§ 121.2     Notice and Due Process Considerations, Including Claims Allowance and Valuation
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 121.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

It is beyond dispute that a Chapter 13 debtor has broad powers to affect the rights of secured and unsecured creditors through confirmation of a plan. For example, the debtor can modify the rights of secured or unsecured claim holders under § 1322(b)(2).1 Undersecured claims can be bifurcated, and the plan can provide different treatment for the resulting allowed secured and unsecured portions.2

[2]

Especially with respect to secured claims, to accomplish confirmation the debtor must provide in the plan a treatment for each allowable claim or class of claims. The mathematics of the plan, feasibility and determination of the various tests for confirmation cannot be undertaken unless the plan is reasonably specific with respect to the allowed amount of each secured claim, the proposed payment to each secured claim holder, the interest rate that will be paid and so forth.3 This almost always requires a statement in the plan that values the creditor’s collateral for purposes of confirmation.

[3]

The Bankruptcy Rules require notice to each creditor that includes a copy of the plan or a summary of the plan.4 If the plan is well constructed and noticing is done properly, each creditor will have precise information about its treatment by the proposed plan. If the plan provides that a creditor will be secured to a specified amount, unsecured for the balance and will receive a stated monthly payment with a specified rate of interest, it is a reasonable expectation that confirmation will bind the debtor and all creditors to the values, monthly payments, interest rates and amounts stated, as provided in § 1327(a).5 Under § 1327(b)6 and (c),7 confirmation should vest all property of the estate in the debtor free and clear of the claims of creditors except as defined by the plan.

[4]

But not all plans are well constructed. And not all notices clearly inform creditors of their treatment under the plan. And the Code and Rules contain other procedures that can affect creditors in some of the same ways as confirmation. Bad plans, bad notices and confirmations that fall short of the due process prescribed elsewhere in the Code and Rules are the principal limitations on the effects of confirmation in Chapter 13 cases.

[5]

Separate from, if not parallel to, confirmation, the Bankruptcy Code and Rules describe a procedure for the allowance and disallowance of claims. Discussed below,8 creditors are permitted, but not required, by § 501 to file proofs of claim.9 A proof of claim filed under § 501 “is deemed allowed, unless a party in interest . . . objects.”10 Bankruptcy Rule 3007 requires that an objection to allowance of a claim be in writing, and the objection together with notice of a hearing must be delivered to the creditor at least 30 days prior to the hearing. An objection to a claim becomes an adversary proceeding if the objection includes a demand for relief of the kind specified in Bankruptcy Rule 7001.11 Bankruptcy Rule 7001 requires an adversary proceeding “to determine the validity, priority or extent of a lien or other interest in property.”12

[6]

An allowed claim is a secured claim to the extent of the value of collateral or of a right to setoff.13 On motion of any party in interest under Bankruptcy Rule 3012, and after “a hearing on notice to the holder,” the bankruptcy court “may determine the value of a claim secured by a lien on property in which the estate has an interest.”14 Under Bankruptcy Rule 3001(f), a proof of claim to which no objection has been filed is “prima facie evidence of the validity and amount of the claim.”15 Consistent with Official Bankruptcy Form 10,16 a lienholder asserts in its proof of claim that it is secured, and lists the amount of the secured claim based on its assessment of the value of its collateral. Creditors thus have expectations based on the Code and Rules that, absent objection, a claim is allowed and secured as stated in a filed proof of claim.

[7]

The tension between claims allowance and confirmation of a Chapter 13 plan is obvious: what happens when the treatment of a creditor by the confirmed plan is inconsistent with the allowed claim filed by the creditor? For example, what happens if the confirmed plan states car lender is secured to the extent of $5,000 because the debtor valued the car in the plan at $5,000 without objection, but car lender files a proof of claim asserting a secured claim of $7,000? If car lender had notice that the plan would limit its secured claim to $5,000, are the effects of confirmation defeated by the filing of a proof of claim that is inconsistent with the plan? Does it make a difference whether the proof of claim was filed before or after entry of the confirmation order? Is the debtor’s plan in the nature of an objection to any inconsistent proof of claim filed by a creditor? Does the content of the notice of the hearing on confirmation affect the answers to these questions? For example, if the notice boldly announced that the value of all collateral and the extent of all liens will be determined at the hearing on confirmation, can a creditor challenge the amount of its secured claim stated in the plan by filing an inconsistent proof of claim?

[8]

The Bankruptcy Code and Rules do not resolve the collision between the confirmation process that culminates in a binding order under § 1327(a)17 and the claims allowance process that deems a claim allowed as filed until objection and that includes separate procedures for valuing collateral. The reported decisions have struggled for an accommodation. Notice and due process considerations have obscured clear resolution of the limits, if any, imposed on the effects of confirmation by the claims allowance process.

[9]

Many courts, including the U.S. Courts of Appeals for the Fourth, Fifth and Eleventh Circuits, have limited the binding,18 vesting19 and free and clear20 effects of confirmation when the plan is inconsistent with a timely filed proof of claim and notice of how the plan or confirmation process would affect creditors fell short of the notice required by the Rules or due process with respect to objections to claims.21

[10]

Some courts, including the U.S. Courts of Appeals for the Fourth and Eleventh Circuits, have reported decisions limiting the effects of confirmation even when the creditor did not file a proof of claim—sometimes citing notice concerns, and in other cases, on the theory that lienholders have the option not to participate in the Chapter 13 case and that confirmation by itself does not engage the creditor in a process that can affect lien rights.22

[11]

A fair number of reported decisions have concluded that the debtor must initiate a formal objection to the creditor’s claim or must commence a separate adversary proceeding before confirmation has the effects described in § 1327.23

[12]

The U.S. Court of Appeals for the Fifth Circuit has twice addressed these issues. In Simmons v. Savell (In re Simmons),24 the proposed plan treated the holder of a statutory lien as an unsecured creditor. The lienholder filed a timely proof of claim and stated an objection to confirmation on the face of the claim form. The lienholder did not appear at the hearing on confirmation or file a separate objection to confirmation; nor did the debtor object to the lienholder’s proof of claim. The plan was confirmed, and the debtor asserted that confirmation voided the statutory lien.

[13]

The Fifth Circuit disagreed, holding that the plan’s treatment of the lienholder as unsecured was not a sufficient objection to the otherwise allowed secured claim. As explained by the Fifth Circuit:

An objection to a proof of claim filed in accordance with Rules 3007, 9004 and 9014 clearly places in issue the allowance or disallowance of that claim as filed. The parties are put on notice that the objection will have to be resolved before a final determination is made as to the allowance or disallowance of the claim. In contrast, the filing of a Chapter 13 plan does not initiate a contested matter. . . . When the creditor files a proof of claim subsequent to the filing of the plan, the Code and the Rules clearly impose the burden of placing the claim in dispute on any party in interest desiring to do so by means of filing an objection. . . . Given the differences in purpose and effect of filing a plan and lodging an objection, [the debtors’] filing of the plan did not clearly place the claim in issue. The plan is like a proof of claim to which objections are filed, thereby instituting contested matters, rather than a vehicle through which objections are made. There is no statement in the plan that it was intended as an objection to [the lienholder’s] proof of claim. Moreover, there is no indication in the record that the plan was served with a notice of hearing on an objection purportedly asserted by the plan to a previously filed proof of claim as is required by Rule 3007. The Code and the Rules do not envision the use of a plan as a means for objecting to proof of claims.25
[14]

Seven years later, in Sun Finance Co., Inc. v. Howard (In re Howard),26 the confirmed plan provided that $500 would be paid in full satisfaction of a disputed secured claim. The disputed claim holder filed a preconfirmation proof of claim for $4,590.47; the debtor did not file a separate objection. The Fifth Circuit held that the confirmed plan was not binding on the disputed secured creditor based in large part because the summary of the plan did not provide actual notice that the secured claim would be compromised by the plan. In language reminiscent of Simmons, the Fifth Circuit explained:

