§ 114.4     To Deal with Objections to Original Plan
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 114.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

One common reason for preconfirmation plan modification is to respond to an objection to confirmation. Preconfirmation modification can fully resolve or render moot a creditor’s objection to the original plan.1

[2]

Preconfirmation modification can take the form of an agreed order in which the objecting creditor consents to modification of its treatment under the plan in settlement of its objection to confirmation. Objections to confirmation that relate to the value of collateral, the monthly payment or the interest rate proposed by the plan are almost always resolved through agreed preconfirmation modifications. Even a good-faith objection under § 1325(a)(3)2 can sometimes be resolved by a preconfirmation modification that increases the percentage of payment, reclassifies a claim3 or increases the length of the plan. A disposable-income test4 objection to confirmation can sometimes be resolved by fine-tuning the budget and adjusting the debtor’s payment into the plan.

[3]

But, as with all preconfirmation modifications, a modification offered to satisfy an objecting creditor must comply with § 1322.5 In In re Brigance,6 deferred presentment service providers objected to the plans.7 The debtors modified their plans to separately classify these creditors for 100 percent payment in advance of other unsecured claim holders. The bankruptcy and district courts held that the modification failed the unfair-discrimination test in § 1322(b)(1) and could not be approved under § 1323(a).

[4]

Not every objection to confirmation resolved by modification of the plan will mean better treatment of creditors. In Villanueva v. Dowell (In re Villanueva),8 the 60-month plan proposed to pay 50 percent of unsecured claims, and the debtor would retain and pay for jewelry through the extended plan. The trustee objected to confirmation on the ground that the jewelry was a luxury item that could not be paid for through the plan at the expense of distributions to other creditors. Rather than fight with the trustee, the debtor surrendered the jewelry and amended the plan to a 36-month plan that would pay 19 percent to unsecured creditors. The bankruptcy court conditioned confirmation that the debtor extend the amended plan to the original 60 months. The Bankruptcy Appellate Panel for the Ninth Circuit reversed, holding that no provision of Chapter 13 required the debtor to extend the plan beyond 36 months once the jewelry was surrendered.9 Preconfirmation modification resolved the trustee’s objection, but there is no escaping the irony that unsecured creditors ended up worse off.


 

1  See, e.g., In re Washington, 6 B.R. 226 (Bankr. E.D. Va. 1980); In re Centineo, 4 B.R. 654 (Bankr. D. Neb. 1980).

 

2  See § 177.1 [ In General ] § 103.1  In General.

 

3  See §§ 158.4 [ To Satisfy an Objecting Unsecured Claim Holder ] § 89.5  To Satisfy an Objecting Unsecured Claim Holder and 187.1 [ Separate Classification of Nondischargeable Claims and Good Faith ] § 106.5  Separate Classification of Nondischargeable Claims and Good Faith.

 

4  See § 163.1 [ In General ] § 91.1  In General.

 

5  See 11 U.S.C. § 1323(a), discussed in § 209.1 [ Timing, Procedure and Form ] § 114.1  Timing, Procedure and Form.

 

6  219 B.R. 486 (Bankr. W.D. Tenn. 1998), aff’d, 234 B.R. 401 (W.D. Tenn. 1999).

 

7  A/k/a check-cashing services.

 

8  274 B.R. 836 (B.A.P. 9th Cir. 2002).

 

9  See §§ 199.1 [ General Rule: Three Years, More or Less ] § 112.1  General Rule: Three Years, More or Less and 201.1 [ Cause for Extension beyond Three Years ] § 112.4  Cause for Extension beyond Three Years for discussion of cause for extension of a Chapter 13 plan beyond three years.