§ 120.2     11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 120.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

11 U.S.C. § 1327(a) states clearly: “The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan and whether or not such creditor has objected to, has accepted, or has rejected the plan.”1 “[B]ind” means “to put under . . . legal restraint, or contract . . . to be obligatory.”2 Section 1327(a) is a strong statement: The terms of a confirmed plan are legal obligations of the debtor and all creditors without regard to whether the plan provides for the creditor’s claim and without regard to whether the creditor participated in the confirmation process.3

[2]

The confirmation order defines the rights of creditors against the debtor and the debtor’s property, displacing prepetition contracts, court orders, state law and the “equities” of prepetition events.4 For example, a creditor with a contract right to receive $200 per month for the installment purchase of a car is bound by confirmation to accept what the plan proposes to pay for the car without regard to the prepetition contract.5 Unsecured claim holders are entitled to nothing more (or less) than what the plan provides in full satisfaction of all prepetition rights to payment from the debtor. Some courts have described the effect of confirmation of a Chapter 13 plan in terms similar to those used to describe the effect of a Chapter 11 confirmation—the making of “a new agreement between the debtor and the creditor with a new obligation to be paid in the manner provided for by the terms of the plan.”6 The confirmed Chapter 13 plan controls the debtor-creditor relationship unless and until the plan is modified or the creditor is relieved of its effects. This binding effect is in some respects even more compelling than a new contract and is reciprocally enforceable by the debtor and all creditors.7

[3]

The fundamental binding effect of confirmation under § 1327(a) has been honored in a vast number of reported decisions. If notice is adequate,8 the creditor that fails to object to confirmation and then to appeal an adverse decision9 is bound by the confirmed plan even if it contains provisions that are inconsistent with the Code that could have been defeated by a timely objection.10 A confirmed plan cannot be collaterally attacked after confirmation under the guise of other contests such as a request for relief from the stay or a motion to dismiss. Debtors and trustees are just as bound by confirmation as creditors—confirmation precludes debtor or trustee behavior that is inconsistent with the plan.11

[4]

Many courts describe the effect of confirmation as res judicata with respect to all issues that were or could have been litigated at or before the hearing on confirmation.12 This resort to judge-made principles of preclusion is usually not harmful, but § 1327(a) is a comprehensive statutory declaration of binding effect that is not dependent on or limited by the conventional rules for preclusion. For example, ordinarily the preclusive effect of a judgment can be altered by contract or agreement between the parties to the original judgment. However, it has been held that the terms of a confirmed Chapter 13 plan cannot be altered by private agreements between the debtor and creditors.13

[5]

Perhaps more importantly, the statutory formulation of binding effect in § 1327(a) is broader than the res judicata effect of an ordinary judgment in the federal courts. A confirmed plan binds even creditors that are not provided for by the plan and without regard to whether the creditor responded to the proposed plan by acceptance or rejection.14 As is demonstrated below,15 some courts have misapplied res judicata to find limitations on the effect of a confirmed plan that fails to provide for a creditor when § 1327(a) clearly states that such a plan is binding even on a creditor that is not provided for by the plan.16

[6]

The Ninth Circuit in Espinosa v. United Student Aid Funds, Inc.,17 explained the important distinction between the res judicata effect of a confirmation order and the statutory effect of confirmation under § 1327(a). Res judicata applies to “giving the judgment in the bankruptcy case preclusive effect in another case.”18 When the context is enforcement of the confirmation and discharge orders in the bankruptcy court that issued them, res judicata is not in play; rather, the binding effect of confirmation is often realized, as it was in Espinosa, through the discharge injunction:

A discharge injunction does not operate by way of res judicata; it is, rather, an equitable remedy precluding the creditor, on pain of contempt, from taking any action to enforce the discharged debt. . . . A discharge injunction could also have res judicata effect, if the creditor were to try to enforce the debt by bringing a post-discharge lawsuit, but the discharge injunction prevents him from even commencing the second suit where the res judicata issue could be litigated. There was no second lawsuit in our case.19
[7]

Examples of the binding effect of confirmation under § 1327(a) are plentiful. The confirmation order is a binding determination of the debtor’s eligibility for Chapter 13, precluding a postconfirmation motion to dismiss on the ground that the debtor was ineligible from the beginning of the case.20 It has been held that the confirmation order in a Chapter 13 case is res judicata with respect to the subject matter jurisdiction of the bankruptcy court.21 Confirmation may determine what is included in property of the estate.22 Confirmation precludes relief from the stay when the creditor unsuccessfully objected to confirmation on the same grounds.23 A creditor cannot use a postconfirmation motion for relief from the stay to collaterally attack the confirmed plan if the creditor failed to object or appeal the order of confirmation, notwithstanding that the confirmed plan contains provisions the creditor could have defeated with a timely objection.24 Even a creditor that was granted relief from the stay before confirmation is bound by the confirmed plan to accept the treatment provided in the plan.25 A creditor excepted by statute from the automatic stay—for example, a creditor attempting to collect child support that falls within the broad exception in § 362(b)(2)26—is still bound by the confirmed plan and risks sanctions for violating the confirmed plan by continued collection efforts. The Eleventh Circuit held the Florida Department of Revenue in contempt for violation of a confirmed plan that provided for child support arrearage when the Department attempted to collect more than the plan provided.27

[8]

Confirmation is a binding determination that the debtor satisfies the disposable income test, thus some courts have held that confirmation precludes a creditor’s postconfirmation motion to require the debtor to commit future tax refunds to the trustee.28

[9]

Because good faith is one of the conditions for confirmation in § 1325(a), confirmation precludes relitigation of the debtor’s good faith on a motion to dismiss.29 A creditor that neglected to raise a best-interests-of-creditors-test objection before confirmation is precluded from raising that objection collaterally, for example, in opposition to a debtor’s motion to modify the plan after confirmation.30 The confirmation order is preclusive of all “adequate protection” arguments a creditor might have made under § 361 of the Code.31 Confirmation of a plan that is specific with respect to the value of collateral,32 the payment or rate of interest and other rights of secured claim holders is binding on lienholders notwithstanding the filing of an inconsistent proof of claim.33 A confirmed plan that treats a lease as a disguised security agreement binds the creditor to accept the present value of its collateral through the plan.34 Plan confirmed without objection that treated “contract for title” as an ordinary secured claim trumps a postconfirmation proof of claim asserting that the contract is executory and can only be assumed under § 365.35

[10]

Assumption of a lease in a confirmed plan has binding effects. For example, when the plan assumed a vehicle lease to be paid directly by the debtor, the lessor was precluded to later claim an administrative expense upon the debtor’s default.36

[11]

A pawnbroker is bound by confirmation of a plan that treated the pawn transaction as an ordinary secured claim notwithstanding that an objection to confirmation would have defeated the plan.37

[12]

All creditors are bound by the order of payment of claims if fixed in the confirmed plan.38

[13]

The U.S. Court of Appeals for the Third Circuit held that failure to object to confirmation is fatal to a creditor’s objections to a plan that fails to provide the present value required by § 1325(a)(5).39 Similarly, the U.S. Court of Appeals for the Seventh Circuit held that confirmation binds a secured claim holder to accept surrender of part of its collateral in full satisfaction of its secured claim notwithstanding that the property surrendered is worth less than the amount the creditor was entitled to had it timely objected to confirmation.40 When the debtor’s car is destroyed after confirmation and insurance pays the value, § 1327(a) generally limits the lienholder to the balance of its secured claim, not the entire proceeds of the insurance policy.41

[14]

The U.S. Court of Appeals for the Ninth Circuit held that a taxing authority’s failure to object to confirmation left it bound by a plan that redeemed property from a tax foreclosure judgment, “[e]ven assuming that the order confirming the plan was in error.”42 The U.S. Court of Appeals for the Tenth Circuit held that res judicata and § 1327(a) prevented the IRS from ransoming its tax lien for more than the precise amount of its allowed secured claim fixed by the order of confirmation: “Absent timely appeal, the confirmed plan is res judicata and its terms are not subject to collateral attack. . . . [T]he IRS was entitled to no more and the [debtors] were obligated to pay no less than the amounts set out in the Plan and confirmation order.”43 A taxing authority that needs tax returns from the debtor before it can determine whether to object to confirmation must act before confirmation to get those returns because confirmation will severely limit options for opposing the plan.44 Property tax creditors are bound by confirmation. For example, when the plan paid less interest than state law or § 51145 required, the purchaser of a tax claim was bound by its failure to object before confirmation.46

[15]

Confirmation orders can be binding with respect to the liability of the debtor and, on strong facts, can affect the rights of creditors against third parties. For example, a plan that expressly provided “the alleged secured claim of Factors Funding, Inc. is hereby discharged as there is no underlying obligation” precluded allowance of any claim filed by Factors Funding, Inc.47 Confirmation of a plan that substituted the debtor’s daughter as the borrower on a car note and provided that the underlying debt would be paid “outside the plan by the debtor’s daughter” barred the creditor’s claim against the debtor when the daughter surrendered the car after confirmation.48 A creditor is bound by a provision prohibiting action against a cosigner notwithstanding that the confirmed plan is broader than the statutory protection of cosigners in § 1301.49 An assignee in privity with the original lender is bound by a confirmed plan.50

[16]

Creditors are bound by plan provisions that preserve avoidance actions. For example, notwithstanding controversy about the standing of Chapter 13 debtors to bring avoidance actions,51 when the plan specifically reserved the debtor’s right to bring such an action, the defendant is bound by confirmation.52

[17]

Real estate mortgages and liens are affected in many ways by confirmation orders in Chapter 13 cases.53 A properly noticed secured creditor that fails to object to confirmation may be deemed to have accepted the treatment of its claim.54 The U.S. Court of Appeals for the Seventh Circuit and several other courts have held that the failure to object to confirmation binds the mortgage holder to accept payment in full without interest when the plan calls for payment of the secured claim without interest.55 A mortgage holder is bound by a confirmed plan that bifurcated its claim and modified the unsecured portion when the mortgage holder filed a claim but failed to object to confirmation.56

[18]

Notwithstanding the Supreme Court’s declaration in Nobelman v. American Savings Bank57 that § 1322(b)(2) prohibits bifurcation of an undersecured claim that is secured only by real property that is the debtor’s principal residence,58 it is widely held that a wholly unsecured home mortgage is not protected from modification.59 Nobelman did not address whether a mortgage holder is bound by failure to object to confirmation of a plan that bifurcates its claim in violation of § 1322(b)(2). Several reported decisions conclude that an undersecured mortgage holder is bound by confirmation of a plan that bifurcates its claim when the creditor sits on its rights after proper notice of the plan.60 Discussed elsewhere in detail,61 even a plan provision that impermissibly modifies a mortgage is binding, and the mortgage creditor must apply payments according to the plan when the creditor fails to object to confirmation.62

[19]

Although not completely without controversy, many courts have held that confirmation of a plan can strip a wholly unsecured mortgage without the separate filing of an adversary proceeding.63 In SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin),64 the U.S. Court of Appeals for the Third Circuit distinguished lien stripping from attacking the validity of a mortgage, stating that “the concept of ‘lien stripping’ is related to the valuation of collateral, not the validity of a lien.” While an attack on validity requires an adversary proceeding under Bankruptcy Rule 7001(2), the Mansaray-Ruffin court concluded that stripping an unsecured mortgage did not. Applying this distinction, a bankruptcy court in the Third Circuit concluded that a Chapter 13 plan can reclassify the claim of a wholly unsecured mortgage without the filing of an adversary proceeding.65

[20]

When the plan cures default and maintains payment on a long-term mortgage under § 1322(b)(5),66 the mortgage holder is bound by confirmation to accept the monthly payment specified in the plan notwithstanding that the contract required a different amount and a timely objection to confirmation would have prohibited the change in terms.67 A plan that fails to pay mortgage arrearages or that provides for arrearages in an amount different than that claimed by the mortgage holder is binding absent timely objection to confirmation.68 A confirmed plan may obligate the mortgage holder or servicer to notify the debtor and trustee of escrow or other changes in mortgage payments.69 A mortgage holder that fails to object to confirmation is precluded from attacking a plan provision for payment of arrearages without interest, notwithstanding Supreme Court authority entitling the creditor to interest on defaults cured through the plan.70

[21]

A prepetition foreclosure sale won’t help a mortgagee that fails to object to confirmation of a plan that continues payments as if nothing happened before the petition—the foreclosing creditor is bound to accept payments for the life of the Chapter 13 plan.71 A confirmed plan providing “‘Debtors hereby rescind said transaction with Household Finance Corporation III’” is binding with respect to rescission of a home mortgage held by HFC.72

[22]

Postconfirmation relief from the stay is not necessarily going to restore happiness for the mortgage holder that failed to object to an unfavorable plan. As explained by the U.S. Court of Appeals for the First Circuit in Carvalho v. Federal National Mortgage Ass’n (In re Carvalho),73 a confirmed plan that bifurcated an undersecured mortgage that was not protected from modification by § 1322(b)(2)74 “is not annulled by the mere act of granting relief from the automatic stay.”75

[23]

The binding effect of confirmation applies with full force to claims entitled to priority76 and full payment77 through the plan. For example, many reported cases recognize that taxing authorities are bound by § 1327(a) to accept the payment of priority claims provided by the plan even when inconsistent with a timely filed proof of claim, so long as notice to the government was adequate.78

[24]

Section 1327(a) states that the binding effect of confirmation extends to each creditor “whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted or has rejected the plan.”79 Even a plan that is entirely silent with respect to a creditor or class of claims is binding unless the creditor objects to confirmation or appeals the order of confirmation.80 Silence in a plan with respect to retention of liens can bind the lienholder to a confirmed plan that limits or eliminates altogether the creditor’s prepetition lien.81

[25]

The binding effect of § 1327(a) applies with full force to modification of confirmed plans, provided that modification is properly noticed.82 Courts sometimes view plan modification targeted at a specific claim as the functional equivalent of a claim objection. Conflicting views with respect to plans that are inconsistent with filed claims are discussed elsewhere.83

[26]

Until recently the U.S. Courts of Appeals for the Ninth and Tenth Circuits had reported especially clear statements of the binding effect of confirmation of Chapter 13 plans in cases dealing with the discharge of student loans; the Tenth Circuit retreated,84 but the Ninth Circuit stayed the course.85 Most educational loans are not dischargeable in a Chapter 13 case unless the debtor files an adversary proceeding and proves the undue hardship exception to the nondischargeability of student loans under § 523(a)(8).86 At about the same time, enterprising debtors’ lawyers in the Ninth and Tenth Circuits had the same idea: Why not provide in the Chapter 13 plan itself that confirmation constitutes a finding pursuant to § 523(a)(8) that excepting the educational loan from discharge would impose an undue hardship on the debtor—a practice that later earned the pejorative “discharge by declaration.”

[27]

Anyone who has been around consumer bankruptcy for even a little while knows that student loans are like real estate mortgages—the notes are bought, sold and assigned, typically with minimal or no notice to the debtor. When it comes time to give notice of the Chapter 13 plan, the student loan is held by a guarantor or servicing agent several times removed from the original transaction. By the time notice of the Chapter 13 plan finds its way to a flesh-and-blood person who understands the provision for discharge of student loans, months have passed and confirmation is history.

[28]

In Andersen v. Higher Education Assistance Foundation (In re Andersen),87 the plan provided, “Pursuant to 11 U.S.C. § 523(a)(8), excepting the aforementioned educational loans from discharge will impose an undue hardship on the debtor and the debtor’s dependents. Confirmation of debtor’s plan shall constitute a finding to that effect and that said debt is dischargeable.”88 The plan provided that educational loans would be paid 10 percent and the balance would be discharged. The student loan creditor had notice of the plan but only managed to file an untimely objection to confirmation that was overruled. The debtor completed payments, and discharge was entered.

[29]

The student loan creditor challenged discharge of its debt, arguing that confirmation could not eliminate its rights under the Bankruptcy Rules to have dischargeability determined in an adversary proceeding. The Bankruptcy Appellate Panel for the Tenth Circuit disagreed, restating the question this way:

The question is whether the demands of due process have been honored. Due process requires only that there be notice and a meaningful opportunity to be heard—no more, and no less. . . . Here, . . . the plan specifically stated the treatment to be accorded the HEAF loans. No argument has been made that HEAF was not properly served with the plan and with notice, or that HEAF lacked the opportunity either to object or to have a meaningful hearing. Indeed, HEAF did respond and filed an objection, thereby indicating that HEAF understood that the plan intended to grant relief affecting HEAF’s interests. However, the objection was not timely filed and was denied for that reason, leading to confirmation of the plan. Thus, it appears that due process has been accorded. . . . Accordingly, the order of confirmation is res judicata as to that issue. . . . Here, the Chapter 13 plan does not purport to make a nondischargeable debt dischargeable. The plan, instead, resolved a potential controversy about whether payment of the student loan would result in an undue hardship to the debtor. Confirmation of the plan constituted a finding to that effect, thereby rendering the loan dischargeable.89
[30]

On further appeal, the U.S. Court of Appeals for the Tenth Circuit agreed with the BAP, adding these strong statements about the responsibility of creditors to protect their own interests at confirmation and the principle of finality expressed in § 1327(a):

HEAF failed to take an active role in protecting its claims. . . . [A] student loan creditor, like every other creditor, has a duty to ensure that its interests are adequately protected. A creditor cannot simply sit on its rights and expect that the bankruptcy court or trustee will assume the duty of protecting its interests. . . . While Andersen surely had the burden of proving undue hardship, and while a discharge granted without such proof is inconsistent with the Code, it is critical that HEAF, as the party affected by this determination, failed to properly challenge the language at issue, the interim rulings of the bankruptcy court, or the confirmed plan. . . . [T]he BAP decision merely recognizes the need for a creditor to protect its interests by timely objecting to a proposed plan or appealing the confirmation order. If a creditor fails to do so, it cannot later complain about a certain provision contained in a confirmed plan, even if such a provision is inconsistent with the Code. . . . [T]he strong policy of finality also justifies the result reached by the BAP. . . . [W]e agree with the Third Circuit that, “after the plan is confirmed the policy favoring the finality of confirmation is stronger than the bankruptcy court’s and the trustee’s obligations to verify a plan’s compliance with the Code.” In re Szostek, [886 F.2d 1405, 1406 (3d Cir. Oct. 12, 1989)].90
[31]

As Andersen worked its way toward the Tenth Circuit, almost identical facts were considered by the Bankruptcy Appellate Panel for the Ninth Circuit in Great Lakes Higher Education Corp. v. Pardee (In re Pardee).91 The plan in Pardee paid the principal amount of student loans and then contained this unusual discharge provision: “any remaining unpaid amounts, if any, including any claims for interest, shall be discharged by the plan.”92 The student loan creditor did not object to confirmation. After discharge, the creditor attempted to collect postpetition interest. Although postpetition interest on a nondischargeable student loan normally is nondischargeable,93 the Bankruptcy Appellate Panel (BAP) found the failure to object to confirmation was fatal to the right to collect postpetition interest:

[W]hen the chapter 13 plan contains a provision that purports to discharge a nondischargeable debt in violation of §§ 523(a) and 1328(a), the student loan creditor with notice of this plan provision must object to the plan or appeal the confirmation order. The failure to do so constitutes a waiver of its right to collaterally attack the confirmed plan postconfirmation on the basis that the plan contains a provision contrary to the Code. The creditor, therefore, is bound by the terms of the confirmed plan pursuant to § 1327(a). . . . The concept of the preclusive effect of final orders is a basic principle of American jurisprudence. . . . Celotex Corp. v. Edwards, 514 U.S. 300[, 115 S. Ct. 1493, 131 L. Ed. 2d 403 1995,] enforces the basic principle enunciated in Stoll [v. Gottlieb, 305 U.S. 165, 59 S. Ct. 134, 83 L. Ed. 104 (1938),] that a final order that is not appealed cannot be collaterally attacked in a later proceeding even if the order was entered in error. . . . [T]his reasoning has been applied to confirmed chapter 13 plans. [See Lawrence Tractor Co. v. Gregory (In re Gregory),] 705 F.2d 1118 [(9th Cir. 1983)] . . . . While the Plan should not have been confirmed with the Discharge Provision, the Plan is res judicata as to all issues that could have or should have been litigated at the confirmation hearing. . . . We respectfully disagree with the holding in [In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994) (Flaum, Rovner, Williams),] because it is contrary to overwhelming Ninth Circuit authority and the general principle upholding the preclusive effect of final orders. While the Plan should not have been confirmed with the Discharge Provision, once confirmed, the Plan was not “nugatory” but was binding on the parties pursuant to § 1327(a) and the well-established principle that a party that fails to appeal a final order cannot collaterally attack that order.94
[32]

On further appeal, the Ninth Circuit endorsed Andersen and gave this unequivocal statement of the binding effect of confirmation orders:

We agree with the Tenth Circuit [Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999) (Anderson, McWilliams, Cook)]. If a creditor fails to protect its interests by timely objecting to a plan or appealing the confirmation order, “it cannot later complain about a certain provision contained in a confirmed plan, even if such a provision is inconsistent with the Code.” This court has recognized the finality of confirmation orders even if the confirmed bankruptcy plan contains illegal provisions.
        We find no reason to depart from the well-settled policy that confirmation orders are final orders that are given preclusive effect. Regardless of whether the plan should have been confirmed with the discharge provision, the BAP was correct in holding that “the Plan is res judicata as to all issues that could have or should have been litigated at the confirmation hearing.”95
[33]

Andersen and Pardee stood clearly for the principle that a properly noticed creditor was bound by the terms of the plan as confirmed, absent timely objection or appeal. Unfortunately, until the Supreme Court affirmed Espinosa,96 that salutary message was eroded by a line of decisions that disrespected the binding effect of confirmation orders that addressed the discharge of student loans. Loose language in some of these decisions threatened the foundation of finality in § 1327(a) and warned that plan terms inconsistent with Code or Rule requirements may be subject to collateral attack.

[34]

The Tenth Circuit’s 1999 holding in Andersen—that the predicate for discharge of a student loan could be established by a properly noticed plan—was restricted by the Tenth Circuit in 2004 in Poland v. Educational Credit Management Corp. (In re Poland).97 In Poland , the Tenth Circuit read Andersen narrowly to not support discharge of student loans when the confirmed plan did not expressly include a finding of undue hardship. The Poland panel telegraphed in a footnote that Andersen had been “wrongly decided and should be reconsidered.”98

[35]

After 2004, bankruptcy courts in the Tenth Circuit scrutinized plans to see if the words satisfied the Poland requirement of specificity. If the trend had stopped there, a requirement of specificity would have been a development in the § 1327(a) case law consistent with the general principle that the binding effect of confirmation requires notice through clarity in plan provisions.99 But the student loan discharge cases moved well beyond plan specificity to question the authority of bankruptcy courts to confirm plans that contain provisions “inconsistent” with the Bankruptcy Code or Rules.

[36]

The slippage began in the Fourth Circuit in Banks v. Sallie Mae Servicing Corp. (In re Banks).100 The plan in Banks put the student loan creditor in a separate class, providing that no “‘interest, penalties, late charges, or costs of collection, including attorneys fees, shall accrue,’” and that upon plan completion, the debtor would “‘be liable for only the unpaid balance of his prepetition debt.’”101 The confirmation order repeated this provision, stating that 10 percent would be paid on the student loan debt, to be applied only to principal. The student loan creditor admitted receipt of the plan, notice of the confirmation hearing and the confirmation order.

[37]

After discharge, in the debtor’s adversary proceeding to declare the debt discharged, the student loan creditor argued that postpetition interest could not be affected by confirmation. Relying on Andersen and Pardee, the bankruptcy court gave confirmation its ordinary § 1327(a) binding effect and declared postpetition interest discharged.

[38]

On appeal, the Fourth Circuit focused on the procedural requirements for excepting student loan debt from discharge under § 523(a)(8) and Bankruptcy Rule 7001, distinguishing plan-noticing requirements under Rule 2002 from the more stringent adversary proceeding service requirements under Rule 7004. “Mailing the proposed plans, the hearing notice, and the confirmation order satisfies the ‘notice’ requirement under Rule 2002, but not the service and summons requirements of Rule 7004.”102 Citing Cen-Pen Corp. v. Hanson (In re Hanson)103 for the proposition that if “an adversary proceeding ‘is required to resolve the disputed rights of the parties, the potential defendant has the right to expect that the proper procedures will be followed,’”104 the Fourth Circuit in Banks held that an adversary proceeding was required to discharge interest on a student loan. Since the debtor in Banks did not initiate an adversary proceeding to determine undue hardship, the student loan creditor did not receive notice by service and summons and the confirmed plan was not entitled to binding effect. Banks was a procedure-focused decision that found a nonstatutory exception to the binding effect of confirmation under § 1327(a) when actual notice of the content of the plan was delivered in the wrong form.

[39]

The Seventh Circuit embraced the procedural distinction crafted by the Fourth Circuit in (a different) In re Hanson.105 The Hanson plan did not contain “discharge by declaration” language; instead, it simply provided for payment of 19 percent of the student loan claim. Upon plan completion, discharge of the student loan balance was contained in the form discharge order used by the bankruptcy court. Although this form of discharge order was entered in error, the Seventh Circuit noted that the student loan creditor “received as little process in this case as the creditors in Banks and Poland.”106 Focusing on the adversary proceeding requirements for discharge determinations and noting that the “Bankruptcy Rules require the debtor to file an ‘adversary proceeding’ against the holder of the student loan debt to make . . . a showing” of undue hardship,107 the Seventh Circuit characterized “discharge by declaration” language in a plan as a “hope that the unsuspecting bankruptcy court will confirm the plan and that the lender will not recognize the discharge by declaration ploy in time to object to confirmation or to file an appeal.”108 Reciting that “dictates of due process trump policy arguments about finality,”109 the Seventh Circuit gave the following curious description of its “narrow” holding:

We do not hold that the due process clause requires the service of a summons and adversary proceeding prior to the discharge of student loan debt. Rather, “we merely confirm that where the Bankruptcy Code and Bankruptcy Rules require a heightened degree of notice, due process entitles a party to receive such notice before an order binding the party will be afforded preclusive effect.”110
[40]

Putting aside the Seventh Circuit’s confusing distinction between the requirements of the Due Process Clause and procedure required by the Code and Rules, Hanson neglects to mention that the binding effect of confirmation is not mere policy; it is statutory. The trend of student loan cases illustrates the problem with courts’ viewing § 1327(a) as akin to judge-made res judicata: the statutory language is easily eroded or ignored in favor of policy. Procedural due process is a factor when, for example, the plan is not properly noticed or the plan language is unclear or deceptive. But when the student loan creditor had actual notice of an unambiguous plan in time to avoid the preclusive effects of confirmation, “due process” is measured against the effectiveness of notice, not against the form of notice.111

[41]

Strong precedent requires an offended creditor to raise due process issues through a confirmation objection, a timely postconfirmation motion or appeal of the confirmation order.112 In the run-up to the Supreme Court’s decision in Espinosa, the student loan cases traveled to a point where the student loan creditor could ignore a properly noticed plan, neglect to raise any objection in the bankruptcy court or on appeal, yet still win by later crying that a plan term conflicts with some Code requirement, or more troubling, with some Rule requirement.113

[42]

A long step along that way, the Sixth Circuit in Ruehle v. Educational Credit Management Corp. (In re Ruehle)114 rejected the Andersen/Pardee precedent, stating that permitting a plan to discharge student loan debt is equivalent to “‘winking at due process, which is the cornerstone of justice.’”115 In Ruehle, the creditor filed a Civil Rule 60(b)(4) (Bankruptcy Rule 9024) motion for relief from the confirmation order after the debtor received a discharge at the completion of plan payments. The bankruptcy court and BAP rejected the debtor’s argument that § 1327(a) required discharge when the plan specifically provided that “[c]onfirmation of debtor’s plan shall constitute a finding of [undue hardship] . . . , and that said debt is dischargeable.”116 The motion for relief asserted that the plan denied the student loan creditor proper notice and violated its due process rights. The Sixth Circuit found a requirement for an adversary proceeding:

The proposed discharge violated both the Bankruptcy Code, [11] U.S.C. § 523(a)(8), and Federal Rule of Bankruptcy Procedure 7001(6). These provisions require that to justify the discharge of a student loan debt, a debtor must establish undue hardship by filing a complaint for an adversarial hearing and serving the creditor with a summons. See Fed. R. Bankr. P. 7003 and 7004. Because that procedure was not followed in this case, the creditor did not file an objection to Ruehle’s “discharge by declaration” and, despite the obvious code and rule violations, her Chapter 13 plan was confirmed.117
[43]

With respect to notice, the Ruehle court fundamentally altered the usual due process burden of proof. The student loan creditor did not claim it was without timely notice of the undue hardship provision in the plan; rather, it claimed that any notice short of service of an adversary proceeding summons was insufficient. The Sixth Circuit did not acknowledge or address that the student loan creditor in Ruehle had actual notice of the plan in time to object to confirmation. Instead, ruling as a matter of law without saying so, the Sixth Circuit found (incongruously) that the record

fails to reflect that the original creditor or its successor, Educational Credit, had reasonable notice of the proposed plan or an opportunity to be heard prior to the confirmation. The bankruptcy court properly held that under these circumstances, the challenge to the validity of the confirmation order was properly brought under Rule 60(b)(4), which permits relief from the judgment when that judgment is void, rather than the catch-all provision in 60(b)(3).118
[44]

Outside the student loan context, when a creditor can show defective notice of the plan, Bankruptcy Rule 9024 is an appropriate mechanism for relief from confirmation.119 But Ruehle goes far beyond any run-of-the-mill lack-of-notice case. Citing Banks and Hanson as “represent[ing] an evolving majority view that a purported ‘discharge by declaration’ of student loan debt is not only invalid but void and, therefore, subject to being set aside upon a Rule 60(b)(4) motion,”120 the Sixth Circuit granted relief from the confirmation order without any review of the quality of notice actually received by the student loan creditor. That the confirmed plan in Ruehle was “void” is significant—signaling that the passage of time was not an obstacle to Rule 60 relief.

[45]

Next to join this retreat from the binding effect of confirmation orders was the Second Circuit in Whelton v. Educational Credit Management Corp.121 The confirmed plan paid 5 percent of student loan debt and provided that confirmation was a finding that payment of more would be an undue hardship. There was no doubt that the student loan creditor received notice and did not object to the plan or appeal the confirmation order.

[46]

One year after discharge in Whelton, ECMC filed a complaint to determine that the debt had not been discharged. The bankruptcy court held that the undue hardship declaration was void because it violated ECMC’s due process right to be served with a complaint.122 The Second Circuit agreed: “While creditors are not ordinarily entitled to personal service before a bankruptcy court may discharge a debt, the Federal Rules of Bankruptcy Procedure provide student loan creditors ‘greater procedural protection’ because these particular types of debts are not automatically dischargeable.”123 Citing Tennessee Student Assistance Corp. v. Hood,124 a sovereign immunity case,125 the Second Circuit stressed the need to use an adversary proceeding and service of process, as required by the Rules. Then the Second Circuit became the first to reach the following troublesome point—that the bankruptcy court lacked authority to confirm a plan that purported to find undue hardship:

Under 11 U.S.C. § 1328(a), the Bankruptcy Court lacked the authority to grant a discharge of Whelton’s student loan debt through the ordinary confirmation process. As a general matter, res judicata can only be invoked where (1) there is a previous adjudication on the merits; (2) the previous action involved ECMC or its privy; and (3) the claims involved were or could have been raised in the previous action. . . . Here, it is difficult to see how these claims could have been raised since ECMC lacked proper notice.126
[47]

The leap here is obvious: It was admitted in Whelton that ECMC and its predecessor had timely notice of the plan and did not object, appear at confirmation or appeal. On these facts, it is hardly “difficult” to see how ECMC could have challenged the undue hardship provision. ECMC had ample opportunity to litigate the discharge issue at confirmation or at least demand an adversary proceeding. The unrestrained language of the Second Circuit’s holding casts a cloud over many reported decisions that consider the opportunity to object at confirmation to be an opportunity to litigate for purposes of issue preclusion and binding effect under § 1327(a).127

[48]

Further arguing from its result, the Whelton court cited the multi-part test for undue hardship in Brunner v. New York State Higher Education Services Corp.128 as proof that undue hardship could not be adjudicated in a “summary proceeding.”129 The Second Circuit states that finding undue hardship through confirmation of the Chapter 13 plan inappropriately “avoided the statutorily required adjudication on the merits . . . necessary for the application of res judicata.”130

[49]

Of course, the question in Whelton was whether the confirmation process provided ECMC adequate opportunity to litigate for purposes of § 1327(a). That the Brunner test is fact-intensive tells us nothing about whether ECMC had sufficient notice and opportunity to litigate those facts at confirmation of the Whelton plan.

[50]

In Educational Credit Management Corp. v. Mersmann (In re Mersmann),131 the Tenth Circuit came full circle in the retreat from Pardee and Andersen. Not only did the Tenth Circuit find procedural barriers to confirming plans that discharge student loans, on the way to overruling Andersen it stated repeatedly that the bankruptcy court “lacks authority” to confirm plans containing hardship discharge findings—all this without addressing due process.132

[51]

The Mersmann appeal involved two debtors. In one case, the plan provided 10 percent to unsecured creditors, including student loan debt, with “completion of the plan [to] result in a finding that it would be an undue hardship for the Debtor to have to pay any additional monies to the special class of school loans not otherwise dischargeable.”133 This plan would have satisfied the Poland requirement for a specific finding of undue hardship.

[52]

In the second case, the plan contained no undue hardship finding. Instead, it stated that the principal of the student loan debt would be paid without interest: “All such debts other than the remaining unpaid original principal amount of the loans remaining upon completion of the plan will be discharged upon entry of the discharge hereunder.”134 This plan did not satisfy the Poland standard, and the Bankruptcy Appellate Panel for the Tenth Circuit had reversed the discharge of interest accrual on that basis.135

[53]

After tracing the statutory history of the student loan discharge exception, the Tenth Circuit said it was unnecessary to look at the issue from the perspective of due process: “While Andersen’s conclusion that due process was satisfied has been cast into considerable doubt by subsequent cases, since we find the statutory and res judicata arguments dispositive, we need not revisit the due process question in this opinion.”136

[54]

Then the Mersmann court made the odd observation that § 1327(a) “serves the same purpose as the general doctrine of res judicata. . . . Discharge-by-declaration deserves no preclusive effect under § 1327(a) because it fails to comport with the provisions of the Bankruptcy Code and Rules governing discharge.”137 In § 523(a)(8), Congress made student loans “presumptively nondischargeable,” requiring “individualized adjudication” for discharge.138 “Unless the debtor affirmatively secures a hardship determination, the discharge order will not include a student loan debt.”139 Moreover, “applying § 1327(a)’s preclusive effect to discharge-by-declaration conflicts with other specific provisions of the Code,” including the § 1328(a)(2) exception to discharge for student loan debts.140 Discharge of student loans through plan confirmation also offends § 1325(a)(1) because that section “permits confirmation of a plan only if it is consistent with the rest of the Code.”141 The Tenth Circuit concluded that “a bankruptcy court lacks authority to confirm a plan provision that seeks to discharge a student loan debt without an adversary proceeding proving ‘undue hardship.’”142

[55]

Turning to res judicata, the Mersmann court held that discharge through the confirmation process failed to provide the degree of notice necessary for a “full and fair opportunity to litigate.”143 Discharge of student loan debt without an adversary proceeding failed to adjudicate the merits—another prerequisite for application of res judicata. To overstate the point, “[i]n short, if an issue must be raised through an adversary proceeding it will not have a preclusive effect unless it is actually litigated.”144

[56]

Gratuitously, the Tenth Circuit observed that forbidding findings of undue hardship through the confirmation process relieves debtors’ attorneys from “the ethical conundrum” of deciding between advocacy for their clients and presentation of valid, good-faith positions in proposed plans.145 Prohibition of discharge without an adversary proceeding “rightfully places the burden of pleading and proving the elements of ‘undue hardship’ on the debtor.”146 The ultimate conclusion:

Since the Bankruptcy Code and Rules allow for discharge of student loan debts in one—and only one—way, see 11 U.S.C. § 523(a)(8); Fed. R. Bankr. P. 7001(6), bankruptcy courts lack the authority to confirm a plan provision calling for the discharge of student loan debt without an adversary proceeding.147
[57]

This broad statement by the Tenth Circuit echoed throughout the bankruptcy courts whenever a sleeping creditor found the short end of an unfavorable confirmed plan.148 Mersmann undercut the statutory binding effect of confirmation in § 1327(a) without a nod to the foundation principle that due process is satisfied by a fully informed opportunity to litigate. The lack-of-authority door opened by the Second and Tenth Circuits in Whelton and Mersmann was not easily shut. Fortunately, Mersmann was not the last word in the saga of Pardee and Andersen.

[58]

Questions about the continuing vitality of Pardee were raised in the Ninth Circuit. The Bankruptcy Appellate Panel for the Ninth Circuit criticized Pardee for neglecting to address due process considerations—notwithstanding that due process issues were not presented to the Ninth Circuit in Pardee. Notwithstanding Pardee, in Educational Credit Management Corp. v. Repp (In re Repp),149 the Ninth Circuit BAP joined the “emerging consensus” that discharge by declaration violated the student loan creditor’s due process rights. The plan in Repp provided that student loan debt would be paid pro rata with other unsecured creditors and any balance would be discharged as an undue hardship. After completion of payments and discharge, the debtors brought an adversary proceeding for declaratory judgment on the binding effect of confirmation under Pardee.

[59]

Noting that “[a] fundamental purpose of the Federal Rules of Bankruptcy Procedure is to set forth what process is due in various categories of bankruptcy matters,”150 the BAP focused on the Rule 7001(6) requirement for an adversary proceeding to determine dischargeability of debt. Although notice of the plan in Repp was adequate, the BAP invented a new rule that when the plan contains “illegal” terms such as discharge by declaration, the creditor is entitled not only to service of a complaint under Rule 7001(6) but also “to expect that the bankruptcy court will perform its independent duty to confirm only those plans that do not contravene the Bankruptcy Code and rules of procedure.”151 This sounds a lot like Whelton: the bankruptcy court lacks authority to confirm “illegal” plan provisions.

[60]

In the same year as Repp, a panel of the Ninth Circuit danced around Pardee in Enewally v. Washington Mutual Bank (In re Enewally).152 Enewally was not a student loan case. The issue in Enewally was whether the plan could be modified to strip a lien claim that was not protected from modification by § 1322(b)(2),153 then maintain payments on the secured portion beyond the expected life of the plan. The Ninth Circuit held that the Code did not permit the debtor to continue payments on the secured portion after the plan’s life: “Because § 1322(b)(2) does not allow a modified secured debt to be paid over a period of time longer than the plan term, the debtors’ proposed plan modification must be disallowed.”154

[61]

The debtors in Enewally argued in the alternative that plan confirmation bound Washington Mutual even if § 1322(b)(2) did not authorize the extended payment. The Ninth Circuit acknowledged its statement in Pardee that “if a creditor fails to timely object to a plan or appeal a confirmation order, ‘it cannot later complain about a certain provision contained in a confirmed plan, even if such a provision is inconsistent with the Code.’”155 Since the bankruptcy court had reserved the issue of continued plan payments, the preclusive effect of confirmation was not decided by the Ninth Circuit in Enewally. But there was this (unfortunate) dicta: “[a]lthough confirmed plans are res judicata to issues therein, the confirmed plan has no preclusive effect on issues that must be brought by an adversary proceeding, or were not sufficiently evidenced in a plan to provide adequate notice to the creditor.”156

[62]

The student loan discharge issue returned to the Ninth Circuit in Espinosa v. United Student Aid Funds, Inc.157 The confirmed plan in Espinosa provided that the principal portion of a student loan debt would be paid but that accruing interest, penalties or fees would be discharged. The debtor completed payments under the plan, but the discharge order (mistakenly) contained standard language excepting any student loan from discharge. Three years after entry of the discharge order, the student loan creditor began intercepting income tax refunds to collect the unpaid portion of the debt. The debtor sought contempt for violation of the discharge injunction. The student loan creditor moved for relief from the confirmation and discharge orders, claiming that the plan’s terms were “in violation of [its] rights under the Bankruptcy Code and Rules, and the Due Process Clause.”158 The bankruptcy court found a violation of the discharge injunction, holding that confirmation was final and the creditor failed to object. The district court reversed based on lack of notice to the student loan creditor and denial of due process.