[A] confirmed Chapter 13 plan is res judicata as to all parties who participate in the confirmation process. The general applicability of res judicata to bankruptcy plan confirmations must give way, however, to the interest of the secured creditor . . . that its lien is secure unless a party in interest objects to it. . . . The filing of an objection is all that [is required]. Once a debtor has objected to a claim, the creditor is on notice that full participation in the confirmation proceedings is required or its lien will be at risk. . . . We hold only that a debtor who wishes to challenge the amount of a secured claim either by asserting a counterclaim or offset against it or by disputing the amount or validity of the lien must file an objection to the creditors’ claim in order to put the creditor on notice that it must participate in the bankruptcy proceedings.27
[15]

Professing to follow Simmons on facts similar to Howard, the U.S. Court of Appeals for the Eleventh Circuit defined a limitation on the effect of confirmation that is not quite the same as either Fifth Circuit result. In Universal American Mortgage Co. v. Bateman (In re Bateman),28 Universal filed an arrearage claim before confirmation for $49,178.80. The debtor did not immediately object. The confirmed plan stated unambiguously there was a “disputed” arrearage to Universal in the precise amount of $21,600. Universal did not object to confirmation. Fourteen months later, the debtor objected to Universal’s claim. Universal responded with a motion to dismiss the Chapter 13 case.

[16]

The Eleventh Circuit first rejected the debtor’s argument that the specific amount stated in the confirmed plan trumped the inconsistent preconfirmation proof of claim. The Eleventh Circuit explained that Universal’s proof of claim was “deemed allowed” under § 502 and was entitled to the prima facie evidentiary effect in Bankruptcy Rule 3001(f).29 Because the debtor did not object in the manner described in Bankruptcy Rule 3007, the Eleventh Circuit refused to allow the dispute stated in the confirmed plan could not constitute an objection to Universal’s claim. Although the plan conflicted with Universal’s preconfirmation proof of claim, thus “demand[ing] a resolution of the inconsistency,” the debtor’s postconfirmation objection was “not the appropriate vehicle by which to do so.”30

[17]

Had the Eleventh Circuit quit there, Bateman would have been characterized as a lack of notice or improper procedure case in which the effects of confirmation were limited because notice of the dispute in the plan was insufficient.31 But the Eleventh Circuit didn’t quit and instead announced a half-pregnant rule with respect to the effect of confirmation on Universal’s arrearage claim:

Universal’s proof of claim and the Plan’s listed distribution amount, however improper, was within the definition of claim preclusion because it very well might have been and, as we have articulated should have been, presented before the bankruptcy judge prior to the Plan confirmation. . . . We are persuaded by the reasoning in [Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985),] that a secured creditor’s lien survives a contrary plan confirmation. . . . [I]f a lien on a mortgage survives the § 1327 res judicata effect of a confirmed plan, then so must any corresponding arrearage claim, such as [the] one Universal asserts here. . . . Although Universal’s lien and arrearage claim survives, we will not reverse the . . . order denying Universal’s motion to dismiss the bankruptcy altogether. . . . Universal, albeit within its rights, filed a proof of claim to be provided for by the Plan, yet, chose not to involve itself in the Chapter 13 proceedings and bypassed these opportunities to correct the discrepancy before the Plan was confirmed. . . . Because it did not vindicate its rights at the appropriate stages of the Chapter 13 process, however, Universal cannot now argue for a dismissal of the petition . . . . Universal retains its secured claim for the arrearage. Bateman will not benefit from a windfall from a plan that should not have been confirmed in the first place. . . . We hold that although the parties are bound to the terms of the Plan, as confirmed, Universal’s secured claim for arrearage survives the Plan and it retains its rights under the mortgage until Universal’s claim is satisfied in full.32
[18]

Bateman is like Simmons in the sense that the Eleventh Circuit denied the confirmed plan its “free and clear” effect on Universal’s lien under § 1327(c). Inferentially, the Eleventh Circuit reached this conclusion because disputing Universal’s arrearage claim in the proposed plan was not sufficient notice—the debtor should have filed a formal objection to Universal’s claim before confirmation. The Eleventh Circuit does not begin to explain how the filing of an objection to Universal’s claim would have provided more or better notice than service of the plan that explicitly limited Universal’s arrearage claim to less than half of what Universal claimed it was owed.

[19]

But Bateman then goes where the Fifth Circuit didn’t in Howard: for distribution purposes, Bateman holds the confirmed plan is preclusive of the amount of Universal’s arrearage claim. The panel might cringe to hear it said, but Bateman sustains the confirmed plan as an objection to the amount of Universal’s arrearage claim for purposes of the Chapter 13 case. The Fifth Circuit refused this outcome in Howard when the confirmed plan limited a disputed secured claim and a preconfirmation proof of claim stated a higher value.33

[20]

That the confirmed plan in Bateman binds the mortgage holder to the amount of the arrearage claim but does not limit the extent of Universal’s lien is a pyrrhic victory for the debtor and a very confusing interpretation of § 1327. In Bateman, the confirmed plan was “binding” under § 1327(a) but did not have the “free and clear” effect next in the statute in § 1327(b) and (c).34 The Eleventh Circuit does not explain why the notice and due process requirements for subsections (b) and (c) of § 1327 are other or different than for binding effect under § 1327(a). If notice of the proposed plan was sufficient to preclude Universal from contesting the amount of its arrearage claim stated in the plan, why wasn’t notice sufficient to limit Universal’s lien?

[21]

Both the Eleventh Circuit and the Fifth Circuit on which it relies cite the failure of the debtor to object before confirmation to the lienholder’s proof of claim as the principal reason for limiting the effect of confirmation under § 1327. Neither court can cite the Code or Bankruptcy Rules for the proposition that a preconfirmation objection to a lienholder’s claim is a prerequisite to the free and clear effect of confirmation under § 1327(c).

[22]

Since the enactment of the Bankruptcy Code, individual debtors under all chapters have avoided liens that impair exemptions under § 522(f) by motion.35 If notice and opportunity to object are adequate, a Chapter 13 plan is no less respectful of due process than a motion. An objection to claim under Bankruptcy Rule 3007 typically is in the form of a motion, not an adversary proceeding. The objection to claim becomes “an adversary proceeding” under Bankruptcy Rule 3007 when it demands relief specified in Bankruptcy Rule 7001—but not because the claim objection is commenced by the filing of a complaint.

[23]

It is not obvious why the Eleventh Circuit and so many other courts are hung up on requiring a separate claim objection when the plan demands relief permitted by §§ 1322 and 1325 and notice of the plan is adequate. The Eleventh Circuit is hardly alone in its confusion about notice, claims objections and the effects of confirmation under § 1327.

[24]

In Piedmont Trust Bank v. Linkous (In re Linkous),36 the U.S. Court of Appeals for the Fourth Circuit held that the usual res judicata effect of confirmation under § 1327 is limited by the due process clause of the Fifth Amendment: the binding effect of a confirmed plan did not extend to the valuation of collateral under § 506(a) when the notice to creditors did not warn that a valuation hearing would be held and the creditor timely filed a proof of claim that was inconsistent with the confirmation order.

[25]

Two years later, the Fourth Circuit carried the uncontroversial general principle in Linkous to an absurd conclusion in Cen-Pen Corp. v. Hanson.37 After several years of litigation with their mortgage holder, Cen-Pen Corporation, the Hansons proposed a Chapter 13 plan that treated the mortgage holder as an unsecured creditor. The plan was served on Cen-Pen and required creditors to submit proofs of claim and objections to confirmation within a specified time. The plan stated, “All claims to be allowed must be filed; to the extent that the holder of a secured claim does not file a proof of claim, the lien of such creditor shall be voided upon the entry of the Order of Discharge.”38 Cen-Pen was fully informed of the content of this plan. Cen-Pen did not object to confirmation. Cen-Pen did not file a proof of claim. The plan was confirmed. All allowable claims were paid through the plan, and the debtors received a discharge.

