§ 113.6     Providing for Postpetition Claims
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 113.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

It is advisable to include a provision in every Chapter 13 plan that the debtor will pay in full (with interest) all postpetition claims allowed under 11 U.S.C. § 1305.

[2]

11 U.S.C.§ 1322(b)(6) permits the debtor to provide for the payment of postpetition claims under § 1305.1 If the debtor incurs a postpetition debt described in § 1305,2 a plan provision for full payment (with interest) maximizes the probability that the postpetition claim holder will file a proof of claim.3 The plan must provide for payment of postpetition claims under § 1322(b)(6), else postpetition claims will not be paid through the plan and will not be dischargeable.4 The postpetition claim holder may be entitled to relief from the stay to collect directly from the debtor.5

[3]

Debtors should provide for the possibility of postpetition claims in the original plan because modification of a confirmed plan to provide for postpetition claims has been refused by some courts.6 Merely “adding” postpetition creditors to the schedules after confirmation will not accomplish payment or discharge absent a provision in the plan for the payment of postpetition claims and cooperation by the claim holder.7

[4]

Debtors routinely neglect to provide for postpetition claims in Chapter 13 plans. Nobody wants to think about new debt at the beginning of a Chapter 13 case. Debtors are warned not to incur new debt,8 and everyone hopes that the debtor will not need to borrow during the case. This is a false hope. Given the three- to five-year length of Chapter 13 plans, experience teaches it is quite likely that the debtor will encounter the “unexpected” event that requires new credit. It may be as ordinary as the washing machine croaking or as awful as a medical emergency. It may be as predictable as unpaid taxes for the year in which the Chapter 13 case is filed.9 No debtor should venture into a Chapter 13 plan that does not provide for payment of postpetition claims.

[5]

Providing for postpetition claims in the plan is only a start. If the holder of a § 1305 claim declines to file a proof of claim, the postpetition claim is not allowed, it won’t be paid through the plan and it is not discharged at completion of payments under the plan.10 To best position the debtor to deal with a postpetition claim, the plan should always provide full payment with interest for claims allowed under § 1305. Absent a provision for postpetition interest, postpetition claim holders may be best advised to withhold filing a claim and collect the entire debt with applicable interest and charges after the Chapter 13 case or after relief from the stay.11

[6]

Typically, postpetition claims are separately classified.12 This is especially important when the plan is a composition plan paying less than 100 percent of prepetition unsecured claims. Because the postpetition claim holder has an option whether to participate by filing a proof of claim,13 the postpetition claim holder is unlikely to file a proof of claim unless postpetition claims are separately classified for full payment with interest.14

[7]

The most common postpetition claims are taxes, medical services or replacement debts for collateral that has worn out during the plan.15 Postpetition consumer debts for property or services necessary for the debtor’s performance under the plan may be disallowed and not discharged even if provided for by the plan if prior approval of the trustee was practicable and was not obtained.16


 

1  See In re Jagours, 236 B.R. 616 (Bankr. E.D. Tex. 1999) (Debtors have option under § 1322(b)(6) to provide for postpetition claims allowed under § 1305; not cause for dismissal that plan does not provide for postpetition claims when the IRS files a § 1305 claim for income taxes for postpetition tax years.); In re Rothman, 76 B.R. 38 (Bankr. E.D.N.Y. 1987) (Debtor has option under § 1322(b)(6) to include plan provision for postpetition tax liabilities for which the taxing authority elects to file a claim under § 1305.); In re Busone, 71 B.R. 201 (Bankr. E.D.N.Y. 1987) (Section 1322(b)(6) permits plan provision for the payment of future tax liability in the event a taxing authority elects to file a claim under § 1305. Omission of such a provision is not fatal to confirmation unless a taxing authority files an allowable claim under § 1305 and the debtor declines to modify the plan consistent with § 1322(b)(6).); Hester v. Powell, 63 B.R. 607 (Bankr. E.D. Tenn. 1986); In re Pritchett, 55 B.R. 557 (Bankr. W.D. Va. 1985). See also §§ 68.3 [ Postpetition Creditors ] § 58.4  Postpetition Creditors and 158.7 [ Postpetition Claims ] § 89.8  Postpetition Claims.