[63]

The Ninth Circuit vacated the district court’s decision, remanding to the bankruptcy court to determine whether the discharge order had been entered “as a result of a clerical error and, if so, whether to correct it so as to conform to Espinosa’s Chapter 13 plan.”159 Citing Pardee, the Ninth Circuit “pointed out . . . that the creditor . . . like Funds here, had timely notice of the Chapter 13 plan and failed to object. We held that the creditor ‘should have raised this argument [about the absence of an adversary proceeding and no finding of undue hardship] in the bankruptcy court by objecting to the plan prior to its confirmation, or by appealing the bankruptcy court’s confirmation of the plan.’”160 The Espinosa panel examined the decisions from other circuits that had rejected Pardee,

 

and [did] not immediately find them persuasive; the rationale of Pardee and Andersen, relying as it does on straightforward notions of notice and waiver, seem [sic] far more consistent with accepted principles concerning the finality of judgments that transcend this particular corner of the law.161
[64]

The Espinosa court rejected the criticism of Pardee by the Ninth Circuit BAP in Repp.162 Acknowledging that Pardee was now in the minority, the Espinosa panel found no need to “bring the matter to the attention of our colleagues and suggest that an en banc court be convened to reconsider the matter afresh.”163

[65]

After remand, the bankruptcy court found that the discharge order containing the student loan exception from discharge had been entered in clerical error and that the student loan creditor was bound by the terms of the confirmed plan. The case then returned to the Ninth Circuit, directly presenting the issue “[w]hether a debtor may obtain discharge of a student loan by including it in a Chapter 13 plan, if the creditor fails to object after notice of the proposed plan.”164 The panel analyzed the statutory and constitutional arguments by Student Aid Funds, concluding that Pardee was on “all fours with our case, foreclos[ing]” Funds’s statutory argument that the debtor’s failure to file an adversary proceeding required setting aside the discharge:

In essence, Pardee held that a discharge is a final judgment and cannot be set aside or ignored because a party suddenly claims, years later, that the trial court committed an error.
        Two circuits have disagreed with Pardee, and accepted Funds’s statutory argument. See Educ. Credit Mgmt. Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033, 1047–49 (10th Cir. Sept. 24, 2007) (en banc) (overruling Andersen [v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999)]); Whelton v. Educ. Credit Mgmt. Corp., 432 F.3d 150, 154 (2d Cir. [Dec. 15,] 2005). These opinions divine some sort of conflict between the Bankruptcy Code’s finality provision, 11 U.S.C. § 1327(a), and those provisions of the Code and Rules that call for an adversary proceeding before a student loan debt may be discharged. We see no such conflict; both provisions can operate fully, within their proper spheres.
        The provision giving student loan creditors a right to special procedures comes into play when the case is pending before the bankruptcy court. If a debtor proposes to discharge a student loan debt without invoking the special procedures applicable to such debts, the creditor can object to the plan until the debtor shows undue hardship in an adversary proceeding.
        But there are many reasons a student loan creditor might not object to such a Chapter 13 plan. The creditor might, for example, believe that the debtor would be able to make a convincing showing of undue hardship, and thus see no point in wasting the debtor’s money, and its own, litigating the issue. Or, the creditor may decide that a Chapter 13 plan presents its best chance of collecting most of the debt, rather than spending years trying to squeeze blood out of a turnip. Or, the creditor may hope that the debtor will make some payments on the plan but ultimately fail to complete it, in which case the creditor will have collected a portion of the debt and still be free to collect the rest later. Or, the creditor may overlook the notice or fail to understand its legal implications.
        Regardless, when the creditor is served with notice of the proposed plan, it has a full and fair opportunity to insist on the special procedures available to student loan creditors by objecting to the plan on the ground that there has been no undue hardship finding. Rights may, of course, be waived or forfeited, if not raised in a timely fashion. This doesn’t mean that these rights are ignored, or that a judgment that is entered after a party fails to assert them conflicts with the statutory scheme or is somehow invalid.
        The Bankruptcy Code’s finality provision comes into play much later in the process, after the bankruptcy proceedings come to an end. A bankruptcy discharge order is a final judgment and, even without the special protection of section 1327(a), a final judgment cannot be ignored or set aside just because it was the result of an error. Errors committed during the course of litigation must be corrected by way of a timely appeal. . . .
        After a judgment (including a discharge) is finalized, and the time for appeal has run, the judgment can only be reconsidered in the limited circumstances provided by Rule 60(b). Mersmann and Whelton pay scant attention to 60(b) or the caselaw thereunder, which strictly cabins the circumstances under which a judgment can be reopened after it becomes final.165
[66]

In Espinosa the Ninth Circuit rejected the faulty analysis of res judicata in Mersmann and Whelton. As mentioned above, Espinosa recognized the distinction between res judicata—which “giv[es] the judgment in the bankruptcy case preclusive effect in another case”166—and § 1327(a)—the statutory effect of confirmation, often enforced through the discharge injunction by the court that entered the confirmation order. Res judicata did not apply because there was no second lawsuit in Espinosa. Mersmann and Whelton should not have relied on the doctrine for the same reason. But even following that wrong track, the Ninth Circuit found binding effect where the Second and Tenth Circuits did not:

        Even if res judicata were the relevant doctrine, neither Mersmann nor Whelton offer [sic] any persuasive reasons why the discharge order here should be denied full preclusive effect. Both cases seem to go off on the theory that the student loan debt couldn’t be discharged by the Chapter 13 plan because the creditor was not served with a complaint and summons, as required for the commencement of an adversary proceeding. Whelton, 432 F.3d at 155; Mersmann, 505 F.3d at 1049–50. But the creditor in our case (as in those other cases) did get proper notice of the proposed Chapter 13 plan, and so knew perfectly well that if the plan were approved and satisfied, the debtor would be granted a discharge of the student debt listed in the plan. Had the creditor wanted to insist on an adversary, it could have objected to the Chapter 13 plan on the ground that there was no judicial finding of undue hardship. . . . But Funds didn’t object to the plan and didn’t appeal the order confirming the plan, as it well could have. Instead, it accepted the payments made by the debtor during the plan’s life and then acted as if the whole thing never happened.167
[67]

Moving to the constitutional arguments, the Ninth Circuit stated in Espinosa “that notice of how the Chapter 13 plan affects creditors’ rights is all that the Constitution, the Bankruptcy Code and the Bankruptcy Rules require to bind creditors to the provisions of a confirmed plan under § 1327(a).”168

        The standard for what amounts to constitutionally adequate notice, however, is fairly low; it’s “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objection.” Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 94 L. Ed. 856 (1950). In re Gregory [,705 F.2d 1118 (9th Cir. 1983,] rejected an argument that Chapter 13 notice of a proposed plan is constitutionally defective because it does not apprise each creditor of how its own claim will be disposed of by the plan. . . .
        The reasoning of In re Gregory is controlling here, not only because it is law of the circuit, but because it’s entirely consistent with Mullane and the more than a half century of due process caselaw that follows it. If a party is adequately notified of a pending lawsuit, it is deemed to know the consequences of responding or failing to respond, even if gaining actual knowledge requires inquiry into court files, hiring a lawyer or conducting legal research. . . . [I]t would be virtually impossible to operate a legal system if due process required more notice than that.169
[68]

That Student Aid Funds received actual notice of the plan was compelling: “We find the argument that the Constitution requires something more than actual notice strained to the point of the bizarre.”170 The Ninth Circuit then condemned the trend in the student loan case law that cited due process to undo the binding effect of confirmed Chapter 13 plans:

 

        The three circuits [Banks, Hanson and Ruehle] that have held that the creditor is denied due process in circumstances such as these appear to have a different understanding of what due process requires. As best we can follow their reasoning, it is that a creditor who is entitled to heightened notice by statute is also entitled to such heightened notice as a matter of due process. . . .
        . . . To begin with, we find it both wrong and dangerous to hold that the standard for what amounts to constitutionally adequate notice can be changed by legislation. The constitutional standard, as we understand it, requires that a party affected by the litigation obtain sufficient notice so that it is able to take steps to defend its interests. Congress can, of course, give rights to additional notice, but we find it difficult to see how this can affect the floor provided by due process—either to increase or diminish it.
        Even if Congress could affect the constitutional standard, it didn’t do so here: Congress made it quite clear that a creditor need only get ordinary notice of a Chapter 13 plan to be bound by its terms. That Congress provided heightened notice requirements for an adversary proceeding, which didn’t take place here, is of no consequence. Had there been an adversary proceeding, and had the creditor not been served with a complaint and summons, the creditor may then have been free to ignore the adversary until it was properly served. But here (and in the similar cases from other courts) there was no adversary proceeding; the creditor’s rights were cut off by the Chapter 13 plan, precisely as specified in the notice the creditor did receive. We reject the idea that a creditor who is in the business of administering student loans has a constitutional right to ignore a properly served notice that clearly specifies that its debt will be discharged on successful completion of the plan.171
[69]

As discussed above, the Bankruptcy Appellate Panel for the Ninth Circuit endorsed the due process argument in Educational Credit Management Corp. v. Repp (In re Repp).172 Espinosa overruled Repp and also overruled bankruptcy court decisions in the Ninth Circuit that had threatened to sanction attorneys when Chapter 13 plans included provisions for discharge of student loans.173

[70]

Andersen and Pardee were not aberrations,174 and the Ninth Circuit’s decision in Espinosa was a rock-solid reaffirmation of the powerful binding effect of confirmation of a Chapter 13 plan under § 1327(a). Although the appellate trend outside the Ninth Circuit disrespected the binding effect of plans that discharged student loans, the Espinosa panel reaffirmed the general rule: Even plan provisions that are inconsistent with the Bankruptcy Code or the Bankruptcy Rules—provisions that would not be approved over any timely objection—are binding and enforceable in a final order of confirmation. Creditors must protect themselves. The principle of finality codified in § 1327(a) trumps the rights of sleeping creditors.175

[71]

The Supreme Court affirmed Espinosa in a unanimous decision authored by Justice Thomas.176 The facts were never good for the student loan creditor in Espinosa. The plan was properly noticed to the creditor, with a boldface warning that its “RIGHTS MAY BE IMPAIRED BY THIS PLAN.”177 The creditor responded by filing a proof of claim, submitting itself to bankruptcy court jurisdiction. It never objected to the plan, which provided full payment of principal but discharge of accruing interest at plan completion. The plan was confirmed, and the creditor did not appeal. The Chapter 13 trustee caught a disparity between the student loan creditor’s proof of claim and the plan, noticed the creditor (again) and gave an opportunity to respond; no response came. The creditor then accepted payments from the trustee and allowed discharge to be entered without complaint. Three years after discharge, the creditor commenced efforts to collect the unpaid interest, prompting the debtor to seek enforcement of the discharge order.178

[72]

The student loan creditor argued to the Supreme Court that the confirmation order was void under Rule 60(b)(4) because the bankruptcy court never made an undue hardship finding under § 523(a)(8). Alternatively, it complained that its due process rights had been violated by the debtor’s failure to file and serve an adversary proceeding.179 Demonstrated above, these arguments had convinced five circuit courts of appeals and several Bankruptcy Appellate Panels—including the Ninth Circuit BAP—to allow student loan creditors to overcome the finality of confirmation orders on very similar facts.

[73]

The essence of Justice Thomas’s opinion is that a confirmation order is a final judgment that an aggrieved party must challenge by direct appeal. The student loan creditor was correct that it was entitled to litigate “undue hardship” in an adversary proceeding, but this argument had to be raised by objection to confirmation and/or by direct appeal of the confirmation order.180 The student loan creditor could not “sleep on its rights” and then attack the confirmation order collaterally.181

[74]

The Supreme Court validated the distinction drawn by Judge Kozinski between procedural or legal error and deprivation of constitutional due process. No question, the bankruptcy court committed “legal error” by confirming a plan that didn’t find undue hardship as predicate to the discharge of student loan debt. But that legal error did not render the confirmation order “void.” The student loan creditor was deprived of its procedural rights to an adversary proceeding under the Bankruptcy Rules; but again, that defect was not of constitutional magnitude sufficient to void the confirmation order when it was beyond dispute that the creditor had actual notice and ample opportunity to protect its rights before confirmation or by appeal.

        Espinosa’s failure to serve United with a summons and complaint deprived United of a right granted by a procedural rule. See Fed. Rule Bkrtcy. Proc. 7004(b)(3). United could have timely objected to this deprivation and appealed from an adverse ruling on its objection. But this deprivation did not amount to a violation of United’s constitutional right to due process. Due process requires notice “reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 642, 94 L. Ed. 2d 865 (1950); see also Jones v. Flowers, 547 U.S. 220, 225, 126 S. Ct. 1708, 164 L. Ed. 2d 415 (2006) (“[D]ue process does not require actual notice. . . .”). Here, United received actual notice of the filing and contents of Espinosa’s plan. This more than satisfied United’s due process rights. Accordingly, on these facts, Espinosa’s failure to serve a summons and complaint does not entitle United to relief under Rule 60(b)(4).182
[75]

Rejecting United’s plea to “expand the universe of judgment defects that support Rule 60(b)(4) relief,”183 the Supreme Court was “not persuaded that a failure to find undue hardship in accordance with § 523(a)(8) is on par with the jurisdictional and notice failings that define void judgments that qualify for relief under Rule 60(b)(4).”184 The bankruptcy court’s failure to comply with § 523(a)(8)’s requirement to find “undue hardship” does not render “its subsequent confirmation order void for purposes of Rule 60(b)(4).”185

        Given the Code’s clear and self-executing requirement for an undue hardship determination, the Bankruptcy Court’s failure to find undue hardship before confirming Espinosa’s plan was a legal error. . . . But the order remains enforceable and binding on United because United had notice of the error and failed to object or timely appeal.186
[76]

The message in Espinosa for debtors’ lawyers is about notice. A Chapter 13 plan that is properly noticed to all creditors is a remarkably powerful tool for the management of debt and other rights of creditors. The outcome in Espinosa was driven by the indisputable clarity and adequacy of notice to the student loan creditor.

[77]

The take-away from Espinosa for creditors is just the other side of that notice: Snooze, you lose. Plan confirmation is the cleavage point in a Chapter 13 case. Set up your internal protocols to catch and respond to unacceptable plans at confirmation. If the debtor gives good notice, you will be bound by confirmation of even an “illegal” plan provision. We always thought that was the law, and Espinosa makes it so.

[78]

The only point on which the Ninth Circuit was not affirmed is in Justice Thomas’s comment that the Ninth Circuit went beyond the principal issue when

it canvassed other bankruptcy court decisions within the Circuit that presented a different question—whether a bankruptcy court presented with a debtor’s plan that proposes to discharge a student loan debt, in the absence of an adversary proceeding to determine undue hardship, should confirm the plan despite its failure to comply with the Code and Rules. The Court of Appeals noted that some Bankruptcy Courts had declined to confirm such plans “even when the creditor fail[ed] to object to the plan.” 553 F.3d at 1205. The court disapproved that practice and overruled those cases, stating that bankruptcy courts must confirm a plan proposing the discharge of a student loan debt without a determination of undue hardship in an adversary proceeding unless the creditor timely raises an objection. Ibid. This, we think, was a step too far.187

Along the way, Justice Thomas observed that bankruptcy judges have an independent obligation to refuse confirmation of plans that don’t comply with Code requirements.188

[79]

There really is relatively little comfort here for creditors. The reality is that if another “legal error” in a Chapter 13 plan sneaks by the trustee and the bankruptcy court, a creditor will find no refuge in Espinosa. A creditor can’t sit back, allow a plan to be confirmed despite noncompliance with the Code, and then say: Judge you should have caught this error, so your judgment is void. The dicta in Espinosa about the duties of bankruptcy judges doesn’t distract from the real holding: Confirmation orders stick.

[80]

The student loan cases are pregnant with difficult issues of professional responsibility for debtors’ attorneys. On a timely objection to confirmation, plan provisions for the discharge of student loans like those in Pardee have been firmly rejected by every court that has considered the issue.189 Put another way, the debtor won’t get away with a plan provision that discharges student loans if the debtor gets caught by a timely objection from the student loan creditor, the Chapter 13 trustee or the bankruptcy court.

[81]

Does debtor’s counsel have a professional obligation to try to discharge student loans through plan provisions like those in Espinosa? Once a bankruptcy court in the district says “No” to confirmation of an Espinosa plan, what does debtor’s counsel do in the next case? Are plan provisions for the discharge of student loans a “nonfrivolous argument for the extension, modification or reversal of existing law or the establishment of new law” for purposes of Bankruptcy Rule 9011? Is it “no harm, no foul” for debtors to try and, if caught, simply withdraw the discharge provision consistent with Bankruptcy Rule 9011(c)(1)(A)? The appellate court resistance to student loan discharge through confirmation, and now the Supreme Court’s dicta in Espinosa that bankruptcy courts should monitor plans for compliance with Code requirements, signal that use of undue hardship provisions in plans is risky for debtors and their counsel.

[82]

Prior to the Supreme Court’s decision in Espinosa, some bankruptcy courts published opinions that it was sanctionable to follow the lead of Andersen and Pardee in hopes that student loan creditors will fail to object to confirmation.190A district court in Kansas held that it was appropriate for a bankruptcy court to deny confirmation of a Chapter 13 plan that included a finding of undue hardship, but the court rejected a “per se rule” that including undue hardship language in Chapter 13 plans was sanctionable.191 When a bankruptcy court in Oklahoma sanctioned a debtor’s counsel for including language in a Chapter 13 plan that would abate and discharge student loan interest, the Bankruptcy Appellate Panel for the Tenth Circuit held that the bankruptcy court went too far when it also ordered counsel to purge similar language from confirmed plans in other Chapter 13 cases in the district.192 Notwithstanding the Supreme Court’s strong affirmance in Espinosa, Justice Thomas’s opinion does not invite debtors’ counsel to renew the practice of using Chapter 13 plans to discharge student loans.

[83]

It would be a mistake to read Espinosa narrowly as merely a student loan discharge case. Espinosa is a robust reaffirmation that the effect of confirmation under § 1327(a) really means what the Code says: “The provisions of a confirmed plan bind the debtor and each creditor . . . whether or not such creditor has objected to, has accepted, or has rejected the plan.” Although many circuit court decisions have gone astray in recent years, chipping away at the finality of confirmation orders in various contexts in Chapter 13 cases—sometimes confusing statutory and procedural rights with constitutional due process—in Espinosa, the Supreme Court brings us back to reality.

[84]

Student loans are large claims in a small percentage of Chapter 13 cases; the binding effect of confirmation is crucial to the management of liens and secured claims in almost every Chapter 13 case. Absent surrender or consent, secured creditors in Chapter 13 cases must retain their liens under § 1325(a)(5), else the plan cannot be confirmed.193 In terms identical to the treatment of student loan dischargeability, Part VII of the Bankruptcy Rules requires an adversary proceeding to determine the validity, priority or extent of a lien. But a confirmed plan that is properly noticed, that addresses the validity, priority or extent of a lien and to which no objection is filed is just as binding on creditors as the plan that discharged student loans in Espinosa.

[85]

In the same circuit that decided Mersmann, the Bankruptcy Appellate Panel held in Hamilton v. Washington Mutual Bank, FA (In re Colon)194 that “the confirmed plan is res judicata as to treatment of Washington Mutual’s claim and distribution of the mortgage loan payments, whether or not that treatment violates § 1322(b).195 The confirmed plan in Colon treated Washington Mutual’s mortgage as unsecured based on an avoidable, unperfected lien, and the BAP correctly concluded that the confirmed plan was binding when the properly noticed creditor failed to object to confirmation or to timely appeal the confirmation order.

[86]

Yet, as demonstrated below,196 some courts have concluded that confirmed Chapter 13 plans that define or limit lien rights are not binding on secured claim holders unless the debtor also files an adversary proceeding or objects to the lienholder’s proof of claim.197 The lesson of Espinosa is that notice of how the Chapter 13 plan affects creditors’ rights is all that the Constitution, the Bankruptcy Code and the Bankruptcy Rules require to bind creditors to the provisions of a confirmed plan under § 1327(a). This principle acknowledges that the statutory effect of § 1327(a) is broader than the judge-made concept of res judicata.

[87]

A decade before Espinosa, the U.S. Court of Appeals for the Seventh Circuit applied the logic of Pardee and Andersen in the context of a confirmed Chapter 13 plan that stripped down the lien of an undersecured car lender. In In re Harvey,198 the proposed plan treated GMAC as an undersecured creditor. The “long form” of the debtor’s plan stated, “‘Upon payment of the allowed secured claim as indicated, any lien held by GMAC on said vehicle shall be void and title to said vehicle shall be released to debtor.’”199 The debtor also filed a single-page “short-form plan,” which did not mention cancellation of GMAC’s lien. The plan was confirmed without objection in 1996.

[88]

In 1998, the debtor moved to modify the plan. The proposed modified plan made no change in the treatment of GMAC’s lien. For the first time, GMAC objected to the lien-stripping provision of the plan, claiming that it never received the portion of the long-form plan that contained the lien-stripping provision.

[89]

The Seventh Circuit reserved the question whether lien stripping over a creditor’s objection is permitted prior to the completion of payments under the plan,200 but the court firmly rejected the creditor’s attack on the confirmed plan:

It is a well-established principle of bankruptcy law that a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan. 11 U.S.C. § 1327(a). . . . The reason for this . . . mirrors the general justification for res judicata principles . . . . This is especially true in the bankruptcy context, where a confirmed plan acts more or less like a court-approved contract or consent decree that binds both the debtor and all the creditors. . . . [T]here is a fundamental defect in GMAC’s case. GMAC failed to lodge a proper objection to the existence of the two plans before the bankruptcy court acted. . . . If GMAC was genuinely uncertain about the combined effect of the short and long forms (a total of four pages), it was obligated to raise this issue with the bankruptcy court prior to the original plan confirmation. . . . [I]t is perfectly reasonable to expect interested creditors to review the terms of a proposed plan and object if the terms are unacceptable, vague, or ambiguous. . . . In re Pence, 905 F.2d 1107, 1109 (7th Cir. [June 27,] 1990) . . . [Andersen v. UNIPAC-NEBHELP (In re Andersen),] 179 F.3d 1253, 1257 (10th Cir. [June 7,] 1999) . . . In re Szostek, 886 F.2d 1405, 1414 (3d Cir. [Oct. 12,] 1989) . . . . We do not mean to suggest that a party may never claim in a subsequent proceeding that a provision of a Chapter 13 plan is ambiguous and should be read one way or another. . . . [T]he ambiguity about which GMAC was complaining was one that was readily identifiable during the original confirmation proceedings. . . . [W]e hold that if GMAC had doubts as to what plan was being confirmed in the 1996 proceedings, it should have alerted the bankruptcy court to the ambiguity at that time, not 16 months later.201
[90]

Harvey is important for two reasons. The decision is a clear affirmation of the binding effect of confirmation on lienholders under § 1327(a). Perhaps more importantly, Harvey appropriately assigns the risk of uncertainty with respect to the content of the plan to the creditor, at least when the ambiguity is readily identifiable at the time of confirmation. Harvey requires creditors that are uncertain about their treatment under the plan to challenge confirmation when the creditor knows of the uncertainty on the face of the plan.202

[91]

More recently—while Espinosa was making its way to the Supreme Court—the Third Circuit revisited the effect of confirmation on liens, and the outcome is troubling. In SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin),203 a divided panel of the Third Circuit concluded that a confirmed plan that satisfied a disputed lien by payment of $1,000 did not release the lien because the debtor did not file an adversary proceeding—notwithstanding that the lienholder had notice and failed to object to confirmation. The majority opinion by Judge Rendell and the dissent by Judge Greenberg perfectly framed the debate about the finality of confirmation under § 1327(a).

[92]

The debtor in Mansaray-Ruffin disputed the claim of a mortgage holder and alleged violation of the Truth in Lending Act. There was no question that the mortgage holder had notice that the plan proposed to limit the disputed mortgage debt to $1,000 and payment of that $1,000 would discharge the underlying lien. The debtor filed a $1,000 proof of claim on behalf of the mortgage holder, and there was no objection to confirmation or appeal of the confirmation order. Instead, more than nine months after confirmation, the mortgage holder filed an adversary proceeding “to Determine Secured Status Pursuant to 11 U.S.C. § 506.”204

[93]

A majority of the Third Circuit panel concluded that release of the mortgage lien could not be accomplished through confirmation because the Bankruptcy Rules required an adversary proceeding. Here’s the explanation by Judge Rendell:

EMC’s failure to object to the plan did not do away with Mansaray-Ruffin’s duty to file a complaint and serve EMC pursuant to Rules 7001, 7003, and 7004. EMC had the legal right to do nothing and insist upon being served with a summons and a complaint in order for its lien to be invalidated. . . . While [In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989),] does note the importance of finality, it recognizes that the policy of finality must yield to the principle that a plan cannot violate a mandatory provision of the Code. . . . [T]he adversary proceeding Rule at issue here is mandatory and establishes a right to specific process that must be afforded. Its mandatory nature is grounded in principles of due process that trump “finality.” . . . [W]e have refused to treat confirmed bankruptcy plans as res judicata with respect to the claims of creditors who did not receive notice that was sufficient under the circumstances—even where adherence to the plain language of the relevant statute would have made the confirmed plan binding on all creditors. . . . [A] creditor’s actual knowledge regarding the bankruptcy proceeding does not eliminate our due process concerns.205

Citing some of the student loan cases discussed above, Judge Rendell concludes:

EMC had the due process right to assume that, unless Mansaray-Ruffin commenced the adversary proceeding required by the Rules and served it with a complaint and a summons, its lien could not be invalidated. Whatever actual knowledge EMC may have had regarding the plan’s treatment of its lien did not eliminate this right and neither did the provisions of § 1327. . . . [W]e do not hold that the failure to adhere to every Rule of Bankruptcy Procedure implicates due process. Rather, we hold only that, where the Rules require an adversary proceeding—which entails a fundamentally different, and heightened level of procedural protections—to resolve a particular issue, a creditor has the due process right not to have that issue resolved without one.206
[94]

In dissent, Judge Greenberg starts with the fundamental observation that the adequacy of notice of the impairment of EMC’s lien turns on due process considerations that are not bound by the Bankruptcy Rules. The majority, explains Judge Greenberg, “is using the Rules as a proxy for due process in this case. But this linking is unjustified as a nonconstitutionally prescribed proxy can be both over- and under-inclusive with respect to satisfying constitutional requirements.”207

[95]

Almost 20 years earlier, in Szostek, the Third Circuit sustained the binding effect of a Chapter 13 plan that paid a secured claim holder without interest. The creditor in Szostek failed to timely object and did not appeal confirmation. The Third Circuit held that the lienholder was bound to accept payment of its debt without interest. Judge Greenberg points out that the plan in Szostek had the same lien-limiting effect as the plan in Mansaray-Ruffin. “I ask what, under the majority’s proposed distinction, would be the proper result if Mansaray-Ruffin had stated in her plan that she valued EMC’s secured claim at $1? Apparently the majority would find that Mansaray-Ruffin’s confirmed plan bound EMC and that the lien would be satisfied upon payment of the $1.”208 But most importantly, Judge Greenberg explains the majority’s faulty logic with respect to allowing the adversary proceeding requirement in the Rules to trump the statutory finality of confirmation:

[T]hese procedures are not proxies for the constitutional due process required to invalidate a lien. From a constitutional perspective, it makes no difference whether a debtor’s plan seeks to extinguish a creditor’s lien rights or simply reduce the value of the creditor’s secured claim. Just because Congress has decided to require more process than the Fifth Amendment requires to deprive a creditor of a lien does not mean that the Constitution requires that enhanced process. . . . Mansaray-Ruffin seeks merely to uphold a confirmed plan and there is not the slightest suggestion in the record that the Code’s procedural notice requirements for the confirmation of her plan were not satisfied. Nothing could be clearer than the Code’s provision that the “confirmed plan bind[s] the debtor and each creditor.” . . . [D]ue process was met in this case.209
[96]

Espinosa confirms that Judge Greenberg has the better of this debate. The majority opinion in Mansaray-Ruffin broadly exposes confirmation orders in Chapter 13 cases to collateral attack of exactly the sort rejected in Espinosa. Judge Rendell’s limitation—that confirmation is not binding only when the Rules require an adversary proceeding—was hollow protection in the ubiquitous circumstance that the plan fixes the amount that will satisfy a secured claim holder’s lien. The finality of confirmation is more robust than the majority allowed in Mansaray-Ruffin. Once the statutory effects of a confirmed plan are breached, creditors can collaterally attack confirmation orders in every conceivable context. It was student loans in Espinosa. It is the extent of a lien in Mansaray-Ruffin. Properly noticed plans are protected from collateral attack. The Ninth Circuit understood this in Espinosa, and Judge Greenberg got it in dissent in Mansaray-Ruffin. Although not explicitly overruled by the Supreme Court, the majority’s holding in Mansaray-Ruffin has doubtful precedential value after Espinosa.

[97]

Ironically, two weeks after the Third Circuit cited Mersmann as reason to back away from Szostek in Mansaray-Ruffin, the Tenth Circuit turned a blind eye to Mersmann, relying instead on the Third Circuit’s Szostek. In Wachovia Dealer Services v. Jones (In re Jones),210 the Tenth Circuit delivered a confusing message with respect to the binding effect of confirmation.

[98]

Consolidated debtors in Jones owned cars acquired for personal use within 910 days of Chapter 13 petitions. The debts were subject to the hanging sentence at the end of § 1325(a)211 and § 506 did not apply.212 The plans proposed to pay the contract balances on the car loans without postpetition interest. The creditors objected. The issue stated by the Tenth Circuit was whether § 1325(a)(5) and the hanging sentence were mandatory conditions for confirmation. Not unexpectedly, the Tenth Circuit concluded that § 1325(a) was mandatory and the plans had to pay the 910-day PMSI car claims with postpetition interest consistent with Till v. SCS Credit Corp.213 But on the way to that holding, the Tenth Circuit had the following to say about silence by secured creditors in Chapter 13 cases:

[I]f a secured creditor fails to object to confirmation, the creditor will be bound by the confirmed plan’s treatment of its secured claim under § 1325(a)(5). In re Talbot, 124 F.3d 1201, 1209 n.10 (10th Cir. [Aug. 26,] 2007). This is because the failure to object constitutes acceptance of the plan. See In re Ruti-Sweetwater, Inc., 836 F.2d 1263, 1266–67 (10th Cir. 1988) . . . . And a creditor’s acceptance of a Chapter 13 plan is one way to satisfy the requirements of § 1325(a)(5) with respect to that creditor’s allowed secured claim. . . . In short, when the holder of an allowed secured claim does not object, the court may interpret this silence as acceptance under § 1325(a)(5)(A); under these circumstances, the plan need not meet the requirements set forth in § 1325(a)(5)(B), including the present-value requirement.214
[99]

The Tenth Circuit cited the Third Circuit’s 1989 decision in Szostek in support of the proposition that “creditors must affirmatively assert their rights prior to confirmation.”215 The panel then cited its own decision in Andersen v. UNIPAC-NEBHELP (In re Andersen),216 noting that Andersen was overruled by Mersmann. Now Mersmann has been implicitly overruled by Espinosa.

[100]

This is all quite strange. In Mersmann, the en banc Tenth Circuit told us that the adversary proceeding requirement in Bankruptcy Rule 7001 disabled the binding effect of a confirmed Chapter 13 plan that included a finding of undue hardship for purposes of discharge of a student loan. There was no doubt in Mersmann that the student loan creditor had actual notice of the plan that proposed to discharge its debt. In Mersmann, the student loan creditor’s silence at confirmation did not waive its (untimely) procedural objection to the finding of undue hardship.

[101]

In Jones, the Tenth Circuit cited Szostek from the Third Circuit and its own (overruled) decision in Andersen to reach the conclusion that a secured creditor forfeited its statutory right to postpetition interest when it failed to object to a contrary Chapter 13 plan. Silence by a creditor waived a statutory right in Jones but did not waive use of the wrong procedure in Mersmann?

[102]

And what about the Tenth Circuit’s citation of Szostek? The divided Third Circuit panel in Mansaray-Ruffin undermined Szostek, holding that a confirmed plan that fixed the amount of a disputed lienholder’s claim and provided for discharge of the lien upon completion of payments was not binding because the debtor did not file an adversary proceeding—notwithstanding notice of confirmation and failure to object. The plans in Jones had the same lien-limiting effect as the plan rejected in Mansaray-Ruffin: A plan that pays a 910-day PMSI car claim without postpetition interest would limit the creditor’s lien rights upon completion of payments. This was the outcome in Szostek. It is the outcome rejected in Mansaray-Ruffin.

[103]

The binding effect of confirmation under § 1327(a) is the same whether the issue is discharge of a student loan or satisfaction of a secured claim. As clearly explained in Espinosa and by the dissent in Mansaray-Ruffin, the issue is notice, not the nature of the debt. The Tenth Circuit got the acceptance by silence issue right in Jones. The Tenth Circuit inappropriately limited the effect of confirmation in Mersmann. The Tenth Circuit reaffirmed the acceptance by silence holding by the Third Circuit in Szostek at almost the same moment that the Third Circuit itself retreated from that holding in Mansaray-Ruffin. Espinosa should align all of these outcomes: if notice is adequate, failure to timely object to or appeal confirmation is fatal to all procedural and legal challenges to the content of the Chapter 13 plan.

[104]

Circuit authority subsequent to Espinosa pins the finality of confirmation orders under all bankruptcy chapters on the adequacy of notice. On remand from the Supreme Court in Travelers Indemnity Co. v. Bailey,217 the U.S. Court of Appeals for the Second Circuit in Johns-Manville Corp. v. Chubb Indemnity Insurance Co. (In re Johns-Manville Corp.)218 put an exclamation point on one of the important take-aways of Espinosa: The binding effect of confirmation in any bankruptcy case depends on constitutionally adequate notice to parties affected by the plan.

[105]

In Bailey, the Supreme Court rejected a challenge to the power of the bankruptcy court to issue broad channeling injunctions as part of the confirmation process in the Johns-Manville reorganization in 1986. The Supreme Court opinion in Bailey did not reach the question whether those broad injunctions were within the subject matter jurisdiction of the bankruptcy court because it concluded that the subject matter jurisdiction of the bankruptcy court had to be challenged by objection to confirmation and/or by direct appeal, and could not be raised collaterally. Buried in the Bailey decision, the Supreme Court noted that at least one party—Chubb Indemnity Insurance Company—also challenged whether it had received constitutionally sufficient notice of the Johns-Manville confirmation in 1986. The Supreme Court did not decide whether Chubb had constitutionally sufficient notice but remanded that question to the Second Circuit.

[106]

Before the Second Circuit answered the remanded question about Chubb, the Supreme Court decided Espinosa. Relying heavily on Bailey, the Supreme Court concluded in Espinosa that a student loan creditor with actual notice of a plan that discharged part of its debt was bound by confirmation when it failed to object or to appeal the confirmation order, and that creditor could not collaterally attack the authority of the bankruptcy court to discharge its debt without a finding of undue hardship.219

[107]

The Second Circuit has now decided the portion of Bailey remanded by the Supreme Court. The Chubb decision is complex but the message is not: Unlike many other parties before the Supreme Court in Bailey, Chubb did not have constitutionally sufficient notice of the injunctive effects of the Johns-Manville plan in 1986, and accordingly, Chubb could challenge the subject matter jurisdiction of the bankruptcy court notwithstanding that it did not object to confirmation or appeal the confirmation order.220

[108]

Chubb brings us full cycle. In Bailey and Espinosa, the Supreme Court reaffirmed the vitality of even “illegal” confirmation orders when affected parties have notice and fail to object to confirmation or appeal. In Chubb, the Second Circuit reminds us that constitutionally insufficient notice is a defect in the confirmation process that never goes away.

[109]

While creditors enjoyed some success attacking the binding effect of confirmed plans prior to Espinosa, Chapter 13 debtors have rarely overcome plan finality. This is not surprising, since courts are understandably reluctant to allow the debtor who proposed the plan to then impeach the plan’s validity.221 Looking at the statute, § 1327(a) states that the provisions of a confirmed plan “bind the debtor and each creditor.”222 The statute makes no distinction—debtors and creditors are equally bound.

[110]

It has been held that § 1327(a) binds the debtor to a plan provision for annual payments to a creditor, and the debtor’s failure to make those payments entitles the creditor to a declaration that its lien and claim are not affected by any discharge entered after completion of payments to other creditors.223 A plan that paid interest on mortgage arrearages bound the debtor even though interest on interest resulted and would not have been required under § 1322(e) had the provision been omitted.224 A Chapter 13 plan that treats a claim as secured and specifies that the creditor will receive $8,000 through the plan is binding on the debtor notwithstanding that the creditor disables itself to have an allowed claim by failing to timely file a proof of claim.225 A confirmed plan that required surrender of real property prohibited the debtor from encumbering or transferring the property after confirmation.226 A plan that stipulated the debtor’s tax liability precludes a challenge to IRS claims after confirmation when the debtor filed amended tax returns.227 Confirmation of a plan that treated a wholly unsecured second mortgage holder as protected from modification by § 1322(b)(2) binds the debtor notwithstanding subsequent clarification that wholly unsecured mortgages can be modified.228

[111]

Plan provisions for payment of named claim holders and plans that treat specific creditors as lienholders can be preclusive of a trustee’s or debtor’s postconfirmation causes of action, for example, to avoid a lien as a preference, or for misconduct in connection with the original loan.229 A confirmed plan that specifies the amount of an arrearage claim to a mortgage holder precludes postconfirmation objection that the arrearage claim was miscalculated.230 A confirmed plan treating a claim holder as secured binds the debtor even though the stay is lifted postconfirmation and the creditor liquidates its collateral.231 The debtor is bound by the value of collateral determined at confirmation and cannot attack that valuation in subsequent litigation over allowance of the lienholder’s claim.232 A confirmed plan that required the filing of claims objections “within six months” precluded the debtor’s objection 26 months after confirmation.233

[112]

Debtors have been stuck with their exemption choices at confirmation. For example, the debtor who chose the federal homestead exemption was unable to later claim a more favorable state exemption.234 Some courts have held that disbursement provisions in a confirmed plan continue to bind the debtor even after conversion or dismissal of the case.235

[113]

The binding effect of confirmation on the debtor becomes more convoluted when a confirmed plan collides with an inconsistent proof of claim. Discussed in more detail elsewhere,236 this issue is perhaps best illustrated by goings-on in the Seventh Circuit beginning with Adair v. Sherman.237

[114]

In Adair, the Chapter 13 plan provided that allowed secured claims would be paid in full. A law firm filed a proof of claim for a bank listing the value of a car at an amount greater than its purchase price. The debtor did not object to the proof of claim before confirmation.

[115]

After confirmation, the debtor filed an adversary proceeding challenging the bank’s proof of claim. That adversary proceeding was dismissed when the Chapter 13 case was dismissed. After dismissal, the debtor filed a Fair Debt Collection Practices Act complaint in district court, alleging an unfair practice by the law firm of overvaluing collateral in proofs of claim. On appeal of the district court’s dismissal of the FDCPA action, the Seventh Circuit held that the debtor was precluded from challenging the value stated on the bank’s proof of claim because of confirmation of the (dismissed) Chapter 13 plan:

Mr. Adair had notice of the proof of claim prior to confirmation, but he chose not to object to it. “As a general rule, the failure to raise an objection at the confirmation hearing or to appeal from the order of confirmation should preclude attack on the plan or any provision therein as illegal in a subsequent proceeding.” . . . [W]hen a proof of claim is filed prior to confirmation, and the debtor does not object prior to confirmation, the debtor may not file a postconfirmation collateral action that calls into question the proof of claim. . . . The amount of the debt was determined definitively . . . in the earlier bankruptcy proceeding when a proof of claim was submitted prior to confirmation and Mr. Adair’s bankruptcy claim [sic] was later confirmed. The amount of the debt therefore cannot be relitigated in a subsequent FDCPA action by operation of the doctrine of issue preclusion.238
[116]

In footnotes, the Seventh Circuit said more about the binding effect of confirmation in collision with the filing of proofs of claim:

We do not address the practice in bankruptcy courts of allowing proofs of claims to be filed after confirmation. . . . We address only the situation in which the creditor filed a proof of claim before confirmation and the debtor had enough time to formulate an objection prior to confirmation. . . . There has been some tension in bankruptcy court cases as to whether debtors are required to object to proofs of claims prior to confirmation. . . . We respectfully choose not to follow those cases allowing postconfirmation objections to proofs of claims to be filed even though the proof of claim itself was filed sufficiently in advance of the confirmation hearing.239
[117]

Adair uses preclusion language to explain why the debtor cannot object to the value stated in the bank’s proof of claim after confirmation of the plan. But it is not clear from the opinion to what the Seventh Circuit panel was giving issue preclusive effect. Was it the proof of claim filed before confirmation or the confirmed plan itself? Or was it the combination of events—a preconfirmation proof of claim that was specific with respect to the value of collateral and a subsequently confirmed plan that was silent with respect to the allowance or amount of secured claims?

[118]

It seems unlikely that the Seventh Circuit intended to give the bank’s proof of claim preclusive effect. Fundamentally, a proof of claim is neither a court order nor a judicial determination of any fact—predicates for issue preclusion in the typical formulation of the concept.240 Moreover, the Bankruptcy Rules clearly provide that a filed proof of claim has “prima facie” evidentiary effect241 in the claims allowance process, but the Code and Rules contemplate that the filing of a proof of claim starts, not ends, that process.242

[119]

If it was the confirmed plan in Adair that triggered preclusion, it certainly must be noted that the confirmed plan was silent with respect to the value of the bank’s collateral or allowance of the bank’s claim. Adair could be read to impose this rule with respect to the binding effect of confirmation: confirmation of a Chapter 13 plan that is silent with respect to the value of collateral precludes objection to the value stated on a proof of claim filed before confirmation.

[120]

But the Seventh Circuit reserved the question whether silence in the plan with respect to the value of collateral would preclude objection when a proof of claim is filed after confirmation. In the Chapter 11 context, the Seventh Circuit previously held that silence in the plan with respect to retention of liens defaults to the loss of liens not specifically preserved by the plan.243 This suggests that it was not just the plan that generated preclusion in Adair but rather the combination of circumstances—silence in the plan and a preconfirmation proof of claim that was not silent.

[121]

Bankruptcy courts in the Seventh Circuit have struggled to apply Adair. In In re Fareed,244 the bankruptcy court interpreted Adair to bind the debtor to the value of a car stated on a creditor’s preconfirmation proof of claim when the plan provided that secured creditors would be paid “100% of the value of their security”; but the court limited Adair by holding that adjudication of claims allowance issues other than value was not precluded by confirmation.245 On slightly different facts, the bankruptcy court in In re Duggins,246 distinguished Adair and held that the value stated in the confirmed plan trumped the contrary value stated in a preconfirmation proof of claim—a confirmed plan that was specific with respect to value was binding on the debtor and the claim holder notwithstanding the preconfirmation filing of an inconsistent proof of claim.247 In a third variation on Adair, in In re Adams,248 the bankruptcy court held that confirmation did not preclude the debtor’s motion to disallow a secured claim when the confirmed plan provided that secured creditors would be paid “100% of allowed claims” and Ford filed a partially secured claim after confirmation.249

[122]

Through the lens of the reported bankruptcy court decisions, Adair stands for the proposition that the binding effect of confirmation with respect to the value of collateral and, perhaps, the allowance of secured claims turns, on three factors: the specificity of the plan; the specificity of the proof of claim; and the timing of the filing of the proof of claim. A confirmed plan that is not specific with respect to value binds the debtor to the value of collateral stated in a proof of claim filed before confirmation. A confirmed plan that specifies the value of collateral binds the debtor and creditor to the value stated in the plan without regard to when an inconsistent proof of claim is filed.250 A confirmed plan that is not specific with respect to value is not binding on the debtor or creditor with respect to a proof of claim filed after confirmation.