[26]

After discharge, Cen-Pen filed a complaint to determine the validity of its lien. Almost incomprehensively, the Fourth Circuit concluded that Cen-Pen’s lien was valid because the plan did not “provide for”39 the claim and the plan provision voiding Cen-Pen’s lien was not binding because the debtors did not file an adversary proceeding:

Although at first blush § 1327 appears to support [the debtors’] argument, we are persuaded that other provisions of the Bankruptcy Code and Rules undercut it. . . . A bankruptcy discharge extinguishes only in personam claims against the debtors, but generally has no effect on an in rem claim against the debtor’s property. . . . For a debtor to extinguish or modify a lien during the bankruptcy process, some affirmative step must be taken toward that end. . . . Here the Hansons did not take a sufficient “affirmative step” to avoid Cen-Pen’s liens. Bankruptcy Rule 7001(2) expressly requires initiation of an adversary proceeding “to determine the validity, priority, or extent of a lien or other interest in property.” . . . Because confirmation of a Chapter 13 plan is res judicata only as to issues that can be raised in the less formal procedure for contested matters, . . . confirmation generally cannot have preclusive effect as to the validity of a lien, which must be resolved in an adversary proceeding.40
[27]

It cannot be said that Cen-Pen lacked notice that the Hanson’s plan treated it as an unsecured creditor and would void its lien if Cen-Pen did not object to confirmation and file a proof of claim. It is not obvious what further or better notice would have been effected by the filing of an adversary proceeding. Chapter 11 plans, on no more notice than in Hanson, affect the lien rights of secured claim holders at confirmation without the filing of adversary proceedings by debtors-in-possession. The lienholder in Hanson simply slept on its rights. For no obvious good reason, the Fourth Circuit chose to save Cen-Pen from its own neglect.

[28]

Hanson has been a nightmare for Chapter 13 practitioners in the Fourth Circuit. The decision seems to require debtors to file adversary proceedings in every Chapter 13 case in which the plan modifies the prepetition lien rights of a secured claim holder. Almost every Chapter 13 plan modifies secured claims, and the resulting expense and delay are enormous. Chapter 13 plans cannot be confirmed until resolution of the adversary proceedings required by Hanson. There is no evidence that adversary proceedings produce any improvement or difference in outcome than the litigation that previously took place with respect to value and the payment of secured claims in the contested matter commenced by an objection to confirmation. In Hanson, the Fourth Circuit truly elevated form over substance with substantial consequences for the administration of Chapter 13 cases.

[29]

In 1997, the Fourth Circuit appeared to retreat from its holding in Hanson in a Chapter 11 case. In Spartan Mills v. Bank of America Illinois,41 a bankruptcy court in Florida entered a preconfirmation financing order in a Chapter 11 case, granting Bank of America a “first and prior lien on and security interest in” the assets of the debtor. Spartan Mills was an unpaid prepetition supplier that asserted a first priority textile processor’s lien. Spartan Mills received the financing order and made no objection.

[30]

The Chapter 11 case converted to Chapter 7. The Florida bankruptcy court approved the sale of the debtor’s assets in an order reciting that Bank of America had a “valid and duly perfected security interest in all of [the debtor’s] assets.” Spartan Mills received this order as well. The debtor’s assets were liquidated, and by agreement the proceeds were paid to Bank of America with a reservation of Spartan Mills’s right to litigate the priority of liens.

[31]

A year and a half later, Spartan Mills brought suit in district court in South Carolina, seeking a declaration that its lien in the proceeds was superior to Bank of America’s. Citing Hanson, Spartan Mills argued that the bankruptcy court orders declaring Bank of America the first lienholder were not binding because “the bankruptcy court’s departure from established procedure for adjudicating the priority of liens denied it the due process notice necessary to bind it through principles of res judicata.”42 The Fourth Circuit gave this odd account of its earlier holding in Hanson (Cen-Pen):

In [Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995)], we held that a confirmation order that treated Cen-Pen as an unsecured creditor of the debtor in bankruptcy could not have preclusive effect as to the validity of a lien that Cen-Pen claimed in the debtor’s assets. We stated, “confirmation generally cannot have preclusive effect as to the validity of a lien, which must be resolved in an adversary proceeding.” . . . We noted that inclusion of boilerplate language on page four of the debtor’s proposed plan voiding liens did not, in the circumstances there, provide sufficient notice to the creditor that his lien was not being allowed to pass through the bankruptcy process intact. . . . Even though Spartan Mills cannot rely on a similar factual circumstance here, it nonetheless argues that because it was not served with notice in an adversary proceeding filed to invalidate its first priority, textile processor’s lien created under South Carolina law, under Cen-Pen it is not bound by the bankruptcy court’s final order distributing the proceeds to Bank of America. We think that Spartan Mills applies Cen-Pen too broadly. . . . [I]f Spartan Mills knew that proper bankruptcy procedure had not been followed, its remedy was to seek reconsideration from the bankruptcy court itself or to appeal to the district court in Florida and ultimately to the Eleventh Circuit. . . . Under the holding of [Celotex Corp. v. Edwards, 514 U.S. 300, 115 S. Ct. 1493, 131 L. Ed. 2d 403 (1995),] Spartan Mills cannot allow a final order that deprives it of a lien position to stand and then hope to attack it collaterally at another time and in another forum. Both our circuit and other federal courts have barred bankruptcy parties from collateral assertion of legal claims after they fail, without reason, to object and appeal as required. . . . The lien of a creditor is void if the unappealed, final order of a bankruptcy court vested with proper jurisdiction so declares regardless of the bankruptcy court’s failure to adhere to normal bankruptcy procedures.43
[32]

This characterization of Hanson in Spartan Mills is curious because the creditor in Hanson failed to do exactly what Spartan Mills says it had to do to preserve its challenge to the confirmation order: the creditor in Hanson did not object to confirmation or appeal the order of confirmation; instead, the creditor in Hanson attacked the lien-voiding effect of the confirmation order in a separate adversary proceeding—a fatal mistake according to Spartan Mills. Stated another way, Spartan Mills reads Hanson (Cen-Pen) as a lack of notice case. This is hardly obvious from the Hanson opinion. Spartan Mills seemed to crack the door to an argument that it is possible in the Fourth Circuit to give adequate notice of a Chapter 13 plan that affects liens in the context of confirmation without filing an adversary proceeding. Spartan Mills and Hanson were accommodated if Hanson controls when inadequate notice intercepts the usual binding effect of a confirmation order under § 1327. Procedural irregularity—the failure to file an adversary proceeding in Hanson—overcomes § 1327 only when it results in a failure of notice to the secured claim holder.

[33]

Well, hope for the return of sanity in Chapter 13 practice in the Fourth Circuit after Spartan Mills was short-lived. In Deutchman v. IRS (In re Deutchman),44 the Chapter 13 plan “contained conflicting directions as to how the IRS claim would be treated.” The plan did not list the IRS as a secured creditor. The plan described the IRS as a “Class 2 ‘Priority Claim’” and provided that the liens of “Class 2 creditors ‘shall be considered released and of no effect’ upon the payment of all allowed claims due them.” Although the plan provided for payment in full of the priority portion of the IRS’s claim, the plan also substantially reduced the amount of the priority claim because the underlying tax debts were more than three years old. The IRS filed a proof of claim for more than $190,000, listing $172,579.15 as secured by liens on the debtor’s property. The debtor did not object to the IRS’s proof of claim. The IRS did not object to confirmation of the plan. Two years after confirmation, the debtor filed a declaratory action seeking a judgment that the IRS’s liens would be extinguished upon payment of the relatively small part of the IRS’s claim that was actually entitled to priority.

