distinguished from valuation for adequate protection purposes which covers the period between the date of the petition and the confirmation of the plan.

      If we were attempting to value FmHA's interest in the property for adequate protection purposes, the possibility of forced liquidation would be assumed and a deduction for selling costs would be logical. However, we conclude that for the purposes of § 1225(a)(5)(B)(ii) valuation, when the debtor plans to retain the property, selling costs should not be deducted from the fair market value of the property when valuing the creditor's interest in the property. [emphasis added]

      In the case at bar, the debtors said they did not consider bankruptcy initially to take advantage of Hougland, but because of a tax problem. Thus, they have a better argument that the stripdown was not "necessary" to their reorganization. Unfortunately, in this case, the additional unsecured claim may put them over the $100,000.00 limit.

      Debtors, for example, could seek to obtain a release from Carr-Gottstein, or have a hearing to establish or liquidate the lease rejection claim.

      Also, if debtors can show that the Cenlar claim should be judged as scheduled, secured at its full amount of about $103,000.00, for determining their eligibility under §109(e), they would qualify.

      To allow debtors some time to analyze their situation, the court will deny confirmation for failure to comply with 11 U.S.C. §109(e) if the debtor does affirmatively seek, by Friday,     1 ABR 111  August 31, 1990, to establish that they are entitled to eligibility by:

Thus, debtors must file a legal brief on the issues and/or file a calendar request by August 31, 1990 for a further evidentiary hearing.

      Debtors indicated they may, instead, seek to convert to chapter 11. They may face an Ahlers problem in a chapter 11. The court is offering the debtors the alternative to try, if they feel they have legally sound legal and factual arguments, to persuade the court that they have chapter 13 eligibility.