[123]

Under the logic of Adair, a nonspecific plan exposes the debtor, the trustee and all creditors to binding effects that may be defined by relatively invisible preconfirmation proofs of claim. The filing and content of proofs of claim is often obscure in Chapter 13 cases.251 Debtors’ counsel do not routinely review proofs of claim before confirmation to determine whether creditors have specified value or amounts that are inconsistent with the proposed plan.

[124]

Under Adair, the binding effect of confirmation becomes a sword in the hands of the diligent creditor that files preconfirmation proofs of claim that are specific with respect to the value of collateral. Since the enactment of the Bankruptcy Code, Chapter 13 debtors and trustees have used the binding effect of confirmation to control the entitlements of not so diligent secured claim holders.252 Creditors might say that Adair is just gravy for the gander.

[125]

Another question pregnant in Adair but not answered by the Seventh Circuit is: Exactly what aspects of a preconfirmation proof of claim are protected by preclusion when the confirmed plan is not specific with respect to the claim? As asserted in Fareed, Adair itself deals only with the value of collateral. Would the gross amount stated on a preconfirmation proof of claim be protected by preclusion principles if the confirmed plan is not specific with respect to the amount of that claim? Fareed reads Adair to permit postconfirmation objection to the amount of a preconfirmation claim when the confirmed plan provides only that allowed claims of that class will be paid 100 percent. This limited reading of Adair is not compelled by any particular language in the Seventh Circuit’s opinion.

[126]

What about unsecured claims? Would a preconfirmation proof of claim filed by an unsecured claim holder be protected by Adair when the plan provides generically that unsecured creditors will be paid a certain percentage of allowed claims? Why would the gross amount be treated differently for preclusion purposes than the value of collateral when both are stated on the face of a preconfirmation proof of claim? Would Adair preclude the trustee’s objection to the $1 million proof of claim filed before confirmation by the victim of an (unliquidated) tort when the confirmed plan provides that allowed unsecured claims would be paid pro rata? Are the interests of other unsecured claim holders so easily precluded by the simple expedient of filing a claim before confirmation?

[127]

Adair gives imperative to the notion that the binding effect of confirmation on the allowance of claims should be controlled with specific provisions in the plan. For example, if the plan recites that confirmation does not preclude objections to claims and notice is adequate, claim holders cannot later complain when postconfirmation claims litigation is prosecuted by the debtor or the trustee. Preservation in the plan of all claims objections is perhaps the most direct solution to the problems raised by Adair.

[128]

The district court in Illinois Department of Revenue v. Ayre (In re Ayre)253 found no barrier in Adair to the binding effect of confirmation when the creditor was properly noticed of a plan that disputed the amount of its debt. The filed proof of claim asserted a priority debt of $104,000, but the plan proposed to satisfy the claim by payment of $10,500. The district court rejected the Department’s argument by analogy to student loan discharge cases, on the basis that no adversary proceeding is required for claims resolution. Notwithstanding notice of the plan, the Department did not object to confirmation and was bound to the amount fixed in the confirmation order. The confirmation process effectively “litigated” the claim dispute, binding the creditor that could have participated by objection to confirmation.

[129]

It should also be noted that any rigidity imposed by the Seventh Circuit in Adair—that at least certain critical claims allowance issues must be litigated before confirmation in Chapter 13 cases—is not consistent with other provisions of the Bankruptcy Code. For example, § 502(j) authorizes reconsideration of the allowance or disallowance of any claim “for cause.”254 Section 502(j) has been cited as a basis for relief from a confirmed Chapter 13 plan when a creditor has made a mistake in a proof of claim and finds itself trapped with inappropriate treatment under the confirmed plan or when the debtor seeks to clarify an error in claims allowance.255

[130]

Another potential conflict between the binding effect of confirmation and claims allowance arises when a creditor files a tardy proof of claim.256 When the plan provides for treatment of a claim, but the creditor files its proof of claim late, the debtor’s objection to the claim collides with the confirmed plan. Some courts treat such an objection as claim reconsideration under § 502(j). Other courts will permit the debtor to modify the plan under § 1329.257 A third approach is to hear the objection, applying the time limitations in Bankruptcy Rule 3002 notwithstanding provision for the claim in the confirmed plan.258

[131]

The confirmed plan is binding upon the Chapter 13 trustee:259 after the order becomes final, a trustee’s change of mind about confirmation is no basis for rescission of confirmation.260 Confirmation can bind the trustee to return a tax refund to the debtor.261 A confirmation order that avoids or defines the extent of a lien is binding on the trustee.262 A confirmed plan can cut off the trustee’s avoidance action if the plan fails to preserve the action or affirmatively provides for the holder of the claim.263 Provision for payments on secured claims beyond the plan term is binding on the trustee and precludes dismissal on that basis.264

[132]

A confirmed plan that specifies the order in which claims will be paid is binding on the trustee and precludes the trustee’s argument that actual distributions were in some other order.265 A confirmed plan that fails the mandatory requirement in § 1322(a)(2) that priority claims be paid in full266 cannot be challenged by the trustee after confirmation.267 Confirmation includes a determination of the best-interests-of-creditors test in § 1325(a)(4),268 precluding the trustee’s postconfirmation attack on exemptions that were included in best-interests-of-creditors analysis.269 A confirmed plan that allowed the exact amount of attorney fees stated in counsel’s Bankruptcy Rule 2016(b) disclosure may preclude the U.S. trustee’s postconfirmation motion for disgorgement of fees.270 The binding effect of confirmation is subject to any right the trustee may have to move for modification under § 1329.271

[133]

Even debtor’s counsel is bound by a confirmed plan that allows attorney fees in a precise amount, notwithstanding that counsel has performed services and requests compensation in a greater amount.272 A confirmed plan providing “zero dollars” for attorney fees binds the trustee to distribute all funds to other creditors and precludes the debtor’s attorney from recovering attorney fees through the confirmed plan.273

[134]

The binding effect of confirmation on the payment of attorney fees is not always a two-way street. For example, in O’Connell v. Mann (In re Davila),274 the Chapter 13 trustee filed a complaint for reduction, disallowance or disgorgement of attorney fees in 155 cases involving the same debtors’ attorney. The attorney defended on the ground that binding, final confirmation orders in many of the cases put the payment of attorney fees beyond further review. The bankruptcy court disagreed, finding that “confirmation of a chapter 13 plan does not foreclose reevaluation of appropriate attorney fees at any time.”275 Similarly, in Jensen v. Dunivent (In re Dewey),276 the Bankruptcy Appellate Panel for the Tenth Circuit rejected a debtor’s attorney’s use of the res judicata effect of confirmation as a defense to a postconfirmation objection to attorney fees.

[135]

The message for creditors in these reported decisions is clear: No creditor is ever safe to assume that it can challenge its treatment under a plan by any procedure other than objection before confirmation. Creditors should never depend on any other player to protect their interests at confirmation. Silence is not golden—the absence of a plan provision for a creditor binds everyone to a dangerous vacuum that may eliminate rather than preserve prepetition rights. Filing a proof of claim that is inconsistent with the proposed plan277 or filing some other contest such as a request for relief from the stay is an unreliable procedure for presenting or preserving a creditor’s disagreement with the plan. Although the bankruptcy court’s jurisdiction over post-discharge disputes is not unlimited,278 the ultimate risk for creditors is violation of the confirmation order before plan completion,279 or of the discharge injunction in § 524(a) after the debtor completes a confirmed plan.280 The only reliable protection for creditors from the binding effect of § 1327(a) is a timely objection to confirmation, and, if necessary an appeal.281 Revocation of confirmation is a possible avenue for relief from a confirmation order, but it is a difficult one, since it requires proof of the debtor’s fraud.282

 


 

1  11 U.S.C. § 1327(a). Section 1327(a) is an important departure from the language of § 657 of the former Bankruptcy Act. Under prior law, the binding effect of confirmation of a Chapter XIII plan was described as follows:

Upon confirmation of a plan, the plan and its provisions shall be binding upon the debtor and upon all creditors of the debtor, whether or not they are affected by the plan or have accepted it or have filed their claims, and whether or not their claims have been scheduled or allowed or are allowable.

    Section 1327(a) of the 1978 Code omits the provisions of former law concerning the filing of claims, the failure to file claims, and the scheduling or allowance of claims. This change in language is not explained in the legislative history. See H.R. Rep. No. 595, at 430 (1977); S. Rep. No. 989, at 142 (1978).

 

2  Webster’s New 20th Century Dictionary of the English Language 185 (unabridged 2d ed. 1983).

 

3  It is often said that claims not provided for in a confirmed plan are not subject to discharge. See § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502. Failure to provide for a claim or interest may create issues concerning the vesting effect of confirmation. See § 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For.

 

4  See In re King, No. 206-BK-04089-JMM, 2007 WL 4097880 (Bankr. D. Ariz. Nov. 13, 2007) (unpublished) (Marlar) (Section 1327 “means that all state court pre-bankruptcy collection proceedings have been nullified by the confirmed plan.”). Actual confirmation is required. See, e.g., Arellano v. Montoya (In re Arellano), No. 07-1024 S, 2007 WL 1746246 (Bankr. D.N.M. June 14, 2007) (unpublished) (Starzynski) (Proposed plan that purported to waive arbitration provision in mortgage contract was not res judicata because plan was not confirmed.).

 

5  See § 451.1 [ In General: Modification Without § 506 ] § 75.1  In General: Modification Without § 506 for discussion of the limitations upon modification of certain purchase money security interests, including “910-day PMSI cars.”

 

6  In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. Feb. 19, 1987) (Matheson) (Once a Chapter 13 plan is confirmed, property of the estate vests in the debtor, and a secured claim holder’s rights and interests are defined strictly by the provisions of the plan. If the debtor defaults after confirmation, the secured claim holder’s remedy is to foreclose the lien granted by the terms of the plan.). Accord In re Harvey, 213 F.3d 318, 321 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (“[A] confirmed plan acts more or less like a court-approved contract or consent decree that binds both the debtor and all the creditors.”); In re Scheierl, 176 B.R. 498, 503 (Bankr. D. Minn. Jan. 6, 1995) (Kishel) (“A Chapter 13 plan is appropriately termed a ‘new contract’ running between the debtor and all of his creditors.”). But see Far W. Fed. Bank v. Vanasen (In re Vanasen), 81 B.R. 59 (D. Or. Dec. 15, 1987) (Panner) (In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. Feb. 19, 1987), incorrectly assumes that a confirmed Chapter 13 plan creates a new obligation between the debtor and a mortgage holder. Confirmation does not discharge prepetition claims and does not create new liens or obligations. Court rejects bank’s contention that default in payments pursuant to confirmed plan creates cause of action on postpetition debt that is not subject to the automatic stay.).

 

7  Padilla v. GMAC Mortgage Corp. (In re Padilla), 389 B.R. 409, 429 (Bankr. E.D. Pa. June 30, 2008) (Frank) (Confirmation of plan establishes new contract between parties; when prepetition default has been cured under § 1322(b)(5) in confirmed plan, creditor’s subsequent demand for payment of prepetition fees and other charges violates § 1327(a) and may be remedied through § 105(a). “Given the role of the confirmed plan in the chapter 13 system, the principle that a confirmed chapter 13 plan must be enforceable requires no extended or elaborate justification. It is difficult to conceive how the chapter 13 system could function if confirmed chapter 13 plans were not judicially enforceable. . . . The principle that confirmed plans are enforceable is manifested in 11 U.S.C. § 1327(a), which declares unequivocally that the terms of the confirmed plan ‘bind the debtor and each creditor.’ However, § 1327(a) contains no specific enforcement mechanism. This is precisely why it is appropriate that 11 U.S.C. § 105(a) be invoked to enforce § 1327(a).”); Padilla v. Wells Fargo Home Mortgage, Inc. (In re Padilla), 379 B.R. 643, 663 (Bankr. S.D. Tex. Aug. 3, 2007) (Isgur) (Upon confirmation, rights of mortgage lenders and debtors “no longer arose from their pre-petition contracts. Their rights arose from the confirmed plan.”); In re Dagen, 386 B.R. 777, 783 (Bankr. D. Colo. Mar. 26, 2008) (Brown) (Postconfirmation income is protected from collection efforts of domestic support creditor by confirmed plan that provided for past-due child support as priority debt; creditor “was contractually obligated to accept distributions from the Chapter 13 trustee in satisfaction of her prepetition claims.”).

 

8  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

9  See § 225.1 [ Appeal of Grant or Denial of Confirmation ] § 117.4  Appeal of Grant or Denial of Confirmation. See, e.g., Hamilton v. Washington Mut. Bank, FA (In re Colon), 376 B.R. 33, 37 (B.A.P. 10th Cir. Sept. 19, 2007) (Bohanon, Brown, McNiff), rev’d on other grounds, 563 F.3d 1171 (10th Cir. May 4, 2009) (Murphy, Brorby, Hartz) (Confirmed plan that treated mortgage holder as unsecured creditor based on avoidable, improperly perfected mortgage was binding because mortgage holder with notice failed to object to confirmation or to timely appeal order of confirmation.).

 

10  See, e.g., Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193, 1203 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith) (“The notices Funds received also warned of the consequences of failing to object—which is more than due process requires. A creditor receiving such notice would have known that its debt could be adversely affected by the proposed plan, and that it needed to file an objection if it wished to avoid that result.”), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010); Hamilton v. Washington Mut. Bank, FA (In re Colon), 376 B.R. 33, 37 (B.A.P. 10th Cir. Sept. 19, 2007) (Bohanon, Brown, McNiff) (“[T]he confirmed plan is res judicata as to its treatment of Washington Mutual’s claim and distribution of the mortgage loan payments, whether or not that treatment violates § 1322(b).”), rev’d on other grounds, 563 F.3d 1171 (10th Cir. May 4, 2009) (Murphy, Brorby, Hartz); Litton Loan Serv’g, L.P. v. Ephraim, No. 07 c 2605, 2008 WL 3849914, at *3 (N.D. Ill. Aug. 14, 2008) (unpublished) (Dow) (Mortgagee that objected to confirmation but failed to appear at confirmation hearing, failed to move for reconsideration and failed to appeal confirmation order was bound by plan that made no payments on mortgage and offset mortgage debt against debtor’s claims under Illinois Interest Act. Debtor’s lack of success in adversary proceeding against mortgagee did not defeat binding effect of confirmation under § 1327. “[U]nder the terms of the Plan, (i) the underlying debt to Provident was satisfied by an offset against a claim that the Debtor had asserted against Provident under the Illinois Interest Act and (ii) Provident would be required to provide a release of its lien within 30 days of confirmation. The terms of the proposed Plan thus gave Provident advance warning that it would not receive any payment other than the offset against the Debtor’s IIA claim.” Court rejected mortgagee’s argument that plan violated § 1322(b)(2) prohibition against modification and should not have been confirmed. Citing In re Pence, 905 F.2d 1107 (7th Cir. July 13, 1990) (Wood, Coffey, Noland), collateral attacks on confirmation are barred except as provided by § 1330(a) or by appeal.); In re Reed, No. 03-40669-7, 2007 WL 2023577, at *5 (Bankr. D. Kan. July 9, 2007) (unpublished) (Karlin) (Under Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253, 1258–59 (10th Cir. June 7, 1999), “need for finality in the confirmation process requires the enforcement of a confirmation order even if a provision of the order or the plan does not comply with a provision of the Bankruptcy Code.”), reconsideration denied, 2007 WL 2701118 (Bankr. D. Kan. Sept. 7, 2007) (unpublished) (Karlin); In re Turner-Mayo, No. 05-44726, 2007 WL 484614, at *5 (Bankr. S.D. Tex. Feb. 8, 2007) (unpublished) (Isgur) (Distinguishing Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. Sept. 8, 1992) (Higginbotham, Duhe, Hunter), plan did not affect validity of Chase Home Finance LLC’s lien or its claim amount, only the interest rate. “Code’s provision that protects a mortgage lender [§ 1322(b)(2)] must yield to the Code’s policy of promoting the finality of the Court’s confirmation order and principles of res judicata [§ 1327(a)].” But see Educational Credit Mgmt. Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc); Whelton v. Educational Credit Mgmt. Corp., 432 F.3d 150 (2d Cir. Dec. 15, 2005) (Calabresi, Raggi, Murtha); Ruehle v. Educational Credit Mgmt. Corp. (In re Ruehle), 412 F.3d 679 (6th Cir. June 23, 2005) (Daughtrey, Gibbons, Sargus); Hanson v. Educational Credit Mgmt. Corp. (In re Hanson), 397 F.3d 482 (7th Cir. Feb. 2, 2005) (Bauer, Manion, Evans); Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296 (4th Cir. Aug. 5, 2002) (Wilkinson, Motz, Baldock), all holding that discharge by declaration of student loans in confirmed Chapter 13 plans is not binding notwithstanding absence of an objection to confirmation. These decisions are discussed below in this section and in §§ 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation and 346.1 [ Student Loans ] § 158.2  Student Loans.

 

11  Many cases discussing the binding effect of confirmation are collected by circuit in Appendix N. See also § 121.1  Overview§ 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation, § 121.3  Failure to Provide For and § 121.4  Other Limitations for discussion of cases finding limitations on the binding effect of confirmation. Confirmation obtained by fraud can be challenged by revocation under § 1330. See, e.g., § 117.3  Revocation of Confirmation. Fraud has been cited by some courts as a nonstatutory reason to reject the binding effect of confirmation. See Johnson v. Stemple (In re Stemple), 361 B.R. 778, 797 (Bankr. E.D. Va. Feb. 14, 2007) (St. John) (If confirmation obtained by fraud, “binding nature of the doctrines of res judicata and/or collateral estoppel will not apply.”). Compare Honda Lease Trust v. Szalinski (In re Szalinski), 360 B.R. 104 (Bankr. W.D. Pa. Feb. 5, 2007) (Deller) (Honda is bound by confirmed plan that modified lease, when it had notice and did not object; under Branchburg Plaza Associates, L.P. v. Fesq (In re Fesq), 153 F.3d 113 (3d Cir. Aug. 18, 1998) (Stapleton, Alito, Shadur), only relief from confirmation order is § 1330(a) revocation, which requires proof of fraud.). If the case has been dismissed, a confirmed plan may lose binding effect in a subsequent case. See, e.g., Ausilio v. United States (In re Ausilio), No. 08-12988, 2010 WL 55507 (E.D. Mich. Jan. 6, 2010) (Zatkoff) (Confirmed plan in dismissed Chapter 13 case that contained handwritten notation that secured claim of IRS would be paid zero and survive discharge had no preclusive effect in subsequent Chapter 11 case.).

 

12  See, e.g., Brown v. Chestnut (In re Chestnut), No. 09-10145, 2009 WL 4885018, at *2 n.3 & *2–*6 (5th Cir. Dec. 17, 2009) (unpublished) (King, Garza, Haynes) (Citing Travelers Indemnity Co. v. Bailey, 129 S. Ct. 2195, 174 L. Ed. 2d 99 (June 18, 2009), and distinguishing Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. Sept. 8, 1992) (Higginbotham, Duhe, Hunter), Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. July 19, 1985) (Clark, Randall, Jolly), and IRS v. Taylor (In re Taylor), 132 F.3d 256 (5th Cir. Jan. 6, 1998) (King, Jones, Werlein), res judicata bars mortgagee’s jurisdictional challenge to release of its lien through confirmed Chapter 13 plan when mortgagee had notice, did not object to confirmation and did not appeal order of confirmation and jurisdictional challenge is raised for first time when debtor moved to enforce confirmed plan; adversary proceeding was not required to release lien because neither validity, priority nor extent of lien was at issue. Separate property of nonfiling spouse was scheduled by debtor, and plan treated mortgage holder as a secured creditor to be paid in full. Plan valued allowed secured claim and provided that mortgage holder would release its lien upon completion of payments. Lienholder did not object to plan, did not object to valuation and did not appeal confirmation order. Debtor completed payments under plan, and when lienholder refused to release lien, debtor moved to enforce confirmed plan and to compel release of lien. “The sole issue before this court on appeal is whether res judicata bars Templeton from now asserting that, because there was no explicit finding by the bankruptcy court that the Eastland property was property of the estate, the lien on the Eastland property need not be released. . . . Templeton is precluded in this appeal from challenging the bankruptcy court’s subject matter jurisdiction during the confirmation proceedings. The issue of a bankruptcy court’s subject matter jurisdiction may be raised on direct appeal; however, a party to the original proceeding that had a fair chance to challenge jurisdiction may not raise the question of jurisdiction in a collateral attack. Travelers Indem. Co. v. Bailey . . . . Templeton could have raised the issue of jurisdiction before the bankruptcy court by objecting to the proof of claim filed on its behalf, by objecting to the plan, or by directly appealing the confirmation order. It followed none of those courses of action, and the bankruptcy court’s subject matter jurisdiction is therefore insulated from Templeton’s collateral attack. . . . While the Supreme Court’s decision in Travelers Indemnity Co. v. Bailey did not involve a Chapter 13 plan, the text of the Bankruptcy Code supports the application of res judicata to such plans. . . . We are also aided in this decision by the consequences to the Chapter 13 Trustee system were we to undo the finality of a confirmed and completed Chapter 13 plan at the behest of a creditor that had notice of the plan and an opportunity to object. Tim Truman, the Chapter 13 Trustee . . . involved in this case, filed an amicus brief urging the application of res judicata to the confirmed plan. . . . We reject Templeton’s argument that an adversary proceeding under Rule 7001(2) was needed for res judicata to apply here. . . . Rule 7001(2) does not apply to this dispute. . . . The confirmed plan does not challenge the validity of Templeton’s lien, its priority over any other lien on the Eastland property, or its extent to the full value of Templeton’s claim. Instead, the plan expressly acknowledged that Templeton’s claim was fully secured and required—upon full payment of the claim—that Templeton release any lien securing the claim. . . . Here, Mr. Chestnut filed a proof of claim on Templeton’s behalf, and no party ever contested the claim or the validity of the lien. Mr. Chestnut’s Chapter 13 plan did not seek to void or reduce the lien, but instead provided that the lien would be released upon full payment of Templeton’s claim, which was done. Applying res judicata to Mr. Chestnut’s confirmed plan does not run afoul of In re Simmons, In re Howard and In re Taylor, which stand for the unremarkable proposition that a Chapter 13 plan must be consistent with the provisions of the Bankruptcy Code. . . . Templeton did not take advantage of Mr. Chestnut’s filing of a claim on its behalf or the confirmation process to raise its questions about the separate or community character of the Eastland property and whether it was properly treated in the plan. . . . To raise these issues now, in the context of resisting compliance with a provision of a completed plan, would run afoul of the finality required of such a plan.”), aff’g 400 B.R. 74 (N.D. Tex. Jan. 6, 2009) (McBryde) (Res judicata effect of confirmation prevented mortgage creditor from challenging plan provision for release of its lien by disputing ownership of property; creditor was party to confirmation and cannot now contend that property belonged to former spouse.), aff’g No. 03-41050-DML-13, 2008 WL 2962943, at *3, *4 (Bankr. N.D. Tex. July 29, 2008) (unpublished) (Nelms) (Creditor’s argument that property was community asset owned by nonfiling spouse was barred by confirmation order and res judicata. “Preclusion of the ownership issue also results from the binding effect of section 1327 of the Code.” Because creditor did not object to its treatment under the plan, “section 1327(a) closes the door to actions or objections that were raised or could have been raised prior to or at confirmation of a plan. Thus the binding effect of section 1327(a) operates consistently with the general doctrine of res judicata.”); In re Harvey, 213 F.3d 318, 321 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (“It is a well-established principle of bankruptcy law that a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan. 11 U.S.C. § 1327(a). . . . The reason for this . . . mirrors the general justification for res judicata principles.”); Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee), 193 F.3d 1083, 1087 (9th Cir. Oct. 25, 1999) (Lay, Pregerson, Hawkins) (“The BAP was correct in holding that ‘the Plan is res judicata as to all issues that could have or should have been litigated at the confirmation hearing.’” Student loan creditor’s failure to object to confirmation of plan that included a provision for discharge of postpetition interest is fatal to collection of postpetition interest after completion of payments and entry of discharge.); Multnomah County v. Ivory (In re Ivory), 70 F.3d 73 (9th Cir. Oct. 30, 1995) (Wallace, Nelson, Brunetti) (“Res judicata” precludes taxing authority’s argument that Chapter 13 debtor cannot redeem property from tax foreclosure judgment where plan provided for curing default and redeeming the real property with monthly payments, taxing authority had notice of the plan, and plan was confirmed without objection.); Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. Apr. 1, 1993) (Murnaghan, Chapman, Young) (Confirmation order generally is treated as res judicata except when to do so would result in a denial of due process); Russell v. Transport Funding LLC (In re Russell), 386 B.R. 229, 231 (B.A.P. 8th Cir. Apr. 9, 2008) (Kressel, Federman, Venters) (“The binding effect of a confirmed Chapter 13 plan is a basic tenet of bankruptcy law. . . . An unappealed, confirmed plan is res judicata, and its terms are not subject to collateral attack.”); Haddox v. Johnson (In re Haddox), Nos. WO-03-048, 00-20020-NLJ, 2003 WL 22681412, at *4 (B.A.P. 10th Cir. Nov. 12, 2003) (unpublished) (McFeeley, Nugent, McNiff) (“[Section] 1327(a) imposes a res judicata bar that precludes a collateral attack on the plan’s content.”); Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370, 372–74 (B.A.P. 1st Cir. Jan. 11, 2001) (Lamoutte, Haines, Deasy) (“Plan confirmation is a final order, with res judicata effect, and is imbued with the strong policy favoring finality. . . . [W]e hold that in the face of notice that timely and unambiguously informs a creditor that his claim will be disallowed in total and discharged under a Chapter 13 plan pending for confirmation, the creditor may not ignore the confirmation process and fail to object simply because the bar date for filing a proof of claim has yet to expire. . . . Confirmation of such a plan, after notice and an opportunity for hearing, bars the creditor’s later-filed claim under principles of res judicata.”); Andersen v. Higher Educ. Assistance Found. (In re Andersen), 215 B.R. 792, 795 (B.A.P. 10th Cir. Jan. 26, 1998) (McFeeley, Cornish, Matheson) (Student loan creditor is bound by confirmation of plan that provided 10% for educational loans and “the balance of each claim shall be discharged.” “[T]he plan specifically stated the treatment to be accorded the HEAF loans. . . . HEAF understood that the plan intended to grant relief affecting HEAF’s interests. . . . [T]he order of confirmation is res judicata as to that issue.”), aff’d, 179 F.3d 1253 (10th Cir. June 7, 1999) (Anderson, McWilliams, Cook), overruled by Educational Credit Mgmt. Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc) (Discharge by declaration of student loan debts in Chapter 13 plans is not authorized by Code; prospectively, student loan discharge must be accomplished through an adversary proceeding.); Anaheim Sav. & Loan Ass’n v. Evans, 30 B.R. 530 (B.A.P. 9th Cir. May 6, 1983) (Ashland, George, Elliott); Snow v. Countrywide Home Loans, Inc. (In re Snow), 270 B.R. 38, 40–41 (D. Md. Nov. 16, 2001) (Keir) (Confirmed plan that provides full payment of mortgage holder’s arrearage precludes debtor from maintaining class action asserting that inspection fee included in arrearage violates state law. “Snow . . . argues that confirmation of the plan is not a final judgment because allowance or disallowance of a claim may be reconsidered under 11 U.S.C. § 502(j). . . . Although 11 U.S.C. § 502(j) states that ‘a claim that has been allowed . . . may be reconsidered for cause,’ this does not provide for automatic reconsideration of every claim, nor does it make confirmation of a plan ‘nonfinal’ for res judicata purposes. . . . [T]he plan confirmation was a final judgment on the merits rendered by a court of competent jurisdiction in accordance with due process and there is no cause to reconsider the order under 11 U.S.C. § 502(j).”); Jones v. United States (In re Jones), 134 B.R. 274 (N.D. Ill. Nov. 26, 1991) (Kocoras) (Res judicata effect of confirmation under § 1327(a) precludes postconfirmation challenge to a debtor’s eligibility.); Young v. IRS (In re Young), 132 B.R. 395 (S.D. Ind. Nov. 1, 1990) (Barker) (Res judicata effect of confirmation codified at § 1327(a) precludes “reconsideration” of confirmation order.); Lester Mobile Home Sales, Inc. v. Woods (In re Woods), 130 B.R. 204 (W.D. Va. June 19, 1990) (Williams) (Confirmation order is res judicata with respect to subject matter jurisdiction of bankruptcy court.); United States v. Edmonston (In re Edmonston), 99 B.R. 995, 998 (E.D. Cal. Apr. 14, 1989) (Dorian) (Absent a showing of fraud by the debtor, confirmation is res judicata as to all issues that were decided or could have been decided at the time of confirmation. “An implicit determination in the bankruptcy court’s confirmation of the plan was the debtor’s eligibility for Chapter 13.”); Government Employees Corp. v. McKinney, 92 B.R. 317 (N.D. Ill. Aug. 31, 1988) (Holderman); In re Waldman, 88 B.R. 59 (E.D. Pa. June 28, 1988) (Broderick); In re Fiddler, No. 04-4213, 2007 WL 4510308 (Bankr. N.D. W. Va. Dec. 18, 2007) (unpublished) (Flatley) (Trustee’s motion to modify to pay creditors 100% from increase in value of realty is precluded by res judicata effect of confirmation); In re Bryant, 323 B.R. 635, 639, 642, 643, 645 (Bankr. E.D. Pa. Apr. 19, 2005) (Sigmund) (Plan which paid Ocwen Bank “in full” fixed amount of $41,471.59 was binding and lien would be released notwithstanding that actual claim was $67,736.17. Proposed plan provided that HUD Loan Management would have its “Bal Paid in Full $41,471.59[,]” and that HUD would retain its lien. Plan was confirmed without objection. Mortgage claim was later filed for $67,736.17. Debtor received discharge. When mortgage creditor commenced foreclosure action, debtor filed second Chapter 13 case and objected to claim, arguing that it had been discharged in prior case. It was not disputed that creditor received adequate notice. “A secured creditor which fails to object to confirmation will be deemed to have accepted the plan. Szostek [886 F.2d 1405 (3d Cir. Oct. 12, 1989)] makes clear that plans that would not be confirmable due to provisions that do not conform to applicable law will nonetheless be given effect if an objection is not raised prior to entry of the confirmation order. . . . [A] creditor with timely and unambiguous notice that its claim will be compromised and discharged may not ignore the confirmation process and fail to object notwithstanding that there either is no bar date for filing a claim or the time for filing a claim has yet to expire. . . . Had claimant been vigilant and objected to the Plan as not providing for full payment, a contested matter would have resolved the amount of the secured claim. However, Claimant was silent, and the Plan was confirmed. Upon confirmation all lien rights were defined by the Plan and upon completion of the payments under the Plan in 1999, the identified debt, i.e., $41,471.59, was paid in full. Thus, the lien that secured that debt and which was retained for the life of the Plan did not survive the Debtor’s discharge.”); In re Ramey, 301 B.R. 534, 545 (Bankr. E.D. Ark. Nov. 12, 2003) (Mixon) (“First National did not object to the plan. When the second amended plan was confirmed, the order became final, and First National is now precluded from challenging it on the merits because of the principles of res judicata.”); Bilal v. Household Fin. Corp. III (In re Bilal), 296 B.R. 828 (Bankr. D. Kan. Aug. 18, 2003) (Flannagan) (Confirmed plan that provided for rescission of transaction with Household Finance Corporation “is res judicata with respect to rescission.”); Linzy v. Keeton (In re Linzy), Nos. 4:96-BK-42297 E, 4:01-AP-4001, 2002 WL 32114564, at *6 (Bankr. E.D. Ark. Aug. 30, 2002) (unpublished) (Evans) (“[T]he Plan, once confirmed, is res judicata as to what Ms. Linzy owed the Keetons on the Contract, at least during the duration of the Plan’s initial term.”); In re Parchman, No. 4:02-BK-11861 E, 2002 WL 32115832, at *1 (Bankr. E.D. Ark. Aug. 5, 2002) (unpublished) (Evans) (“Because good faith is a requirement for confirmation of a Chapter 13 plan, the issue is necessarily determined by the confirmation order and has res judicata effect.”); In re Young, 285 B.R. 168, 175 (Bankr. D. Md. Oct. 23, 2002) (Keir) (“[T]he doctrine res judicata applies to the provisions for specific attorney’s fees set forth in the chapter 13 plan.”); In re Young, 281 B.R. 74, 81 (Bankr. S.D. Ala. Mar. 8, 2001) (Shulman) (Pawnbroker treated as a secured claim “is bound by 11 U.S.C. § 1327(a) and the doctrine of res judicata.”); In re Jones, 271 B.R. 397, 401 (Bankr. S.D. Ala. Aug. 21, 2000) (Mahoney) (Upon objection, “[t]he claim would be found to be valued precisely as indicated in the final confirmation order. Res judicata dictates this.”); Patton v. United States Dep’t of Educ. (In re Patton), 261 B.R. 44, 48 (Bankr. E.D. Wash. Apr. 3, 2001) (Rossmeissl) (Applying Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), and Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), student loan creditors are bound by confirmed plan that found undue hardship. “[T]he Court holds that the confirmation orders in each of these cases is res judicata and cannot now be challenged by ECMC.”); In re Estrella, 257 B.R. 114, 118 (Bankr. D.P.R. Dec. 7, 2000) (Lamoutte) (“The confirmation order is res judicata as to eligibility issues.”); In re Vincent, 252 B.R. 91, 94–95 (Bankr. E.D. Va. June 2, 2000) (Adams) (“[T]he Plan and Related Motions complies with the notice and due process mandates of the Fourth Circuit’s ruling in Piedmont Trust Bank v. Linkous, etc., 990 F.2d 160 (4th Cir. [Apr. 1,] 1993). . . . Therefore, the confirmation order . . . is res judicata and is binding on Transouth. Thus, the plan interest rate for its secured debt is 8% and is binding on the creditor and the Chapter 13 trustee. . . . [I]f the creditor, with sufficient notice of the treatment of its claim as outlined above, does not object to confirmation of the debtor’s plan, the rate proposed in the plan governs the repayment of the debt.”); In re York, 250 B.R. 842, 848 (Bankr. D. Del. Aug. 16, 2000) (Fitzgerald) (Postconfirmation modification of the treatment of other creditors does not offer student loan creditor an opportunity to object to unchanged provision of confirmed plan with respect to discharge of interest. “[R]es judicata precludes ECMC from objecting to Debtors’ proposed modified plan pursuant to which ECMC’s treatment is unchanged from the confirmed plan.”); In re Elstien, 238 B.R. 747, 754 (Bankr. N.D. Ill. July 27, 1999) (Barliant) (“The order confirming a chapter 13 plan establishes that the requirements under § 1325(a) have been met, including the provision under § 1325(a)(1) that the plan comply with applicable provisions of the Code. . . . Because § 109(e) is among those provisions, the order of confirmation has res judicata effect as against the IRS with respect to the question of eligibility for chapter 13 relief.”); Marlow v. Sweet Antiques (In re Marlow), 216 B.R. 975, 979 (Bankr. N.D. Ala. Jan. 27, 1998) (Caddell) (“Pursuant to § 1327, the order of confirmation in a chapter 13 case constitutes res judicata as to all justiciable issues which were or could have been raised prior to confirmation.” Accordingly, res judicata and the finality of an order allowing claims bar debtors’ postconfirmation preference action to avoid a judicial lien.); In re Carrillo, 215 B.R. 212, 217 (Bankr. N.D. Okla. Dec. 1, 1997) (Rasure) (“A confirmation order is res judicata as to all issues decided or which could have been decided at the hearing on confirmation.” Confirmation order in prior Chapter 13 case that treated claim of Oklahoma Employment Security Commission as a general unsecured debt was binding on OESC.); In re Gates, 214 B.R. 467, 470 (Bankr. D. Md. Nov. 5, 1997) (Keir) (Citing Piedmont Trust Bank v. Linkous, 990 F.2d 160 (4th Cir. Apr. 1, 1993), “a bankruptcy court’s confirmation order is typically res judicata.”); Bright v. Ritacco (In re Ritacco), 210 B.R. 595, 597 (Bankr. D. Or. June 18, 1997) (Radcliffe) (“In general, confirmation of a plan is res judicata, as to all justiciable issues which were or could have been decided at the confirmation hearing.” Res judicata effect of confirmation precludes adversary proceeding to revoke confirmation when facts constituting fraud were known before confirmation.); Franklin Fed. Bancorp, FSB v. Lochamy (In re Lochamy), 197 B.R. 384 (Bankr. N.D. Ga. Dec. 26, 1995) (Cotton) (Confirmation of a Chapter 13 plan is res judicata with respect to the debtor’s eligibility for Chapter 13 relief and precludes a creditor’s postconfirmation motion to dismiss grounded on ineligibility.); In re Puckett, 193 B.R. 842, 850 (Bankr. N.D. Ill. Feb. 14, 1996) (Wedoff) (“The res judicata impact of plan confirmation under § 1327(a)” precludes the IRS’s motion to reopen a Chapter 13 case to vacate the order of confirmation where the IRS was properly scheduled with a debt of zero, the IRS did not object to confirmation and did not timely file a proof of claim, the debtor completed payments under the plan, and an order of discharge was entered.); In re Torres, 193 B.R. 319, 323 (Bankr. N.D. Cal. Mar. 11, 1996) (Weissbrodt) (“A confirmed plan is res judicata as to all justiciable issues that were, or could have been, determined at confirmation.”); In re Bernard, 189 B.R. 1017, 1019 (Bankr. N.D. Ga. Jan. 2, 1996) (Drake) (Section 1327 and res judicata preclude debtor’s objection to claim 26 months after confirmation of plan that included provision that required “any remaining claims objections to be pursued within six months.”); In re Brenner, 189 B.R. 121, 128 (Bankr. N.D. Ohio Oct. 3, 1995) (Speer) (“The doctrine of res judicata, equity, and the policies underlying the Bankruptcy Code” all preclude the IRS’s challenge to a confirmed plan that treats it as a priority unsecured claim holder notwithstanding that the IRS filed a proof of claim asserting secured status.); In re Lee, 182 B.R. 354, 358–59 (Bankr. S.D. Ga. May 23, 1995) (Walker) (“Res judicata, which is the basis for the binding effect of a confirmed plan, . . . binds the creditor to the terms of the plan and precludes relitigation of issues which either were previously decided or could have been previously decided. . . . A non-filing secured creditor who is not provided for under a plan is nevertheless bound to the terms of a plan in the sense that it is subject to the automatic stay . . . and must accept the treatment the debtor affords its claim under the plan for the debtor’s discharge of personal liability. Thus, a secured creditor who does not file a proof of claim and is not provided for in a plan is bound to receive nothing under the plan, and may not seek a deficiency from the debtors. . . . [A] secured creditor’s in rem rights are another matter.”); In re Eason, 178 B.R. 908 (Bankr. M.D. Ga. Aug. 2, 1994) (Laney) (Section 1327 and res judicata prohibit the IRS from objecting to modification after confirmation where the IRS’s treatment is not changed and the IRS failed to object to confirmation of the original plan.); In re Klus, 173 B.R. 51, 54 (Bankr. D. Conn. Oct. 13, 1994) (Shiff) (“It is well settled that ‘under § 1327, a confirmation order is res judicata as to all issues decided or which could have been decided at the hearing on confirmation.’”); McDonough v. Plaistow Coop. Bank (In re McDonough), 166 B.R. 9 (Bankr. D. Mass. Mar. 29, 1994) (Boroff) (“Law of the case” doctrine precludes bank from objecting to the avoidance of its lien in the context of an adversary proceeding after confirmation where the bank failed to object to confirmation of a plan that provided for avoidance of the bank’s lien.); In re Ross, 162 B.R. 785 (Bankr. N.D. Ill. Dec. 14, 1993) (Sonderby) (Confirmation of a plan is res judicata as to the value of collateral where the plan specified the allowable amount of the secured portion of a creditor’s claim.); Midlantic Nat’l Bank v. Kouterick (In re Kouterick), 161 B.R. 755 (Bankr. D.N.J. Nov. 24, 1993) (Stripp) (Section 1327 is res judicata with respect to a mortgage holder’s arguments that mistakes in valuation and fraud by the debtor are a basis for revocation of confirmation under § 1330.); Kuebler v. Commissioner (In re Kuebler), 156 B.R. 1012, 1017 (Bankr. E.D. Ark. June 24, 1993) (Mixon), aff’d, 172 B.R. 595 (E.D. Ark. July 28, 1994) (Woods) (“An unappealed order confirming a Chapter 13 plan is entitled to res judicata effect as to all issues pertaining to the plan that were raised or could have been raised at the confirmation hearing . . . whether the issue was decided correctly or incorrectly.”); Lawson v. Lackey (In re Lackey), 148 B.R. 626 (Bankr. N.D. Ala. Dec. 18, 1992) (Sledge) (Res judicata effect of confirmation precludes relief from the stay when creditor unsuccessfully objected to confirmation on the same grounds that are argued in support of relief from the stay.); In re Patterson, 107 B.R. 576 (Bankr. S.D. Ohio Nov. 1, 1989) (Calhoun) (Confirmation order is res judicata of adequate protection of a secured claim holder. Automobile financier’s failure to object to confirmation is fatal to argument that car lien is not adequately protected when plan proposes to pay arrearages on home mortgage before any payments to car lender.); In re Stage, 79 B.R. 487 (Bankr. S.D. Cal. Nov. 5, 1987) (Malugen); In re Guilbeau, 74 B.R. 13 (Bankr. W.D. La. Jan. 20, 1987) (Boe); In re Toth, 61 B.R. 160 (Bankr. N.D. Ill. May 21, 1986) (Schmetterer); In re Wright, 54 B.R. 553 (Bankr. E.D. Pa. Nov. 25, 1985) (Goldhaber); In re Clark, 38 B.R. 683 (Bankr. E.D. Pa. Apr. 27, 1984) (Goldhaber); Pennsylvania Sch. Employees’ Retirement Fund v. Pizzullo, 33 B.R. 740 (Bankr. E.D. Pa. Oct. 14, 1983) (Twardowski); Waterfield Mortgage Co. v. Clark, 31 B.R. 502 (Bankr. S.D. Ohio July 14, 1983) (Anderson); In re Russell, 29 B.R. 332 (Bankr. E.D.N.Y. Apr. 26, 1983) (Parente). See also discussion of postconfirmation relief from the stay beginning at § 124.1  Procedure.