[34]

The Fourth Circuit refused the effect of confirmation argued by the debtor. The Fourth Circuit found that the debtor could not define and discharge the IRS’s liens “by merely camouflaging his treatment of the IRS’s liens in his plan.” The court explained:

[T]he plan improperly characterized all of the IRS’s claims as Priority II unsecured claims under § 507 and created additional confusion by setting forth an unclear payment schedule. . . . [T]he plan did not consistently identify any IRS claim as a secured claim. Such lack of clarity could only mislead both the secured creditor and the bankruptcy court, as well as cause improper treatment of the secured claims in the confirmed plan, and we will not condone it. Another fatal consequence of Deutchman’s plan was its failure to give specific notice to the IRS of Deutchman’s intent to accord the liens less than full protection. See Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160, 162–63 (4th Cir. 1993). . . . We held that the lack of adequate notice alone denied the secured creditor due process and that, accordingly, the confirmation order devaluing the claims would not be given preclusive effect. . . . The same result obtains here. Deceptive information is equivalent to no notice at all, and for lack of specific notice, Deutchman’s efforts fail.45
[35]

Had the Fourth Circuit stopped there, Deutchman would have been aligned with Linkous and with the Spartan Mills reading of Hanson—poorly drafted plans providing ambiguous notice to secured claim holders do not have the binding effects described in § 1327. But the Fourth Circuit wasn’t content to rest Deutchman on the “camouflage” limitation on the effects of confirmation. Citing Hanson, the court went on to reinvigorate form over substance in Chapter 13 cases in the Fourth Circuit:

In order to extinguish or modify a lien, the debtor must take some affirmative step toward that end. . . . Deutchman did not take a sufficient affirmative step to modify or extinguish the IRS’s liens. First, if we assume that Deutchman intended to challenge the validity or existence of the IRS’s liens, he failed to effectively do so because he sought no preconfirmation adversary hearing. Second, Deutchman filed no objection to the proof of claim.46
[36]

The U.S. Court of Appeals for the Ninth Circuit has now made it abundantly clear that all creditors, including lien holders, are bound by confirmation of Chapter 13 plans even when the plan affects the rights of creditors in a manner that is inconsistent with the Code.47 But earlier, when lack of notice of the content of the plan offended the due process sensibilities of the Bankruptcy Appellate Panel for the Ninth Circuit, the finality of confirmation under § 1327 gave way to the claims allowance process. In Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy),48 a local rule provided that secured claims would be paid the lesser of the amount of the claim or the amount provided in a confirmed plan. The creditor had notice of the Chapter 13 case but did not get a copy of the plan and was unaware that the plan reduced its arrearage claim from $36,800 to $4,500. A year and a half after confirmation, the creditor filed a “motion for allowance of claim.” The Bankruptcy Appellate Panel for the Ninth Circuit held that due process prohibited the confirmed plan from reducing the allowed amount of the mortgage arrearage claim below the amount shown on the creditor’s timely filed proof of claim. The BAP explained:

[The creditor] had a right to expect that if the debtor wished to object to its claim for arrearages, the debtor would file, in accordance with the Bankruptcy Rules, a written objection with notice of a hearing on the matter. Because the [creditor’s] claim was compromised without the requisite notice, [the creditor] was deprived of its constitutionally protected right of due process . . . . [T]he plan that was confirmed here was fatally defective in its arbitrary reduction of [the creditor’s] secured arrearage claim. We do not believe the need for finality of confirmed plans extends to circumstances present in this case: where a debtor misuses, whether or not intentionally, the plan confirmation process to reduce a valid claim without the requisite notice and opportunity to be heard. In any event, § 502(a) is the statutory provision which specifically governs questions of claims allowance and, consequently, should control over the more general policy considerations embodied in § 1327(a).49
[37]

The suggestion in the last sentence of the quotation from Hobdy that the claims allowance process trumps the binding effect of confirmation under § 1327(a) was abandoned by the Ninth Circuit BAP a decade after Hobdy in Shook v. CBIC (In re Shook).50 Between Hobdy and Shook, the U.S. Court of Appeals for the Ninth Circuit decided Great Lakes Higher Education Corp. v. Pardee (In re Pardee),51 which cemented the circuit’s position that the res judicata effect of confirmation under § 1327 extends even to provisions of the plan that are inconsistent with the Bankruptcy Code when a creditor with notice fails to object to confirmation.52 In Shook, the debtors listed CBIC as an unsecured, nonpriority creditor. CBIC filed a timely proof of claim asserting secured status by virtue of a judgment lien. The confirmed plan did not mention CBIC’s lien. The debtors did not object to CBIC’s secured claim for four and one-half years. During the interim, CBIC was paid in full as if it were a secured claim holder, consistent with its filed proof of claim. The Ninth Circuit BAP seized the opportunity to align itself with courts that hinge the binding effect of confirmation on the adequacy of notice, not the nature of the process:

We have approved a line of cases which holds that the lien of a participating or nonparticipating creditor cannot be extinguished except through a formal claim objection or lien avoidance action, rather than through an uncontested plan confirmation hearing. . . . The “middle-of-the-road” approach, which has emerged in the case law subsequent to [Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (B.A.P. 9th Cir. 1991),] focuses on the sufficiency of the notice and considers the totality of the circumstances. Those courts hold that a debtor can bypass the claims allowance and adversary rules and, instead, “object” to a creditor’s claim through plan provisions which modify such debt and lien. . . . We now acknowledge that a plan can effectively determine value and/or avoid a lien only if the creditor receives clear notice that the plan will do so. A plan that is silent about the fate of a secured claim provides no notice of what will happen to the secured claim and therefore cannot effectively avoid a lien or determine its value. . . . Debtors listed the CBIC debt as unsecured in their bankruptcy schedules, but did not refer to it in the plan. . . . Nothing in the plan alerted CBIC that Debtors intended simultaneously to avoid its lien and pay it nothing. . . . [S]uch “treatment” did not meet the due process requirements for the discharge of a secured debt, pursuant to § 1328(a). Due process is the linchpin to determining the rights of secured creditors in chapter 13.53
[38]

In the interest of balance, if not clarity, one court of appeals used the claims allowance process to limit the effects of confirmation in a way that threatens the reasonable expectations of creditors. United Feeds, Inc. v. Greenig (In re Greenig)54 is a Chapter 12 case, but the statutory framework and principles are identical to those under Chapter 13. The confirmed plan in Greenig stated “that [United Feeds, Inc.] was an unsecured creditor holding an allowed claim in the amount of $126,766.43, on which each debtor would pay a fixed percentage.”55 United Feeds did not file a proof of claim and did not receive its first payment under the confirmed plan. Almost a year after the bar date for timely filing claims,56 United Feeds moved the bankruptcy court “for leave to file a late proof of claim.” The debtors objected to allowance of the late-filed proof of claim. The bankruptcy court overruled the debtors’ objection finding “it was the debtors themselves who ‘short-cut the claims allowance process’ . . . ‘the orders confirming the plans serve as final adjudications of the allowability of UF’s claims,’ UF ‘was entitled to rely upon the treatment accorded its claim by the debtor in the reorganization plan.’”57

[39]

The U.S. Court of Appeals for the Seventh Circuit disagreed:

It is undisputed that unfortunately UF did not file its proof of claim within the 90-day limit set forth in clear and unambiguous language in Rule 3002(c), and the parties agree that none of the exceptions to 3002(c) applies. Therefore, considering that 11 U.S.C. § 502(b)(9) bars untimely proofs of claims where none of the 3002(c) exceptions apply, we hold that UF’s claim is barred. . . . UF argues that, because the plan has been confirmed, and because the confirmed plan obligates the Greenigs to pay UF’s claim, the Greenigs should be precluded from challenging that obligation. The problem with UF’s argument is that the fact that a confirmed plan is binding does not mean that a plan based on legal errors should not be reversed: just as a trial verdict is binding but may be reversed if it is founded on legal errors, so a reorganization plan is binding but may be reversed if it is not in accord with the context of the Bankruptcy Rules and Bankruptcy Rules of Procedure. . . . In a Chapter 12 bankruptcy case, the creditor has 90 days to file a proof of claim, unless an exception of Fed. R. Bankr. P. 3002(c) applies. This requirement may not be circumvented, either by the existence of a confirmed plan, or by the presence of equitable considerations. Because UF failed to file its proof of claim within the 90-day time limitation its claim is barred.58
[40]

