§ 114.6     Effect of Preconfirmation Modification on Prior Acceptance or Rejection of the Plan
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 114.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The Code is unusually specific about the effect of a preconfirmation modification on acceptance or rejection of the plan. 11 U.S.C. § 1323(c) provides that any holder of a secured claim that has accepted or rejected the original Chapter 13 plan is “deemed to have accepted or rejected . . . a plan as modified, unless the modification provides for a change in the rights of such holder . . . and such holder changes such holder’s previous acceptance or rejection.”

[2]

In a Chapter 13 case, acceptance of the plan matters to determine whether the plan satisfies the confirmation requirement for secured claim holders in 11 U.S.C. § 1325(a)(5)1 and to determine whether a priority claim holder has accepted treatment other than full payment under § 1322(a)(2).2 With the possible exception of a secured claim for alimony, maintenance or support,3 priority claims are unsecured claims, and the provision for deemed acceptance or rejection of a preconfirmation modification in § 1323(c) has no application.

[3]

Acceptance of the plan by a secured claim holder is deemed to be an acceptance of any preconfirmation modification of the plan unless (1) the modified plan changes the rights of the secured claim holder, and (2) the secured claim holder changes its acceptance to rejection.4 Both conditions must be met. A preconfirmation modification that does not change the treatment of a claim is deemed accepted if the original plan was accepted, without regard to whether the claim holder changes its previous acceptance. There are no reported Chapter 13 cases discussing whether a deemed acceptance or rejection of a preconfirmation modification can be overcome by the creditor.

[4]

The process for changing a prior acceptance or rejection is uncertain in a Chapter 13 case. There is no bankruptcy rule addressing the question.5 In a Chapter 11 case, under Bankruptcy Rule 3018(c), acceptance or rejection of the plan must be in writing. The creditor that wishes to change a prior acceptance or rejection under § 1323(c) might try doing so in writing.6 Under Bankruptcy Rule 3006, a creditor might consider withdrawing its claim to effect the withdrawal of a prior acceptance or rejection of the plan.

[5]

It has been held that when an amended Chapter 13 plan adversely affects the rights of a secured claim holder and the claim holder receives notice of the original plan and the amended plan but fails to object to either, the creditor is bound by confirmation of the amended plan.7 When the modified plan does not alter the creditor’s rights under the original plan, acceptance or rejection prior to modification is binding.8 Bankruptcy Rule 3019 applied prior to 1993 and permitted a creditor to object to a modified plan although it failed to object to the original plan.9

[6]

Chapter 13 debtors are rarely dependent upon acceptances by secured claim holders to accomplish confirmation because of the ready availability of cramdown under § 1325(a)(5)(B).10 However, when the debtor has an acceptance from a secured claim holder and then finds it necessary to modify the plan, § 1323(c) contemplates that the affected creditor may change its acceptance to a rejection and force the debtor to attempt confirmation over the creditor’s objection. If notice of a preconfirmation modification is adequate and the accepting secured claim holder fails to act, the modified plan becomes the plan under § 1323(b), and the debtor may proceed to confirmation without contest.


 

1  See § 101.2 [ Acceptance of Plan ] § 74.3  Acceptance of Plan before BAPCPA.

 

2  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment and 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims.

 

3  See §§ 100.3 [ Secured Priority Claims? ] § 73.7  Secured Priority Claims? and 300.1 [ Secured Priority Claims? ] § 136.18  Secured Priority Claims before BAPCPA.

 

4  11 U.S.C. § 1323(c).

 

5  Prior to 1993, Bankruptcy Rule 3019 applied to Chapter 13 cases and required a hearing to determine whether acceptance or rejection of a plan was deemed effective when the debtor modified the plan before confirmation.

 

6  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment, 101.2 [ Acceptance of Plan ] § 74.3  Acceptance of Plan before BAPCPA and 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims. See also Fed. R. Bankr. P. 3018 and Official Bankruptcy Form 14, applicable in Chapter 11 cases.

 

7  In re Toth, 61 B.R. 160 (Bankr. N.D. Ill. 1986).

 

8  In re Hopper, 17 B.R. 292 (Bankr. W.D. Ky. 1982).

 

9  In re Gronski, 65 B.R. 932 (Bankr. E.D. Pa. 1986).

 

10  See § 74.11  The Power to Modify.