 

13  See In re Pike, No. 03-16382, 2005 WL 3481502 (Bankr. D. Kan. Mar. 10, 2005) (unpublished) (Nugent) (Debtor and creditor are bound by confirmed plan and cannot change interest rate through agreed order; rather, parties must proceed through plan modification process.); Hope v. Brown & Williamson Fed. Credit Union (In re Vaughn), 110 B.R. 94 (Bankr. M.D. Ga. Jan. 22, 1990) (Hershner) (Chapter 13 trustee can recover voluntary “side payments” by the debtor directly to an unsecured claim holder that allowed the unsecured claim holder to recover more than the allowed amount of its claim. The debtor and the creditor were bound by the provisions of the confirmed plan, and the direct payments violated the plan.); In re Snider, 50 B.R. 311 (Bankr. S.D. Ohio July 8, 1985) (Pettigrew). See discussion of modification after confirmation beginning at § 126.1  Standing, Timing and Procedure.

 

14  See 11 U.S.C. § 1327(a), quoted above in this section.

 

15  See below in this section, and see § 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For for discussion of plans that fail to provide for creditors.

 

16  See § 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For. Distinct from the effects of confirmation under 11 U.S.C. § 1327, 11 U.S.C. § 1328(a) provides that discharge after completion of plan payments applies to “all debts provided for by the plan.” See § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502.

 

17  553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010). See below in this section for detailed discussion of Espinosa.

 

18  553 F.3d at 1200.

 

19  553 F.3d at 1200.

 

20  Vicenty v. Sandoval (In re Sandoval), 327 B.R. 493 (B.A.P. 1st Cir. June 16, 2005) (Feeney, Boroff, Kornreich) (Confirmation of Chapter 13 plan is res judicata with respect to the debtor’s eligibility under § 109(e); creditors cannot challenge eligibility after confirmation by motion to dismiss.). Accord Jones v. United States (In re Jones), 134 B.R. 274 (N.D. Ill. Nov. 26, 1991) (Kocoras); Rosetti v. Chase Home Fin. LLC (In re Rosetti), Nos. 06-43810-DML-13, 07-04063-DML, 2007 WL 2669265, at *3 (Bankr. N.D. Tex. Sept. 6, 2007) (unpublished) (Lynn) (When Chase did not raise debtor’s ineligibility under § 109(g)(2) in its objection to confirmation, Chase is bound by confirmation and precluded from raising ineligibility postconfirmation. Citing Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. May 4, 1987) (Garwood, Jolly, Hill), “not only did Chase have full notice of the Plan and the confirmation hearing, it actually objected to confirmation of the Plan. Having failed in (or before) its objection to raise the issue of eligibility, Chase is now precluded from doing so.”); In re Wyatt, 368 B.R. 99 (Bankr. D.N.H. May 10, 2007) (Vaughn) (Confirmation is binding upon creditor with sufficient notice of plan, and res judicata effect extends to debt-limit eligibility.); In re Allison, No. 06-30040, 2006 WL 2620480, at *4–*10 (Bankr. S.D. Tex. Sept. 12, 2006) (unpublished) (Isgur) (Even if eligibility is jurisdictional, confirmation is final order that is res judicata with respect to eligibility and with respect to subject matter jurisdiction. “A final confirmation order is generally res judicata as to all justiciable issues which were or could have been decided at the confirmation hearing, including a debtor’s eligibility to commence a chapter 13 case.”); In re Arriaga, Nos. 02-41989, 02-41686, 2003 WL 25273842 (Bankr. D. Idaho Feb. 6, 2003) (unpublished) (Pappas) (Confirmation of plan is res judicata with respect to eligibility.); In re Estrella, 257 B.R. 114, 118 (Bankr. D.P.R. Dec. 7, 2000) (Lamoutte) (Confirmation order precludes creditor’s motion to dismiss based on eligibility under § 109(g). Prior Chapter 13 case was dismissed on the trustee’s motion for failure of the debtor to appear at the meeting of creditors and to make payments under the plan. Debtor refiled and confirmed a plan without objection. After confirmation, creditor moved to dismiss under § 109(g)(1). “The confirmation order is res judicata as to eligibility issues. . . . Since Popular received notice of the confirmation hearing, failed to object [to] the plan, and to appeal the confirmed order, it may not now collaterally attack the confirmation process on the ground that the debtor was ineligible to file under section 109(g)(1) of the Bankruptcy Code.”); In re Elstien, 238 B.R. 747, 753–57 (Bankr. N.D. Ill. July 27, 1999) (Barliant) (Because IRS had actual notice of Chapter 13 in time to file an objection to confirmation, § 1327(a) precludes postconfirmation motion to dismiss on the ground of ineligibility. Debtor was president and major shareholder of corporation. Prior to bankruptcy, IRS asserted trust fund recovery penalty claim of $553,427.50. Debtor did not schedule claim and in the statement of affairs answered “none” to questions about corporate offices and stock ownership. IRS commenced administrative proceedings and was aware when the debtor filed Chapter 13 case. “If the IRS were the only claimant with a motion to dismiss, this would be a tough case because both parties would deserve to lose. The Debtor filed false schedules, when accurate schedules would have disclosed that he was ineligible for chapter 13 relief . . . . The IRS, on the other hand, had actual knowledge of the bankruptcy case in ample time to file a proof of claim, move to dismiss the case, and object to confirmation of the plan, yet it did nothing for two years. . . . Applying § 1327(a) here, the confirmation of the Debtor’s plan precludes the IRS from asserting its arguments that the case should be dismissed because the Debtor is ineligible for chapter 13 relief. The order confirming a chapter 13 plan establishes that the requirements under § 1325(a) have been met, including the provision under § 1325(a)(1) that the plan comply with applicable provisions of the Code. . . . Because § 109(e) is among those provisions, the order of confirmation has res judicata effect as against the IRS with respect to the question of eligibility for chapter 13 relief.”); In re Nikoloutsos, 199 B.R. 624, 626–27 (Bankr. E.D. Tex. May 14, 1996) (Abel) (Ex-spouse’s failure to prosecute ineligibility prior to confirmation leaves ex-spouse bound by plan. “[P]ursuant to 11 U.S.C. § 1327(a), Wanda is bound by the terms of the Plan ‘whether or not the claim of . . . [Wanda] is provided for by the plan.’ As a creditor with notice of the plan, it was incumbent upon Wanda to review the Plan and raise any objection thereto at the confirmation hearing. . . . Because the Plan was clear regarding how the Debtor proposed to treat the unsecured creditors and because it is undisputed that Wanda had notice of the Plan, Wanda is now bound by the terms of the Plan. Wanda may not use an untimely assertion of ineligibility as ‘cause’ to have the case dismissed or converted.”), rev’d on other grounds, 199 F.3d 233 (5th Cir. Jan. 6, 2000) (Garza, Jolly, DeMoss); Franklin Fed. Bancorp, FSB v. Lochamy (In re Lochamy), 197 B.R. 384, 386, 387 (Bankr. N.D. Ga. Dec. 26, 1995) (Cotton) (Confirmation precludes motion to dismiss on the ground of ineligibility. “Both the Code’s language and structure establish that Congress did not intend the eligibility requirements to be jurisdictional. Since compliance with the provision of Chapter 13 is a requisite to plan confirmation pursuant to § 1325(a)(1), the issue of eligibility is implicit in the confirmation hearing.” Bank moved for conversion or dismissal before confirmation asserting ineligibility. At confirmation hearing, bank waived its objection, and plan was confirmed. After confirmation, bank again asserted ineligibility as a ground for conversion or dismissal. “[T]he court concludes that confirmation of a debtor’s Chapter 13 plan may be res judicata as to the issue of eligibility under § 109(e). . . . [The bank] remained silent and permitted the plan to be confirmed. . . . [The bank] has not made any showing or offered any reason for its failure to raise the eligibility issue or preserve its motion at the confirmation hearing.”). But see Johnson v. Stemple (In re Stemple), 361 B.R. 778, 796–97 (Bankr. E.D. Va. Feb. 14, 2007) (St. John) (Confirmation “implicitly determines eligibility . . . [which] became final upon entry of the confirmation order,” but if obtained by fraud, “binding nature of the doctrines of res judicata and/or collateral estoppel will not apply.”); In re Rist, 153 B.R. 79 (Bankr. M.D. Fla. Mar. 29, 1993) (Proctor) (Without discussion of § 1327(a), confirmation order is set aside and Chapter 13 case is dismissed where it appears after confirmation on the motion of a creditor that the debtor was ineligible for Chapter 13 relief because of § 109(g)(2).). See also discussion of consequences of ineligibility in § 9.5  Consequences of Ineligibility: Jurisdiction; Automatic Stay; Strike, Dismiss or Excuse?.

 

21  Brown v. Chestnut (In re Chestnut), No. 09-10145, 2009 WL 4885018, at *2 n.3 (5th Cir. Dec. 17, 2009) (unpublished) (King, Garza, Haynes) (Citing Travelers Indemnity Co. v. Bailey, 129 S. Ct. 2195, 174 L. Ed. 2d 99 (June 18, 2009), and distinguishing Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. Sept. 8, 1992) (Higginbotham, Duhe, Hunter), Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. July 19, 1985) (Clark, Randall, Jolly), and IRS v. Taylor (In re Taylor), 132 F.3d 256 (5th Cir. Jan. 6, 1998) (King, Jones, Werlein), res judicata bars mortgagee’s jurisdictional challenge to release of its lien through confirmed Chapter 13 plan when mortgagee had notice, did not object to confirmation and did not appeal order of confirmation and jurisdictional challenge is raised for first time when debtor moved to enforce confirmed plan. “Templeton is precluded in this appeal from challenging the bankruptcy court’s subject matter jurisdiction during the confirmation proceedings. The issue of a bankruptcy court’s subject matter jurisdiction may be raised on direct appeal; however, a party to the original proceeding that had a fair chance to challenge jurisdiction may not raise the question of jurisdiction in a collateral attack.”); Lester Mobile Home Sales, Inc. v. Woods (In re Woods), 130 B.R. 204, 208 (W.D. Va. June 19, 1990) (Williams) (Confirmation order is res judicata with respect to the subject matter jurisdiction of the bankruptcy court. Creditor failed to object to confirmation or to timely appeal order of confirmation. Several months later, creditor moved for relief from the stay, alleging that the plan valued the creditor’s collateral at less than fair market value and improperly modified the creditor’s rights in violation of §§ 1325(a)(5)(B) and 1322(b)(2). Asserting that these objections were “jurisdictional,” creditor claimed it was not bound by the order of confirmation and could challenge “subject matter jurisdiction” by motion for relief from the stay. District court concluded that the confirmation order has res judicata effect even as to the issue of subject matter jurisdiction. “A Chapter 13 bankruptcy case, unlike the typical civil case, can involve several discrete disputes within it which are disposed of sometimes over the course of several years. It is important for the orderly and efficient administration of the case and for the securing of the rights of the parties to the case that the issues, including the issue of subject matter jurisdiction resolved by the order confirming a Chapter 13 plan, not be subject to reconsideration (except in the case of fraud) after the direct appeals process for the order has ended.”); In re Allison, No. 06-30040, 2006 WL 2620480, at *4–*10 (Bankr. S.D. Tex. Sept. 12, 2006) (unpublished) (Isgur) (“[Promenade National Bank v. Phillips (In re Phillips), 844 F.2d 230 (5th Cir. May 6, 1988) (Timbers, King, Higginbotham),] teaches that this Court’s subject matter jurisdiction exists separately from the determination of eligibility. . . . [O]nce a court makes a determination that it has jurisdiction and renders a final decision, the decision is binding unless reversed on appeal even if that decision was erroneous. . . . [I]mplicit in the Court’s final order confirming the Debtor’s chapter 13 plan was a determination that the Court has subject matter jurisdiction. . . . [T]he issue of the Court’s subject matter jurisdiction was cental to the Court’s exercise of jurisdiction when it confirmed the Debtor’s plan. Union Federal could only prevail on its motion to dismiss based on the Debtor’s ineligibility or lack of subject matter jurisdiction if the Court first determined that the confirmation order was entered in error for those same reasons—arguments barred by res judicata. Thus, the same cause of action is involved and res judicata bars the relitigation of the issue of subject matter jurisdiction.”). See below in this section for discussion of Travelers Indemnity Co. v. Bailey, 129 S. Ct. 2195, 174 L. Ed. 2d 99 (June 18, 2009), and of Johns-Manville Corp. v. Chubb Indemnity Insurance Co., 600 F.3d 135 (2d Cir. Mar. 22, 2010) (Calabresi, Wesley).

 

22  Yoon v. Krick (In re Krick), 373 B.R. 593 (Bankr. N.D. Ind. Sept. 12, 2007) (Klingeberger) (Confirmation of plan that provided for co-tenancy interest in real estate which had been conveyed to debtor jointly with her parents established that debtor had an interest that became property of estate. Confirmation revested that interest in debtor.).

 

23  Lawson v. Lackey (In re Lackey), 148 B.R. 626 (Bankr. N.D. Ala. Dec. 18, 1992) (Sledge). See § 242.1 [ Confirmation as a Defense to Relief from the Stay ] § 124.2  Confirmation as a Defense to Relief from the Stay.

 

24  See, e.g., Countrywide Home Loans v. Davis (In re Davis), No. 05-6214, 2006 WL 1734250, at *4 (10th Cir. June 21, 2006) (unpublished) (Murphy, Anderson, O’Brien) (Motion for relief from stay denied after confirmation of plan that treated Countrywide’s mortgage as unperfected precluded adversary proceeding to determine whether claim was secured. Confirmed plan stated, “Countrywide Home Loans is secured by an unperfected mortgage that will be avoided upon plan completion.” After confirmation, Countrywide filed motion for relief from stay asking in the alternative for modification of plan or for declaration that its mortgage was valid. Relief from stay was denied and not appealed. Countrywide then filed an adversary proceeding to determine whether its claim was secured. “We agree with the BAP that the bankruptcy court failed to accord the proper preclusive effect to the court’s prior orders on [Countrywide’s] motion for a stay [sic] or for other relief. . . . [Countrywide] asserts the same cause of action in the instant proceeding as it did in its motion for relief from the automatic stay . . . . [I]t clearly had multiple opportunities to protect its lien rights during the Chapter 13 proceeding itself. . . . [Countrywide] received Davis’s proposed Plan, which clearly indicated that [Countrywide’s] claim was to be treated as unsecured because of an unperfected mortgage . . . . [Countrywide] failed to attend the meeting of creditors or the hearing on confirmation of the Plan, nor did it challenge the Plan once it was confirmed . . . . [Countrywide] may not now have yet another attempt to prevail on a claim already resolved adversely to it by the bankruptcy court.”); Salt Creek Valley Bank v. Wellman (In re Wellman), 322 B.R. 298, 301–02 (B.A.P. 6th Cir. Dec. 28, 2004) (Cook, Gregg, Whipple) (Confirmation precludes relief from stay that is inconsistent with plan notwithstanding that motion for stay relief was filed before confirmation and decided after confirmation. “[T]he provisions of the Debtors’ confirmed plan bound the Bank and pretermitted its motion for relief from stay, absent a post-confirmation default in carrying out the plan. . . . Once a plan is confirmed, it is treated as the exclusive and transcendent relationship between the debtor and the creditor. . . . When a debtor and creditor have been bound to a confirmed plan, an action by the creditor seeking relief that is incompatible with the plan is properly overruled.”); IMPAC Funding Corp. v. Simpson (In re Simpson), 240 B.R. 559, 561 (B.A.P. 8th Cir. Nov. 5, 1999) (Koger, Kressel, Dreher) (Confirmation of plan that provides for mortgage moots mortgage holder’s appeal of denial of relief from the stay. “The sum of the judicial decisions that have considered the statutorily binding effect of a confirmed plan of reorganization is that if the confirmed plan treats the creditor, and if the creditor received proper notice of the plan and its proposed confirmation, the creditor’s only potential remedy for a plan it doesn’t like is to appeal the order of confirmation. . . . The debtors’ plan lists IMPAC as a creditor and plainly treats the debt to IMPAC. IMPAC did not appeal from the order confirming the debtors’ plan and it is now a final and unappealable order. IMPAC cannot now raise issues it could have and should have raised by objecting to confirmation and in an appeal of the confirmation order.”); Chevy Chase Bank v. Locke (In re Locke), 227 B.R. 68, 71 (E.D. Va. Nov. 10, 1998) (Doumar) (Car lender that failed to object to confirmation of a plan that valued its collateral at $8,200 cannot attack the confirmation order by motion for relief from the stay after confirmation notwithstanding the timely filing of a proof of claim for $12,004.25. “[T]he Bank’s failure to raise an objection prior to confirmation of the plan precludes consideration of that objection after the fact.”); Lester Mobile Home Sales, Inc. v. Woods (In re Woods), 130 B.R. 204 (W.D. Va. June 19, 1990) (Williams) (Res judicata and § 1327(a) preclude a creditor from using a request for relief from the stay to challenge the value and treatment of the creditor’s collateral through the confirmed plan. Allegations that the plan valued the creditor’s collateral at less than fair market value and improperly modified the creditor’s rights, in violation of §§ 1325(a)(5)(B) and 1322(b)(2), are matters that creditor could have asserted by timely objection to confirmation or appeal of the confirmation order. These issues cannot be raised by motion for relief from the stay after the confirmation order is final. Creditor’s argument that these defects in the plan are “jurisdictional” did not rescue creditor’s untimely objections to confirmation.); In re James, 359 B.R. 602 (Bankr. W.D. La. Oct. 31, 2007) (Hunter) (Confirmed plan precluded stay relief to permit bank to pursue easement access to enclosed tract that had been surrendered.); In re Crowley, 258 B.R. 587, 591–92 (Bankr. D. Vt. Dec. 8, 2000) (Brown) (Confirmation of plan that provided for real estate-secured claim holder is binding and defeats postconfirmation motion for relief from the stay based on clarification of state law with respect to redemption rights. Confirmed plan provided for 20-year payout of mortgage secured by commercial property. Mortgage holder did not appeal confirmation order. After confirmation, the District Court for the District of Vermont held that a bankruptcy debtor’s right of redemption must be exercised within 60 days of the date of the petition, a change from prior law. Mortgage holder moved for relief from the stay, arguing that the change in the law was cause for relief. “[T]he binding effect of a chapter 13 plan extends to any issue actually litigated by the parties or necessarily determined by the confirmation order . . . . This Court rejects the Movants’ argument that a post-confirmation change in longstanding applicable bankruptcy law is sufficient to warrant a revocation or modification of the terms of a confirmed and operating Chapter 13 plan.”); In re Steele, 182 B.R. 284 (Bankr. W.D. Okla. May 12, 1995) (Lindsey) (In the context of a postconfirmation motion for relief from the stay, mortgage holder is bound by confirmation of plan that skipped one postpetition payment and paid administrative expenses in advance of mortgage payments during the early months, notwithstanding that the effect was to create a postconfirmation default to the mortgage holder. Citing Green Tree Acceptance, Inc. v. Hoggle (In re Hoggle), 12 F.3d 1008 (11th Cir. Jan. 11, 1994), the debtor could modify the plan after confirmation to provide for postpetition defaults, and thus the plan itself could provide for the creation and the payment of a postpetition “default” by scheduling mortgage payments to begin one month after the petition. The better approach would be for the debtor to begin making mortgage payments directly to the mortgage company or to the Chapter 13 trustee immediately with the filing of the Chapter 13 case. That the plan contained no explanation how secured claim holders would be paid in the early months of the plan is a matter that could not be challenged after confirmation by motion for relief from the stay.); In re Walker, 128 B.R. 465 (Bankr. D. Idaho July 1, 1991) (Pappas) (Section 1327(a) binds mortgage holder to confirmed plan that modifies creditor’s rights in violation of § 1322(b)(2). Copy of plan with notice of confirmation hearing was served on the creditor. Creditor did not object to confirmation or appeal order of confirmation. Creditor cannot use a postconfirmation motion for relief from the stay to collaterally attack confirmed plan. Acceptance of a plan “is inferred from the absence of a timely objection.”). See also In re Ferrante, 195 B.R. 990, 993 (Bankr. N.D.N.Y. May 3, 1996) (Gerling) (Confirmation of amended plan that treated mortgage holder’s deficiency judgment as an unsecured claim binds creditor notwithstanding that mortgage holder had relief from the stay, foreclosed and recorded deficiency judgment that became a lien on other property of the estate. Recording of deficiency judgment was violation of the stay and void. “Pursuant to code § 1327(a) a confirmed plan binds the debtor and each creditor, as long as the creditor received notice and has an opportunity to present any objection it might have. . . . [T]he Debtor’s Amended Plan provides for the treatment of the Bank’s deficiency claim as an unsecured claim and also provides that the Bank receive a 14.3% dividend on such claim. There has been no evidence that the Bank filed any objection to said treatment and, accordingly, is bound by the terms of the Debtor’s Amended Plan.”); Green Tree Fin. Corp. v. Garrett (In re Garrett), 185 B.R. 620, 623 (Bankr. N.D. Ala. July 31, 1995) (Sledge) (Creditor is not entitled to a writ of seizure under Alabama law because confirmation binds the creditor to accept the curing of defaults and the maintenance of payments through the plan, notwithstanding that the creditor was granted relief from the stay prior to confirmation. Before confirmation, mobile home–secured creditor was granted relief from the stay. A plan that provided for the mobile home loan was confirmed without objection. The creditor went into state court to get possession of the mobile home. The debtor removed the state court action to the bankruptcy court. “The central legal issue in this hearing is whether an order terminating the automatic stay, entered before the order confirming the plan, provides an exception to the rule that the parties are bound by confirmation. . . . The preconfirmation lift stay order terminated the automatic stay . . . but does not change the binding effect of an order of confirmation, or remove a claimholder from the provisions of a confirmed plan, unless the plan expressly preserves the terms of the lift stay order.”).

 

25  In re Lemma, 394 B.R. 315, 322–24 (Bankr. E.D.N.Y. Sept. 29, 2008) (Grossman) (Confirmed plan that cures default and maintains payments trumps relief from codebtor stay under § 1301(c)(2), notwithstanding prepetition judgment of foreclosure and postpetition termination of § 362(a) stay under § 362(c)(3). “The only effect termination of the stay had on this case was to permit the Bank to proceed against Debtors in state court. . . . [T]here is nothing in the Code to even suggest that once the stay is terminated, Debtors can no longer bind the Bank under a plan which implements the cure and reinstatement provisions provided in the Bankruptcy Code. . . . The Bank is now barred by res judicata from arguing that Debtors had no right to cure and reinstate the mortgage and note. . . . [E]ven where the stay has been terminated preconfirmation by operation of law under section 362(c)(3) . . . the debtor still retains the right to bind the creditors under a confirmed plan. . . . [T]his Court declines to follow [In re Cline, 386 B.R. 344 (Bankr. N.D. Ala. Feb. 11, 2008) (Robinson).]”); In re Moffitt, No. 04-91391-DML-13, 2007 WL 1118287 (Bankr. N.D. Tex. Apr. 12, 2007) (unpublished) ( (Confirmation subsequent to conditional stay relief order precludes enforcement of conditions.); In re Sullivan, 321 B.R. 306, 308 (Bankr. M.D. Fla. Jan. 14, 2005) (Funk) (Mortgage holder is bound by confirmed plan notwithstanding consensual relief from stay before confirmation. “The pre-confirmation lift stay order terminated the automatic stay under 11 U.S.C. § 362(a), but does not change the binding effect of an order of confirmation . . . . The Court agrees with the holding in [Green Tree Financial Corp. v. Garrett (In re Garrett), 185 B.R. 620 (Bankr. N.D. Ala. July 31, 1995)]. A confirmation order which provides for payments to a creditor is binding upon that creditor notwithstanding the fact that the creditor obtained relief from the automatic stay prior to confirmation of the plan.”); In re Ferrante, 195 B.R. 990, 993 (Bankr. N.D.N.Y. May 3, 1996) (Gerling) (Confirmation of amended plan that treated mortgage holder’s deficiency judgment as an unsecured claim binds creditor notwithstanding that mortgage holder had relief from the stay, foreclosed, and recorded deficiency judgment that became a lien on other property of the estate. Recording of deficiency judgment was violation of the stay and void. “Pursuant to code § 1327(a) a confirmed plan binds the debtor and each creditor, as long as the creditor received notice and has an opportunity to present any objection it might have. . . . [T]he Debtor’s Amended Plan provides for the treatment of the Bank’s deficiency claim as an unsecured claim and also provides that the Bank receive a 14.3% dividend on such claim. There has been no evidence that the Bank filed any objection to said treatment and, accordingly, is bound by the terms of the Debtor’s Amended Plan.”); Green Tree Fin. Corp. v. Garrett (In re Garrett), 185 B.R. 620, 623 (Bankr. N.D. Ala. July 31, 1995) (Sledge) (Creditor is not entitled to a writ of seizure under Alabama law because confirmation binds the creditor to accept the curing of defaults and the maintenance of payments through the plan, notwithstanding that the creditor was granted relief from the stay prior to confirmation. Before confirmation, mobile home–secured creditor was granted relief from the stay. A plan that provided for the mobile home loan was confirmed without objection. The creditor went into state court to get possession of the mobile home. The debtor removed the state court action to the bankruptcy court. “The central legal issue in this hearing is whether an order terminating the automatic stay, entered before the order confirming the plan, provides an exception to the rule that the parties are bound by confirmation. . . . The preconfirmation lift stay order terminated the automatic stay . . . but does not change the binding effect of an order of confirmation, or remove a claimholder from the provisions of a confirmed plan, unless the plan expressly preserves the terms of the lift stay order.”).

    The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub. L. No. 109-8, 119 Stat. 23 (2005), included new restrictions on the automatic stay in § 362(c)(3) and (4). See discussion beginning at § 59.1  In GeneralEven though no stay came into effect under § 362(c)(4), a creditor not paying attention may be bound by confirmation of a plan. See, e.g., In re Murray, 350 B.R. 408 (Bankr. S.D. Ohio Sept. 13, 2006) (Waldron) (Because confirmed plan overcame vesting effect in § 1327(b), home remained property of Chapter 13 estate within exclusive jurisdiction of bankruptcy court under 28 U.S.C. § 1334(e)(1) notwithstanding that no automatic stay came into effect under § 362(c)(4).). But see Cline v. Deutsche Bank Nat’l Trust Co. (In re Cline), 386 B.R. 344, 352–53 (Bankr. N.D. Ala. Feb. 11, 2008) (Robinson) (Distinguishing Green Tree Financial Corp. v. Garrett (In re Garrett), 185 B.R. 620 (Bankr. N.D. Ala. July 31, 1995), when stay terminates or does not come into effect under § 362(c)(3) or (c)(4), confirmation of a plan does not upset mortgage holder’s right to proceed with foreclosure in state court. In Kimberly Cline’s seventh bankruptcy case and Jimmy Cline’s fifth bankruptcy case, court extended automatic stay under § 362(c)(3) as to all creditors except Ameriquest Mortgage. With respect to Ameriquest, court extended stay temporarily until January 31, 2007, to allow parties to negotiate. During that negotiation, debtors confirmed a plan that cured default and maintained payments with respect to Ameriquest. “[O]nce a court finds there is no sufficient reason to justify an extension or imposition of the stay under Section 362(c)(3) or (4), confirmation of a plan should neither change that finding nor interfere with the creditor’s uninterrupted right to exercise its remedies post-confirmation without seeking additional relief from the court. . . . Section 1327(a) does not implicitly or otherwise overrule a pre-confirmation order allowing the stay to expire under Section 362(c)(3). The expiration or termination of the stay pursuant to Section 362(c)(3) transcends confirmation, and notwithstanding Section 1327(a) a creditor may continue to rely on such expiration or termination after confirmation when exercising its contractual and state court remedies.”).

 

26  See §§ 69.1 [ Alimony and Support Exception ] § 58.5  Alimony and Support Exception and 430.1 [ Domestic Support Obligation Exception ] § 58.6  Domestic Support Obligation Exception after BAPCPA.

 

27  Florida Dep’t of Revenue v. Rodriguez (In re Rodriguez), No. 09-13222, 2010 WL 597224, at *3 (11th Cir. Feb. 22, 2010) (unpublished) (Dubina, Pryor, Anderson) (Florida Department of Revenue did not violate automatic stay by sending child support collection letters because of exception in § 362(b)(2)(B); state did violate confirmation order by seeking to collect more than was provided for in confirmed plan, and bankruptcy court appropriately found contempt and assessed attorney fees. State waived sovereign immunity under § 106(b) by filing a proof of claim. Carver v. Carver, 954 F.2d 1573 (11th Cir. Mar. 6, 1992) (Fay, Hatchett, Gibson), was distinguishable. “[A]lthough the State cannot be said to have violated the automatic stay provisions of § 362(a) because of the child support exception to that statute, it did violate the terms of Rodriguez’s bankruptcy plan, as confirmed by the bankruptcy court. Because the State, like all creditors, was bound by the terms of the confirmed plan pursuant to § 1327(a), we conclude that the bankruptcy court did not err in granting Rodriguez’s motion for contempt. . . . Although § 1327(b), which provides that following confirmation property revests with the debtor, allows a child support creditor to seek collection from the debtor, § 1327(a) forbids collection of any debt not confirmed by the plan.”). See also In re Diaz, No. 6:02-bk-05591-ABB, 2009 WL 3584517 (Bankr. M.D. Fla. Sept. 30, 2009) (Briskman) (State entities were bound by confirmation and by claims allowance process to the amount of allowed child support claims and cannot relitigate effect of confirmation when charged with stay violations and violations of discharge injunction. State child support agencies had notice and did not object to plan providing for payment of allowed child support claims. Preclusive effect was given to claim allowance process and confirmation order establishing amount of allowable support claims.); Fort v. Florida Dep’t of Revenue (In re Fort), 412 B.R. 840, 858–59 (Bankr. W.D. Va. June 30, 2009) (Stone) (When amount of state’s support claim was fixed in confirmed plan, state’s postconfirmation continuation of wage deduction did not violate stay but did violate § 1327(a), to extent it sought payment of prepetition support; however, bankruptcy court order partially disallowing state’s proof of claim and confirmed plan providing for payment of lesser amount than state asserts were inconsistent with Florida state court’s authority to determine amount of support. “The Court concludes that the boundaries of its own jurisdiction and that of the Florida court need to be clearly defined with no overlapping territory and that proper comity to that court dictates that any determination of the viability of the disallowed portion of the state’s claim ought to be made in that [state] court.”); In re Worland, No. 008-2148-AJM-13, 2009 WL 1707512 (Bankr. S.D. Ind. June 16, 2009) (Metz) (Child Support Division of Marion County Prosecutor’s Office did not violate automatic stay by garnishing wages and intercepting tax refund because of exceptions in § 362(b)(2)(C) and (F); however, MCPO was bound by confirmed plan that paid domestic support obligation in full, and postconfirmation collection efforts violated confirmation order. No monetary sanction was appropriate because MCPO immediately returned tax refund and stopped garnishment.).

 

28  In re Grissom, 137 B.R. 689 (Bankr. W.D. Tenn. Mar. 4, 1992) (Brown). See also In re Torres, 193 B.R. 319, 323–24 (Bankr. N.D. Cal. Mar. 11, 1996) (Weissbrodt) (Res judicata precludes motion to modify plan to require nine additional months where 35% dividend was paid in only 27 months. Original plan called for 35% payment but was silent with respect to length. No disposable income test objection was made. When it appeared that confirmed plan would pay in full in only 27 months, creditor moved for modification to require nine additional months to increase dividend to unsecured claim holders. “A confirmed plan is res judicata as to all justiciable issues that were, or could have been, determined at confirmation. . . . The unambiguous language of this plan served to put the Trustee and all creditors on notice that Debtor was not proposing a term of any specific length, so that it obviously could turn out to be more or less than three years. . . . Anyone—Trustee and/or creditors—who disliked the absence of a three year minimum term could have objected to confirmation on that basis to invoke § 1325(b)(1)(B). . . . Once the plan is confirmed, it is res judicata as to the § 1325(b)(1)(B) issue.”). But see In re Zayed, 340 B.R. 108 (Bankr. M.D. Fla. Mar. 9, 2006) (Jennemann) (Debtor is bound by confirmed plan requiring turnover of tax refunds to trustee.). See also § 236.1 [ Tax Refunds ] § 122.1  Tax Refunds.

 

29  In re Elstien, 238 B.R. 747, 754 (Bankr. N.D. Ill. July 27, 1999) (Barliant) (Because IRS had actual knowledge of Chapter 13 in time to file an objection to confirmation, confirmation precludes motion to dismiss on the ground of bad faith by the debtor. “Confirmation requires a finding that the plan was proposed in good faith (§ 1325(a)(3)) and that issue is barred.”). Accord In re Curtis, No. 09-41396, 2010 WL 1444851, at *2 (Bankr. S.D. Ill. Apr. 9, 2010) (Altenberger) (Confirmation of plan necessarily included finding that petition was filed in good faith under § 1325(a)(7); confirmation precluded motion to dismiss for bad faith—notwithstanding that motion to dismiss was filed before confirmation of plan—when the movant failed to also object to confirmation. “Pennell raised the good faith issue in her motion to dismiss under § 1307(c) prior to confirmation. However, although she received notice that the Debtor had filed an amended plan, she did not file an objection to confirmation of the amended plan. When the Court confirmed the plan, it necessarily found that the Debtor’s petition was filed in good faith, and under § 1327(a), Pennell is now bound by that determination. Accordingly, Pennell’s motion to dismiss the Debtor’s Chapter 13 case is denied as moot.”); In re King, 290 B.R. 641, 651 (Bankr. C.D. Ill. Mar. 5, 2003) (Perkins) (“Objections based upon allegations of lack of good faith . . . must be raised at or prior to confirmation, and, if not, are waived. . . . Issues resolved by confirmation are not thereafter subject to collateral attack by a creditor that had notice of the proceeding but failed to object to confirmation. . . . By not objecting to the plan or otherwise raising the issue prior to confirmation, BANK ONE waived the issue of lack of good faith.”); In re Parchman, No. 4:02-BK-11861 E, 2002 WL 32115832, at *1 (Bankr. E.D. Ark. Aug. 5, 2002) (unpublished) (Evans) (“IFIC’s failure to object to Debtor’s Chapter 13 plan during the confirmation process bars it from litigating the issue of good faith in a Motion to Dismiss. Because good faith is a requirement for confirmation of a Chapter 13 plan, the issue is necessarily determined by the confirmation order and has res judicata effect. . . . While IFIC’s Motion to Dismiss was filed prior to the confirmation of Debtor’s Chapter 13 plan, confirmation of the plan prior to the hearing on the Motion to Dismiss precludes an analysis of the good faith issue.”).

 

30  In re Eason, 178 B.R. 908 (Bankr. M.D. Ga. Aug. 2, 1994) (Laney) (Section 1327 and res judicata prohibit the IRS from objecting to modification after confirmation where the IRS’s treatment is not changed and the IRS failed to object to confirmation of the original plan. Statements and schedules showed that best-interests-of-creditors test required the debtor to pay interest to unsecured and priority claim holders. Debtor’s original plan did not provide for the payment of interest, but IRS did not object. At modification several years after confirmation, IRS is precluded from raising best-interests-of-creditors test objection.). Accord In re Harvey, 213 F.3d 318 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (Confirmation of plan that lien-stripped undersecured car lender precludes objection to same provision in modified plan.); In re Salva, No. 03-09405(ESL), 2009 WL 2898822 (Bankr. D.P.R. Apr. 1, 2009) (Lamoutte) (Best-interests-of-creditors test cannot be raised for first time after confirmation by way of a motion to dismiss for cause.). But see In re Stevens, 236 B.R. 350, 351–52 (Bankr. E.D. Va. Mar. 8, 1999) (Tice) (Upon denial of confirmation of second modified plan that contained findings that would discharge student loans, court declares that first modified plan that contained the same provision for discharge of student loans that was confirmed months earlier without objection does not have the effect specified in the confirmed plan. “[I]t does not matter that debtor’s earlier plan, which sought to discharge the educational loan as an undue hardship, has been confirmed. The provision cannot have the effect sought for it. When the debtor completes payment of the plan, then an appropriate adversary proceeding may be filed on the undue hardship claim. . . . The court considers this a due process requirement and will not permit the discharge of an otherwise nondischargeable debt by a provision of a chapter 13 plan.”); In re Boehm, 202 B.R. 99, 101–02 (Bankr. N.D. Ill. Oct. 29, 1996) (DeGunther) (On trustee’s postconfirmation motion, court applies best-interests-of-creditors test to determine that interest is payable. Confirmed plan provided 100% dividend to unsecured creditors. Debtor scheduled unencumbered real property with a value of $35,000. One creditor filed a proof of claim for $19,154.53, including postpetition interest of $2,774.69. Trustee filed motion to determine whether interest should be paid on the unsecured claim. “Here, the Debtor owns an unencumbered residence worth approximately $35,000. The only filed claim in the bankruptcy is the Creditor’s claim . . . . There is no doubt that if the Debtor’s estate were liquidated under Chapter 7 the Creditor would receive 100% of its claim plus interest. . . . [P]ost-petition interest should be paid on this unsecured claim.”).

 

31  In re Ragan, 140 B.R. 283 (Bankr. D. Kan. Apr. 22, 1992) (Franklin) (Creditor’s failure to object to confirmation is fatal to motion for adequate protection because adequate protection under § 361 is limited by § 1327 to the time between the filing of the petition and confirmation. Adequate protection must be asserted as a ground for objection to confirmation, else the argument is precluded by confirmation.); In re Patterson, 107 B.R. 576 (Bankr. S.D. Ohio Nov. 1, 1989) (Calhoun) (Confirmation order is res judicata of adequate protection of a secured claim holder. Automobile financier’s failure to object to confirmation is fatal to argument that car lien is not adequately protected when plan proposes to pay arrearages on home mortgage before any payments to car lender.).

 

32  See, e.g., Onyx Invs., L.L.C. v. Foster, No. 06-4053-SAC, 2007 WL 1347696 (D. Kan. May 8, 2007) (unpublished) (Crow) (Creditor whose unsecured lien was stripped is bound by confirmation when opportunity to object to confirmation satisfied due process; adversary proceeding is not necessary to strip lien.); Scott v. Countrywide Home Loans, Inc. (In re Scott), 376 B.R. 285, 295 (Bankr. D. Idaho Sept. 4, 2007) (Pappas) (When Countrywide and its privy had notice of plan, which contained clear lien-stripping language, lender is barred by res judicata effect of confirmation from claiming that value of property was misrepresented. “The value of [debtors’] house, and whether Defendants’ second mortgage lien was completely unsecured or not, were issues that ‘could have or should have been litigated at the confirmation hearing,’” quoting Duplessis v. Valenti (In re Valenti), 310 B.R. 138, 150 (B.A.P. 9th Cir. May 11, 2004) (Montali, Perris, Marlar).); In re Jackson-Bostic, No. 02-52127(RTL), 2006 WL 4457347 (Bankr. D.N.J. June 14, 2006) (unpublished) (Lyons) (Motion to enforce cramdown feature of completed plan is granted based on res judicata effect of confirmed plan that clearly provided second mortgage had no value.); In re Barron, 325 B.R. 17 (Bankr. M.D. Ala. Apr. 15, 2005) (Williams) (Debtor is only obligated to insure mobile home for $15,000 value in confirmed plan; Green Tree not justified to force-place insurance and not entitled to reimbursement for premium.).

 

33  See below in this section, and see §§ 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., IRS v. DiPasquale, No. 06-106(MLC), 2006 WL 1207990 (D.N.J. Apr. 28, 2006) (unpublished) (Cooper) (Citing In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989), confirmed plan that provided full payment for IRS and release of IRS’s lien upon completion of payments was binding and lien was released without payment when IRS filed proof of claim that omitted its secured debt.); In re Simmons, 379 B.R. 143 (Bankr. N.D. Ill. Aug. 30, 2007) (Sonderby) (Mortgagee is bound by confirmation, which included arrearages based on mortgagee’s proof of claim, and mortgagee accepted plan payments for two years; mortgagee is not entitled to relief from the confirmation order to increase arrearages. Distinguishing In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994), confirmed plan did not violate mandatory provisions of § 1322(a)(2), when mortgagee participated in confirmation and order of confirmation was entered without objection.); In re Averhart, 372 B.R. 441, 443, 445 (Bankr. E.D. Wis. July 12, 2007) (Shapiro) (Under In re Harvey, 213 F.3d 318, 321 (7th Cir. May 2, 2000), “a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan”; Wells Fargo Financial is bound by 4.89% interest rate in plan rather than 9.5% asserted in its proof of claim. “Wells Fargo had ample opportunity to object to the proposed interest rate of 4.89% in debtor’s plan but failed to do so.”); In re Ramey, 301 B.R. 534 (Bankr. E.D. Ark. Nov. 12, 2003) (Mixon) (Plan that treated bank’s claim as unsecured was binding because bank had notice and did not object to confirmation; preconfirmation proof asserting a secured claim to which the debtor objected but that was unresolved at the time of confirmation does not change outcome.); In re Abrams, 305 B.R. 920 (Bankr. S.D. Ala. Mar. 8, 2002) (Mahoney) (Confirmed plan that stated a value for a car but provided no preferential payment and no postconfirmation interest is binding with respect to interest because the plan was not ambiguous.); In re Jones, 271 B.R. 397, 401 (Bankr. S.D. Ala. Aug. 21, 2000) (Mahoney) (Upon objection, collateral value stated in confirmed plan defeats larger amount stated in proof of claim filed after confirmation. “The claim would be found to be valued precisely as indicated in the final confirmation order.”); In re Duggins, 263 B.R. 233 (Bankr. C.D. Ill. June 12, 2001) (Perkins) (Value stated in confirmed plan trumps contrary value in proof of claim filed before confirmation.); In re Hudson, 260 B.R. 421 (Bankr. W.D. Mich. Mar. 30, 2001) (Gregg) (Confirmed plan that valued car lender’s collateral at $8,000 trumps inconsistent proof of claim timely filed after confirmation.); In re Vincent, 252 B.R. 91 (Bankr. E.D. Va. June 2, 2000) (Adams) (Interest rate in confirmed plan trumps interest rate in proof of claim.).