It is hard to imagine clearer facts than Greenig to support the ordinary application of the binding effect of confirmation under § 1327(a).59 The limitation on the binding effect of confirmation in Greenig is amorphously described by the Seventh Circuit as a plan that “is not in accord with the context of the Bankruptcy Rules.”60

[41]

Contrast Greenig with In re Dennis.61 The plan in Dennis provided that Chrysler was a secured claim holder and that Chrysler would be paid $8,000 through the plan. The plan was confirmed without objection. Chrysler filed an untimely proof of claim for $15,910.45. The debtor objected to Chrysler’s claim and the court sustained the objection under § 502(b)(9).62 Notwithstanding disallowance of the claim, the court held that the debtor was bound by the confirmed plan to pay Chrysler $8,000:

[S]ince 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 secure claim to such extent because all parties are bound by the confirmation under Code section 1327(a). . . . [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.63
[42]

As between Greenig and Dennis, Dennis seems rightly decided but for the wrong reason. The debtor in Dennis should have been precluded from objecting to allowance of Chrysler’s claim for the same reason the debtor in Greenig should have been precluded from objecting to United Feeds’s late-filed proof of claim: the plan allowed Chrysler’s claim, and the plan was confirmed and binding before the debtor sought to bar Chrysler’s claim in the parallel process of claims objections. The outcome is the same—the debtor is bound by the plan to pay Chrysler in Dennis and should have been bound by the plan to pay United Feeds in Greenig.

[43]

The next question lurking in Greenig and Dennis is whether failure to timely file a claim is “cause” to reconsider allowance under § 502(j).64 The answer to this question might depend on the exact language of the plan. For example, a plan that says, “Secured claims for which timely proofs of claim are filed and allowed will be paid as follows . . .” might produce a different outcome than a plan that says, “Chrysler’s claim is allowed as a secured claim and will be paid $8,000 through the plan.”

[44]

Eight years before Greenig, in In re Pence,65 the proposed plan surrendered collateral in full satisfaction of a secured claim. At the hearing on confirmation, the debtor put on evidence that the property to be surrendered had a value of $58,500 and the debt to be satisfied was $47,000. The creditor did not contest this valuation, and the plan was confirmed. It later appeared that the appraisal offered at confirmation was inflated. The creditor claimed that it never received formal notice of the hearing on confirmation. The Seventh Circuit “assumed” that the creditor did not receive actual notice of the confirmation hearing but held that the creditor was bound by the valuation of its collateral and was precluded from asserting that its secured claim was not satisfied:

[The creditor is] still not entitled to avoid the binding effects of the reorganization plan. Due process does not always require formal written notice of court proceedings; informal actual notice will suffice. In this case, [the creditor,] a sophisticated and organized creditor, had knowledge of [the debtor’s] bankruptcy petition and should have known that a reorganization plan would have to be filed within fifteen days of the petition. . . . Creditors, especially lending institutions . . . must follow the administration of the bankruptcy estate to determine what aspects of the proceeding they may want to challenge. . . . [The creditor] was not entitled to stick its head in the sand and pretend it would not lose any rights by not participating in the proceedings.66
[45]

Two years after Greenig, the Seventh Circuit forcefully reaffirmed the principles in Pence without so much as a bow toward Greenig. In In re Harvey,67 the confirmed plan lien-stripped GMAC’s undersecured claim. GMAC did not object to confirmation. Two years later, the debtor moved to modify the plan in other respects, and GMAC attacked the lien-stripping provision for the first time. GMAC claimed that it had ambiguous notice of the lien-stripping provision in the original plan.

[46]

Citing the “well established principle of bankruptcy law that a party with adequate notice of a bankruptcy proceeding cannot ordinarily attack a confirmed plan,” the Seventh Circuit rejected GMAC’s objection to the modified plan. The court found a “fundamental defect” in GMAC’s case in that GMAC “failed to lodge a proper objection” to confirmation of the original plan. The Seventh Circuit noted that, if GMAC was genuinely uncertain about the effect of the plan on its lien, “it was obligated to raise this issue with the bankruptcy court prior to the original plan confirmation.” Characterizing the ambiguity about which GMAC complained as “one that was readily identifiable during the original confirmation proceedings,” the Seventh Circuit held, “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.”68

[47]

Harvey puts the Seventh Circuit at odds with the Fourth Circuit with respect to the burden of raising a challenge to an ambiguous Chapter 13 plan. As detailed above, the Fourth Circuit in Deutchman puts the risk of ambiguous language in the plan squarely on the debtor: A Chapter 13 plan that is not clear with respect to the treatment of a secured claim holder does not have binding effect under § 1327(a). In contrast, the Seventh Circuit in Harvey puts the burden on the creditor to object to confirmation of an ambiguous plan else confirmation will be binding on the creditor—at least where the ambiguity is “readily identifiable” during the confirmation process.

[48]

Greenig is not easily reconciled with Pence and Harvey. Pence and Harvey stand for the proposition that if notice of the plan satisfies due process, a secured claim holder in the Seventh Circuit is bound by confirmation and cannot collaterally attack the treatment of its lien under the confirmed plan notwithstanding less than letter-perfect compliance with formal procedures elsewhere in the Code and Bankruptcy Rules.69 The valuation of collateral at issue in Pence and the lien stripping in Harvey are no less a part of the “context of the Bankruptcy Rules” than the claims allowance question in Greenig. There is no mention in Pence of any motion to value the creditor’s security under Bankruptcy Rule 3012, nor did the debtor object to any claim or commence any formal procedure other than confirmation in support of the “eat dirt” plan. The debtor in Harvey did not file an adversary proceeding to limit the extent of GMAC’s lien. On clearly uncertain notice in Pence and less than certain notice in Harvey, the confirmed plans were held to be binding by the Seventh Circuit; there was no question of the clarity of notice in Greenig, yet the confirmed plan was swept aside to permit (re-)litigation of claims allowance. Go figure.

[49]

And there is more from the Seventh Circuit. Discussed in detail above,70 in Adair v. Sherman,71 the Seventh Circuit addressed the flip side of Pence: Does confirmation of a Chapter 13 plan that is silent with respect to the value of collateral preclude the debtor from challenging the value stated on a preconfirmation proof of claim? In Adair, the 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 original purchase price. The debtor did not object to the proof of claim; the plan was confirmed. After confirmation, the debtor filed an adversary proceeding challenging the bank’s proof of claim. The adversary proceeding was dismissed when the Chapter 13 case was dismissed. After that dismissal, the debtor filed a complaint in district court alleging that the bank’s law firm violated the Fair Debt Collection Practices Act. Citing Pence, the Seventh Circuit held that collateral estoppel barred the FDCPA action:

In our decision in Pence, we refused relief to a creditor who, “instead of attacking the valuation head on at the confirmation hearing,” chose “a collateral attack on the confirmation order where valuation may not be contested.” . . . Our sister circuits share our view that once a bankruptcy plan is confirmed, its terms are not subject to collateral attack. . . . When a proof of claim is filed prior to confirmation, and the debtor does not object to confirmation, the debtor may not file a postconfirmation collateral action that calls into question the proof of claim.72
[50]

In a footnote, the Seventh Circuit said more about the collision between confirmation and claims allowance in Chapter 13 cases:

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.73
[51]

Adair could be read to hold that confirmation of a plan that is silent with respect to the value of collateral is preclusive of challenge to the value stated on a proof of claim filed before confirmation. Another way to state Adair is that lack of specificity in the plan is a severe limitation on the effects of confirmation: in the collision between confirmation of a plan and the claims allowance process, the value stated on a preconfirmation proof of claim trumps a plan that is silent with respect to value.

[52]

Creditors might say that Adair levels the Chapter 13 playing field in the Seventh Circuit. Diligent creditors that file proofs of claim before confirmation can expect preclusive effect, at least with respect to issues that are specifically addressed in the proof of claim and not specific in the confirmed plan. But this role reversal plays out further: debtors will rightfully respond to Adair that the invisible process of filing a proof of claim is insufficient notice on which to bottom preclusion with respect to value or any other aspect of claims allowance.