 

2  See § 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA.

 

3  See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

4  See § 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

5  See § 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5  Postpetition Claims and Relief from the Stay.

 

6  See § 127.4  To Provide for Postpetition Claims. See, e.g., In re Trentham, 145 B.R. 564 (Bankr. E.D. Tenn. 1992) (Debtor has option under § 1322(b)(6) to provide in the original plan for payment of postpetition claims that are allowed under § 1305(a)(2). When the debtor fails to so provide, § 1329 does not permit the debtor to modify the plan after confirmation to provide for postpetition creditors.); RTO Rents v. Benson (In re Benson), 116 B.R. 606 (Bankr. S.D. Ohio 1990) (Section 1322(b)(6) is no help to a Chapter 13 debtor who desires to modify a plan after confirmation to provide for the assumption of a postpetition lease of household goods. Section 1322(b)(6) permits a debtor to provide for the payment of “allowed” postpetition claims. When the lessor refuses to file a proof of claim, there is no “allowed” postpetition claim to be dealt with under § 1322(b)(6) by modification under § 1329.).

 

7  See §§ 261.1 [ To Provide for Postpetition Claims ] § 127.4  To Provide for Postpetition Claims, 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims. See, e.g., In re Smith, 192 B.R. 712 (Bankr. E.D. Tenn. 1996) (Confirmed plan that is silent with respect to the payment of postpetition claims does not “provide for” such claims when the debtor amends the schedules after confirmation to add nine postpetition creditors. Postpetition claims will not be discharged upon completion of payments because the plan does not provide for them, the claim holders have not filed proofs of claim, the debtor cannot file proofs of claim on behalf of the postpetition claim holders, and the claims do not appear to be allowable under § 1305 even if the claim holders filed proofs of claim.).

 

8  See § 92.1 [ Incurring Debt prior to Confirmation ] § 69.1  Incurring Debt prior to Confirmation.

 

9  Taxes for the year in which a Chapter 13 petition is filed and for each subsequent year during the administration of the case are postpetition claims under § 1305(a)(1). See §§ 292.1 [ Taxes ] § 136.2  Taxes before BAPCPA and 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA. See, e.g., In re Jagours, 236 B.R. 616 (Bankr. E.D. Tex. 1999) (Plan that does not provide for postpetition claims under § 1305 does not provide for taxes for the year in which the case was filed and subsequent tax years, but the filing of a postpetition tax claim does not require dismissal of the Chapter 13 case. Plan filed in 1994 provided for full payment of priority claim for income taxes for calendar year 1991. On March 16, 1998, IRS filed “amended” claim for postpetition taxes of $8,741.45 for tax years 1994, 1995 and 1996. Trustee moved to dismiss on the ground of “infeasibility.” Bankruptcy court denied motion to dismiss on the ground that the taxes were not entitled to priority because they related to postpetition tax years and debtors had elected not to provide for postpetition claims under § 1322(b)(6).).

 

10  See §§ 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims, 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.

 

11  See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

12  See § 158.7 [ Postpetition Claims ] § 89.8  Postpetition Claims. See, e.g., In re Bagby, 218 B.R. 878, 889–90 (Bankr. W.D. Tenn. 1998) (On postconfirmation motions to modify, check-cashing services used to pay utilities and rent probably are necessary to the debtors’ performance under the plan and can be separately classified for full payment. “[B]ecause only those claims for consumer debts for products or services that are necessary to the debtor’s performance under the plan may be allowed, a reasonable basis exists for the separate classification and treatment of post-petition claims. It is appropriate to provide for payment in full of allowed post-petition claims because by definition these debts were incurred to enable the debtor to perform under the plan. . . . [D]iscrimination between pre-petition unsecured claims and post-petition unsecured claims has a reasonable basis.”).

 

13  See § 281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

14  See In re Bagby, 218 B.R. 878, 889 (Bankr. W.D. Tenn. 1998) (“Because a post-petition claimant always has the option of not filing a proof of claim and not participating in a Chapter 13 plan, the debtor who hopes to discharge a post-petition claim will want to provide for full repayment of post-petition claims.”).

 

15  See § 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA.

 

16  See 11 U.S.C. §§ 1305(b) and 1328(d), discussed in §§ 302.1 [ Postpetition Claims ] § 137.1  Postpetition Claims before BAPCPA and 350.1 [ Postpetition Claims ] § 158.6  Postpetition Claims.