 

34  See GMAC v. Butler (In re Butler), 261 B.R. 846 (Bankr. D.S.C. Mar. 1, 2001) (Bishop) (Confirmed plan that treated GMAC SmartLease as a secured claim is res judicata in GMAC’s adversary proceeding more than one year after confirmation.); In re Durham, 260 B.R. 383 (Bankr. D.S.C. Mar. 2, 2001) (Waites) (Distinguishing Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. Sept. 21, 1999), and Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. Apr. 1, 1993), plan that treated car lease as a disguised security agreement binds creditor to accept the present value of its collateral through the plan because notice was adequate, the lessor was aware or should have been aware that its lease was being treated as a disguised security agreement and the creditor clearly was provided for by the plan.). But see General Elec. Capital Auto Lease v. Eron (In re Eron), No. 00-2343, 2001 WL 985113 (4th Cir. Aug. 24, 2001) (unpublished) (Confirmed plan that treated car lease as security interest is not binding on lessor because debtors failed to take additional action.). See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See also § 175.1 [ Fake Leases and Rental Agreements ] § 102.8  Fake Leases and Rental Agreements.

 

35  In re Moore, 290 B.R. 141, 144 (Bankr. W.D. Mo. Feb. 18, 2003) (Venters) (Confirmed plan that treated “contract for title” to mobile home as a secured claim valued at $18,000 trumps postconfirmation proof of claim for $26,000 asserting an executory contract when notice of plan was adequate and claim holder failed to timely object to confirmation. “[W]here adequate notice has been provided to claimants regarding the plan confirmation process, most courts prohibit further litigation of all issues which were or could have been litigated at or before confirmation.”).

 

36  Ford Motor Credit Co. v. Parmenter (In re Parmenter), 527 F.3d 606, 608 (6th Cir. Oct. 20, 2008) (Martin, Sutton, Oberdorfer) (When confirmed plan assumes car lease and provides for payments directly by debtor to lessor, lease deficiency and attorney fees are not administrative expenses upon default; creditor is bound by confirmed plan, and lease claim is not transformed into an administrative expense, thereby “leapfrogging other [unsecured] creditors.”); Ford Motor Credit Co. v. Estate of Benn, 362 B.R. 1 (E.D. Mich. Jan. 25, 2007) (Taylor) (Confirmation bound Ford Motor Credit to assumption of lease and direct lease payments from debtors; since leases were never of benefit to bankruptcy estates, Ford was not entitled to administrative expense claims when debtors defaulted after confirmation.); In re White, 370 B.R. 713 (Bankr. E.D. Mich. July 5, 2007) (Tucker) (Debtors and Ford Motor Credit are bound by confirmed plan which provided for assumption of automobile lease; Ford’s motion for administrative expense allowance for excess mileage and wear charges is denied since plan did not provide for those charges as administrative expenses.). But see In re Wells, 378 B.R. 557 (Bankr. S.D. Ohio Nov. 5, 2007) (Hopkins) (Debtor is bound by assumption of car lease in confirmed plan; upon postconfirmation default, lessor is entitled to administrative expense under § 365(g)(2)(A).).

 

37  In re Young, 281 B.R. 74, 77–81 (Bankr. S.D. Ala. Mar. 8, 2001) (Shulman) (“At the time the Debtors filed Chapter 13 . . . the Debtors were within the redemption period set forth in the pawn ticket contract. . . . The Debtors’ plan was confirmed prior to the expiration of the extended redemption period given by § 108(b) without any objection from Cash America. . . . [I]f an objection to confirmation of a debtor’s plan on section 1325(a)(5) grounds could have been raised and litigated prior to confirmation, whether those grounds were litigated or not, the confirmation order becomes conclusive as to those grounds. . . . Cash America chose not to object to the Debtors’ plan . . . . [H]aving slept on their rights, Cash America cannot now complain about the treatment of its secured claim.”).

 

38  See, e.g., In re Tapley, No. 06-52297-JDW, 2007 WL 2274716 (Bankr. M.D. Ga. Aug. 3, 2007) (unpublished) (Walker) (Creditor that failed to object to confirmation is bound by plan that pays first $1,500 to debtor’s attorney before paying other creditors.). See § 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA for discussion of order of payment of claims.

 

39  In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989) (Mansmann, Nygaard, Aldisert). Accord In re Bryant, 323 B.R. 635, 639 (Bankr. E.D. Pa. Apr. 19, 2005) (Sigmund) (A Chapter 13 plan which paid Ocwen Bank “in full” a fixed amount of $41,471.59 was binding and the lien would be released notwithstanding that its actual claim was $67,736.17. “A secured creditor which fails to object to confirmation will be deemed to have accepted the plan. . . . Szostek, [886 F.2d 1405 (3d Cir. Oct. 12, 1989),] makes clear that plans that would not be confirmable due to provisions that do not conform to applicable law will nonetheless be given effect if an objection is not raised prior to entry of the confirmation order.”); In re Abrams, 305 B.R. 920 (Bankr. S.D. Ala. Mar. 8, 2002) (Mahoney) (Confirmed plan that stated a value for a car but provided no monthly payment and no postconfirmation interest is binding with respect to the absence of interest because the plan was not ambiguous and the car lender had an opportunity to object and did not object to confirmation.); In re Taylor, 280 B.R. 711, 714 (Bankr. S.D. Ala. Apr. 17, 2001) (Mahoney) (Mortgage holder is not entitled to interest because confirmed plan provided 100% payment without interest and the unsecured claim filed by the mortgage holder raised no entitled to interest. “[T]he order of confirmation is binding on Empire regardless of the propriety of its treatment.”); In re Brenner, 189 B.R. 121, 122–29 (Bankr. N.D. Ohio Oct. 3, 1995) (Speer) (IRS’s failure to object to confirmation is fatal to postconfirmation argument that it was entitled to interest on its secured claim. Confirmed plan treated IRS as an unsecured priority claim to be paid in full without interest. Thirty-three months after confirmation, the IRS filed an “amended proof of claim,” differing from its original claim only in that it included for the first time an assertion that interest was payable at 10% on its secured claim. “Like the Court in [In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989),] this Court also concludes that the policy regarding the binding nature of the confirmed plan outweighs the policy of a secured creditor receiving post-petition interest on its claim when such interest was not provided for in the plan. . . . [H]ad the IRS timely objected to the Plan, it surely would have prevailed. This does not, however, give the IRS the right to ignore the bankruptcy proceedings for nearly two years and expect to have its claim treated as it would have been had it timely objected to the Plan.”). But see SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin), 530 F.3d 230 (3d Cir. June 24, 2008) (Rendell, Greenberg, Van Antwerpen), discussed below in this section.

 

40  In re Pence, 905 F.2d 1107 (7th Cir. July 13, 1990) (Wood, Coffey, Noland). Accord In re Harvey, 213 F.3d 318 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (Without expressing an opinion whether lien stripping over a creditor’s objection is permitted prior to the completion of payments under a Chapter 13 plan, confirmation of plan that lien-stripped undersecured car lender precludes objection to same provision in later modified plan.); In re McGill, No. 07-13086 SR, 2009 WL 2912503 (Bankr. E.D. Pa. June 11, 2009) (Raslavich) (Under In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989) (Mansmann, Nygaard, Aldisert), car lender that received notice and failed to object was bound by confirmation of plan that surrendered car that had been destroyed postpetition.); In re Stansbury, 403 B.R. 741, 746, 748 (Bankr. M.D. Fla. Mar. 9, 2009) (Glenn) (Confirmed plan that surrendered corporation’s property in full satisfaction of debtor’s obligation was binding on creditor with notice that failed to object, notwithstanding that plan incorrectly classified mortgage creditor. Two factors determine binding effect: “First, the Court should determine whether the affected creditor received proper notice of the proposed plan. . . . Second, the Court should determine whether the issue resolved in the plan was appropriately addressed as a contested matter in the confirmation process, or whether it should have been resolved in the context of an adversary proceeding. . . . In other words, a confirmed plan is binding on all creditors, unless a particular creditor was otherwise entitled to the heightened procedural safeguards provided by an adversary proceeding.” This creditor had adequate notice and opportunity to litigate surrender and classification at confirmation. “The improper classification and treatment of a claim are matters that are suitable for resolution at the confirmation hearing. In re Burrell, 346 B.R. 561, 568-70 (B.A.P. 1st Cir. 2006).”); In re Basham, 167 B.R. 903, 903 (Bankr. W.D. Mo. May 16, 1994) (Koger) (Secured claim holder is bound to accept surrender of its mobile home collateral in full satisfaction of its claim where the debtor served a copy of the plan summary on all creditors, the summary contained a typewritten entry that “Secured Creditors agree to accept collateral in full satisfaction of their claims,” and the secured claim holder was aware of its treatment under the plan and did not object to confirmation.). See also In re Kitts, No. 06 31215, 2006 WL 3337515 (Bankr. E.D. Tenn. Nov. 16, 2006) (unpublished) (Stair) (Without regard to hanging sentence BAPCPA added at end of § 1325(a), confirmation of plan that surrendered car “in full satisfaction of the debt” was binding on lienholder and precluded deficiency claim.). Surrender in full satisfaction of a debt protected by the hanging sentence added by BAPCPA to the end of § 1325(a) is discussed in § 451.5 [ Surrender in Full Satisfaction? ] § 75.5  Surrender in Full Satisfaction?.

 

41  See § 238.1 [ Loss, Destruction or Surrender of Property after Confirmation ] § 122.3  Loss, Destruction or Surrender of Property after Confirmation. See, e.g., In re Hardin, 375 B.R. 506 (Bankr. E.D. Wis. Sept. 11, 2007) (McGarity) (When car was destroyed postconfirmation, insurance proceeds paid by third party’s liability carrier were payable to Ford only to extent of Ford’s remaining secured claim, with excess payable to debtors. Under UCC in Wisconsin, secured creditor had security interest in proceeds only to extent of its secured claim balance.); In re McDade, 148 B.R. 42 (Bankr. S.D. Ill. Nov. 12, 1992) (Coutrakon); In re Pourtless, 93 B.R. 23 (Bankr. W.D.N.Y. Nov. 23, 1988) (McGuire); In re Tucker, 35 B.R. 35 (Bankr. M.D. Tenn. Oct. 13, 1983) (Paine). But see First Fidelity Bank v. McAteer (In re McAteer), 985 F.2d 114, 118–19 (3d Cir. Feb. 3, 1993) (Mansmann, Hutchinson, Bartle) (Confirmation of plan that crammed down bank’s claim to the fair market value of a truck does not affect the bank’s right to collect the full amount of its debt consistent with a credit life insurance policy upon the death of the debtor. Credit life and disability policy required the insurance company to pay bank “any amount remaining according to the schedule of indebtedness, plus up to two months’ arrearage.” At confirmation, the bank’s secured claim was crammed down from $13,722 to the value of the collateral, $7,525. The debtor died after confirmation, and the insurance company tendered $11,356, the amount due on the entire indebtedness on the date of death, plus two months’ arrearage. Although debtor owned the policy, debtor did not own the proceeds, and confirmation could not alter the bank’s rights against the insurance company. “While it is true that the bankruptcy court’s confirmation of the plan binds the debtor and all creditors . . . it does not follow that a discharge in bankruptcy alters the right of a creditor to collect from third parties. Section 524(e) specifically limits the effect of a discharge. . . . [The bank’s] interest in the proceeds of the life insurance policy is not the property of the debtor’s estate and thus cannot be altered by the confirmation of the Chapter 13 plan. Under the life insurance policy, . . . the insurance company was required to pay the amount remaining under the schedule of indebtedness. . . . [T]he confirmation . . . did not work to erase or alter [the bank’s] right, as a third party beneficiary, to collect from the insurance company.”).

 

42  Multnomah County v. Ivory (In re Ivory), 70 F.3d 73, 75 (9th Cir. Oct. 30, 1995) (Wallace, Nelson, Brunetti). Accord In re Commings, 297 B.R. 701 (Bankr. N.D. Ill. July 31, 2003) (Goldgar) (Purchaser at prepetition Illinois tax sale is bound by confirmed plan that redeems the property in installments; purchaser did not challenge the adequacy of notice and debtor filed a preconfirmation proof of claim on behalf of the purchaser.).

 

43  United States v. Richman (In re Talbot), 124 F.3d 1201, 1209 (10th Cir. Aug. 26, 1997) (Baldock, Holloway, Murphy). See also In re Barton, 359 B.R. 681 (Bankr. N.D. Ill. Nov. 8, 2006) (Black) (County with notice of plan and of proof of claim filed on its behalf is bound by confirmation to accept payment of property taxes without interest. County is enjoined from collecting more than confirmed plan paid.). But see Harchar v. United States (In re Harchar), No. 00-1184, 2006 WL 3196846 (Bankr. N.D. Ohio Oct. 4, 2006) (unpublished) (Morgenstern-Clarren) (Debtors’ complaint alleged violation by IRS of terms of confirmed plan but failed to specify any plan provision violated.).

 

44  See Department Treasury of P.R. v. Pagàn (In re Pagàn), 279 B.R. 43, 47 (D.P.R. June 17, 2002) (Laffitte) (Failure to object binds Commonwealth of Puerto Rico to confirmed plan and precludes motion to require debtors to file tax returns. “[Debtors] in this case are legally obliged to file tax returns. Section 105(a), however, does not allow a bankruptcy court to sit as a roving equity commission to ensure that the Puerto Rico tax laws are followed. . . . Treasury requested the order compelling the debtors to file tax returns so that it could subsequently amend its proofs of claim. . . . [T]he debtors’ plans had already been confirmed, and Treasury had failed to object to the plans prior to their confirmations. These confirmed plans had become binding. Treasury was seeking relief under section 105(a) so that it could amend its proof of claim after the plan had been confirmed. It was not an abuse of discretion for the Bankruptcy Court to deny this request.”).

    BAPCPA added many new requirements for debtor(s) to file or provide tax returns with important consequences for failure to do so. See § 42.4  Tax Return Duties—In General§ 42.5  Tax Return Duties Seven Days before First Scheduled Meeting of Creditors§ 42.6  Tax Return Duties One Day before First Scheduled Meeting of Creditors§ 42.7  Tax Return Duties—On Request and § 42.8  Consequences of Failure to File or Provide Tax Returns.

 

45  See 11 U.S.C. § 511, discussed in § 513.1 [ Taxes ] § 136.3  Taxes after BAPCPA.

 

46  In re McLemore, 426 B.R. 728, 735 (Bankr. S.D. Ohio Mar. 30, 2010) (Humphrey) (Purchaser of tax certificate was bound by confirmed plan that provided interest rate below state statutory rate when creditor failed to object or raise § 511. Notice of plan was not “qualitatively defective.” Plan described treatment of all secured claims, classifying secured claims and clearly providing for prime rate, plus 1.5% risk factor. If tax purchaser thought plan language was ambiguous, it should have objected to confirmation.).

 

47  Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370, 372–74 (B.A.P. 1st Cir. Jan. 11, 2001) (Lamoutte, Haines, Deasy) (“We conclude that the plan confirmation process, resulting in confirmation of Fili’s amended Chapter 13 plan, effectively extinguished Fili’s alleged liability to Factors. . . . Under the circumstances of this case, where the notice was adequate (indeed, repeated) and the plan clearly and unequivocally disclaimed any liability whatsoever to Factors, Factors was not free blithely to forgo its full and fair opportunity to object to the plan’s plain terms. . . . Plan confirmation is a final order, with res judicata effect, and is imbued with the strong policy favoring finality. . . . This is not a case such as Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. [Apr. 1,] 1993) where the confirmation notice was later deemed insufficient to apprise a creditor of the need to object to confirmation. . . . [W]e hold that in the face of notice that timely and unambiguously informs a creditor that his claim will be disallowed in total and discharged under a Chapter 13 plan pending for confirmation, the creditor may not ignore the confirmation process and fail to object simply because the bar date for filing a proof of claim has yet to expire. . . . Confirmation of such a plan, after notice and an opportunity for hearing, bars the creditor’s later-filed claim under principles of res judicata.”). But see Harris v. Fidelity Nat’l Info. Servs. Inc. (In re Harris), Nos. 03-44826, 08-3014, 2008 WL 924939, at *5 (Bankr. S.D. Tex. Apr. 4, 2008) (unpublished) (Bohm) (Complaint alleging mortgage servicer engaged in unauthorized fee splitting with law firms does not state cause of action for violation of confirmed plan because “there are no provisions in the Code which make a plan binding upon a non-creditor third party.”).

 

48  In re Wallace, 259 B.R. 646, 648 (Bankr. E.D. Tenn. Mar. 6, 2001) (Stair) (“In the present case, the Credit Union acquiesced in the Chapter 13 Plan releasing the Debtors’ liability on the note. The Credit Union agreed to look to a third party for payment. . . . Creditors are bound by the terms of a confirmed plan unless the plan is abandoned by the debtor. . . . Clearly, a third party has failed to comply with the plan’s provisions. That third party’s breach, however, cannot be considered a plan modification by the Debtors where the Credit Union freely released the Debtors from any further liability on this debt.”), aff’d, No. 01-5869, 2002 WL 31055985, at *1–*2 (6th Cir. Sept. 13, 2002) (unpublished) (Siler, Daughtrey, Gilman) (“[T]he Credit Union acquiesced in the Chapter 13 plan releasing the debtors’ liability on the note. The Credit Union agreed to look to a third party for payment. ‘The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.’ . . . [C]reditors are bound by the terms of a confirmed plan unless the plan is abandoned by the debtor.”).

 

49  In re Bonanno, 78 B.R. 52 (Bankr. E.D. Pa. Sept. 22, 1987) (Fox).

 

50  In re Martin, 427 B.R. 573 (Bankr. W.D. Va. Apr. 13, 2010) (Krumm) (Assignee of car lender’s deficiency claim was in privity with lender that had notice of plan providing for surrender of vehicle in full satisfaction; under Student Aid Funds, Inc. v. Espinosa, __ U.S. __, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010), creditor’s argument that debtor should have filed adversary proceeding was forfeited by failure to object to confirmation.).

 

51  See § 50.3  Strong-Arm Powers, Statutory Liens, Preferences and Fraudulent Conveyances for discussion of the debtor’s authority to file avoidance actions. Lien avoidance under § 522(f) is discussed beginning at § 49.1  Available in Chapter 13 Cases.

 

52  See Hearn v. Bank of N.Y. (In re Hearn), 337 B.R. 603, 611 (Bankr. E.D. Mich. Feb. 3, 2006) (Shefferly) (Confirmed plan binds defendants to debtor’s standing to bring avoidance actions. Distinguishing Ruehle v. Educational Credit Management Corp. (In re Ruehle), 412 F.3d 679 (6th Cir. June 23, 2005), reservation of standing in plan is not due process violation and is not illegal. Plan provision that classified mortgagee as secured creditor was not preclusive because plan specifically contemplated avoidance action. “[T]he filing of this adversary proceeding was explicitly contemplated by and disclosed in the Debtor’s modified plan. Section 1327(a) does not bar the Debtor from bringing this action.”). See also Hamilton v. Washington Mut. Bank, FA (In re Colon), 376 B.R. 33, 37 (B.A.P. 10th Cir. Sept. 19, 2007) (Bohanon, Brown, McNiff) (Confirmed plan that treated mortgage holder as unsecured creditor based on avoidable, improperly perfected mortgage was binding because mortgage holder failed to object to confirmation or to timely appeal order of confirmation. “[T]he confirmed plan is res judicata as to its treatment of Washington Mutual’s claim and distribution of the mortgage loan payments, whether or not that treatment violates § 1322(b).” Trustee successfully avoided mortgage in separate adversary proceeding.), rev’d on other grounds, 563 F.3d 1171 (10th Cir. May 4, 2009) (Murphy, Brorby, Hartz).

 

53  See §§ 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate, 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

54  See §§ 101.2 [ Acceptance of Plan ] § 74.3  Acceptance of Plan before BAPCPA and 445.1 [ Acceptance of Plan ] § 74.4  Acceptance of Plan after BAPCPA. See, e.g., In re Meyers, No. 06-11348-SSM, 2007 WL 4119071, at *2 (Bankr. E.D. Va. Nov. 16, 2007) (unpublished) (Mitchell) (County is bound by confirmation of plan that provided improperly for its claim to be unsecured when it was secured by personal property lien—“even if that treatment is contrary to law.”); In re Bryant, 323 B.R. 635, 639, 642, 643, 645 (Bankr. E.D. Pa. Apr. 19, 2005) (Sigmund) (Confirmed plan which paid Ocwen Bank “in full” a fixed amount of $41,471.59 was binding and lien would be released notwithstanding that actual claim was $67,736.17. “A secured creditor which fails to object to confirmation will be deemed to have accepted the plan. . . . Szostek [886 F.2d 1405 (3d Cir. Oct. 12, 1989),] makes clear that plans that would not be confirmable due to provisions that do not conform to applicable law will nonetheless be given effect if an objection is not raised prior to entry of the confirmation order. . . . [A] creditor with timely and unambiguous notice that its claim will be compromised and discharged may not ignore the confirmation process and fail to object notwithstanding that there either is no bar date for filing a claim or the time for filing a claim has yet to expire. . . . Had claimant been vigilant and objected to the Plan as not providing for full payment, a contested matter would have resolved the amount of the secured claim. However, Claimant was silent, and the Plan was confirmed. Upon confirmation all lien rights were defined by the Plan and upon completion of the payments under the Plan in 1999, the identified debt, i.e., $41,471.59, was paid in full. Thus, the lien that secured that debt and which was retained for the life of the Plan did not survive the Debtor’s discharge.”).

 

55  Homebanc v. Chappell (In re Chappell), 984 F.2d 775, 782–83 (7th Cir. Jan. 14, 1993) (Coffey, Ripple, Eschbach) (Confirmation of plan calling for 100% payment of second mortgage precludes postdischarge foreclosure action when mortgage holder’s proof of claim was paid in full during the life of the plan but without interest. Plan specified that creditor would receive $20,661.20. Mortgage company filed a proof of claim for $20,661.20 and did not object to confirmation. The debtors paid $20,661.20 through the plan and received a discharge. Second mortgage holder realized before discharge it was not receiving interest and protested to debtors’ counsel but made no effort to modify, revoke, or otherwise attack the confirmation order. “If [plan] was unsatisfactory to [the mortgage holder], it should have objected. . . . Instead, [the mortgage company] failed to attend the Section 341 meeting and also failed to file an objection to confirmation. . . . Failure to object to the confirmation of a Chapter 13 plan is deemed acceptance. . . . [T]he untimeliness of [the mortgage holder’s] claim [for interest] under section 506(b) bars it from now obtaining any interest on the second mortgage. The Chapter 13 plan filed by the Chappells and the proof of claim filed by the [mortgage holder] both list $20,661.20 as the principal owed on the second mortgage. It is undisputed that the Chappells paid that amount in full through their plan and received a discharge. . . . [T]here was no evidence of a scheme by the Chappells to trick or mislead.”). Accord In re Turner-Mayo, No. 05-44726, 2007 WL 484614, at *5 (Bankr. S.D. Tex. Feb. 8, 2007) (unpublished) (Isgur) (Distinguishing Sun Finance Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. Sept. 8, 1992), plan did not affect validity of Chase Home Finance LLC’s lien or its claim amount, only the interest rate. “Code’s provision [§ 1322(b)(2)] that protects a mortgage lender must yield to the Code’s policy of promoting the finality of the Court’s confirmation order and principles of res judicata [§ 1327(a)].”); In re Echevarria, 212 B.R. 26, 28 (Bankr. D.P.R. Aug. 1, 1997) (Carlo) (Oversecured mortgage holder is bound by confirmation of plan that pays its claim in full without interest and cannot collect interest and late charges after discharge notwithstanding that plan also provided it would retain its lien. “[D]ebtor is not required to file an adversary proceeding to provide for and subsequently obtain the discharge of a debt secured by a lien. Although the debtor’s plan in this case provided for lien retention, this cannot mean that the lien exists forever, irrespective of full payment of the underlying obligation. The general statement that liens pass through bankruptcy proceedings unaffected must be qualified. ‘They do—unless they are brought into the bankruptcy proceeding and dealt with there.’ . . . Matter of Penrod, 50 F.3d 459, 463 (7th Cir. [Mar. 22,] 1995) . . . . [A] statement in a Chapter 13 payment plan providing for lien retention, only provides for lien retention until the debt is paid. . . . [T]he debtor provided for, and paid in full, Doral’s claim as filed. Therefore, the underlying lien should be extinguished. . . . After the order of confirmation, the conclusion of payments under the plan and an order of discharge that is final, the Court concludes that any claim to interest by a previously oversecured creditor, whose claim was paid in full under the plan, is waived. . . . Doral was an oversecured creditor and Doral was entitled to interest. Doral chose or at least failed to exercise this right. The proof of claim filed by Doral did not include a claim for interest. Doral did not object to confirmation of the debtor’s plan on the basis that the debtor’s plan did not provide for interest. . . . Doral is bound by the order of confirmation and the order of discharge in this case. . . . Pursuant to the discharge order and 11 U.S.C. § 1328, Doral was prohibited from attempting to collect the discharged debt. Doral will be enjoined from making any further attempts to collect the discharged debt and will be required to deliver to the debtor the mortgage note pertaining to the debt for cancellation.”); In re Brenner, 189 B.R. 121, 122–29 (Bankr. N.D. Ohio Oct. 3, 1995) (Speer) (IRS is bound by confirmed plan that treats it as a priority unsecured claim holder notwithstanding that IRS timely filed proof of its secured claim. Confirmed plan treated IRS as an unsecured priority claim to be paid in full without interest. Thirty-three months later, IRS filed an “amended proof of claim,” differing from its original proof of claim only in that it included a “stamped statement indicating that interest was payable at ten percent (10%) on the secured claim.” Debtor objected to amended claim. “[T]he claim of the IRS for interest is contrary to the plan of reorganization and should have been addressed before confirmation of the Plan. . . . Like the Court in [In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989),] this Court also concludes that the policy regarding the binding nature of the confirmed plan outweighs the policy of a secured creditor receiving post-petition interest on its claim when such interest was not provided for in the plan. . . . [H]ad the IRS timely objected to the Plan, it surely would have prevailed. This does not, however, give the IRS the right to ignore the bankruptcy proceedings for nearly two years and expect to have its claim treated as it would have been had it timely objected to the Plan. . . . As with the Court in [Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. May 4, 1987),] this Court feels that the IRS is presently seeking to untimely object to the confirmation of the Debtor’s Plan through another disingenuous method. The propriety of the confirmed Plan should have been addressed before confirmation and, if necessary, pursued upon direct appeal. The IRS is now precluded from seeking this Court’s review of that plan on its merits. The doctrine of res judicata, equity, and the policies underlying the Bankruptcy Code all preclude the IRS from asserting its claim for interest now, two years into the Plan. . . . [C]reditors who sleep on their rights through the confirmation process do so at their own peril. . . . [T]his Court must note that it finds no lack of good faith on the behalf of the Debtor. . . . Were bad faith found, the result would be different. . . . This Court finds that Debtor’s failure to properly treat the IRS claim as a secured claim should not change the result of the binding effect of the Plan in this case.”); In re Battle, 164 B.R. 394, 396–99 (Bankr. M.D. Ga. Feb. 24, 1994) (Hershner) (Although oversecured mortgage holder was entitled to interest on its arrearages under § 502(b) and Rake v. Wade, 508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (June 7, 1993), where plan provided for payment of the arrearages without interest, mortgage holder had notice, and plan was confirmed without objection, mortgage holder is bound by the plan and cannot realize payment of interest by adding unmatured interest to an amended proof of claim. “SunTrust did not object to confirmation even though the proposed plan clearly provided that no interest would be paid on the arrearage. The Court confirmed the plan. . . . SunTrust would have been entitled to interest on the arrearage if it had objected to confirmation of Debtor’s Chapter 13 plan. . . . [W]hile the policy in favor of protecting the rights of mortgage lenders granted by the Code is sound, it must under these facts give way to the wisdom of promoting the finality of the Court’s confirmation order.”); In re Fitak, 92 B.R. 243 (Bankr. S.D. Ohio June 29, 1988) (Cole) (Secured claim holder is bound by plan that fails to provide for present value/interest when creditor did not object to confirmation and filed a proof of claim that under local superintendency orders was deemed to be an acceptance of the debtor’s plan. Had the creditor rejected the plan or objected to confirmation, the creditor would have been entitled to more favorable treatment.); In re Stage, 79 B.R. 487 (Bankr. S.D. Cal. Nov. 5, 1987) (Malugen) (Mortgage holder’s failure to object to payment of arrearages without interest is fatal to objection that interest was required.); In re Hebert, 61 B.R. 44 (Bankr. W.D. La. Feb. 21, 1986) (Bernard) (Though confirmation may not force the cancellation of liens, confirmation can fix the amount and extent of lien. When debtor’s plan proposes to pay IRS claim in full but without interest and IRS fails to object, confirmation binds the IRS and the extent of its claim and the extent of its lien is fixed by the plan. If the debtor completes payments called for by the plan, the lien will be discharged because the IRS’s allowed secured claim will have been paid in full. The IRS has a lien only in the amount provided for by the confirmed plan by operation of §§ 1322(a)(2), 1327(a), and 1327(c).). See also In re Lindgren, 85 B.R. 447, 449 (Bankr. N.D. Ohio Mar. 16, 1988) (Bodoh) (Plan proposed to pay ITT $19,184.96, with interest. ITT filed a proof of claim. Plan was confirmed without objection from ITT. Five years later, debtors completed payments under the plan, but the trustee’s final report disclosed (without explanation) that ITT had been paid the principal amount of its allowed claim, without interest. Discharge was entered, and eight months later ITT moved to reopen. Held: reopening denied. ITT failed to object to confirmation (why would it?) and failed to object to the payments it was receiving during the five years the plan was in effect. Completion of payments is binding, and “the debtors’ property is free and clear of ITT’s lien pursuant to 11 U.S.C. § 1327(b), (c). . . . ITT’s motion to enforce its lien outside the plan shall be overruled.”).

 

56  In re Gadson, 114 B.R. 453 (Bankr. E.D. Va. Feb. 7, 1990) (Tice). See also Bank of Am., NA v. Nathanson (In re Nathanson), No. 09-4537(GEB), 2010 WL 1850185 (D.N.J. May 6, 2010) (unpublished) (Brown) (Bank of America did not object to confirmation or appeal confirmation order and was bound by confirmed plan that gave its junior lien no value; Bank may not use reconsideration of its proof of claim to evade binding effect of confirmation.).

 

57  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (June 1, 1993).

 

58  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

59  See § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA.

 

60  See § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA. See, e.g., Hamilton v. Washington Mut. Bank, FA (In re Colon), 376 B.R. 33, 37 (B.A.P. 10th Cir. Sept. 19, 2007) (Bohanon, Brown, McNiff), rev’d on other grounds, 563 F.3d 1171 (10th Cir. May 4, 2009) (Murphy, Brorby, Hartz) (“[T]he confirmed plan is res judicata as to its treatment of Washington Mutual’s claim and distribution of the mortgage loan payments, whether or not that treatment violates § 1322(b).”); Nationsbanc Mortgage v. Williams (In re Williams), 276 B.R. 899, 907–10 (C.D. Ill. Oct. 27, 1999) (Scott) (Notwithstanding that Nationsbanc Mortgage’s claim was protected from modification by § 1322(b)(2) and Nobelman, failure to object to confirmation leaves Nationsbanc bound by plan that bifurcated its mortgage. “Contrary to Nationsbanc’s assertion, the confirmation process afforded it sufficient notice and opportunity to be heard. Nationsbanc received a copy of the Plan. It also received at least 25 days’ notice of the time to file objections to the Plan and of the hearing on confirmation. . . . [C]onfirmation orders can determine value of collateral. . . . Once the confirmation order is final and non-appealable, parties in interest, including creditors, are precluded from attacking the plan terms as illegal in a subsequent proceeding. . . . The Confirmation Orders fix the amount of Nationsbanc’s allowed secured claim. . . . Determining the secured portion of the creditor’s claim in no way challenges the validity of the lien. Nationsbanc, therefore, was not entitled to an adversary proceeding because its lien was not challenged. . . . [T]he confirmation process may modify or even remove a creditor’s lien without an adversary proceeding if the creditor participates in the bankruptcy process and the claim is dealt with in the bankruptcy. In re Penrod, [50 F.3d 459 (7th Cir. Mar. 22, 1995)]; In re Pence, 905 F.2d 1107 (7th Cir. [June 27,] 1990). . . . [Deutchman v. IRS (In re Deutchman),] 192 F.3d 457 (4th Cir. Sept. 21, 1999); Cen-Pen Corporation v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995); [Piedmont Trust Bank v. Linkous (In re Linkous),] 990 F.2d 160 (4th Cir. [Apr. 1,] 1993)[,] . . . are in conflict with the controlling Seventh Circuit decisions in Penrod and Pence. . . . Once the Confirmation Orders became final, Nationsbanc could not attack the terms as illegal.”); Bank of Am., NA v. Nathanson (In re Nathanson), No. 09-4537(GEB), 2010 WL 1850185 (D.N.J. May 6, 2010) (unpublished) (Brown) (Bank of America did not object to confirmation or appeal confirmation order and was bound by confirmed plan that gave its junior lien no value.); Dupree v. Lomas Mortgage USA, Inc. (In re Dupree), 183 B.R. 270, 282 (Bankr. W.D. Okla. June 16, 1995) (Lindsey) (Distinguishing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. July 19, 1985), Sun Financial Co. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. Sept. 8, 1992), and Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. Apr. 1, 1993), mortgage holder is bound by confirmation of a pre-Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (June 1, 1993), Chapter 13 plan that bifurcated its undersecured claim and provided that lien would be released upon payment of allowed secured portion of claim. Mortgage holder received motion under § 506 for valuation of its collateral, received order valuing its collateral, had notice of plan that bifurcated its claim and provided for release of unsecured portion of its lien, and received order of confirmation. Mortgage company did not object to valuation of its property and did not object to or appeal confirmation. Nearly four years later, after completion of payments and entry of discharge, mortgage company refused to release unsecured portion of its lien and disputed debtor’s complaint to quiet title in state court. “[T]his court finds and concludes that debtors reasonably provided to Lomas, and that Lomas in fact received, notice of debtors’ proposed bifurcation and lien-splitting of its claim which was clearly sufficient to inform it that its rights were subject to being adversely affected. Lomas, however, took no action to protect its interests other than to file its proof of claim.”), on reconsideration, 188 B.R. 991 (Bankr. W.D. Okla. July 20, 1995) (Lindsey) (Lomas Mortgage is bound by plan confirmed in 1991 to accept bifurcation of its undersecured mortgage; however, because of mixup between debtor and Chapter 13 trustee, unsecured portion of Lomas’s split claim was not paid through plan. Lomas is entitled to postdischarge lien on residence to secure portion of its unsecured claim that should have been paid during plan. Also, Lomas is entitled to interest on its unpaid, unsecured claim to compensate for failure to receive timely payments during plan.).

 

61  See §§ 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman and 308.1 [ Miscellaneous Claims Issues ] § 138.7  Miscellaneous Claims Issues.

 

62  See, e.g., In re Gonzalez, No. 09-11503-DHW, 2010 WL 1490057 (Bankr. M.D. Ala. Apr. 15, 2010) (Williams) (Mortgage creditor was bound by confirmed plan which provided that debtor would make all postpetition contractual mortgage payments according to contract terms; because mortgage was not in default at filing of petition, creditor may not recover an escrow shortage by filing an arrearage claim but must instead adjust the escrow payment in the manner allowed by the contract.); Galloway v. EMC Mortgage Corp. (In re Galloway), No. 09-01124-NPO, 2010 WL 364336 (Bankr. N.D. Miss. Jan. 29, 2010) (Olack) (Mortgage creditor was bound by confirmation, and complaint stated causes of action for violations of § 506, Bankruptcy Rule 2016, automatic stay and discharge injunction, based on allegations that mortgage creditor misapplied plan payments.); Rodriguez v. Countrywide Home Loans, Inc. (In re Rodriguez), 421 B.R. 356 (Bankr. S.D. Tex. Dec. 9, 2009) (Isgur) (Fact issues remained with respect to whether Countrywide violated plan terms or confirmation orders by misallocating mortgage payments during Chapter 13 case. Confirmation obligated mortgage lender to ensure that debtor had opportunity to cure arrearages under § 1322(b)(5). Mortgage creditor was obligated to allocate payments properly among principal, interest and arrearages as prescribed in plan. When creditor admitted misapplication of some mortgage payments, but disputed amounts, genuine issue of material fact existed.); In re Lucio, No. 04-81962-G3-13, 2008 WL 5479110 (Bankr. S.D. Tex. Nov. 21, 2008) (Letitia Clark) (Mortgage creditor that participated in confirmation was aware of, and bound by, local Chapter 13 procedures for administration of home mortgages that required creditor to give notice of any payment adjustments to debtor, debtor’s counsel and trustee; failure to give required notice limits reimbursement for forced-placed insurance to same amount as prior year.); In re Janssen, 396 B.R. 624 (Bankr. E.D. Pa. Nov. 7, 2008) (Frank) (Violation of § 1327(a) can be remedied under § 105(a). Closed case was reopened to permit prosecution of adversary proceeding alleging that mortgage creditor failed to properly apply payments to prepetition arrearage.); Boday v. Franklin Credit Mgmt. Corp. (In re Boday), 397 B.R. 846, 851 (Bankr. N.D. Ohio Oct. 2, 2008) (Speer) (Binding effect of confirmation required mortgage creditor to split claim under § 1322(b)(5) into prepetition arrearages and ongoing mortgage payments. Confirmed plan “provided that the Defendant was required to adjust its record so as to indicate that all arrearages had been paid, and that the amount due should correspond to the Parties’ original amortization schedule.” Creditor was ordered to adjust its records to reflect that prepetition arrearages had been paid and debtors had cured prepetition defaults.). But see In re Dendy, 396 B.R. 171 (Bankr. D.S.C. May 5, 2008) (Waites) (Confirmation of properly noticed plan that treated second mortgage as wholly unsecured and void was binding on creditor that failed to object, but lienholder was not obligated to release or cancel mortgage after discharge; in rem and in personam obligations were satisfied and debt was uncollectible, but mortgagee did not violate confirmed plan, confirmation order or discharge injunction by failing to take independent steps to release mortgage of record. Confirmation voided mortgage, and court can order that recorder reflect mortgage was voided.).

 

63  See §§ 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., Onyx Invs., L.L.C. v. Foster, No. 06-4053-SAC, 2007 WL 1347696 (D. Kan. May 8, 2007) (unpublished) (Crow) (Unsecured lien was stripped by confirmation when opportunity to object satisfied due process; adversary proceeding is not necessary to strip lien.); In re Wegscheid, 361 B.R. 144, 147 (Bankr. D. Ariz. 2007) (Haines) (Applying Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), confirmation has res judicata effect when creditor “failed to object to a plan that clearly and unequivocally stated its lien was wholly unsecured and therefore modifiable.”); American Gen. Fin. Servs., Inc. v. Bryan (In re Bryan), 357 B.R. 12 (Bankr. N.D.N.Y. Dec. 12, 2006) (Gerling) (Res judicata effect given to confirmation order that stripped wholly unsecured junior lien under Celli v. First National Bank of Northern New York (In re Layo), 460 F.3d 289, 292 (2d Cir. Aug. 15, 2006) (Kearse, Sack, Hall). Lienholder had notice of plan and participated in confirmation process. Confirmation included valuation and determined that junior lender’s claim was totally unsecured. “[A] creditor who fails to object to a plan or appeal a confirmation order is without a basis for challenging a provision of the confirmed plan.”); In re Blackaby, No. 05-10755, 2006 WL 3885134 (Bankr. E.D. Ky. Sept. 21, 2006) (unpublished) (Scott) (Res judicata effect was given to confirmed plan that treated Countrywide as wholly unsecured. Creditor’s own records showed notice of filing before bar date for timely proofs of claims, and Countrywide also received notice of amended plan in time to object. Notices were mailed to post office box in California, and Countrywide’s affidavit stated that using that post office box address (apparently the payment address) “added an additional layer of review” and delay.); In re Coss, No. 02-65893, 2005 WL 5419055 (Bankr. N.D.N.Y. July 14, 2005) (unpublished) (Gerling) (Plan clearly and unambiguously provided for bifurcation of CitiMortgage’s claim; creditor had adequate notice, did not object to confirmation and is bound by confirmed plan.).

 

64  530 F.3d 230, 236 (3d Cir. June 24, 2008) (Rendell, Greenberg, Van Antwerpen).

 

65  In re Kemp, 391 B.R. 262, 265 (Bankr. D.N.J. July 17, 2008) (Wizmur).

 

66  See § 129.1 [ Overview: General Rules for Saving Debtor’s Home ] § 81.1  Overview: General Rules for Saving Debtor’s Home.

 

67  Linzy v. Keeton (In re Linzy), Nos. 4:96-BK-42297 E, 4:01-AP-4001, 2002 WL 32114564, at *6 (Bankr. E.D. Ark. Aug. 30, 2002) (unpublished) (Evans) (Confirmation order providing 36 monthly payments of $331.30 is binding on the holder of a long-term debt under § 1322(b)(5) notwithstanding that the contract required a different payment. “Although it is generally improper to modify a long-term debt in this manner because it is inconsistent with the ‘maintenance of payments’ requirement of 11 U.S.C. § 1322(b)(5), the Plan, once confirmed, is res judicata as to what Ms. Linzy owed the Keetons on the Contract, at least during the duration of the Plan’s initial term.” After 36-month term of the plan, relationship reverted to the contract terms.).