[53]

Bankruptcy court decisions reported after Adair have declined to extend the Seventh Circuit’s holding to proofs of claim filed after confirmation74 and have found preclusion in the debtor’s favor when the plan is specific with respect to value even if the creditor filed a preconfirmation proof of claim.75 One reported decision further limits Adair to preclusive effect only with respect to the value of collateral, leaving unobstructed other aspects of the claims allowance process.76

[54]

The jurisprudence of notice and due process as limits on the effects of confirmation in Chapter 13 cases needs some work. It is hard to tell from these reported decisions whether the courts are concerned about the sufficiency of notice of how confirmation will affect creditors (or the debtor) or whether the use of a particular procedural device—a proof of claim, an objection to claim, a motion to value collateral or an adversary proceeding—determines the vitality of confirmation under § 1327. Would the outcomes in Howard, Hobdy or Deutchman have been different if the notices to creditors clearly explained the treatment of each creditor by the plan and boldly informed that collateral would be valued and the extent of liens and allowed secured claims would be determined at the hearing on confirmation? Or were the plans doomed unless and until the debtors also filed the right motion or complaint raising the same issues as the plans but dressed in the proper papers?

[55]

Several courts have endeavored to distill the cases discussed above into categories, but even good organization does not generate consistency or predictability in this area of Chapter 13 practice. For example, in In re Basham,77 the debtor served a summary of the plan on all creditors, including a mobile home lender. The summary contained a type written entry that “secured creditors agree to accept collateral in full satisfaction of their claims.” The mobile home lender was aware of this notice and did not object to confirmation. The Bankruptcy Court for the Western District of Missouri concluded that the mobile home lender was bound by the confirmed plan to accept its collateral in full satisfaction of its claim. Along the way, the court eloquently endeavored to accommodate the confirmation process and the claims allowance process in Chapter 13 cases:

The difficult issue in this case is the apparent conflict between the claims allowance procedures . . . and the binding effect of the Chapter 13 plan. . . . Green Tree never objected to the Debtor’s plan calling for the surrender of the mobile home “in full satisfaction of [its] claim.” . . . Green Tree filed a deficiency claim after plan confirmation, and the Debtor failed to object to that claim. Under the plan confirmation procedure, Green Tree had no right to a deficiency. Under the claims allowance procedure, Green Tree has an allowed secured claim that is prima faci[e] evidence of its amount and validity. . . . As with most splits in opinion, there are three approaches. . . . Some courts choose the claims process over the plan confirmation process, see [Sun Finance Co., Inc. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992); Simmons v. Savell (In re Simmons), 765 F.2d 547, 552 (5th Cir. 1985)]; some courts choose the chapter 13 plan process over the claims process, see In re Pence, 905 F.2d at 1108; and some courts choose a middle-of-the-road approach, see [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160, 163 (4th Cir. 1993)]. . . . The common theme through all three approaches is that of notice. Did the creditor receive adequate notice that its rights were to be modified under the plan? . . . The Court is troubled by the Fifth Circuit’s conclusion in In re Howard that a confirmed plan is only binding on creditors who participate in the confirmation process. . . . This conclusion seems contrary to the language of § 1327(a) which states that a confirmed plan is binding on all creditors whether or not they file claims or plan objections. . . . In addition, a rule requiring a claim objection as a prerequisite to a modification of secured creditor rights may, as a practical matter, be unworkable when a creditor does not file a proof of claim before plan confirmation. . . . [T]he Court cannot conclude that a claim objection is the exclusive means of notice to a secured creditor that its rights are to be modified. Nor does the Court adopt the approach found in In re Pence . . . . A per se rule that notice of the filing of the petition is sufficient to apprise a secured creditor that its rights are to be modified may be a workable approach when the creditors are sophisticated lenders who are familiar with the bankruptcy process, but such a rule would be unduly harsh to unsophisticated creditors and may not accord such creditors due process. The Court finds that the third approach is the best approach. Looking to the contents of the notice to determine if the notice is reasonably calculated, under the circumstances, to apprise interested parties that their rights may be modified, is a flexible approach that encompasses the totality of circumstances presented in each case. Such approach allows the Court to consider a creditor’s sophistication, the amount of their involvement in the bankruptcy proceeding, as well as, that creditor’s reliance on the claims allowance procedures as demonstrated by a proof of claim filed before plan confirmation. Applying the third approach to the case at hand, Green Tree had sufficient notice of the plan’s treatment of its claim to be bound by the plan’s terms. Green Tree is a sophisticated lender that was aware that its rights could be modified in a Chapter 13 proceeding. . . . The plan summary received by Green Tree plainly stated that the mobile home would be surrendered in full satisfaction of its claim. Green Tree relied on this plan term in its motion to lift stay. This creditor had adequate opportunity to challenge the proposed plan prior to its confirmation. . . . By failing to object to plan confirmation, Green Tree lost its right to contest the plan.78
[56]

Four years after Basham, another bankruptcy court in the Eighth Circuit faced similar facts, employed a similar construct and reached a similar conclusion by a completely different resolution of the impact of claims allowance on confirmation. In In re Harnish,79 Sears was listed in the schedules as an unsecured creditor. The plan did not preserve Sears’s lien. Sears timely filed a proof of claim asserting both a secured claim and an unsecured claim. The debtors did not object to the proof of claim. Two months after confirmation, the trustee filed a report on claims, identifying Sears as an unsecured claim holder. Sears objected to the report. The bankruptcy court first identified three approaches similar to those in Basham to the effects of confirmation under § 1327 and the filing of timely proofs of claim that are inconsistent with the confirmation order:

Under the first approach, the debtor or a party in interest must object to the creditor’s proof of claim because a Chapter 13 plan “does not provide the creditor with sufficient notice that the claim is disputed.” [Simmons v. Savell (In re Simmons), 765 F.2d 547, 552 (5th Cir. 1985)]; see also [Sun Finance Co., Inc. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992)] . . . . Under the second approach, the debtor’s filing of a Chapter 13 petition is sufficient by itself “to put the creditor on notice that its rights may be altered.” [In re Pence, 905 F.2d 1107 (7th Cir. 1990)]. Under this approach, secured creditors have a duty to “follow the administration of the bankruptcy estate to determine what aspects of the proceeding they may want to challenge.” Pence, 905 F.2d at 1109. The third approach looks at the contents of the notice to determine whether it is “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.” [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993)].80
[57]

Acknowledging that the Eighth Circuit had not addressed the collision of § 1327 and claims allowance in a Chapter 13 case, the court cited other Eighth Circuit authority81 to conclude that the Eighth Circuit would adopt the second approach. Applying the second approach:

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 . . . . The confirmed plan provides for distribution “to the unsecured creditors of this estate whose claims are duly approved and allowed.” Because Sears was scheduled as an unsecured creditor and Debtors’ plan provides for distribution to unsecured creditors, the plan provides for Sears’ claim under § 1327(c). . . . By participating in the case by filing a proof of claim, Sears acts at its peril and cannot be excused from failing to monitor its plan treatment. . . . Because the plan was confirmed without preserving Sears’ lien, that lien was extinguished.82
[58]

Basham and Harnish take different routes using the same map to reach approximately the same place. Though professing to apply different rules, both decisions focus on the adequacy of notice. Basham and Harnish are instructive that courts falling in the second or third categories consider similar facts and are likely to reach similar conclusions whether notice is adequate to enforce the effects of the confirmed plan on creditors. The Fourth Circuit would stand apart as the extreme example of category one: courts that have elevated the claims allowance process over the plan confirmation process without regard to the clarity of the plan or the adequacy of notice of confirmation.