 

68  See, e.g., In re Workman, 373 B.R. 460 (Bankr. D.S.C. July 31, 2007) (Waites) (When mortgage creditor actively participated and didn’t object to confirmation that relied upon arrearage amount in its proof of claim, res judicata precludes amended claim for larger arrearage.); Miller v. Countrywide Home Loans (In re Miller), No. 99-25616JAD, 2007 WL 81052 (Bankr. W.D. Pa. Jan. 9, 2007) (unpublished) (Deller) (Countrywide was bound by confirmation when it received amendments to confirmed plan, accepted payments under amended plan and filed no proof of claim for pre- or postconfirmation arrearages. After discharge, Countrywide demanded unpaid prepetition arrearages of $13,000. Plan provision for $6,400 arrearages was binding. Confirmation resulted in mortgage reinstatement.); In re Abbott, No. 01-17874-WCH, 2006 WL 344758, at *2 (Bankr. D. Mass. Feb. 13, 2006) (unpublished) (Hillman) (Confirmed plan that specified arrearage bound EquiCredit Corporation; “provisions in an adequately noticed Chapter 13 plan which modify the rights of a secured creditor are the functional equivalent of a claims objection under § 502(a).” Debtor successfully completed plan, and discharge prohibited EquiCredit from seeking reimbursement for prepetition arrearage in excess of amount specified in confirmed plan.); In re Cleveland, 349 B.R. 522, 534 (Bankr. E.D. Tenn. Sept. 20, 2006) (Stair) (Countrywide is bound by confirmed plan that it negotiated for payment “in full” of arrears of $11,285.56 with interest; proof of claim for postpetition property taxes and homeowner’s insurance is disallowed. “Countrywide negotiated its own treatment in the Confirmed Plan, and it cannot now seek to revise that treatment because it failed to include an additional amount necessary to satisfy the Debtor’s escrow obligation.”); McDonald v. Bank Fin. (In re McDonald), 336 B.R. 380, 383, 385 (Bankr. N.D. Ill. Jan. 17, 2006) (Schmetterer) (Mortgagee violated discharge injunction by refusing to reinstate loan and attempting to collect prepetition arrearages when confirmed plan unambiguously and clearly set forth arrearage amount to be paid by trustee “regardless of contrary proofs of claim.” Citing In re Chappell, 984 F.2d 775 (7th Cir. Jan. 14, 1993), and distinguishing Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. May 22, 2003): “Because there is no dispute that the arrears specified in the Debtor’s Plan were paid in full and that the current post-petition mortgage payments were made when due, the . . . loan should have been reinstated upon entry of the Debtor’s discharge as the confirmed Plan required.”); In re Thaxton, 335 B.R. 372, 374, 375 (Bankr. N.D. Ohio Oct. 27, 2005) (Baxter) (Creditor with lien on principal residence was bound by confirmed plan that established arrearage at $2,590 notwithstanding timely filed proof of claim for $4,088.56. “The opportunity to object to the plan is not merely an option to be exercised at the convenience of the creditors. The policy favoring finality of a plan places an obligation on creditors to make a timely objection prior to confirmation. . . . Clareshire cannot excuse or otherwise circumvent its failure to file a timely objection by filing a Proof of Claim for a higher arrearage amount, merely because it may have been entitled to such a recovery had the issue been raised properly. A timely filed proof of claim is not an alternate forum for the creditor to raise objections that were not made before the plan confirmation.”); In re Stiller, 323 B.R. 199, 205–15 & n.23 (Bankr. W.D. Mich. Apr. 4, 2005) (Hughes) (Distinguishing Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (B.A.P. 9th Cir. Aug. 23, 1991), Fleet Real Estate Funding Corp. v. Fewell (In re Fewell), 164 B.R. 153 (Bankr. D. Colo. Jan. 14, 1993), and Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. May 22, 2003), $4,000 arrearage amount stated in confirmed plan was binding on mortgage holder notwithstanding proof of claim filed eight days after confirmation asserting arrearage of $10,510.23. “A confirmed plan is res judicata with respect to the provisions of that plan. . . . U.S. Bank is bound by the terms of the Debtors’ confirmed plan concerning the Section 1322(b)(5) cure of U.S. Bank’s arrearage. . . . [W]hile it may be customary for parties, practitioners, and even the courts to speak of a home mortgage arrearage as a ‘claim’ that must be paid by the debtor as part of his Chapter 13 plan, it is not a claim as that term is used in the context of claims allowance under Section 502. A lender’s claim for purposes of Section 502 is the amount owed to that creditor under the terms of the lending agreement as of the date of the debtor’s bankruptcy petition. . . . [T]he cure of a home mortgage lender’s arrearage under Section 1322(b)(5) is a confirmation issue, not a claims allowance issue. The amount of the arrearage and the time within which it is to be cured has everything to do with whether the debtor’s plan can meet the confirmation standard of Section 1325(a)(1) with respect to the debtor’s proposed treatment of the home mortgage lender and nothing to do with the amount of the home mortgage lender’s Section 502 claim (i.e., (1) unpaid principal balance, plus (2) secured but unpaid interest, plus (3) other unpaid charges). . . . [T]he July 14 plan unequivocally states that the amount of the arrearage to U.S. Bank for purposes of Section 1322(b)(5) is $4,000.00. U.S. Bank had an opportunity to object . . . . I have no choice but to enforce the confirmed plan as written. . . . U.S. Bank is at fault for the predicament in which it now finds itself. . . . U.S. Bank is barred under the plan from enforcing its rights under its loan contract and mortgage so long as Debtors comply with the Section 1322(b)(5) cure provisions included in that plan. However, the amount of U.S. Bank’s claim against Debtors remains unaffected. While U.S. Bank’s failure to object to Debtors’ plan may delay recovery of the amount it is owed by Debtors under their contract, the fact remains that Debtors still owe U.S. Bank the full amount due under their loan agreement with U.S. Bank.” In a footnote, “[t]he practical effect of Debtors’ apparent understatement of U.S. Bank’s arrearage in their plan is to create a ‘balloon’ that must be accounted for at the conclusion of the promissory note’s term. While such a balloon might be inconsistent with the original terms of the promissory note, it is nonetheless a permissible modification because of the Section 1322(b)(5) exception.”); In re Riser, 289 B.R. 201, 204–05 (Bankr. M.D. Fla. Jan. 7, 2003) (Funk) (Confirmation order stating exact amount of mortgage claim and arrearage is binding; mortgage was current when debtor completed payments, and postconfirmation effort to collect $11,000 of “allowable corporate advances” violated discharge injunction. Confirmation order provided that principal balance and arrearages were $67,776.71 and $1,283.82. Debtor made all plan payments and received a discharge. After discharge, debtor’s attorney wrote six letters to Norwest and Wells Fargo to determine the status of the mortgage and obtain a payoff. Wells Fargo claimed $11,000 was due for “allowable corporate advances,” including damages Wells Fargo paid to settle the debtor’s sanction action with respect to an aborted foreclosure. “Debtor’s mortgage was current at the conclusion of the case. . . . [T]here was no evidence that Norwest advanced any funds on Debtor’s behalf during the pendency of the case. . . . Wells Fargo and its assignees are forever barred from attempting to claim or collect these ‘recoverable corporate advances.’”), after hearing on sanctions, 298 B.R. 469 (Bankr. M.D. Fla. June 6, 2003) (Funk); In re Stewart, 247 B.R. 515, 521 (Bankr. M.D. Fla. Mar. 15, 2000) (Proctor) (Mortgage holder’s failure to object to confirmation and failure to timely file a proof of claim leaves the creditor bound by confirmation of a plan that does not pay arrearages notwithstanding that § 1322(b)(2) would have prohibited confirmation. Original plan provided for payment of an arrearage owed to a mortgage holder. After the claims bar date passed, the debtor amended the plan to delete payment of the arrearage. The amended plan was noticed to the mortgage holder and confirmed without objection. More than a year after confirmation, the mortgage holder sought relief from the confirmation order. “It is well settled that a creditor who fails to timely object to a proposed plan or appeal from a confirmation order cannot later attack a plan on the basis that one of its provisions is inconsistent with the Bankruptcy Code. . . . A Chapter 13 plan’s failure to comply with § 1322(b)(2) is a ground for a valid objection to or appeal from a confirmation order, but not a legitimate ground to attack a plan that was confirmed three years ago.”); In re Sanders, 243 B.R. 326, 329, 331 (Bankr. N.D. Ohio Jan. 19, 2000) (Baxter) (Confirmed plan prohibiting recovery of attorneys’ fees or costs was binding on mortgage holder notwithstanding inconsistent proof of claim filed before confirmation. Plan properly noticed to mortgage holder and confirmed without objection provided: “Per 11 U.S.C. § 1322(e), secured creditors holding liens upon the debtors’ real estate shall not be entitled to counsel fees or courts [sic] costs in this case for any reason, including proceedings upon or after default of any provision herein by the debtor.” Plan provided $4,000 for mortgage holder’s arrearage claim. Mortgage holder filed a timely proof of claim before confirmation for $6,965.73, which included $2,172 for legal fees, court costs and expenses. Debtor objected to claim. “The arrearage claim of TMS was approved in the confirmed plan in an amount of $4,000.00 at the contract rate of interest . . . . Thusly, that amount becomes the allowed arrearage claim of TMS. To allow otherwise would allow both TMS and the Debtor to subvert the ‘finality’ objective of the plan confirmation process.”).

 

69  See §§ 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman and 308.2 [ Mortgage Claim Issues ] § 138.8  Mortgage Claim Issues. See, e.g., Miller v. Laskowski (In re Laskowski), 384 B.R. 518 (Bankr. N.D. Ind. Feb. 27, 2008) (Dees) (Mortgagee is bound by plan term requiring it to notify debtor and/or trustee of changes in escrow payments; res judicata effect of confirmed plan binds mortgagee.).

 

70  In re Stage, 79 B.R. 487 (Bankr. S.D. Cal. Nov. 5, 1987) (Malugen). Accord In re Battle, 164 B.R. 394, 395–99 (Bankr. M.D. Ga. Feb. 24, 1994) (Hershner) (Although oversecured mortgage holder was entitled to interest on its arrearages under § 502(b) and Rake v. Wade, 508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (June 7, 1993), where plan provided for payment of the arrearages without interest, mortgage holder had notice, and plan was confirmed without objection, mortgage holder is bound by the plan and cannot realize payment of interest by adding unmatured interest to an amended proof of claim. “The plan proposed to pay SunTrust its arrearage without interest. . . . [N]otices were sent to SunTrust. SunTrust was represented by counsel. . . . SunTrust filed an amended proof of claim. . . . The claim also asserts an arrearage claim in the amount of $4,934.69, which includes $777.43 for thirty-six months of interest on the arrearage. Counsel for SunTrust stated that the $777.43 represents the ‘estimated’ interest that would accrue on the arrearage over the term of Debtor’s Chapter 13 plan. . . . SunTrust’s claim for estimated or unmatured interest violates section 502(b)(2). . . . An oversecured creditor is entitled to preconfirmation and postconfirmation interest on a home mortgage arrearage that is cured through a Chapter 13 plan. . . . [B]ut the oversecured creditor may not claim an amount for interest that has not matured. . . . SunTrust did not object to confirmation even though the proposed plan clearly provided that no interest would be paid on the arrearage. The Court confirmed the plan. . . . SunTrust would have been entitled to interest on the arrearage if it had objected to confirmation of Debtor’s Chapter 13 plan. . . . [W]hile the policy in favor of protecting the rights of mortgage lenders granted by the Code is sound, it must under these facts give way to the wisdom of promoting the finality of the Court’s confirmation order.”). See § 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994 for discussion of interest on interest before and after Rake v. Wade, 508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 424 (June 7, 1993). See § 135.1 [ Section 1322(e): Contracts after October 22, 1994 ] § 83.2  Section 1322(e): Contracts after October 22, 1994 for discussion of congressional reaction to Rake—the addition of 11 U.S.C. § 1322(e). See §§ 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994136.2 [ Rate of Interest to Cure Default: Contracts after October 22, 1994 ] § 83.4  Rate of Interest to Cure Default: Contracts after October 22, 1994 for discussion of the rate of interest before and after enactment of § 1322(e).

 

71  See United States v. Bartlett (In re Bartlett), 353 B.R. 398 (Bankr. D. Vt. Nov. 1, 2006) (Brown) (Rural Housing Authority was bound by confirmed plan recognizing debtors’ right of redemption and opportunity to cure default notwithstanding prebankruptcy foreclosure.); In re Jones, No. 02-15197DWS, 2003 WL 22843162 (Bankr. E.D. Pa. Nov. 14, 2003) (unpublished) (Sigmund) (Confirmation of plan that provided direct payment to mortgage holder did not void prepetition foreclosure sale because plan was silent with respect to foreclosure sale; however, mortgage holder is bound by the plan to accept payment in full of its allowed secured claim, and relief from the stay is not appropriate to permit mortgage holder to conclude its purchase of the property from the foreclosure sale.).

 

72  Bilal v. Household Fin. Corp. III (In re Bilal), 296 B.R. 828, 831, 835–37 (Bankr. D. Kan. Aug. 18, 2003) (Flannagan) (“Because the order confirming the Bilals’ plan has become final, HFC . . . cannot now attack the order on the ground the Bilals used an improper procedure to obtain relief they included in the plan. . . . The first two sentences clearly inform HFC that the Bilals are exercising their right to rescind their transaction with it, and the last two clearly inform HFC that confirmation of the plan would make its mortgage void. Under [Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999)], this means that HFC can no longer contest whether the Bilals still had a right to rescind the transaction when they filed their plan or whether the Bilals’ exercise of that right rendered HFC’s mortgage void.” Although plan is res judicata with respect to rescission, confirmation did not resolve debtors’ obligation to tender or rights to damages under TILA.). Compare Mourer v. Equicredit Corp. of Am. (In re Mourer), 287 B.R. 889, 897 (Bankr. W.D. Mich. Jan. 10, 2003) (Stevenson) (Confirmed plan that treated Equicredit as a secured creditor precludes remedy of rescission in debtors’ postconfirmation adversary proceeding under Truth in Lending Act and Home Ownership and Equity Protection Act. “[T]he remedy of rescission requested by the Debtors and allowed by TILA is contrary to the finality afforded a confirmed plan under Chapter 13. Accordingly, although the Debtors may be entitled to rescission under TILA, the imposition of the bankruptcy filing and the finality of plan confirmation makes this remedy antithetical. The Debtors knew or should have known that their treatment of Equicredit’s claim as secured was going to be under attack prior to plan confirmation and should have affirmatively acted to change Equicredit’s treatment under the plan.”).

 

73  335 F.3d 45 (1st Cir. July 9, 2003) (Selya, Arnold, Lipez).

 

74  Home mortgages are not protected from modification by § 1322(b)(2) are discussed beginning at § 80.1  In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence.

 

75  335 F.3d at 52.

 

76  See § 73.2  What Claims Are Priority Claims?, § 136.1  Treatment of Priority Claims and § 73.3  Priority Claims Added or Changed by BAPCPA. See, e.g., Illinois Dep’t of Revenue v. Ayre (In re Ayre), 360 B.R. 880, 884 (C.D. Ill. Jan. 16, 2007) (Scott) (Confirmation without objection bound Illinois Department of Revenue to amount fixed in plan for its priority claim, when plan process litigated disputed amount; confirmation binds “creditors if the plan provision at issue could have been litigated in the confirmation process.”); In re Gellington, 363 B.R. 497, 502–03 (Bankr. N.D. Tex. Mar. 8, 2007) (Hale) (Although Texas did not violate automatic stay by garnishing debtor’s wages to collect child support arrearages because § 362(b)(2)(C) excepts collection of a DSO from stay, garnishment did violate confirmation order because plan provided payment of DSO arrearages through the plan. “[A]fter confirmation, the terms of the plan and the confirmation order control. Here, the confirmed Plan indicates that Debtor would pay the claim at issue, the pre-petition arrears, in monthly payments under the Plan. There was not a provision in the Plan allowing the Attorney General to garnish the Debtor’s wages. . . . [G]arnishment for prepetition arrears would be contrary to the Confirmation Order and section 1327. . . . Section 362(b)(2)(C) acts as an exception to the automatic stay in a bankruptcy proceeding for the withholding of the domestic support obligation at issue. However, under section 1327 of the Bankruptcy Code, the provisions of a confirmed Chapter 13 plan are res judicata and bind all creditors, including . . . the State of Texas. . . . Because the actions were not willful and because the State has agreed to promptly refund the garnished funds to the Debtor, no sanctions are in order.”).

 

77  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment, 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims and 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

78  See, e.g., Burrell v. Town of Marion (In re Burrell), 346 B.R. 561, 568–70 (B.A.P. 1st Cir. July 17, 2006) (Lamoutte, Vaughn, Deasy) (Confirmation of plan that treated property taxes and water charges as unsecured priority debts to be paid in full without postpetition interest was binding notwithstanding liens for property taxes and water charges under Massachusetts law; completion of payments discharged postpetition interest and released the liens. “Although the Town held an allowed secured claim, the Debtor’s plan failed to satisfy any of the three options for treatment of an allowed secured claim. The Debtor’s plan treated the Town’s allowed secured claim as a priority unsecured claim. Accordingly, the Debtor’s plan failed to provide for the payment of postpetition interest . . . . The Town did not object to its treatment under the Debtor’s plan and the bankruptcy court confirmed that plan. . . . Accordingly, the confirmation order is res judicata and binding on the Debtor and the Town in accordance with § 1327 of the Bankruptcy Code. . . . [T]he Debtor’s completion of her plan effectively discharged [the] real estate tax lien, covering prepetition real estate taxes and water charges, against her interest in the property, pursuant to the terms of the Bankruptcy Code. . . . [U]pon completion of the Debtor’s plan payments and receipt of her Chapter 13 discharge, the Debtor had neither an in personam nor an in rem obligation to pay any prepetition claim beyond the amount in the Town’s allowed claim. . . . The allowance of the Town’s secured claim for prepetition real estate taxes and water claims was res judicata on the amount of its claim. . . . The failure of the Town to object to the improper treatment of its allowed secured claim in the Debtor’s plan prior to confirmation or to appeal the confirmation order is binding on the Town.”); Meyer v. Pagano, No. C 01-0848 MMC, 2002 WL 31159110, at *3–*5 (N.D. Cal. Sept. 25, 2002) (unpublished) (Chesney) (Confirmed “pot” plan that called for 36 monthly payments of $100 is binding on priority claim holder that filed a proof of claim for $157,910; balance of the priority claim will be discharged when debtor pays $3,600 to the trustee. Citing Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), “Debtor’s proposed plan which neither the Trustee nor the [priority claim holder] opposed prior to confirmation, did not include a provision for the full payment of priority claims. . . . Neither the Trustee nor the [priority claim holder] sought revocation or moved to dismiss. Having failed to take those steps, and having failed to object to the terms of the Plan prior to confirmation, the Trustee is now bound by the provisions of the Plan and may not attack the Plan on the ground that its provisions are contrary to law. . . . In [In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994)], the Seventh Circuit held that an order confirming a Chapter 13 plan, where the plan did not include a provision requiring full payment of priority claims, was ‘nugatory,’ and had ‘no res judicata effect as to the omitted priority claims.’ . . . In Pardee, however, the Ninth Circuit rejected the holding of Escobedo.”); In re Northrup, 141 B.R. 171, 173 (N.D. Iowa Nov. 12, 1991) (Hansen) (Bankruptcy court cannot protect a priority claim holder from its own failure to object to a plan that fails to pay priority claims in full. “[Section] 1327(a) provides that once the plan is confirmed, late objections may not be made. A creditor has a great incentive to object prior to confirmation of the plan in order to place the bankruptcy court on notice of any potential deficiencies in the plan. If the creditor does not object, the creditor runs the risk that the bankruptcy court will not discover the defect in the exercise of its independent review and will confirm the plan. In other words, failure to object prior to confirmation will operate as a waiver of the objection after confirmation.”); In re Saunders, No. 02-21699 NVA, 2006 WL 4854454, at *2 (Bankr. D. Md. Apr. 3, 2006) (unpublished) (Alquist) (Citing Bankruptcy Rule 3015(f) and Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 830 (11th Cir. May 22, 2003), government’s assertion that Mr. Saunders should pay more than 10% provided in confirmed plan is an objection which “could and should have been made at the original confirmation hearing.”); In re Puckett, 193 B.R. 842, 848–51 (Bankr. N.D. Ill. Feb. 14, 1996) (Wedoff) (Distinguishing In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994), IRS not entitled to reopen Chapter 13 case to vacate order of confirmation when schedules listed IRS with a debt of zero, plan provided that unsecured claim holders that failed to file timely proofs of claim would be paid nothing, IRS did not object to confirmation and did not timely file a proof of claim, debtor completed payments, an order of discharge was entered, and the case was closed. “[T]his court plainly had subject matter jurisdiction to enter a confirmation order. . . . [T]he government has made no assertion that the entry of the confirmation order in this case involved any denial of due process . . . . [T]he IRS was given ample notice of the confirmation hearing and was informed both that the debtor valued the Service’s claim at zero and that she proposed to pay no more than $7,000 into her plan. This information was sufficient to give the IRS notice that the debtor’s plan would not pay the claim of over $100,000 that it later asserted. . . . In the government’s view, Escobedo holds that because the plan in that case did not provide for full payment of priority claims, as required by Section 1322(a)(2), the order confirming the plan was jurisdictionally void. . . . However, the better reading of Escobedo . . . is that a Chapter 13 plan which does not provide for full payment of priority claims is ‘invalid’ only in the sense that its improper provisions do not command the special res judicata effect provided by Section 1327(a). Thus, during the pendency of the case, priority claimants who are not being paid in full may obtain modification of the plan, requiring the debtor to make full payment of their claims, despite the res judicata impact of plan confirmation under Section 1327(a); and, if full payment is not possible, or if the debtor fails to make the payments, the case may be dismissed under Section 1307. . . . [I]f [Escobedo] is read in the manner suggested by the government, it would present substantial difficulties with the finality of confirmation orders in other contexts. Many of the provisions of the Bankruptcy Code related to the confirmation of plans under Chapter 11 and 13 may be viewed as mandatory. If the failure of a plan to comply with these provisions renders the order of confirmation void, then confirmed Chapter 11 and 13 plans would be subject to collateral attack, on any number of confirmation issues, for years after plan payments were completed and the debtors discharged. . . . [T]he government did not seek relief until after the case was concluded, at which time it was too late to modify the plan or dismiss the case. And because the order of confirmation was within the jurisdiction of this court and did not deprive the IRS of due process, it cannot now be voided under Fed.R.Civ.P. 60(b).”); Matravers v. United States (In re Matravers), 149 B.R. 204, 206 (Bankr. D. Utah Jan. 15, 1993) (Allen) (Citing Ledlin v. United States (In re Tomlan), 102 B.R. 790 (E.D. Wash. July 5, 1989), aff’d, 907 F.2d 114 (9th Cir. July 12, 1990), confirmed Chapter 13 plan that listed but provided no payment to the IRS with respect to the debtors’ personal liability for taxes for the year prior to the filing of the petition is binding on the IRS and discharges the debtors’ tax liability without payment. “The chapter 13 plan provided that the IRS would receive no payments on the pre-petition 1983 Personal Liability claim. A confirmed plan denying the IRS payment is binding. . . . Thus the 1983 Personal Liability will be discharged pursuant to § 1328(a) when the plan is fully paid.”); In re Ivory, 146 B.R. 27 (Bankr. D. Or. Oct. 8, 1992) (Hess); In re Smith, 142 B.R. 862 (Bankr. E.D. Ark. Feb. 4, 1992) (Mixon) (Ordinarily, res judicata and § 1327 prohibit collateral attacks on an order of confirmation; however, an order of confirmation is subject to collateral attack “where a creditor does not receive notice prior to the discharge of any portion of its claim.” IRS filed a claim for $36,534.84. No objection was filed. The trustee erroneously interpreted the plan to reduce the IRS’s claim to $12,177.06. Debtor completed payments under the (erroneously interpreted) plan, and discharge was entered. IRS filed a complaint to revoke the debtor’s discharge. The court treated the complaint as a motion for relief from an order under Bankruptcy Rule 9024 and granted the IRS relief from the confirmation order and the discharge. “An order confirming a plan which provides payment to a creditor of an amount less than the allowed claim cannot be used as a substitute for an objection to the claim.”); In re O’Neal, 142 B.R. 411 (Bankr. D. Or. July 10, 1992) (Hess) (State taxing authority is bound by § 1327(a) to accept payment of redemption rights in installments through the Chapter 13 plan when county had notice of the case, knew provisions of the proposed plan, was aware of the date of confirmation, and failed to object to confirmation.); In re Mosley, 74 B.R. 791 (Bankr. C.D. Cal. May 29, 1987) (Bufford), appeal dismissed as moot, 101 B.R. 608 (B.A.P. 9th Cir. July 24, 1989) (Bufford) (Section 1327 precludes a creditor from seeking to modify a Chapter 13 plan after confirmation absent postconfirmation default or changed circumstances. Confirmed plan called for payment of priority taxes in the amount of $3,323. IRS did not object to confirmation. Section 1327 bars IRS claim insofar as it exceeds amount in the confirmation order.). But see In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994) (Flaum, Rovner, Williams) (Mandatory requirement in § 1322(a)(2) that the plan pay priority claims in full precludes any res judicata effect for a plan that fails to pay priority and administrative claims in full.).

 

79  11 U.S.C. § 1327(a) (emphasis added). See Moscaritolo v. Akincibasi (In re Akincibasi), No. 3:05-cv-822-J-32HTS, 2006 WL 2466544, at *2 (M.D. Fla. Aug. 24, 2006) (unpublished) (Corrigan) (Confirmation order that disallowed claims renders moot appeal of order denying extension of time to file a proof of claim. “[A] confirmation order has res judicata effect on pending claims and is akin to a final judgment entered by a district court. . . . [T]he Confirmation Order addressed Moscaritolo’s claim and is res judicata as to that claim . . . . Because Moscaritolo failed to appeal the Confirmation Order, which adjudicated his claim, Moscaritolo’s claim is now moot.”).

 

80  See In re Hedrick, 343 B.R. 762, 765–66 (Bankr. E.D. Va. Jan. 27, 2006) (Mayer) (Failure to object to confirmation of plan that provided 100% payment of unsecured claims but was silent with respect to postpetition interest is fatal to § 1325(a)(4) argument for postpetition interest when estate was solvent; unsecured creditor cannot solve this problem by filing an amended proof of claim after confirmation that includes postpetition interest. “Had the matter been brought to the court’s attention at the confirmation hearing, the plan would not have been confirmed without a provision for payment of postpetition interest on allowed joint unsecured claims. It was not and the plan was confirmed. Confirmation orders are final orders and are binding on the parties. . . . Postpetition interest is not part of an allowed proof of claim but is payable . . . in a chapter 13 case pursuant to a confirmed plan, if provided in the chapter 13 plan. Here, there was no such provision in the confirmed chapter 13 plan.”); In re Jones, No. 02-15197DWS, 2003 WL 22843162 (Bankr. E.D. Pa. Nov. 14, 2003) (unpublished) (Sigmund) (Although plan was silent with respect to prepetition foreclosure sale, foreclosing creditor is bound by confirmation when plan provided for direct payment to the mortgage holder without mention of the prepetition foreclosure sale. Relief from the stay is not appropriate to permit the mortgage holder to conclude its purchase of the property from the foreclosure sale because the mortgage holder is bound by confirmation to accept payments through the plan.); In re Herndon, 188 B.R. 562, 565 (Bankr. E.D. Ky. Aug. 24, 1995) (Lee) (IRS is bound by confirmation of plan that does not provide for payment of priority claims notwithstanding that the IRS was not scheduled as a creditor and did not receive notice in time to timely file a proof of claim. The IRS’s untimely filed proof of claim is not allowed. Because the plan did not provide for the IRS, its claim will not be discharged. “Due Process concerns are not implicated; the right of the IRS to collect its claim is simply abated until the plan payments are completed.”). See also In re Nikoloutsos, 199 B.R. 624, 626 (Bankr. E.D. Tex. May 14, 1996) (Abel) (Ex-spouse’s failure to prosecute ineligibility prior to confirmation leaves ex-spouse bound by plan. “[P]ursuant to 11 U.S.C. § 1327(a), Wanda is bound by the terms of the Plan ‘whether or not the claim of . . . [Wanda] is provided for by the plan.’”), rev’d on other grounds, 199 F.3d 233 (5th Cir. Jan. 6, 2000) (Garza, Jolly, DeMoss).

 

81  See §§ 104.2 [ Lien Retention ] § 74.12  Lien Retention before BAPCPA and 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens. See, e.g., In re Penrod, 50 F.3d 459 (7th Cir. Mar. 22, 1995) (Posner, Rovner, Moran) (In a Chapter 11 case, acknowledging the analogous provisions of §§ 1141(c) and 1327(c), confirmation extinguishes a lien that is not preserved by the plan or the order of confirmation.); In re Harnish, 224 B.R. 91, 93–94 (Bankr. N.D. Iowa June 2, 1998) (Kilburg) (Sears had notice that the debtors’ plan did not preserve its lien and treated it as an unsecured claim holder and is thus bound by confirmation notwithstanding that it filed a timely proof of claim asserting secured status. “Sears filed its proof of claim prior to the original date set for the confirmation hearing. This constitutes participation by Sears in the bankruptcy proceeding. The confirmed plan is silent regarding Sears’ lien. . . . The 3-page plan itself does not mention Sears’ claim. Debtors’ schedules, however, list Sears as an unsecured creditor referencing the same account for which Sears filed its proof of claim . . . . Because the plan was confirmed without preserving Sears’ lien, that lien was extinguished.”).

 

82  See, e.g., McCarty v. Jenkins (In re Jenkins), 428 B.R. 845 (B.A.P. 8th Cir. Apr. 26, 2010) (Schermer, Mahoney, Saladino) (Failure to object to modifications that cured postconfirmation mortgage defaults by increasing monthly payments without increasing base amount bound trustee and precluded argument that plan was in material default; internal trustee calculations of base amount that increased each time the plan was modified to increase the monthly payment were not consistent with the plan as actually modified.); In re Bailey, 425 B.R. 825, 827 (Bankr. D. Minn. Mar. 30, 2010) (O’Brien) (Properly noticed modified plan that decreased plan length from 60 months to 36 months was preclusive of subsequent modification to increase plan length back to 60 months. “[T]rustee’s proposed modification [to extend term] is simply a collateral attack on the . . . confirmed modified plan that was not objected to and from which no appeal was taken. The doctrine of res judicata bars consideration of the trustee’s modified plan.”); In re Budziak, No. 05-10668, 2009 WL 3297791, at *5 (Bankr. D. Vt. Oct. 13, 2009) (unpublished) (Brown) (Under § 1327, confirmation orders are not susceptible to collateral attack by creditors, and Bankruptcy Rule 9006(b) does not excuse bank’s failure to timely object to modification of confirmed plan. Bank had notice of motion to modify confirmed plan, permitting sale of residence and surrender to senior mortgage lender if sale could not be consummated. Bankruptcy Rule 9006 contains no “language . . . to suggest that it provides a mechanism for re-opening a time period which has come to its legal conclusion by virtue of the entry of an order. . . . Hence, the Court finds Rule 9006 does not offer the Bank a basis for extending the due date of the Bank’s objection or excusing its untimely filing of an objection based upon excusable neglect.”); In re Searcy, 333 B.R. 617 (Bankr. D. Mass. Dec. 1, 2005) (Hillman) (In reopened 15-year-old case, modified plan was adequately noticed and confirmation bound mortgagee to modified claim, notwithstanding debtor’s failure to separately object to proof of claim. Adequately noticed plan modification is functionally equivalent to claims objection. Creditor’s lack of collection effort for more than a decade triggered laches. Court ordered discharge of mortgage.).

 

83  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

84  See Educational Credit Mgmt. Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc), discussed below in this section and in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

85  See Espinosa v. United States Aid Funds, Inc., 553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tachima, Smith), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010), discussed below in this section and in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

86  See § 346.1 [ Student Loans ] § 158.2  Student Loans.

 

87  215 B.R. 792 (B.A.P. 10th Cir. Jan. 26, 1998) (McFeeley, Cornish, Matheson), aff’d, 179 F.3d 1253 (10th Cir. June 7, 1999) (Anderson, McWilliams, Cook). Andersen was overruled by Educational Credit Management Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc), discussed below in this section and in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

88  215 B.R. at 793.

 

89  215 B.R. at 793–96.

 

90  179 F.3d at 1257–58. See also In re Munck, No. 02-41690, 2007 WL 4354418 (Bankr. D. Kan. Dec. 7, 2007) (unpublished) (Karlin) (Applying Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999) (Anderson, McWilliams, Cook), state child support service was bound by confirmed plan that provided for discharge of debt when confirmation and claims objection processes effectively litigated discharge. Overruling of Andersen by Educational Credit Management Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc), was prospective only.); In re Bailey, No. 04-42258, 2007 WL 4563442 (Bankr. D. Kan. Dec. 20, 2007) (unpublished) (Karlin) (Discharge provision in pre-Mersmann plan met Andersen requirements.).

 

91  218 B.R. 916 (B.A.P. 9th Cir. Mar. 31, 1998) (Ryan, Klein, Jones), aff’d, 193 F.3d 1083 (9th Cir. Oct. 25, 1999) (Lay, Pregerson, Hawkins).

 

92  218 B.R. at 918.

 

93  See § 346.1 [ Student Loans ] § 158.2  Student Loans.

 

94  218 B.R. at 922–26.

 

95  193 F.3d at 1086–87 (internal citations omitted).

 

96  United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010), aff’g 553 F.3d 1113 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith).

 

97  382 F.3d 1185 (10th Cir. Sept. 7, 2004) (Kelly, Baldock, Brorby).

 

98  382 F.3d at 1189 n.2.

 

99  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

100  299 F.3d 296 (4th Cir. Aug. 5, 2002) (Wilkinson, Motz, Baldock).

 

101  299 F.3d at 299.

 

102  299 F.3d at 301.

 

103  58 F.3d 89 (4th Cir. June 22, 1995) (Hamilton, Wilkinson, Heaney). Hanson is discussed in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

104  299 F.3d at 302 (quoting In re Hanson, 58 F.3d at 93). The Fourth Circuit’s Hanson decision is discussed in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

105  397 F.3d 482 (7th Cir. Feb. 2, 2005) (Bauer, Manion, Evans).

 

106  397 F.3d at 486.

 

107  397 F.3d at 484.

 

108  397 F.3d at 484–85.

 

109  397 F.3d at 486.

 

110  397 F.3d at 487 (quoting In re Banks, 299 F.3d at 302).

 

111  See In re Ginther, 427 B.R. 450, 456–57 (Bankr. N.D. Ill. Apr. 22, 2010) (Barbosa) (“[T]he Supreme Court recently held in United Student Aid Funds, Inc. v. Espinosa, __ U.S. __, 130 S. Ct. 1367, 176 L. Ed. 2d 158 ([Mar. 23,] 2010), a creditor can lose its right to an adversary proceeding by failing to object, at least where it received reasonable or actual notice. Espinosa clarified that the Bankruptcy Rules are procedural rules . . . and therefore overruled In re Hanson, 397 F.3d 482 (7th Cir. [Feb. 2,] 2005) [(Bauer, Manion, Evans)], which had held that constitutional due process required compliance with notice provisions in the Rules.”).

 

112  See Rules 9023 and 9024, discussed in § 223.1 [ Relief from Confirmation Order: Bankruptcy Rules 9023 and 9024 ] § 117.2  Relief from Confirmation Order: Bankruptcy Rules 9023 and 9024. In Hanson, the Seventh Circuit granted relief from the confirmation order under Bankruptcy Rule 9024 (Civil Procedure Rule 60(b)(4)). Hanson, 397 F.3d at 487.

 

113  The adversary proceeding requirement is found in Bankruptcy Rule 7001(6). See SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin), 530 F.3d 230 (3d Cir. June 24, 2008) (Rendell, Greenberg, Van Antwerpen), discussed above and below in this section.

 

114  412 F.3d 679 (6th Cir. June 23, 2005) (Daughtrey, Gibbons, Sargus).

 

115  412 F.3d at 684 (quoting the bankruptcy court, In re Ruehle, 296 B.R. 146, 164 (Bankr. N.D. Ohio July 17, 2003) (Kendig)).

 

116  412 F.3d at 681.

 

117  412 F.3d at 681.

 

118  412 F.3d at 683.

 

119  See §§ 223.1 [ Relief from Confirmation Order: Bankruptcy Rules 9023 and 9024 ] § 117.2  Relief from Confirmation Order: Bankruptcy Rules 9023 and 9024 and 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

120  412 F.3d at 684.

 

121  432 F.3d 150 (2d Cir. Dec. 15, 2005) (Calabresi, Raggi, Murtha).

 

122  432 F.3d at 153.

 

123  432 F.3d at 153 (quoting Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 451, 124 S. Ct. 1905, 158 L. Ed. 2d 764 (May 17, 2004)).

 

124  541 U.S. 440, 124 S. Ct. 1905, 158 L. Ed. 2d 764 (May 17, 2004).

 

125  See §§ 235.1 [ Other Limitations ] § 121.4  Other Limitations and 346.1 [ Student Loans ] § 158.2  Student Loans.

 

126  432 F.3d at 154–55.

 

127  See above in this section, and see § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., Illinois Dep’t of Revenue v. Ayre (In re Ayre), 360 B.R. 880, 886 (C.D. Ill. Jan. 16, 2007) (Scott) (“[T]he confirmation process and the claims adjudication process are alternative methods to resolve a disputed claim. . . . Since both result in litigation as contested matters, due process is met through the use of either method.”).

 

128  831 F.2d 395 (2d Cir. Oct. 14, 1987) (Lumbard, Oakes, Kearse). See § 346.1 [ Student Loans ] § 158.2  Student Loans.

 

129  432 F.3d at 155.

 

130  432 F.3d at 155.

 

131  505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc).

 

132  505 F.3d at 1049.

 

133  505 F.3d at 1039.

 

134  505 F.3d at 1040.

 

135  505 F.3d at 1041.

 

136  505 F.3d at 1047.

 

137  505 F.3d at 1047.

 

138  505 F.3d at 1048.

 

139  505 F.3d at 1048.

 

140  505 F.3d at 1048.

 

141  505 F.3d at 1048.

 

142  505 F.3d at 1049.

 

143  505 F.3d at 1049 (quoting Nwosun v. General Mills Rests., Inc., 124 F.3d 1255, 1257 (10th Cir. Sept. 8, 1997) (Seymour, Porfilio, Murphy), for the four elements needed to apply res judicata.).

 

144  505 F.3d at 1050.

 

145  505 F.3d at 1050.

 

146  505 F.3d at 1050.

 

147  505 F.3d at 1051. Mersmann was applied prospectively, resulting in some subsequent decisions that still apply Andersen. See, e.g., In re Munck, No. 02-41690, 2007 WL 4354418 (Bankr. D. Kan. Dec. 7, 2007) (unpublished) (Karlin) (Applying Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), state child support service is bound by confirmed plan that provided for discharge of debt when confirmation and claims objection processes effectively litigated discharge. Overruling of Andersen by Educational Credit Management Corp. v. Mersmann (In re Mersmann), 505 F.3d 1033 (10th Cir. Sept. 24, 2007) (en banc), was prospective only.); In re Bailey, No. 04-42258, 2007 WL 4563442 (Bankr. D. Kan. Dec. 20, 2007) (unpublished) (Karlin) (Discharge provision in pre-Mersmann plan met Andersen requirements.).

 

148  See, e.g., SLW Capital, LLC v. Mansaray-Ruffin (In re Mansaray-Ruffin), 530 F.3d 230 (3d Cir. June 24, 2008) (Rendell, Greenberg, Van Antwerpen), discussed below in this section.

 

149  307 B.R. 144, 154 (B.A.P. 9th Cir. 2004), overruled by Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tachima, Smith), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010), discussed below in this section.

 

150  307 B.R. at 150.

 

151  307 B.R. at 152. In using the term “illegal” the panel was quoting from In re Webber, 251 B.R. 554, 557–58 (Bankr. D. Ariz. Aug. 9, 2000) (Haines).

 

152  368 F.3d 1165 (9th Cir. May 27, 2004) (Canby, Rymer, Thomas).

 

153  11 U.S.C. § 1322(b)(2), discussed beginning at § 80.1  In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence

 

154  368 F.3d at 1172.

 

155  368 F.3d at 1172 (quoting In re Pardee, 193 F.3d at 1086).

 

156  368 F.3d at 1173 (emphasis added).

 

157  530 F.3d 895 (9th Cir. June 24, 2008) (per curiam), op. after remand, 553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tachima, Smith), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010).

 

158  530 F.3d at 896.

 

159  530 F.3d at 899.

 

160  530 F.3d at 897 (quoting Pardee, 193 F.3d at 1086).

 

161  530 F.3d at 898.

 

162  530 F.3d at 898.

 

163  530 F.3d at 898.

 

164  Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193, 1197 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith), aff’d, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010).

 

165  553 F.3d at 1198–99 (footnote and internal citations omitted).

 

166  553 F.3d at 1200.

 

167  553 F.3d at 1200–01 (internal citations omitted).

 

168  553 F.3d at 1202.

 

169  553 F.3d at 1202–03.

 

170  553 F.3d at 1203.

 

171  553 F.3d at 1203–04 (footnote omitted).

 

172  307 B.R. 144 (B.A.P. 9th Cir. Mar. 26, 2004) (Klein, Ryan, Rimel).

 

173  553 F.3d at 1204 n.6 and 1205.