[59]

Ironically, the fragile line between the approaches described in Harnish is illustrated by an opinion from another bankruptcy court in the Eighth Circuit, this time from the Eastern District of Missouri. In In re Fiore,83 not unlike the Sears lien in Harnish, the debtor listed as an unsecured debt a claim for prepetition attorney fees for legal services related to modification of a domestic support decree. The plan identified specific priority debts other than the attorney fees and provided full payment for only the identified priority debts. The attorney fee claimant filed a preconfirmation proof of claim asserting priority under § 507(a)(7).84

[60]

The bankruptcy court conceded that the debtor fully intended to treat the attorney fee claim as a general unsecured claim but held that the proof of claim “is controlling in this situation.”85 The court then gave this unsatisfying explanation:

The Debtor may argue that the Claimant waived his right to prosecute this priority claim because he failed to object to confirmation of the plan. Although such a procedure may have brought the issue before the Court at an earlier time in this case, a claimant should not lose a right to payment because it chose one remedy that may be less timely or less economical than a different remedy.86
[61]

The bankruptcy court in Fiore didn’t analyze the effect of confirmation on the attorney fee claim as a notice issue. Instead, the court aligned itself with the Fourth Circuit and elevated the claims allowance process over the effect of confirmation, without regard to whether the fee claimant had notice of the plan. Like Sears in Harnish, the attorney fee claimant in Fiore was listed as an unsecured creditor, the plan did not provide priority status and a proof of claim inconsistent with the plan was filed before confirmation. It is hard on these facts to argue that the attorney fee claimant was without notice that its priority was in jeopardy. The notice in Fiore would have been outcome determinative under Basham and Harnish.

[62]

Discussed in more detail below,87 “silence” in the plan with respect to a lien or the status of a claim (priority, for example) is sometimes characterized as a lack of notice that disables the usual effects of confirmation under § 1327. Other times silence is described as a failure to “provide for” the claim. In an alternative holding in Fiore, the bankruptcy court states that § 1327 does not preclude the attorney fee claimant’s right to payment because the priority claim was “not provided for in the confirmed plan.”88

[63]

The plan in Fiore was not silent in any sense with respect to the attorney fee claim; rather, it affirmatively excluded the attorney fee from priority treatment. The election of remedies that occurred in Fiore was the debtor’s choice to proceed with confirmation of a plan that treated the attorney fees as a general unsecured claim rather than prosecuting an objection to the proof of claim. If notice of the content of the plan was sufficient, confirmation in Fiore should have determined the status of the attorney fee claim. Characterizing the notice question as a failure to “provide for” the attorney fee claim distracts from the real issue of the adequacy of notice. Stating the holding in terms of a proof of claim overcoming the effects of a contrary confirmed plan is even more disruptive of the statutory scheme.

[64]

Searching for greater certainty, or perhaps thinking wishfully, several bankruptcy courts have refined and publicized their confirmation procedures, broadcasting the form of notice to creditors that will support the full prescription effects of § 1327. For example, in In re Holmes,89 the Chapter 13 plan provided Old Kent would be paid $7,806 plus interest on account of its secured claim. The debtor’s motion to confirm the plan and notice provided: “CREDITORS SHALL TAKE NOTICE THAT IN THE ABSENCE OF A WRITTEN OBJECTION BY A CREDITOR, THE AMOUNT PAYABLE WHICH IS SPECIFIED IN THE PLAN TO BE PAID TO EACH OF THE SECURED CREDITORS WILL BE ACCEPTED BY THE COURT.”90

[65]

Old Kent filed a proof of claim for $8,072.21. Old Kent filed an objection to confirmation and appeared at the confirmation hearing. The bankruptcy court disallowed a portion of Old Kent’s claim and confirmed the plan. Old Kent’s motion to reconsider argued that it was improper to determine the allowable amount of its secured claim at the confirmation hearing. Distinguishing Howard, Hobdy and other cases, the bankruptcy court sustained the use of the confirmation process as noticed above:

[A] court may determine the amount of a secured creditor’s claim and, therefore, whether a debtor’s plan complies with 11 U.S.C. §§ 1322(b)(5) and 1325(a)(5), as part of the confirmation process. . . . A creditor cannot simply rely, at the confirmation hearing, on the fact that it has filed a proof of claim to which the debtor has not, independently objected. . . . The Motion to Confirm in this case clearly notified secured creditors that the Debtors were seeking an order pursuant to Section 506(a) valuing the secured claims to be paid through the Plan . . . . Old Kent was clearly put on notice that its claim was in dispute.91
[66]

In In re Dickey,92 the Bankruptcy Court for the Middle District of Pennsylvania considered whether a Chapter 13 plan can strip off a mortgage lien based on the absence of value under § 506(a) when the plan boldly provided, “MORTGAGE LIEN TO BE AVOIDED IN ITS ENTIRETY PURSUANT TO SECTION 506.” The court gave the following prescription for Chapter 13 plans that can avoid liens through the confirmation process by valuation under § 506(a):

[T]he debtor must insure that the due process requirements of Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S. Ct. 652, 94 L. Ed. 865 (1950) are met by the plan. . . . [A]t a minimum, the plan must “clearly and accurately characterize the creditor’s claim” and must give the creditor an explanation as to why the lien is worthless. . . . [T]he plan must put the creditor on notice that its lien will be lost if the creditor does not object to the plan. . . . [T]o strip off a mortgage through the confirmation of a Chapter 13 plan, the plan must clearly state on its face that the debtor does not intend to file an adversary complaint or contested matter in order to avoid the lien, that the confirmation order alone will avoid it, and that if the affected creditor wishes to contest the avoidance, he must file an objection to the plan.93
[67]

Similarly, even bankruptcy courts in the Fourth Circuit are experimenting with notices in Chapter 13 cases that might survive appellate review. In In re Thomas,94 the bankruptcy court rolled out a new form of the Chapter 13 plan to solve notice deficiencies identified earlier in the district.95 The plan in Thomas provided for payment of Haverty’s as a secured creditor with collateral valued at $2,000. In bold print, the plan provided, “In accordance with 11 U.S.C. § 506(d), any claim of lien above the value of the secured claim shall be void, and liens shall be released upon payment of the value set forth below, or the indebtedness, whichever is less, or upon discharge if no proof of claim is filed.”96 The plan was confirmed without objection. A month after confirmation, Haverty’s filed a proof of claim asserting secured status for $5,400. The debtors objected. Acknowledging the similarities to Spartan Mills, the bankruptcy court held that Haverty’s was bound to accept $2,000 in satisfaction of its lien:

The principal question here is whether by virtue of notice contained in debtors’ chapter 13 plan, the claimant Haverty’s had “due process notice” of the cramdown valuation of its secured proof of claim so as to give preclusive effect to the order confirming the plan. . . . The same issue was addressed by my prior decision of In re Rodnok[, 197 B.R. 232 (Bankr. E.D. Va. 1996)] . . . . [I]n Rodnok, this court . . . held that the confirmed chapter 13 plan did not provide appropriate notice to the secured creditor of a valuation under Bankruptcy Rule 3012 and § 506(a) so as to fix the value of the claim. Following the court’s ruling in Rodnok, the chapter 13 trustees . . . suggested that the court consider changing the prescribed chapter 13 plan form . . . . The court has recently adopted local rules changes which include the proposed modification . . . . [T]he debtors’ plan in this case has included the . . . additional notice to secured creditors . . . . I find the plan satisfied due process notice requirements to Haverty’s in that the notice of valuation set out in the plan “was reasonably calculated” to give Haverty’s ample notice of the fixing of the value of its secured claim at $2,000.00.97
[68]

Holmes and Thomas are on the right track: notice is the issue, not the sanctity of one procedure or another. But for a few overstatements in a few appellate decisions—mostly confined to the Fourth and Fifth Circuits—almost all the reported cases finding limits on the effects of confirmation in the claims allowance process can be explained as notice cases.