 

174  See § 346.1 [ Student Loans ] § 158.2  Student Loans. See, e.g., Poland v. Educational Credit Mgmt. Corp. v. Poland (In re Poland), 276 B.R. 660, 662 (D. Kan. Dec. 17, 2001) (Brown) (Citing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), student loan is dischargeable at the completion of payments when confirmed plan provided, “‘If no Proof of Claim is timely filed by the U.S. Department of Education, the claim shall be deemed discharged in its entirety upon completion of the Plan.’”); El Khabbaz v. Sallie Mae Servicing Corp. (In re El Khabbaz), 264 B.R. 204, 207–08 (Bankr. N.D. Iowa June 26, 2001) (Kilburg) (Provision of confirmed plan that “‘[s]tudent loan held by Sallie Mae is over seven years old and will be discharged at the completion of plan payments’” discharges student loan notwithstanding that plan miscalculated counting of the seven-year period. “It is now well settled that a Chapter 13 plan may not include a provision discharging a student loan for undue hardship. . . . This court has noted, however, that a majority of courts enforce offending plan provisions even though acknowledging the provision may be contrary to the Code. . . . The issue of finality is especially important when the plan has already been completed and the discharge received. . . . A majority of courts have concluded that student loan discharge provisions in confirmed plans cannot be subsequently attacked. . . . Debtor’s student loan debt to TGSLC is discharged pursuant to the confirmed plan. Although the plan provision is based on an erroneous computation of the length of the repayment period for the consolidated loan, it is binding on TGSLC as successor to Sallie Mae.”); Patton v. United States Dep’t of Educ. (In re Patton), 261 B.R. 44, 48 (Bankr. E.D. Wash. Apr. 3, 2001) (Rossmeissl) (Applying Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), and Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), student loan creditors are bound by confirmed plan that found undue hardship; however, debtors’ counsel are cautioned that future use of the provision could result in sanctions. “Based upon Pardee and Andersen the Court holds that the confirmation orders in each of these cases is res judicata and cannot now be challenged by ECMC. The Court’s ruling should not be interpreted as an approval or validation of the plan language at issue. This court agrees with those recent decisions which disapprove of the practice of dealing with the issue of discharge of student loans in the plan confirmation process. . . . This Court will not knowingly confirm a plan which contains language which attempts to discharge student loan debt independent of an adversary proceeding. Inclusion of plan provisions which attempt to circumvent determination by adversary proceeding of dischargeability of student loans through the plan confirmation process is improper, but plans confirmed with such provisions will be binding on the parties if the confirmation order is not appealed or revoked. . . . However inclusion of these provisions may be the subject of sanctions.”); In re York, 250 B.R. 842, 844–48 (Bankr. D. Del. Aug. 16, 2000) (Fitzgerald) (Provision of confirmed plan that discharges interest on student loans at the completion of payments is binding on Department of Education and its assignee; postconfirmation modification of the treatment of other creditors does not offer the student loan creditor an opportunity to object to the unchanged provision with respect to the discharge of interest. Citing In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989), “the Third Circuit has stated that this ‘policy of finality’ overrides possible deficiencies within the confirmed plan . . . . [A]bsent any timely objections, a court can confirm a plan which includes a provision that determines the dischargeability of a debt, even though the request for the determination did not follow correct procedure. . . . The Third Circuit’s policy of finality and the binding power of § 1327 abrogates ECMC’s ability to object. If anything, the proposed modification, whereby the Debtors surrender a vehicle and lower the monthly plan payments, enhances ECMC’s position and the potential for successful plan completion. . . . To allow ECMC to object to a proposed modified confirmed plan in which Debtors seek to change only a provision unrelated to ECMC jeopardizes established precedent. . . . [R]es judicata precludes ECMC from objecting to Debtors’ proposed modified plan pursuant to which ECMC’s treatment is unchanged from the confirmed plan.”).

 

175  See, e.g., Needelman v. Pennsylvania Higher Educ. Assistance Agency, 399 B.R. 695 (S.D. Cal. Jan. 5, 2009) (Lorenz) (Applying Espinosa v. United Student Aid Funds, Inc., 553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith), properly noticed student loan creditor is bound by confirmation of plan that paid only part of debt and discharged balance.).

 

176  United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 176 L. Ed. 2d 158 (Mar. 23, 2010), aff’g 553 F.3d 1193 (9th Cir. Dec. 10, 2008) (Kozinski, Tashima, Smith).

 

177  130 S. Ct. at 1374.

 

178  130 S. Ct. at 1374.

 

179  130 S. Ct. at 1374–75.

 

180  130 S. Ct. at 1380.

 

181  130 S. Ct. at 1380.

 

182  130 S. Ct. at 1378.

 

183  130 S. Ct. at 1378.

 

184  130 S. Ct. at 1379.

 

185  130 S. Ct. at 1379.

 

186  130 S. Ct. at 1380.

 

187  130 S. Ct. at 1380.

 

188  130 S. Ct. at 1381.

 

189  See § 346.1 [ Student Loans ] § 158.2  Student Loans. See, e.g., In re Webber, 251 B.R. 554, 556–58 (Bankr. D. Ariz. Aug. 9, 2000) (Haines) (Distinguishing Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), and Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), it is not appropriate to include a provision in the plan that “[u]pon successful completion of the chapter 13, the student loans will not be excepted from discharge.” “[I]f the plan were confirmed as drafted, the discharge of the student loans could not be challenged in a collateral proceeding, because the confirmation order would have res judicata effect, even if the offending provision violated the Bankruptcy Code or Rules. . . . [T]his is not a collateral attack on a confirmation order, but rather a timely and proper direct objection. Therefore, the holdings of Pardee and Andersen have no bearing.”); In re Hensley, 249 B.R. 318 (Bankr. W.D. Okla. May 12, 2000) (TeSelle) (Citing In re Evans, 242 B.R. 407 (Bankr. S.D. Ohio Nov. 17, 1999), inclusion of undue hardship finding in plans rejected notwithstanding the absence of timely objection to confirmation.); In re Fox, 249 B.R. 140 (Bankr. D.S.C. Mar. 31, 2000) (Waites) (Distinguishing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), on the preconfirmation objection of student loan lender and Chapter 13 trustee, bankruptcy court denies confirmation of a plan that would find an undue hardship for purposes of § 523(a)(8).); In re Featherston, 238 B.R. 377, 381 (Bankr. S.D. Ohio Aug. 19, 1999) (Clark) (Citing In re Mammel, 221 B.R. 238 (Bankr. N.D. Iowa 1998), “[w]hen a debtor attempts to discharge a student loan debt solely through a provision in his or her Chapter 13 plan rather than the filing of an adversary complaint, courts have routinely denied confirmation of the plan.”); In re Stevens, 236 B.R. 350 (Bankr. E.D. Va. Mar. 8, 1999) (Tice) (Denies confirmation of second modified plan that would discharge student loans. Citing In re Hinton, 231 B.R. 384 (Bankr. S.D. Fla. Mar. 18, 1999), and In re Mammel, 221 B.R. 238 (Bankr. N.D. Iowa June 9, 1998), § 1328(a)(2) specifically excepts from discharge student loans under § 523(a)(8), and an action to except a student loan from discharge must be brought by adversary proceeding.); In re Evans, 235 B.R. 133, 134–35 (Bankr. S.D. Fla. June 17, 1999) (Mark) (Sustains trustee’s objection to plan that stated, “‘Pursuant to 11 U.S.C. § 523(a)(8), excepting the aforementioned education loans from discharge will impose an undue hardship on the debtor and the debtor’s dependents.’” Citing In re Hinton, 231 B.R. 384 (Bankr. S.D. Fla. Mar. 18, 1999), and In re Mammel, 221 B.R. 238 (Bankr. N.D. Iowa June 9, 1998), “[t]he court in Mammel was careful to differentiate between a confirmed plan with the student loan discharge provisions and a proposed plan containing such a clause.” Discharging student loans through the confirmation process defeats the adversary proceeding requirements, does not satisfy the evidentiary burden on the debtor under § 523(a)(8), lacks sufficient notice to the creditor and is bad policy.); In re Hinton, 231 B.R. 384 (Bankr. S.D. Fla. Mar. 18, 1999) (Friedman) (Denies confirmation of plan that would discharge student loans upon completion of 1% payment to unsecured claim holders and that included a finding of undue hardship. Citing In re Mammel, 221 B.R. 238 (Bankr. N.D. Iowa June 9, 1998), plan cannot discharge student loans at confirmation because confirmation process does not satisfy adversary proceeding requirements and elements of § 523(a)(8) are unproven.); In re Galey, 230 B.R. 898, 899–900 (Bankr. S.D. Ga. Feb. 8, 1999) (Davis) (On trustee’s objection, denies confirmation of plan that includes finding that excepting student loans from discharge would impose an undue hardship. “[T]he plan is inconsistent with the spirit and the purpose of the Code.” Due process is implicated: “[W]here the debtor seeks to discharge a debt, which is expressly excluded from the Chapter 13 discharge, mere insertion of a provision in the plan changing that result requires the safeguards of Part VII of the Federal Rules of Bankruptcy Procedure. Such notice has not been afforded in this case.”); In re Mammel, 221 B.R. 238, 239 (Bankr. N.D. Iowa June 9, 1998) (Kilburg) (Distinguishing Andersen v. Higher Education Assistance Foundation (In re Andersen), 215 B.R. 792 (B.A.P. 10th Cir. Jan. 26, 1998) (McFeeley, Cornish, Matheson), aff’d, 179 F.3d 1253 (10th Cir. June 7, 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 218 B.R. 916 (B.A.P. 9th Cir. Mar. 31, 1998), plan that proposed to discharge student loans upon confirmation could not be confirmed without regard to whether a confirmed plan containing such a provision would bind student loan creditors. Although trustee’s objection to confirmation was withdrawn and student loan creditors did not file objections to the plan, court exercised its “independent right and duty to review proposed Chapter 13 plans for compliance with the Code” and denied confirmation.).

 

190  See, e.g., In re Lemons, 285 B.R. 327, 333 (Bankr. W.D. Okla. Nov. 13, 2002) (Jackson) (Plan provision that would abate student loan interest and discharge collection expenses and penalties violates Bankruptcy Rule 9011: “The Court hereby admonishes Mr. Johnson for his conduct in this case. . . . Mr. Johnson is further ordered to purge the offending language from proposed plans in pending cases and to take appropriate action in confirmed cases in which the plans include the offensive language. . . . [A]ll bankruptcy counsel are hereby placed on notice of this Court’s dim view of other efforts of gamesmanship mentioned above, especially those delineated within ‘discharge by declaration’ and ‘exemption by declaration.’ This Court ‘may impose sanctions on its own initiative,’ Rule 9011(c)(1)(B), and will not hesitate to take appropriate action to deter such conduct.”); In re Webber, 251 B.R. 554, 558 (Bankr. D. Ariz. Aug. 9, 2000) (Haines) (“It is not appropriate for debtors’ counsel to submit such plans in the hope that the student lending agencies fail to object.”); In re Hensley, 249 B.R. 318, 321–24 (Bankr. W.D. Okla. May 12, 2000) (TeSelle) (Citing In re Evans, 242 B.R. 407 (Bankr. S.D. Ohio Nov. 17, 1999), inclusion of undue hardship finding in plans violates Bankruptcy Rule 9011 notwithstanding Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), and notwithstanding the absence of timely objection to confirmation; to avoid sanctions, debtors’ attorneys are ordered to modify the confirmed plans to delete undue hardship provision. “Counsel appearing before this Court are officers of the Court and are ethically obligated to inform the Court if they are aware of the existence of a plan provision that renders the plan non-confirmable. . . . The Court does not believe that a fair reading of the opinion of the Tenth Circuit in Andersen can reasonably lead one to conclude that the Tenth Circuit intended to encourage the practice of intentionally inserting unlawful plan provisions in the hope that confirmation of the plan will occur and the time for appeal will pass before such provisions are noticed so that debtors and their counsel can then claim res judicata. . . . [T]he Court believes that the inclusion of such a provision in a chapter 13 plan and/or order confirming a chapter 13 plan is both unethical and sanctionable conduct pursuant to Bankruptcy Rule 9011. . . . See Taylor v. Freeland & Kronz, 503 U.S. 638, 642, 112 S. Ct. 1644, 118 L. Ed. 2d 280 ([Apr. 21,] 1992) . . . . ‘Debtors and their attorneys face penalties under various provisions for engaging in improper conduct in bankruptcy proceedings. See, e.g., . . . Rule 9011’ . . . . [T]he Court is willing to defer its consideration of sanctions, provided counsel in each of these cases files, within ten days of the date of this Order, a modified plan striking the student loan discharge provision, or dismisses or converts the case to one under chapter 7.”); In re Evans, 242 B.R. 407, 410–12 (Bankr. S.D. Ohio Nov. 17, 1999) (Hopkins) (Distinguishing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. Oct. 25, 1999), court sua sponte denies confirmation of plan that would discharge student loans upon confirmation and ordered debtor’s attorney to show cause why the attempt did not violate Bankruptcy Rule 9011. In Andersen and Pardee, the plans had already been confirmed and the validity of the student loan discharge provision was not raised before confirmation. “Had the issue in Andersen and Pardee been raised prior to confirmation, a different result likely would have occurred given that both decisions contain language indicating that the plans at issue would not have been confirmed had the issue been raised prior to confirmation. . . . [T]hese decisions stand for the following proposition: the Code and the Rules don’t permit you to include such an addendum in a chapter 13 plan, but if you do and the plan is confirmed due to the absence of a timely objection, the provision is nevertheless binding upon the creditor due to the need for finality. The Court does not believe that such authority constitutes a basis under Rule 9011(b)(2) for the inclusion of such a provision in a plan. . . . This Court is of the opinion that Andersen and Pardee provide no more protection from Rule 9011(b) sanctions for an unsupported ‘discharge by declaration’ than [Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L. Ed. 2d 280 (Apr. 21, 1992),] provides for an unsupported ‘exemption by declaration.’”). See also § 346.1 [ Student Loans ] § 158.2  Student Loans.

 

191  In re Wright, 279 B.R. 886, 889 (D. Kan. Apr. 29, 2002) (Rogers) (Rejects “per se rule” that including undue hardship language in Chapter 13 plans is sanctionable. Bankruptcy court appropriately denied confirmation of plan that included finding of undue hardship, but “[t]his court believes, as did the bankruptcy court, that these matters can be handled when they arise.”). Accord Educational Credit Mgmt. Corp. v. Gardner (In re Gardner), 287 B.R. 822, 826–27 (D. Kan. Oct. 30, 2002) (Crow) (“[T]he inclusion of [undue hardship discharge provisions] in a plan in the hope that they will trap the unwary student loan creditor should result in the imposition of sanctions. The court, however, does not believe that a per se rule should be adopted. Debtors’ counsel are on notice that the filing of plans containing this language will not be allowed unless there is a good faith basis for them.”); Educational Credit Mgmt. Corp. v. Green (In re Green), 287 B.R. 827 (D. Kan. Oct. 30, 2002) (Crow).

 

192  Haddox v. Johnson (In re Haddox), Nos. WO-03-048, 00-20020-NLJ, 2003 WL 22681412, at *3–*4 (B.A.P. 10th Cir. Nov. 12, 2003) (unpublished) (McFeeley, Nugent, McNiff) (Confirmed plan that discharged student loan interest was res judicata and bankruptcy court was without authority to order debtor’s attorney to delete the offending provision. In an unrelated Chapter 13 case, In re Lemons, 285 B.R. 327 (Bankr. W.D. Okla. Nov. 13, 2002) (Jackson), bankruptcy judge sanctioned debtor’s counsel for proposing language that would abate and discharge student loan interest. The sanctions order required counsel to purge similar language from other plans in confirmed cases. When counsel moved to delete the student loan provision from the confirmed plan in Haddox, the debtor hired new counsel and objected. The BAP first concluded that the motion to purge was a motion to modify that was not authorized by the debtor and could not be accomplished by the bankruptcy court on its motion. “Tenth Circuit precedent as articulated in [Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. June 7, 1999),] supports the Appellant’s argument that the provisions of a confirmed Chapter 13 plan cannot be collaterally attacked because they are inconsistent with or contrary to other provisions of the Bankruptcy Code. . . . [Section] 1327(a) imposes a res judicata bar that precludes a collateral attack on the plan’s content.”).

 

193  See § 74.12  Lien Retention before BAPCPA and § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

194  376 B.R. 33 (B.A.P. 10th Cir. Sept. 19, 2007) (Bohanon, Brown, McNiff), rev’d on other grounds, 563 F.3d 1171 (10th Cir. May 4, 2009) (Murphy, Brorby, Hartz).

 

195  376 B.R. at 37 (emphasis added).

 

196  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

197  See, e.g., Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995) (Hamilton, Wilkinson, Heaney), discussed in § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

198  213 F.3d 318 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood).

 

199  213 F.3d at 319 (quoting plan).

 

200  See §§ 104.2 [ Lien Retention ] § 74.12  Lien Retention before BAPCPA, 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA and 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

201  213 F.3d at 321–23. Accord In re Linkous, 339 B.R. 375, 379 (Bankr. W.D. Va. Mar. 24, 2006) (Krumm) (Car lender with notice of plan that provided for ongoing monthly payments but eliminated contractual balloon is bound by confirmation. Any ambiguity in plan shifted burden to creditor “to explore their rights as affected by the plan prior to confirmation of the plan.”).

 

202  Other courts—including some of those rendering the student loan decisions discussed above—have found that the debtor bears the risk of any uncertainty in the content of the plan when the binding effect of confirmation is at issue under § 1327(a). See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

203  530 F.3d 230 (3d Cir. June 24, 2008) (Rendell, Greenberg, Van Antwerpen).

 

204  530 F.3d at 233.

 

205  530 F.3d at 237–39.

 

206  530 F.3d at 242.

 

207  530 F.3d at 248.

 

208  530 F.3d at 249.

 

209  530 F.3d at 248–49.

 

210  530 F.3d 1284 (10th Cir. July 7, 2008) (Henry, Tacha, Lucero).

 

211  The hanging sentence tacked onto the end of 11 U.S.C. § 1325(a) by BAPCPA is discussed beginning at § 75.1  In General: Modification Without § 506.

 

212  See § 451.1 [ In General: Modification Without § 506 ] § 75.1  In General: Modification Without § 506.

 

213  541 U.S. 465, 124 S. Ct. 1951, 158 L. Ed. 2d 787 (May 17, 2004). See § 451.1 [ In General: Modification Without § 506 ] § 75.1  In General: Modification Without § 506.

 

214  530 F.3d at 1291.

 

215  530 F.3d at 1291 n.4.

 

216  179 F.3d 1253 (10th Cir. June 7, 1999) (Anderson, McWilliams, Cook).

 

217  __ U.S. __, 129 S. Ct. 2195, 174 L. Ed. 2d 99 (June 18, 2009).

 

218  600 F.3d 135 (2d Cir. Mar. 22, 2010) (Calabresi, Wesley).

 

219  United Student Aid Funds, Inc. v. Espinosa, 130 S. Ct. 1367, 1376, 176 L. Ed. 2d 158 (Mar. 23, 2010).

 

220  Perhaps less firmly grounded in either Bailey or Espinosa, the Second Circuit in Chubb went further to restate its holding that the channeling injunctions exceeded the power of the bankruptcy court. Because Chubb’s subject matter jurisdictional challenge was meritorious, the Second Circuit concluded that Chubb was not bound by the Johns-Manville confirmation order or by subsequent interpretations of that order.

 

221  See, e.g., Russell v. Transport Funding LLC (In re Russell), 386 B.R. 229, 231 (B.A.P. 8th Cir. Apr. 9, 2008) (Kressel, Federman, Venters) (Debtor is bound by confirmed plan that provided amount and interest rate for secured creditor and cannot use claim objection filed three and one-half years after confirmation as collateral attack on secured creditor’s treatment under the plan. “The binding effect of a confirmed Chapter 13 plan is a basic tenet of bankruptcy law. . . . An unappealed, confirmed plan is res judicata, and its terms are not subject to collateral attack. . . . [O]nce the Debtor’s Chapter 13 plan was confirmed, the Debtor was bound by it, and he cannot collaterally attack its terms now that they are no longer advantageous or convenient to him. The Debtor’s objection to Transport’s claim constitutes an impermissible attack on the confirmation order, and the bankruptcy court correctly overruled the objection.”).

 

222  11 U.S.C. § 1327(a). See, e.g., In re Whitney, No. 04-62483-13, 2007 WL 1687273 (Bankr. D. Mont. June 7, 2007) (unpublished) (Kirscher) (Debtors are bound by confirmed plan to pay tax refunds to trustee; “other income” dedicated for 60 months includes tax refunds.); In re Torres, 336 B.R. 839, 843 (Bankr. M.D. Fla. Dec. 16, 2005) (Jennemann) (Debtor is bound by confirmed plan to pay allowed secured claim and cannot change that amount after completion of payments when collateral is damaged. Citing Ford Motor Credit Co. v. Stevens (In re Stevens), 130 F.3d 1027 (11th Cir. Dec. 12, 1997), debtor is bound to plan terms for payment of allowed secured claim. Since debtor completed plan payments, “and the amount and status of Carmax’s claim was determined at confirmation . . . [h]e cannot now at the eleventh hour, reclassify Carmax’s claim to shift the burden of the van’s loss, ex post facto, to Carmax and retain the $1,636.53.”).

 

223  Cone v. Davies (In re Davies), 143 B.R. 747 (Bankr. D. Idaho July 29, 1992) (Hagan). See also In re Grant, 428 B.R. 504 (Bankr. N.D. Ill. May 24, 2010) (Squires) (Debtor was bound by confirmation under § 1327(a) to pay unsecured creditors in full with interest in five years; it was cause for dismissal that debtor defaulted in payments and could not complete full payment of unsecureds within five years.); Jiminez v. NYCTL 1996-1 Trust (In re Jiminez), Nos. 98-4471 (JMP), 04-03149 (JMP), 2008 WL 2026147 (Bankr. S.D.N.Y. May 9, 2008) (unpublished) (Peck) (Debtor is bound by confirmed plan that recognized validity of city tax lien and contained lien-retention clause; city is bound by plan provision for 9% rather than 18% statutory interest when city did not object to confirmation.).

 

224  Ruhl v. HSBC Mortgage Servs., Inc., 399 B.R. 49, 60 (E.D. Wis. Dec. 23, 2008) (Adelman) (Debtors were bound by confirmed plan that pays interest on mortgage arrearages; debtors were precluded from arguing that § 1322(e) barred interest. “[N]othing in § 1322(e) forbids a bankruptcy court from confirming a plan in which the debtor proposes to pay more than what is ‘necessary’ to cure default.”), aff’g 394 B.R. 469 (Bankr. E.D. Wis. Mar. 19, 2008) (Shapiro); Case v. Wells Fargo Bank, NA (In re Case), 394 B.R. 469, 478, 476 (Bankr. E.D. Wis. Mar. 19, 2008) (Shapiro) (Debtor is bound by plan provision that paid interest on interest—more than required to cure default under § 1322(e). Citing In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989), “[t]here is nothing illegal about parties agreeing to pay more than what is required under the § 1322(e) formula.” Adversary proceedings asserting confirmed plans paid mortgagees more than § 1322(e) would have required, by paying interest on interest, are dismissed. Confirmation binds debtors, citing Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000): “What persuades this court that res judicata applies is that the challenge to interest on interest payments has been brought by the debtors—the very same parties who proposed such payments in their plans.” Court distinguishes In re Escobedo, 28 F.3d 34 (7th Cir. June 22, 1994), which found confirmation to be invalid because of failure to comply with mandatory provision of § 1322(a)(2).). See § 135.1 [ Section 1322(e): Contracts after October 22, 1994 ] § 83.2  Section 1322(e): Contracts after October 22, 1994 for discussion of 11 U.S.C. § 1322(e).

 

225  In re Dennis, 230 B.R. 244, 252–53 (Bankr. D.N.J. Feb. 23, 1999) (Stripp) (Although Chrysler cannot have an allowed claim because it did not timely file a proof of claim, plan that treats Chrysler as a secured claim holder is binding, and debtor must pay the amount provided in the plan. Plan provided to pay Chrysler $8,000. Chrysler filed an untimely proof of claim for $15,910.45. Debtor objected to the claim, and court held that § 502(b)(9) disallowed Chrysler’s untimely filed claim. “If a chapter 13 plan which modifies a secured claim is confirmed, it binds the creditor ‘whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.’ . . . A plan term proposing modification of a secured claim is certainly a ‘request for determination and allowance or disallowance’ of such claim within the meaning of the Advisory Committee Note to Rule 3002(a) . . . . If a chapter 13 plan does not propose to modify a secured claim, then by virtue of Rule 3002(a) the secured creditor is not required to file a proof of claim and the lien will pass through bankruptcy unaffected. If, however, a plan does propose to modify a secured claim, by paying the secured creditor less than the creditor believes is due, the secured creditor who objects to such treatment must file a timely proof of claim and objection to confirmation or it will be bound by the plan under Code section 1327(a). . . . Similarly, since Code section 1327(a) also binds the debtor, a debtor’s proposal in a plan to pay a ‘cram down’ amount to a secured creditor is an admission by the debtor that such creditor has an allowed secured claim to the extent provided by the plan. Confirmation of the plan allows the secured claim to such extent because all parties are bound by the confirmation under Code section 1327(a). . . . To the extent that [In re Schaffer, 173 B.R. 393 (Bankr. N.D. Ill. Oct. 13, 1994),] and other courts have held that a secured creditor must file a proof of claim even to receive the amount which a debtor’s plan proposes to pay it, this court disagrees, because such holdings overlook the fact that confirmation binds the debtor under Code section 1327(a). Moreover, in light of Rule 3002(a)’s omission of an explicit requirement that secured creditors must file proofs of claim, and the fact that the notice of the bar date states that proofs of claim must be filed to share in payment from the estate ‘except as otherwise provided by law,’ a serious due process issue would exist if secured creditors who choose not to file a proof of claim in reliance on a plan’s terms could then be told after confirmation that they shall not receive the payment proposed in the plan. If debtors want that result, the plan and notice must explicitly state that the lien is to be cancelled, or words to that effect, and that the secured creditor shall receive no payment.”). But see United Feeds, Inc. v. Greenig (In re Greenig), 152 F.3d 631 (7th Cir. Aug. 3, 1998) (Posner, Bauer, Coffey) (In a Chapter 12 case, notwithstanding confirmed plan providing that creditor had an “allowed claim” that would be paid a fixed percentage, because creditor failed to timely file a proof, unsecured claim was not allowable and cannot be paid over debtor’s objection.). See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation for further discussion of Greenig and Dennis.

 

226  Manion v. Providian Nat’l Bank, 269 B.R. 232 (D. Colo. Nov. 6, 2001) (Kane).

 

227  In re Buckner, 261 B.R. 478 (Bankr. E.D. Okla. Nov. 8, 2000) (Cornish).

 

228  In re Cruz, 253 B.R. 638, 641–43 (Bankr. D.N.J. Oct. 13, 2000) (Burns) (Debtors are bound by confirmation of plan that treated second mortgage holder as secured and protected from modification by § 1322(b)(2); debtors cannot use § 1329 to modify treatment of second mortgage to reflect postconfirmation decision in McDonald v. Master Financial, Inc. (In re McDonald), 205 F.3d 606 (3d Cir.), cert. denied, 531 U.S. 822, 121 S. Ct. 66, 148 L. Ed. 2d 31 (Oct. 2, 2000), that wholly unsecured mortgage is not protected from modification. “[T]he value of each secured claim is fixed upon confirmation as of the effective date of the plan. . . . Once a plan is confirmed, it is res judicata to all issues that were or could have been brought prior to confirmation. . . . Based on the debtors’ declared value of their home and the amounts due for the two mortgages secured by that home, the debtors could not have modified the claims of either mortgagee, even under the holding in McDonald since the value of the home was sufficient to provide security at least in part for both mortgages. . . . [T]he issue of value could have and should have been litigated prior to confirmation of the debtors’ plan. As a result, the debtors are bound by their statement, upon which all parties relied at confirmation, that their home was worth $40,000.”). Accord In re Lipford, No. 04-83766C-13D, 2006 WL 4458528 (Bankr. M.D.N.C. Mar. 10, 2006) (unpublished) (Stocks) (Res judicata effect of confirmed plan precludes modification to eliminate bifurcated unsecured claim based on debtors’ prior Chapter 7 discharge. Debtors had opportunity to litigate that issue at confirmation.).

 

229  See, e.g., Celli v. First Nat’l Bank of N. N.Y. (In re Layo), 460 F.3d 289, 293–95 (2d Cir. Aug. 15, 2006) (Hearse, Sack, Hall) (Confirmed plan that treated mortgage holder as secured with regular monthly payments precluded trustee’s adversary proceeding asserting that mortgage had been released and discharged. “[T]he facts that form the basis for the Trustee’s challenge to the mortgages were available in the county clerk’s office for anyone to see. The Trustee had clear opportunities to object to the validity of the mortgage lien listed in the confirmed Chapter 13 plan—when FNB filed its claim . . . and when Layo consented to and included that claim in his final Chapter 13 plan. . . . We acknowledge that challenges to the validity of a lien must be brought through an adversary proceeding. Where, at the outset, there is no dispute as to the basis of a lien, however, given the policy embodied in § 1327(a) that confirmation of a plan ‘bind the debtor and each creditor,’ it does not follow that a non-objecting creditor has a right to bring an adversary proceeding whenever he gets around to doing so. . . . We do not view [Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995),] as establishing a general rule that creditors whose liens are not in dispute at the time of confirmation have a right to bring an adversary proceeding post-confirmation to challenge the lien[.]”); Consumer Portfolio Servs., Inc. v. Coleman, 342 B.R. 817 (N.D. Ala. Mar. 16, 2006) (Guin) (Bankruptcy court had jurisdiction to determine whether confirmed and completed Chapter 13 plan precluded debtor’s post-discharge state court lawsuit alleging that repossession and liquidation of a car pursuant to the confirmed plan was inconsistent with Alabama Uniform Commercial Code.); Broadnax v. Department of Veteran Affairs, No. Vic.A. 2:04CV693, 2005 WL 1185809 (E.D. Va. May 19, 2005) (unpublished) (Jackson) (Confirmed plan precludes district court litigation in which debtor asserts that mortgage holder imposed improper charges and improperly accounted for payments prior to confirmation; unconfirmed plan in subsequent Chapter 13 case has no res judicata or collateral estoppel effect in litigation between debtor and mortgage holder.); Snow v. Countrywide Home Loans, Inc. (In re Snow), 270 B.R. 38 (D. Md. Nov. 16, 2001) (Keir) (Citing Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000), Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. Sept. 21, 1999), and Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995), confirmation of plan that provides full payment of mortgage holder’s arrearage precludes class action asserting that inspection fee included in arrearage violates state law.); In re Allen, No. 07-20389-TLM, 2009 WL 856985 (Bankr. D. Idaho Mar. 31, 2009) (Myers) (Confirmed plan that contemplated sale of property and acknowledged secured claims precluded debtors from later contesting validity of notes or mortgages.); Woltman v. PNC Bank (In re Woltman), No. 1:07-bk-01647MDF, 2008 WL 5157477 (Bankr. M.D. Pa. Nov. 18, 2008) (unpublished) (France) (Binding effect of confirmation prevented debtors from avoiding judgment lien when confirmed plan provided that lien would be paid in full; failure to adequately investigate lien prior to confirmation does not overcome binding effect.); Jones v. Regional Acceptance Corp. (In re Jones), No. 08-40027-JJR, 2008 WL 4830538 (Bankr. N.D. Ala. Nov. 4, 2008) (unpublished) (Robinson) (Debtors were bound by confirmed plan that provided for payment in full of car lender’s secured claim without reserving TILA action.); Jones v. GMAC (In re Jones), Nos. 06-81987-JAC-13, 06-80150-JAC-13, 2007 WL 1725593 (Bankr. N.D. Ala. June 13, 2007) (unpublished) (Caddell) (Truth in Lending Act complaint attacking charge for GAP insurance is barred by res judicata effect of confirmed plan that pays GMAC in full. Four elements of res judicata are present in plan confirmation: valid prior judgment from court of competent jurisdiction, final judgment on merits, identity of parties, and same cause of action in both proceedings.); Consumer Portfolio Servs., Inc. v. Coleman (In re Coleman), Nos. 01-70473-CMS-13, 04-70048-CMS, 04-70049-CMS, 2007 WL 1526651 (Bankr. N.D. Ala. May 24, 2007) (unpublished) (Stilson) (Confirmed plan providing for surrender of car and payment of post-sale deficiency precludes debtor’s cause of action for violation of Alabama UCC notice of sale requirements.); Smith v. Fairbanks Capital Corp. (In re Smith), 299 B.R. 687, 691 (Bankr. S.D. Ga. Aug. 15, 2003) (Walker) (In class action by Chapter 13 debtor against Fairbanks Capital Corporation for improper assessment and collection of attorney fees, “[i]n light of [Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. May 22, 2003)], the court cannot entertain a postconfirmation claim objection raised by Debtor based on the amount of Fairbanks’ claim.”); Mourer v. Equicredit Corp. of Am. (In re Mourer), 287 B.R. 889, 897 (Bankr. W.D. Mich. Jan. 10, 2003) (Stevenson) (Confirmed plan that treated Equicredit as a secured creditor precludes remedy of rescission in debtors’ postconfirmation adversary proceeding under Truth in Lending Act and Home Ownership and Equity Protection Act. “[T]he remedy of rescission requested by the Debtors and allowed by TILA is contrary to the finality afforded a confirmed plan under Chapter 13. Accordingly, although the Debtors may be entitled to rescission under TILA, the imposition of the bankruptcy filing and the finality of plan confirmation makes this remedy antithetical. The Debtors knew or should have known that their treatment of Equicredit’s claim as secured was going to be under attack prior to plan confirmation and should have affirmatively acted to change Equicredit’s treatment under the plan.”); American Gen. Fin., Inc. v. Tippins (In re Tippins), 221 B.R. 11, 23–26 (Bankr. N.D. Ala. May 1, 1998) (Sledge) (Preclusive effect of confirmation order bars debtor’s postconfirmation cause of action against a creditor for fraud, misrepresentation and collusion in connection with credit life insurance included in prepetition loan transaction. In Chapter 13 case filed in 1995, debtor scheduled a debt to AmGen but did not schedule any claim or cause of action against AmGen. AmGen filed a secured proof of claim that included credit life insurance premiums. No objection was filed to AmGen’s proof of claim. Chapter 13 plan was confirmed that paid 100% of all allowed claims and paid AmGen “direct.” Two years after confirmation, debtor filed a state court action against AmGen for fraud, misrepresentation, conspiracy and violations of state law in connection with credit life insurance purchased from AmGen as part of the prepetition loans by AmGen. Debtor amended her schedules to disclose this cause of action and, without objection, claimed the cause of action and its proceeds as exempt property. AmGen filed an adversary proceeding in the bankruptcy court to enjoin the debtor from proceeding with the state court action. “An order confirming a chapter 13 plan is claim preclusive as to all justiciable issues which were or could have been decided before confirmation. . . . The claims made in the Tippins’ state court complaint involve the same pre-petition loan transactions which provide the basis of AmGen’s proof of claims. The Tippins could and should have raised objections to AmGen’s proof of claims prior to confirmation, but failed to do so. . . . Tippins listed AmGen as a creditor . . . . AmGen properly filed proofs of claims . . . . No objection to AmGen’s claims were filed. . . . The plans did not mention any claim or cause of action against AmGen. The confirmation orders expressly allowed AmGen’s claims and the Tippins’ chapter 13 plans paid the claims of AmGen direct. The facts clearly show that the Tippins had full opportunity to contest AmGen’s claims. Because the Tippins’ claims should have been brought in their bankruptcy cases, claim preclusion prevents them from being raised now. . . . [I]t is clear that the same operative facts serve as a basis of both claims and there does not seem to be any disagreement that the Tippins’ claims are counterclaims. . . . [D]ebtor’s claims against a creditor are barred by the doctrine of claim preclusion where an order confirming a chapter 13 plan allows claims arising from the same facts or transactions.”); Marlow v. Sweet Antiques (In re Marlow), 216 B.R. 975, 979–81 (Bankr. N.D. Ala. Jan. 27, 1998) (Caddell) (Res judicata effect of confirmation and finality of order allowing claims bar debtor’s postconfirmation preference action to avoid a judicial lien. Creditor recorded judgment lien two months before Chapter 13 petition. Creditor filed a proof of claim asserting secured status by virtue of the recorded judgment. Order confirming plan provided that “properly filed secured claims” would be paid through the plan. At the deadline to file proofs of claim, the trustee filed a motion to allow claims that listed the judgment lien creditor as a secured claim holder. Debtor did not object to the trustee’s motion. Approximately six months after the deadline for objecting to claims, the debtor filed an adversary proceeding seeking to set aside the judgment lien as a voidable preference under § 547. “Pursuant to § 1327, the order of confirmation in a chapter 13 case constitutes res judicata as to all justiciable issues which were or could have been raised prior to confirmation.” Citing Russo v. Seidler (In re Seidler), 44 F.3d 945 (11th Cir. 1995), and Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995), the court acknowledged, “There is a line of cases which provides that ‘if an issue must be raised through an adversary proceeding it is not part of the confirmation process and, unless it is actually litigated, confirmation will not have a preclusive effect.’” However, the court found that “an order of confirmation is entitled to res judicata effect with respect to claims of creditors if certain due process requirements are satisfied. . . . In the case at bar, the Court finds that all due process requirements have been satisfied and that Marlow’s confirmation order when coupled with the order allowing claims is entitled to res judicata effect with respect to all issues involved with the claim of Malornis. The debtor as the plan proponent was under a duty to examine the claims filed in her chapter 13 case and object to same as appropriate. Marlow knew about her preference claim when she filed her petition, scheduled the claim of Malornis without reserving the right to attack the validity of the claim postconfirmation, and failed to object to the claim within the time prescribed by the order allowing claims. The rights of the debtor and Malornis were established by the confirmation order and order allowing claims which were entered without objection or appeal. Marlow is now bound by the terms of her confirmed chapter 13 plan and the order allowing claims to provide for the claim of Malornis as a secured judgment lienholder in her case.” Court cites Spartan Mills v. Bank of America Illinois, 112 F.3d 1251 (4th Cir. May 6, 1997), as support for distinguishing Cen-Pen.). But see Elliott v. ITT Corp., 150 B.R. 36, 39 (N.D. Ill. Dec. 4, 1992) (Aspen) (Res judicata effect of confirmation does not bar debtor from bringing consumer class action alleging that creditors engaged in “insurance packing” in connection with consumer credit transactions. A Chapter 13 plan confirms “the manner in which the debtor will discharge his financial obligations” and does not preclude the debtor from challenging the underlying debt.); Hildebrand v. Hays Imports, Inc. (In re Johnson), 279 B.R. 218 (Bankr. M.D. Tenn. June 2, 2002) (Lundin) (Confirmation of a “base or percentage, whichever is greater” plan does not preclude Chapter 13 trustee’s avoidance action with respect to a vulnerable security interest because the allowance of claims and the determination of secured status are not necessary to confirmation of the plan.). See also Marshall v. Security State Bank of Hamilton (In re Marshall), 121 B.R. 814 (Bankr. C.D. Ill. Dec. 6, 1990) (Altenberger) (Even if Truth-in-Lending Act violation is a “compulsory counterclaim,” failure of confirmation of Chapter 13 plan does not bar debtor from asserting Truth-in-Lending Act claim.).

 

230  In re Cushion, 349 B.R. 919, 921 (Bankr. M.D. Fla. Aug. 28, 2006) (Funk) (Confirmation of plan that provided full payment of $14,327.14 arrearage claim precludes debtors’ postconfirmation objection to arrearage claim in that same amount when proof of claim was filed a month before hearing on confirmation. “A Chapter 13 debtor who has an opportunity to object to a creditor’s claim prior to confirmation but fails to do so waives the right to object to the claim and is bound by the confirmation order. . . . Such a waiver does not apply to a claim, which is filed on the eve of confirmation and thus does not provide the debtor a reasonable opportunity to object. . . . Debtors had over a month to file an objection . . . . Debtors elected to amend their plan at the confirmation hearing to provide for the full payment . . . . Debtors waived their right to object . . . and are bound by the treatment thereof.”); In re Bopp, No. 04-50836, 2006 WL 2846877 (Bankr. W.D. La. Apr. 12, 2006) (unpublished) (Schiff) (Debtor is bound by confirmed plan that fixed arrearage claim and regular monthly payment when debtor sought to refinance mortgage two years after confirmation.); In re Starling, 251 B.R. 908, 910 (Bankr. S.D. Fla. Aug. 9, 2000) (Friedman) (Confirmation of plan that was amended to provide for arrearage claim filed by mortgage holder is preclusive of the debtor’s postconfirmation objection to claim. Original plan provided for mortgage arrearage claim of $11,433.96. Chase Mortgage filed a prepetition arrearage claim for $18,960.76. In response to Chase’s objection to confirmation, the debtor provided for full payment of the arrearage claim in the amount filed by Chase. Six months after confirmation, the debtor objected to Chase’s arrearage claim, arguing that the claim was miscalculated. “The confirmation order effectively bound both Case and the Debtor to the terms of the plan. . . . The Debtor had the opportunity to object to Chase’s claim and to adjudicate the amount of the arrearage owed to Chase prior to the confirmation hearing but failed to do so. To allow the Debtor to object, months after the plan has been confirmed, would contradict the ‘finality’ objective of the confirmation process and would overlook the express language of section 1327(a) of the Bankruptcy Code. Thus, the Debtor waived the right to object to Chase’s claim by failing to obtain an adjudication on the amount of the claim prior to confirmation of the Second Amended Chapter 13 Plan.”).

 

231  In re Abercrombie, 39 B.R. 178 (Bankr. N.D. Ga. Apr. 18, 1984) (Norton). Accord In re Clark, 172 B.R. 701, 703–05 (Bankr. S.D. Ga. Sept. 19, 1994) (Walker) (Finality of confirmation order under § 1327 precludes debtor’s objection to creditor’s secured claim. Prior to petition, FMCC repossessed a car. FMCC filed a claim asserting secured status. The confirmed plan mistakenly designated FMCC as a secured creditor. Eight months after confirmation, the debtor objected to FMCC’s proof of claim. “Under section 1327(a), the order of confirmation fixes the rights of all parties and binds them to the terms of the plan. Just as creditors are bound by the treatment afforded their claims, the debtor is likewise bound by the same terms. . . . The order confirming Debtor’s plan served as the final allowance of FMCC’s claim under the plan fixing FMCC’s entitlement to treatment as a secured creditor in this case. The doctrine of res judicata prevents Debtor’s objection under Bankruptcy Rule 3007. However, this does not signal an end to the Court’s analysis. Debtor’s objection is in the nature of a motion for reconsideration of the order of confirmation which fixed the rights of FMCC as a secured creditor. Claims may be reconsidered after confirmation in accordance with 11 U.S.C. § 502(j). . . . In order for the Court to reconsider claim after confirmation, the movant must first demonstrate ‘cause.’ . . . Debtor impliedly alleges that the FMCC claim was not challenged through inadvertence or some form of excusable neglect. Although inadvertence and excusable neglect may provide cause for the Court to reconsider its confirmation order, such reconsideration is discretionary and is only to be undertaken according to the equities of the case. . . . Debtor offers no explanation for its failure to object to FMCC’s claim. . . . ‘[E]quity aids the vigilant.’ . . . Debtor has failed to demonstrate that the equities of the case in favor of allowing reconsideration of the FMCC claim outweigh the necessity for finality in both the claims allowance process and the rights of the parties as established in the confirmed plan. . . . Debtor has not sought a modification of his plan pursuant to 11 U.S.C. § 1329.”). But see In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989), and In re Stone, 91 B.R. 423 (Bankr. N.D. Ohio July 21, 1988) (Bodoh), discussed in §§ 238.1 [ Loss, Destruction or Surrender of Property after Confirmation ] § 122.3  Loss, Destruction or Surrender of Property after Confirmation and 264.1 [ To Surrender Collateral, Account for Repossession or Change the Treatment of a Secured Claim ] § 127.7  To Surrender Collateral, Account for Repossession or Change the Treatment of a Secured Claim.

 

232  EvaBank v. Baxter, 278 B.R. 867 (N.D. Ala. May 30, 2002) (Acker) (Confirmation order that incorporated preconfirmation proof of claim and restated the value and interest rate from the proof of claim is preclusive of value and interest rate in postconfirmation claims litigation.), vacating In re Baxter, 269 B.R. 458 (Bankr. N.D. Ala. Nov. 8, 2001) (Caddell); Wilson v. DaimlerChrysler Fin. Servs. Ams., LLC (In re Wilson), 409 B.R. 72 (Bankr. W.D. Pa. July 30, 2009) (Fitzgerald) (Debtor was bound by confirmation order setting deadline for § 506 valuation motions; motion filed 14 months late was denied.); In re Kuhasz, No. 07-20282, 2008 WL 5539788, at *4 (Bankr. D. Kan. Nov. 19, 2008) (unpublished) (Somers) (Debtors were bound by confirmation of plan that pays car lender in full and can’t use claim objection or plan modification to delete negative equity from secured claim. “[P]ost-confirmation change in applicable bankruptcy law is not sufficient to warrant a revocation or modification of the terms of a confirmed and operating Chapter 13 plan.”); In re Davis, 300 B.R. 898 (Bankr. N.D. Ill. Oct. 27, 2003) (Hollis) (Citing In re Pence, 905 F.2d 1107 (7th Cir. June 17, 1990), debtor is bound by valuation of secured claim in confirmation order notwithstanding preconfirmation proof of claim that stated value lower than the confirmation order.); In re Clark, 172 B.R. 701, 703–04 (Bankr. S.D. Ga. Sept. 19, 1994) (Walker) (Finality of confirmation order under § 1327 precludes debtor’s objection to creditor’s secured claim. Prior to petition, FMCC repossessed a car. FMCC filed a claim asserting secured status. The confirmed plan mistakenly designated FMCC as a secured creditor. Eight months after confirmation, the debtor objected to FMCC’s proof of claim. “Under section 1327(a), the order of confirmation fixes the rights of all parties and binds them to the terms of the plan. Just as creditors are bound by the treatment afforded their claims, the debtor is likewise bound by the same terms. . . . The order confirming Debtor’s plan served as the final allowance of FMCC’s claim under the plan fixing FMCC’s entitlement to treatment as a secured creditor in this case. The doctrine of res judicata prevents Debtor’s objection under Bankruptcy Rule 3007.”); In re Ross, 162 B.R. 785, 789–90 (Bankr. N.D. Ill. Dec. 14, 1993) (Sonderby) (Both the debtor and an automobile-secured creditor are bound by the value of the collateral stated in the confirmed plan, and the debtor cannot attack that valuation by an objection to a proof of claim filed two years after confirmation. In the debtor’s schedules and plan, the debtor listed Edison as a secured claim holder with a car as collateral valued at $4,000. Edison received a summary of the proposed plan showing that the debtor would pay the $4,000 secured portion of its claim in full and 10% of its unsecured claim. Edison filed a proof of claim that asserted a security interest in a car but did not assert any value for the car different from the $4,000 stated in the debtor’s schedules and in the debtor’s plan. Edison did not object to confirmation of the plan. Two years after confirmation, the debtor objected to Edison’s proof of claim, arguing that the value of the automobile was really $3,161.50. Citing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. July 19, 1985), the court held that the value of assets is appropriately determined at the confirmation hearing. “The Debtor never objected to Edison’s secured claim and subsequently his plan was confirmed requiring the Debtor to pay secured creditors 100% of their claims. Because the Debtor failed to object to Edison’s secured claim prior to confirmation, he waived any opportunity he had to establish the valuation upon which Edison’s claim rests. . . . The law is well settled that a confirmation order is res judicata as to all issues decided or which could have been decided at the hearing on confirmation. . . . Once confirmed, the parties must look to the plan to determine the treatment of their claims. In essence a confirmed Chapter 13 plan constitutes a contract between the debtor and his/her creditors. . . . In this case, the Court entered an order confirming the Debtor’s plan which provided a value of the Debtor’s automobile of $4,000. Therefore, the Debtor is barred from objecting to the value of the collateral as anything different than provided in his own plan.”).

 

233  In re Bernard, 189 B.R. 1017, 1019–23 (Bankr. N.D. Ga. Jan. 2, 1996) (Drake) (Section 1327 and res judicata preclude debtor’s objection to claim 26 months after confirmation of plan that included provision that required “any remaining claims objections to be pursued within six months.” “Applying the mandate of Code section 1327(a), the Court finds that objections regarding the amount which the plan should pay in satisfaction of a claim, like contests of the plan’s classification of that claim, form just such a matter which could have been raised in the course of the plan-confirming process. To the extent that a debtor may have had the opportunity to object to a specific aspect of a claim before or during the confirmation hearing, his failure to do so, therefore, should cement the presumption of that claim’s validity. . . . Section 502, therefore, offers nothing either in support or in contradiction of section 1327(a)’s apparent bar upon post-confirmation objections. . . . [T]he act of confirmation will preclude any subsequent attempt to raise a section 502(a) ‘objection to claim.’ . . . [U]nless a party or the Court has stated and, in fact, included a reservation to the contrary, the section 502 ‘objection to claim’ should have no place in the post-confirmation world. . . . The process of section 502(j) appears directly applicable . . . . When read collectively, sections 1327(a), 502(a) and 502(j), therefore, appear to direct that confirmation implicitly decides claim validity and, after confirmation, the section 502(j) ‘motion to reconsider’ presents the only means by which a claim’s validity may be questioned. . . . [S]omewhere during the many months which elapsed, the Debtor’s continued failure to act has become both unreasonable and unjustifiable under the terms of section 502(j). . . . [The confirmation order] directed the Debtor to present all challenges to claims within the first six months following confirmation. The Debtor’s failure to observe that internal statute of limitations argues heavily against the presence of ‘cause’ in this case. . . . [T]he Debtor simply has waited too long to bring this matter to the Court’s attention.”). Compare Konover v. Testa (In re Testa), 197 B.R. 459, 461 (Bankr. M.D. Pa. Apr. 15, 1996) (Thomas) (Provision in confirmed plan to pay unsecured claims that are “timely and accurately filed” did not bar debtors’ objection to landlord’s proof of claim nor did it preclude lawsuit against landlord. “Federal Rule of Bankruptcy Procedure 3007 addresses objections to claims but sets no deadline to file same.”).

 

234  In re Williams, No. 05-47644-DML-13, 2007 WL 4522326, at *2 (Bankr. N.D. Tex. Dec. 19, 2007) (unpublished) (Lynn) (Debtor is bound by federal homestead exemption claimed at confirmation and cannot change to Texas homestead. “The law is clear that an issue that could have or should have been raised in connection with confirmation of a plan is res judicata by virtue of the confirmation order.”).

 

235  See §§ 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994 and 338.1 [ In General ] § 153.1  In General. See, e.g., In re Cox, 381 B.R. 525 (Bankr. E.D. Tenn. Jan. 4, 2008) (Stair) (Debtor is bound by confirmed plan and dismissal order which provided that trustee would disburse funds on hand in accordance with confirmed plan. Cause of action pending at petition became property of bankruptcy estate, and settlement proceeds were in hands of trustee at dismissal.).

 

236  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

237  230 F.3d 890 (7th Cir. Aug. 25, 2000) (Bauer, Easterbrook, Ripple).

 

238  230 F.3d at 894–96. Accord Snow v. Countrywide Home Loans, Inc. (In re Snow), 270 B.R. 38, 40–41 (D. Md. Nov. 16, 2001) (Keir) (Citing Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000), Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. Sept. 21, 1999), and Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995), confirmation of plan that provides full payment of mortgage holder’s arrearage precludes class action asserting that inspection fee included in arrearage violates state law. Countrywide’s preconfirmation arrearage claim included “property inspection fees” of $193. Confirmed plan provided for payment in full of Countrywide’s arrearage. “Snow . . . argues that confirmation of the plan is not a final judgment because allowance or disallowance of a claim may be reconsidered under 11 U.S.C. § 502(j). . . . Snow’s argument on nonfinality under § 502(j) is not properly before this court, because it was not raised below . . . . Furthermore, the argument has no merit. . . . Although 11 U.S.C. § 502(j) states that ‘a claim that has been allowed . . . may be reconsidered for cause,’ this does not provide for automatic reconsideration of every claim, nor does it make confirmation of a plan ‘nonfinal’ for res judicata purposes. Rather, ‘[d]etermination of whether there is sufficient cause to reconsider a claim under § 502(j) lies within the sound discretion of the [c]ourt.’ . . .  [T]he plan confirmation was a final judgment on the merits rendered by a court of competent jurisdiction in accordance with due process and there is no cause to reconsider the order under 11 U.S.C. § 502(j). . . . [S]eeking to remove the inspection fee is clearly a modification of the lien and the confirmed plan, rather than a challenge to the validity of the lien itself, as was the case in Cen-Pen. Under Cen-Pen, confirmation of a Chapter 13 plan does not extinguish liens not addressed by the plan, and does not leave an option to avoid the liens once the plan is confirmed.”).

 

239  230 F.3d at 895 nn.4 & 6.

 

240  If the Seventh Circuit meant judicial estoppel, rather than collateral estoppel, it did not say so in Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000), and it is not obvious that the facts of Adair would support judicial estoppel. See also § 47.7 [ Causes of Action ] § 46.11  Causes of Action—Including Judicial Estoppel Issues.

 

241  See Fed. R. Bankr. P. 3001(f). See also § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

242  See, e.g., 11 U.S.C. §§ 501, 502.

 

243  See In re Penrod, 50 F.3d 459 (7th Cir. Mar. 22, 1995) (Posner, Rovner, Moran), discussed in § 104.2 [ Lien Retention ] § 74.12  Lien Retention before BAPCPA.

 

244  262 B.R. 761 (Bankr. N.D. Ill. May 31, 2001) (Wedoff).

 

245  262 B.R. at 763–71 (“[C]laim allowance under § 502 is distinct from collateral valuation under § 506(a). . . . In [Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000),] . . . the Seventh Circuit referred to § 502 and discussed the need for debtors to file preconfirmation ‘claim objections.’ Nevertheless, for a number of reasons, it is apparent that the issue actually dealt with by the court was collateral valuation under § 506(a), and that the decision should properly be read as requiring only that valuation of collateral—establishing the amount of the creditor’s ‘allowed secured claim’ for purposes of § 1325(a)(5)—take place at the time of confirmation. . . . A failure to challenge a creditor’s asserted valuation can be seen as acceptance by default, as Adair holds. . . . If there is a conflict between a proof of claim and the terms of a confirmed plan, the plan will control . . . . [A] requirement that the allowance of claims under § 502 be fully adjudicated at the time of confirmation is not practicable, and would substantially delay confirmation and creditor payment. . . . [B]ecause Household Automotive Finance Company had filed a proof of claim against Marilyn Fareed which was not objected to as of the confirmation hearing, the total claim amount asserted in the proof of claim was deemed allowed under § 502(b) at the time of plan confirmation, although it remained potentially subject to objection thereafter. . . . Household’s proof of claim asserted that Fareed’s automobile, for purposes of § 506(a), had a value of $8,600. Because this valuation was not challenged by Fareed or any other party at the time of confirmation, the value of Household’s security interest under § 506(a) was fixed at $8,600 at the confirmation hearing, regardless of how much Fareed’s automobile was actually worth at that time. . . . Fareed retained no right to challenge the value of Household’s secured claim under § 506(a) after confirmation.”).

 

246  263 B.R. 233 (Bankr. C.D. Ill. June 12, 2001) (Perkins).

 

247  263 B.R. at 236–44 (Debtor scheduled Sears as secured by a television valued at $500. Sears had notice of plan but did not object to confirmation. Three days before confirmation, Sears filed a proof of claim valuing the television at $819.99. After confirmation, the debtor objected to Sears’s proof of claim. “[T]he debtor’s plan is an offer that is deemed accepted unless objected to prior to confirmation. . . . Although it is permissible for the amount of a secured claim to be determined pursuant to a motion filed under Fed.R.Bankr.P. 3012, because the confirmation process proceeds quickly in Chapter 13 cases, such motions offer no time advantage and are rarely filed. . . . Since SEARS was given proper notice and opportunity to object to the DEBTOR’S Plan but did not do so and since valuation of a secured claim is properly determined through the plan confirmation process, the binding effect of the confirmed plan pursuant to Section 1327(a) should preclude any subsequent consideration or different disposition of the valuation issue. . . . The deemed allowance of a filed proof of claim is at most, conditional, lasting only until a party in interest objects. Once an objection is filed, the claim is no longer deemed allowed, but is subject to determination as a contested matter. . . . [T]he purpose of a proof of claim is to establish the validity and the total, unbifurcated amount of the debt. The bifurcation or valuation process contemplated by 11 U.S.C. § 506(a) is not properly part of the claims allowance process. . . . When the language of Section 1327(a), which expressly dictates finality, is compared to the temporary, conditional nature of the ‘deemed allowed’ clause of Section 502(a), it is readily apparent that, if primacy between the two is even an issue, Congress accorded that primacy to a confirmed plan, not to a proof of claim. . . . Nothing in the Bankruptcy Code or Rules indicates an intent to permit a proof of claim to serve a dual function as an objection to plan. . . . Because all creditors receive a copy of the Chapter 13 plan but not filed proofs of claim, the plan confirmation process is the preferred procedure for ensuring adequate notice of and opportunity to object to proposed secured claim amounts which affect the amount of money that unsecured creditors receive. . . . [Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000),] stands for the straightforward proposition that once a secured claim amount is determined (by whatever procedure) in a bankruptcy case, that determination cannot be collaterally attacked in a subsequent proceeding. . . . Adair does not hold that a secured claim value asserted in a proof of claim preempts a competing value stated in a Chapter 13 plan. . . . [W]here a Chapter 13 plan values a secured claim and the plan is confirmed, with or without objection of the secured creditor, the creditor is bound by the plan’s value notwithstanding that the creditor filed a proof of claim stating a higher value before confirmation and that no objection to the claim was filed before confirmation.”). Accord EvaBank v. Baxter, 278 B.R. 867 (N.D. Ala. May 30, 2002) (Acker) (When proof of claim is filed before confirmation and plan is specific with respect to the value of collateral and interest rate, plan is binding and preclusive of value or interest rate litigation after confirmation.), vacating In re Baxter, 269 B.R. 458 (Bankr. N.D. Ala. Nov. 8, 2001) (Caddell); In re Ramey, 301 B.R. 534 (Bankr. E.D. Ark. Nov. 12, 2003) (Mixon) (Confirmed plan that treated bank as an unsecured creditor was binding notwithstanding preconfirmation proof asserting a secured claim when bank did not object to confirmation and debtor did object to the proof of claim before confirmation of the plan.); In re Davis, 300 B.R. 898, 901 (Bankr. N.D. Ill. Oct. 27, 2003) (Hollis) (Citing In re Pence, 905 F.2d 1107 (7th Cir. June 17, 1990), and distinguishing Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000), valuation of secured claim in confirmation order trumps lower value in preconfirmation proof of claim when debtor later converts to Chapter 7 and seeks to redeem the collateral. “Arcadia valued its collateral at $14,450 in its proof of claim. The confirmed plan, however, stated that the amount of Arcadia’s secured claim is $22,939.00. . . . [T]he amount of the secured claim as described in the plan is the amount of Arcadia’s allowed secured claim in this chapter 7 case. . . . [T]he plan was both filed and confirmed after Arcadia filed its proof of claim. . . . [T]hat the plan valued Arcadia’s secured claim differently than the proof of claim is tantamount to a challenge to the secured claim. If the plan had provided for a lesser value and Arcadia failed to object, it would be bound by the value specified in the plan.”).

 

248  264 B.R. 901 (Bankr. N.D. Ill. Aug. 3, 2001) (Schmetterer).

 

249  264 B.R. at 904–07 (“A secured claim that is filed pre-confirmation without objection (and is therefore ‘allowed’) and is treated in a subsequently confirmed Chapter 13 Plan cannot later be attacked as to the secured value, [Adair v. Sherman, 230 F.3d 890, 894 (7th Cir. Aug. 25, 2000)]. However, Adair did not prohibit later review of the amount of total debt due should partial payment thereof be proved, nor did it deal with claims filed after confirmation. . . . . [A] creditor can invoke collateral estoppel against a debtor only where the fact issue of claim valuation was previously litigated as part of the confirmation of a plan under Chapter 13. . . . Where a debtor has no pre-confirmation opportunity to litigate the extent of a creditor’s allowed secured claim under § 506(a), there is no bar to such litigation being brought after confirmation of debtor’s Chapter 13 Plan.”). See also In re Adams, 270 B.R. 263, 269–72 (Bankr. N.D. Ill. Dec. 4, 2001) (Schmetterer) (When plan is silent with respect to collateral value and proof of claim is filed after confirmation, confirmation order does not preclude motion to value collateral at zero to reflect postconfirmation repossession and sale of collateral. “A motion for valuation of a security can be made at any time, as there are no time limits for doing so set in § 506(a) or Rule 3012. . . . The only limitation on a post-confirmation ‘strip down’ motion under Rule 3012 or valuation under § 506(a) is that the parties are bound by any valuation included in a confirmed plan where the secured creditor filed a claim preconfirmation and its asserted collateral value was not challenged before confirmation . . . or the confirmed plan itself specifies collateral value. . . . Ford obviously cannot show that valuation of its claim was litigated as part of Debtors’ Plan confirmation proceeding when its claim was not even filed until after the confirmation order was entered and Debtor did not assert collateral values as terms of the plan. . . . If the Debtors’ Plan here had fixed or determined the value of collateral, confirmation would have had a collateral estoppel effect. But here the Plan merely stated that the secured creditors were to be paid ‘100% of allowed claims.’ Ford could not have ‘allowed’ claims until its claims were filed, and the Plan terms in this case left open the value of security for future determination. . . . A contrary ruling would allow secured creditors to delay the filing of claims in order to bar claim challenges or any hearing at all on secured value. . . . Once Ford sold the repossessed vehicles, it recovered the secured value thereof from the marketplace. By seeking as it now does to have the deficiencies on the rest of its filed secured claims paid 100% through the Plan as secured debt, it attempts to recover the secured values a second time, and this time to recover values inflated above what the market produced.”), motion for new trial denied, 275 B.R. 274 (Bankr. N.D. Ill. Mar. 26, 2002) (Schmetterer).

 

250  See Illinois Dep’t of Revenue v. Ayre (In re Ayre), 360 B.R. 880, 884 (C.D. Ill. Jan. 16, 2007) (Scott) (Confirmation without objection bound Illinois Department of Revenue to amount fixed in plan for its priority claim, because plan process litigated the disputed amount; confirmation binds creditors “if the plan provision at issue could have been litigated in the confirmation process.”); Nationsbanc Mortgage v. Williams (In re Williams), 276 B.R. 899, 907–10 (C.D. Ill. Oct. 27, 1999) (Scott) (Confirmed plan that fixed the secured amount of Nationsbanc Mortgage’s undersecured claim trumps an inconsistent proof of claim timely filed after confirmation. “[C]onfirmation orders can determine value of collateral. . . . Once the confirmation order is final and non-appealable, parties in interest, including creditors, are precluded from attacking the plan terms as illegal in a subsequent proceeding. . . . The Confirmation Orders fix the amount of Nationsbanc’s allowed secured claim. . . . Once the Confirmation Orders became final, Nationsbanc could not attack the terms as illegal.”); In re Hernandez, No. 08 B 72148, 2009 WL 1024621 (Bankr. N.D. Ill. Apr. 14, 2009) (unpublished) (Barbosa) (Absent postconfirmation default, GMAC was bound by confirmed plan, and any issue not raised at confirmation was waived under Adair v. Sherman, 230 F.3d 890 (7th Cir. Aug. 25, 2000) (Bauer, Easterbrook, Ripple); In re Moore, 290 B.R. 141 (Bankr. W.D. Mo. Feb. 18, 2003) (Venters) (Confirmed plan that treated “contract for title” to mobile home as a secured claim valued at $18,000 trumps postconfirmation proof of claim for $26,000 when notice was adequate and claim holder failed to object to confirmation.); In re Jones, 271 B.R. 397, 401 (Bankr. S.D. Ala. Aug. 21, 2000) (Mahoney) (Confirmed plan that provided a secured creditor with a “grossed up collateral value of $3,193.00” defeats proof of claim filed by the creditor after confirmation that claimed $4,191.23. Trustee should pay the claim as filed after confirmation unless and until an objection to the claim is filed. “This is a wasteful procedure admittedly because the result is predetermined.”).

 

251  See § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

252  See above in this section, and see § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

253  360 B.R. 880 (C.D. Ill. Jan. 16, 2007) (Scott).

 

254  See §§ 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation, 264.1 [ To Surrender Collateral, Account for Repossession or Change the Treatment of a Secured Claim ] § 127.7  To Surrender Collateral, Account for Repossession or Change the Treatment of a Secured Claim and 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption for further discussion of § 502(j).

 

255  See, e.g., In re White, No. 06-01373, 2007 WL 2413013, at *2 (Bankr. N.D. Iowa Aug. 21, 2007) (unpublished) (Kilburg) (Motion to amend confirmed plan should be “recast” as motion to reconsider claims when debtor seeks to delete 28 claims for which she is not obligated. Section 502(j) reconsideration of claims is “an exception to res judicata effect of §  1327 and exists as a separate and independent authority for reducing claims based on the equities of the case. . . . The bankruptcy court may consider a § 502(j) motion at any time, even after a Chapter 13 plan has been confirmed.”); In re Turner, No. 02-50222, 1994 WL 1886773, at *2–*3 (Bankr. S.D. Ga. Oct. 27, 1994) (unpublished) (Walker) (Bankruptcy court exercises its discretion not to reconsider Nissan’s claim under § 502(j) based on a typographical error. NMAC filed a timely proof of claim for $1,404.49 and two years later discovered it was supposed to be $14,404.49. “[T]he treatment given a creditor’s claim in a confirmed plan of reorganization is final subject to several important exceptions. One of those exceptions is the power of the Court to reconsider claims under 11 U.S.C. § 502(j) and Bankruptcy Rule 3008. . . . NMAC has alleged sufficient facts to establish cause based on inadvertence in filing the incorrect proof of claim. However, . . . Debtors would be unfairly prejudiced by the allowance of NMAC’s amended claim. Debtors’ plan results in a 100% dividend to creditors. Debtors have made substantial payments into the plan. Most of these payments have been disbursed to unsecured creditors which would not have received any disbursements if NMAC had correctly filed its proof of claim within the allowed time. NMAC waited two years before seeking reconsideration of its allowed claim. If the Court were to allow NMAC’s asserted claim at this late date according to the plan as confirmed, Debtors would be forced to pay both 100% of NMAC’s allowed secured claim as well as 100% of the unsecured claims under the plan. Equity does not favor the assessment of additional expense to the Debtors to pay for NMAC’s mistake.”).

 

256  See §§ 289.1 [ Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon ] § 135.6  Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon and 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7  Untimely Filed Claims in Cases Filed after October 22, 1994.

 

257  Section 1329 is sometimes described as an exception to the binding effect of confirmation because it provides for modification of confirmed plans. See 11 U.S.C. § 1329, discussed beginning at § 126.1  Standing, Timing and Procedure See, e.g., In re Mellors, 372 B.R. 763, 769 (Bankr. W.D. Pa. July 26, 2007) (Deller) (Balancing finality of confirmation under In re Szostek, 886 F.2d 1405 (3d Cir. Oct. 12, 1989), with § 1329(a)’s “limited exception to the binding effect of confirmed plans,” changed circumstances permit modification to surrender vehicle when defect making vehicle inoperable was discovered postconfirmation.).

 

258  See, e.g., In re Parker, 391 B.R. 411, 414 (Bankr. S.D. Ohio July 21, 2008) (Preston) (Although confirmation binds debtor and creditors, operating “as res judicata of all justiciable issues,” and although debtor’s plan proposed to treat mortgagee as unsecured because of an unperfected mortgage, confirmation did not determine allowance of mortgagee’s claim; when mortgagee failed to file timely proof of claim for its unsecured debt, debtor’s objection to claim is sustained. Adoption of mortgagee’s theory that confirmation prevented debtor from objecting to tardy proof of claim “would render Rule 3002(c) mere surplusage, in violation of a basic tenet of statutory construction that statutes and rules are to be interpreted in a manner that gives effect to each.”).

 

259  But see In re Erwin, 376 B.R. 897, 902 (Bankr. C.D. Ill. Oct. 1, 2007) (Perkins) (Equal-monthly-installment requirement in § 1325(a)(5)(B)(iii)(I) is binding on debtor and creditors but is not binding on trustee. “The specific terms of a confirmed plan are binding on the debtor and each creditor, but not on the trustee. 11 U.S.C. § 1327(a). Simply stated, neither the debtor nor any creditor has the right or power to dictate to the Chapter 13 trustee exactly how a claim is to be paid—the trustee determines those details. . . . The TRUSTEE’S argument that the equal payment provision is aimed at debtors, not trustees, is well-founded. . . . Since the equal payment provision was added to Section 1325, not Section 1326, . . . it serves as a restriction on how debtors may propose payments, not as a directive as to how trustees must make payments.”).

 

260  In re Winterfeldt, 28 B.R. 486 (Bankr. E.D. Wis. Mar. 8, 1983) (Shapiro).

 

261  See, e.g., In re Rookard, No. 03-42320-13, 2005 WL 4147869 (Bankr. D. Kan. Oct. 17, 2005) (unpublished) (Karlin) (Trustee is bound by confirmed plan that required return to the debtor of prepetition tax refund.).

 

262  In re Williams, 166 B.R. 615, 619–20 (Bankr. E.D. Va. Apr. 22, 1994) (Adams) (Confirmed plan avoids judgment lien and is binding on Chapter 13 trustee, and debtor need not file a separate adversary proceeding to accomplish avoidance of the lien. The plan provided that a judgment lien in favor of NationsBank would be disallowed and deemed avoided because there was no value in the debtor’s residence to satisfy any portion of the lien. NationsBank did not object to confirmation. The trustee argued that the debtor could not avoid NationsBank’s judicial lien through a provision of the confirmed plan. The court distinguished Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. July 19, 1985): “This case differs from Simmons. . . . First, no proof of claim has been filed by NationsBank. . . . [I]n this case the bank’s claim is fully unsecured and . . . no objection to the debtor’s Chapter 13 plan has been filed by NationsBank. . . . The expense of requiring the filing of contested matters by Chapter 13 debtors, as urged by the trustee, in order to permissibly modify secured creditors’ rights, would be unnecessarily burdensome to the debtors and to the bankruptcy courts’ dockets. . . . A potentially secured creditor whose claim is classified otherwise by the debtor in a Chapter 13 plan, has ample means to contest the plan’s treatment of the claim. A creditor can file a proof of claim to put the plan’s treatment of that claim in issue, or the offended creditor can object to confirmation of the plan and challenge the treatment of its claim at the confirmation hearing. The burden of policing a plan’s treatment of claims should be on the Chapter 13 creditors as it is on the Chapter 11 creditors. . . . The debtor in this case would accomplish little by instituting a contested matter under Rule 4003(d). A contested proceeding would serve only to duplicate the treatment of the NationsBank lien permissibly set out in the plan.”). But see § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

263  Celli v. First Nat’l Bank of N. N.Y. (In re Layo), 460 F.3d 289, 293–95 (2d Cir. Aug. 15, 2006) (Kearse, Sack, Hall) (Confirmed plan that treated mortgage holder as secured with regular monthly payments precluded trustee’s adversary proceeding asserting that mortgage had been released and discharged. “[T]he facts that form the basis for the Trustee’s challenge to the mortgages were available in the county clerk’s office for anyone to see. The Trustee had clear opportunities to object to the validity of the mortgage lien listed in the confirmed Chapter 13 plan—when FNB filed its claim . . . and when Layo consented to and included that claim in his final Chapter 13 plan. . . . We acknowledge that challenges to the validity of a lien must be brought through an adversary proceeding. Where, at the outset, there is no dispute as to the basis of a lien, however, given the policy embodied in § 1327(a) that confirmation of a plan ‘bind the debtor and each creditor,’ it does not follow that a non-objecting creditor has a right to bring an adversary proceeding whenever he gets around to doing so. . . . We do not view [Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995),] as establishing a general rule that creditors whose liens are not in dispute at the time of confirmation have a right to bring an adversary proceeding post-confirmation to challenge the lien.”).

 

264  In re Westenberg, 365 B.R. 895 (Bankr. E.D. Wis. Mar. 30, 2007) (McGarity) (Plan that included payment of secured claims beyond plan term was accepted by creditors’ lack of objection and was binding on trustee; trustee’s motion to dismiss is denied when debtors complied with plan.).

 

265  United States v. Richman (In re Talbot), 124 F.3d 1201, 1210 (10th Cir. Aug. 26, 1997) (Baldock, Holloway, Murphy) (Provision of confirmed plan fixing order of payments to creditors trumps trustee’s argument that she is entitled to recover “overpayments.” Plan and confirmation order trifurcated the IRS’s claim into a priority claim of $15,875, a secured claim of $18,674, and a general unsecured claim of $3,111. Twenty months after confirmation, the debtors sold their residence, and the IRS extracted $19,229 from the proceeds on account of its prepetition tax lien. The trustee sought disgorgement, arguing that the IRS had been paid $11,703 plus interest toward its prepetition tax lien through payments under the plan. Although the Tenth Circuit agreed with the trustee that the IRS’s tax lien was limited to $18,674 as fixed by the plan, the trustee’s mathematics were rejected because “[b]oth the Plan and confirmation order . . . provide that allowed claims will be paid in the following order: administrative/attorney, priority, secured, unsecured. Accordingly, it is clear that at the time the Talbots made their payment to the IRS [from the sale proceeds], the entire secured claim of $18,674.08 plus interest remained to be paid.”).

 

266  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment and 441.1 [ New and Changed Treatment of Priority Claims ] § 73.6  Treatment of Priority Claims Changed by BAPCPA.

 

267  Meyer v. Pagano, No. C 01-0848 MMC, 2002 WL 31159110, at *3 (N.D. Cal. Sept. 25, 2002) (unpublished) (Chesney) (“Debtor’s proposed plan which neither the Trustee nor the [priority claim holder] opposed prior to confirmation, did not include a provision for the full payment of priority claims. . . . [H]aving failed to object to the terms of the Plan prior to confirmation, the Trustee is now bound by the provisions of the Plan and may not attack the Plan on the ground that its provisions are contrary to law.”).

 

268  11 U.S.C. § 1325(a)(4) is discussed beginning at § 90.1  In General: Plan Payments vs. Hypothetical Liquidation.

 

269  See In re Greene, 359 B.R. 262 (Bankr. D. Ariz. Jan. 24, 2007) (Marlar) (Confirmation is preclusive of “trustee’s conditional objection to exemptions” because confirmation resolved best-interests-of-creditors test, which includes consideration of exemptions.).

 

270  In re Young, 285 B.R. 168, 174–75 (Bankr. D. Md. Oct. 23, 2002) (Keir) (“[T]he confirmation of the plan, in which a specific amount of disbursement to counsel for the debtor as attorney’s fees was required, acted as a final adjudication of the matters set forth in the plan. . . . [T]he plan set forth the specific amount of the payment to debtor’s counsel to be made by the chapter 13 Trustee as a disbursement under the plan. Matters determined by confirmation are res judicata and cannot be relitigated, except where a separate adversarial proceeding is required . . . . [T]he allowance of fee does not fall within the category of acts requiring a separate adversarial proceeding. Consequently, the doctrine res judicata applies to the provisions for specific attorney’s fees set forth in the chapter 13 plan.”).

 

271  11 U.S.C. § 1329 is discussed beginning at § 126.1  Standing, Timing and Procedure and § 126.6  Modification after Confirmation after BAPCPA.  See, e.g., In re Jafary, 333 B.R. 680 (Bankr. S.D.N.Y. Nov. 18, 2005) (Morris) (Res judicata effect of confirmation bound trustee, who must move for modification before completion of plan payments to have authority to disburse funds to unsecured creditors when trustee received refund of overpayment after trustee certified plan completion.). Compare In re Fiddler, No. 04-4213, 2007 WL 4510308 (Bankr. N.D. W. Va. Dec. 18, 2007) (unpublished) (Flatley) (Trustee’s motion to modify to pay creditors 100% from increase in value of realty is precluded by res judicata effect of confirmation; issue of increasing real estate values could have been litigated at confirmation.).

 

272  Lauria v. Titan Sec. Ltd. (In re Lauria), 243 B.R. 705, 711–12 (Bankr. N.D. Ill. Jan. 26, 2000) (Squires) (Although debtor’s former attorney has an equitable lien on payments to the debtor pursuant to a prepetition noncompete agreement, attorney is bound by confirmed plan to accept 22% as an unsecured claim holder because attorney had notice that the plan did not treat him as a secured claim holder and failed to object. Debtor scheduled former attorney as an unsecured creditor. Plan provided 22% to general unsecured claims. Attorney did not object to confirmation. Debtor brought turnover action against former attorney to recover payments withheld pursuant to a prepetition, noncompete agreement. Former attorney “has an equitable lien on the $500 monthly payments from Titan under the noncompetition agreement. This does not, however, end the matter because of the res judicata effect of the confirmation order and the language of 11 U.S.C. § 1327. . . . Daday . . . was scheduled as a creditor, albeit listed by the Debtor as unsecured, rather than secured. Daday was sent notice of the confirmation hearing, but he did not object to confirmation of the Debtor’s plan which was confirmed. . . . Because Daday is a creditor of the Debtor, he is bound by the Debtor’s plan. The plan provides for payment of 22% on all general unsecured claims and payment in full on secured claims. Because Daday did not object to the confirmation of the Debtor’s Chapter 13 plan, Daday is bound by the plan as he was given notice of the initial confirmation hearing scheduled in the bankruptcy case.”); In re Black, 116 B.R. 818 (Bankr. W.D. Okla. July 16, 1990) (Lindsey) (Confirmed plan authorizing the trustee to pay debtor’s counsel $750 is binding on counsel. Postconfirmation request for interim compensation and expenses of $4,337 is barred by the confirmation order.). See §§ 294.1 [ Debtors’ Attorneys’ Fees ] § 136.6  Debtors’ Attorneys’ Fees before BAPCPA and 515.1 [ Debtors’ Attorneys’ Fees ] § 136.7  Debtors’ Attorneys’ Fees after BAPCPA for discussion of debtors’ attorneys’ fees.

 

273  In re Lasica, 294 B.R. 718, 722 (Bankr. N.D. Ill. May 19, 2003) (Squires) (Confirmation of plan that provided zero payment for debtor’s attorney precluded allowance of attorney fees as an administrative priority claim after confirmation. “[T]his post-confirmation application for attorney’s fees cannot properly be allowed when the creditors were advised of a lesser amount, here zero, especially if the effect of allowing such fees would virtually eliminate the promised dividend to general unsecured creditors. . . . [T]he Debtor, the Attorney and all creditors are bound by the confirmed plan.”); In re Hallmark, 225 B.R. 192 (Bankr. C.D. Cal. Sept. 10, 1998) (Ryan) (Confirmation of plan that stated the amount of attorney fees allowable as an administrative expense was “$0.00” binds the trustee to distribute the $6,781.71 on hand at confirmation to creditors under the plan and precludes the trustee from distributing any money on account of allowed fees of debtor’s counsel. Although fees awarded to debtor’s counsel are administrative expenses and would otherwise be entitled to distribution under § 1326(b) before or in advance of payments to other creditors, the binding effect of confirmation under § 1327(a) and the mandate in § 1326(a)(2) that the trustee distribute payments according to the plan preclude payment to debtor’s counsel where the plan and confirmation order provide for zero payment to debtor’s counsel. Trustee cannot recover from other creditors any amount of distributions already made.).

 

274  210 B.R. 727 (Bankr. S.D. Tex. Dec. 6, 1996) (Brown).

 

275  210 B.R. at 732.

 

276  237 B.R. 783 (B.A.P. 10th Cir. Aug. 24, 1999) (Clark, Bohanon, Pearson) (Confirmed plan called for payment of attorney fees as administrative expenses. At confirmation, § 1325(a)(4) required the debtor to pay at least 6% of unsecured, nonpriority claims. Confirmed plan called for 8%. Simultaneously with confirmation, debtor’s attorney filed a request for almost $4,000 in postpetition fees. Had the large fee claim been known, payment of the fee would have caused the plan to violate the best-interests-of-creditors test. Bankruptcy court did not err in disallowing the attorney fees based on determination that plan would not have been confirmable under § 1325(a)(4) had the attorney fees been known at the time of confirmation. Offensive use of collateral estoppel by the debtor’s attorney would be unfair under these circumstances.).

 

277  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

278  See, e.g., Pollilo v. Harleysville Nat’l Bank (In re Pollilo), No. 09-0287, 2010 WL 235125 (Bankr. E.D. Pa. Jan. 15, 2010) (Fox) (Although confirmed plan bound creditor, cause of action for violation of confirmation order alleging that creditor failed to supply certificate of vehicle title after completion of plan and closing of bankruptcy case sought only damages—relief available in state court. Bankruptcy court lacked subject matter jurisdiction to hear breach of contract claim that arose after plan completion.). See also § 162.1  In General, Including Discharge Hearing and Discharge Injunction and § 162.2  Discharge Injunction and § 524(i) after BAPCPA for discussion of the discharge injunction.

 

279  See, e.g, In re Luedtke, No. 02-35082-svk, 2008 WL 2952530, at *6 (Bankr. E.D. Wis. July 31, 2008) (unpublished) (Kelley) (Credit union violated confirmation order by incorrectly reporting to credit reporting agency balance of original loan and continuing delinquency rather than secured amount in confirmed plan; although debtor could have proceeded under Fair Credit Reporting Act, remedy was available for violation of confirmation order. “[T]he Credit Union did violate the confirmation order by its affirmative reports to CRAs. Just as a creditor can violate the discharge injunction for deliberately refusing to submit accurate information, the confirmation order prevents those same actions during the course of a Chapter 13 case. . . . When the Credit Union reports that the Debtor owes amounts according to the original loan, those reports are not accurate, and violate the confirmation order.” Because of credit union’s good-faith belief that it was properly reporting, remedy was for it to cause credit reporting agencies to remove disputed information.).

 

280  The discharge injunction is discussed in § 357.1 [ In General, Including Discharge Hearing and Discharge Injunction ] § 162.1  In General, Including Discharge Hearing and Discharge Injunction. See, e.g., De Jesus Rivera v. GECC of P. R. (In re De Jesus Rivera), Nos. 00-00801 GAC, 04-00165, 2006 WL 3898296 (Bankr. D.P.R. Feb. 24, 2006) (unpublished) (Carlo) (Confirmed plan bound secured creditor to payment without interest; demand for interest after plan completion and discharge violated discharge injunction.).

 

281  Appeal of confirmation is discussed in § 225.1 [ Appeal of Grant or Denial of Confirmation ] § 117.4  Appeal of Grant or Denial of Confirmation. See, e.g., In re Burgess, Nos. 03 C 71, 04-3896, 2005 WL 1772872 (7th Cir. July 27, 2005) (unpublished) (Bauer, Easterbrook, Manion) (Provisions of confirmed plan are binding on debtor and creditors; party challenging confirmed plan must appeal confirmation order or file adversary proceeding to revoke confirmation.); Mountain Peaks Fin. Servs., Inc. v. Shepard (In re Shepard), 328 B.R. 601 (B.A.P. 1st Cir. June 2, 2005) (Lamoutte, Votolato, Haines) (Confirmation was binding when creditor appealed denial of objection to confirmation but failed to appeal confirmation order.).

 

282  See, e.g., In re Rodrigues, 370 B.R. 467 (Bankr. D. Mass. July 5, 2007) (Feeney) (Motion to reopen closed case and revoke discharge was denied; confirmation order has res judicata effect and is entitled to finality, citing Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370, 373 (B.A.P. 1st Cir. Jan. 11, 2001) (Lamoutte, Haines, Deasy).). Revocation of confirmation under 11 U.S.C. § 1330 is discussed in § 224.1 [ Revocation of Confirmation ] § 117.3  Revocation of Confirmation.