[69]

“Notice” in this context works in all directions: proper words in the plan, in the order confirming the plan or in a notice of confirmation can limit the effects of confirmation with respect to valuation and claims allowance. For example, in In re Barton,98 the confirmed plan stated, “The amount of a creditor’s secured claim shall be the amount stated as secured on a proof of claim filed by or on behalf of the creditor unless the court determines a different amount following the filing of a separate motion to value the claim or the filing of an objection to the claim.”99 Ford filed a preconfirmation proof of claim for $23,004.38 and designated the total amount as secured. The confirmed plan identified Ford’s collateral with a value of $15,000. After confirmation, the debtor objected to Ford’s claim and proposed to treat Ford as secured to the extent of $8,500.

[70]

Based on the limiting language in the plan, the bankruptcy court held that the plan provision valuing Ford’s collateral at $15,000 was not preclusive of the debtor’s postconfirmation objection: “The language in the form Chapter 13 plan . . . require[d] an objection to claim to be a separate pleading and be resolved by notice and hearing. . . . The confirmed plan had no res judicata effect as to the amount of the allowed secured claim.”100

[71]

Along the same lines in In re Callahan,101 a confirmed plan did not cram down a car lender’s claim because the debtor failed to check a box on the plan indicating that collateral would be valued at the confirmation hearing. The bankruptcy court held that the blank box defeated the preclusive effect of the plan because the creditor “was entitled to a negative inference that the debtor would not seek cramdown of its secured claim at the confirmation hearing.”102

[72]

It would be nice if the Bankruptcy Code and Rules prescribed a unitary procedure for fixing value, determining the extent of liens, confirming plans and allowing claims, but these processes are at once separate and inextricably intertwined in a Chapter 13 case. Courts such as the Fourth Circuit that have declared bright-line rules for the ascendancy of one or another procedure103 immediately encounter the reality of the next case104 in which an awkward exception or inconsistency105 reveals that more is going on than just picking among procedures. These courts are asking the wrong question. The issue is not, which procedure trumps another? The issue is, did the creditor have sufficient notice of the plan and opportunity to object such that confirmation has the effects described in § 1327(a), (b) and (c)?

[73]

Procedural due process can be satisfied in several ways without violating any fundamental principles of bankruptcy law. Describing in a Chapter 13 plan the treatment of a secured claim and determining the allowed amount of a secured claim for purposes of § 506(a) inevitably involve some of the same questions of fact and law. Valuation of collateral is often at the heart of both. There is no reason under the Bankruptcy Code or Rules why the overlapping issues can’t be decided in either context—during a hearing on confirmation of the plan or as part of a hearing before or after confirmation on an objection to a claim. If notice is adequate, the value of a secured claim holder’s collateral can be determined on a motion in advance of confirmation under Bankruptcy Rule 3012,106 at the confirmation hearing as part of the trial of a contested plan, or at a hearing on an objection to the creditor’s claim. The outcome of each of these procedures is the same for purposes of the effects of confirmation in § 1327—if notice was adequate and the procedural due process rights of the secured claim holder are respected, a bankruptcy court order fixing the value of collateral, determining the allowed amount of a secured claim or defining what the secured claim holder will receive in satisfaction of its lien rights is binding on all parties without regard to the label on the process.107

[74]

For example, if the plan served on a creditor said, “Your collateral is worth $5,000 and you will be paid $5,000 at the rate of $200 a month with 10% interest in full satisfaction of your lien,” that creditor is in no doubt that the confirmation process engages the claims allowance process and that confirmation will bind the creditor to accept $5,000 in full satisfaction of its secured claim. After confirmation of this plan, if the creditor filed proof of a secured claim for $7,000, upon objection the debtor would win because the creditor is collaterally estopped to assert a value for its collateral or lien rights inconsistent with the $5,000 (with interest) defined by the confirmed plan. Claims allowance remains distinct from confirmation, but the litigation of issues important to claims allowance may be precluded when the confirmation process has fully engaged the secured claim holder in fact-finding essential to both procedures.

[75]

Especially in jurisdictions that reach confirmation in advance of the bar date for timely filing claims,108 it will often be true that the plan deals quite specifically with claim holders that have not filed proofs of claim. All manner of procedural foolishness results from a rule that issues such as the value of collateral or the extent of an allowed secured claim can only be determined by objection to a claim. Bankruptcy Rule 3004 permits a Chapter 13 debtor (or the trustee) to file a proof of claim on behalf of a creditor under certain circumstances.109 If no claim has been filed by the creditor, debtors will be forced to file proofs of claim on behalf of creditors and then object to those claims to join the hearing on that objection with the hearing on confirmation. Comprehensive notice of a creditor’s treatment under the proposed plan and of the opportunity to object to confirmation is fully redundant of any purpose served by requiring the debtor to file a proof of claim for a creditor and to then object to that proof of claim.

[76]

If the claims allowance process is commenced before confirmation by the filing of a proof of claim, a properly noticed plan that is inconsistent with a creditor’s claim is indistinguishable from an objection to that claim. To require the debtor to separately file a written objection to a proof of claim when precisely the same contest is presented in the notice for the hearing on confirmation elevates form over substance. Perhaps the routine should be that every Chapter 13 plan and notice of hearing on confirmation includes in large type, “THIS PLAN IS AN OBJECTION TO ANY INCONSISTENT PROOF OF CLAIM THAT MAY BE FILED BY ANY CREDITOR. THIS OBJECTION WILL BE HEARD SIMULTANEOUSLY WITH THE HEARING ON CONFIRMATION.” A notice like this might comfort some courts in the same way that specific notice of valuation at confirmation seems to bolster the effects of confirmation in some jurisdictions.110 But again, the issue is not which procedure is used; the issue is the adequacy of notice. If the summary or copy of the plan unmistakably puts the creditor on notice that the plan treats the creditor’s claim in a manner that is inconsistent with that creditor’s proof of claim, notice of the hearing on confirmation serves all the purposes that would be served by requiring the debtor to file a separate objection to the proof of claim.

[77]

It might be argued that the claims allowance process has greater vitality when notice of the plan or of the hearing on confirmation is not adequate or when the plan is not specific with respect to the rights of claim holders. A plan that is incomplete111 or ambiguous112 with respect to the treatment of claims—no matter how well noticed to creditors—can have no greater binding, vesting or free and clear effects than the words themselves will support.113 Conversely, a confirmed plan, perfect in every detail but unknown to creditors because of failed notice, weighs little in litigation with a creditor armed with a timely filed claim and due process entitlements.

[78]

But even this attractive conclusion overstates the proper balance of responsibility. The Chapter 13 debtor certainly has an obligation to use best efforts to clearly describe in the plan the treatment of claims and to give comprehensive notice to all creditors. But creditors in Chapter 13 cases have an important responsibility to police the content of the plan and to object to plans that are ambiguous or uncertain. As the Seventh Circuit stated in Harvey, “It is perfectly reasonable to expect interested creditors to review the terms of the proposed plan and object if the terms are unacceptable, vague, or ambiguous.”114 Ironically, the more obvious the ambiguity or uncertainty in the plan, the more reasonable it is to enforce the effects of confirmation under § 1327 when the creditor sleeps through the confirmation process.

[79]

This is the proper accommodation of the confirmation process and the claims allowance process in a Chapter 13 case. Both are available to creditors and debtors. They inevitably overlap, and when they do, the question becomes whether notice and opportunity to litigate were adequate.115 If notice was adequate, many rights that can be decided at confirmation or as part of the claims allowance process will be finally determined in whichever procedure is completed first. Normal rules of preclusion then apply.

[80]

In jurisdictions that have embraced specific procedural limitations on the effects of confirmation, to get a final resolution of creditors’ rights at the confirmation hearing, the debtor must perform procedural contortions that align the confirmation and claims allowance procedures. For example, the debtor might file objections to any filed claims that are not consistent with the proposed plan and move that the objections be set for hearing in conjunction with the hearing on confirmation. With respect to each secured claim, the debtor might move for a valuation hearing under Bankruptcy Rule 3012116 and move that the valuation hearing be combined with the hearing on confirmation. For each secured claim holder that has not yet filed its own proof of claim, the debtor may have to file a claim on behalf of the creditor,117 object to that claim and move that the objection be combined with the hearing on confirmation. In some jurisdictions, a motion will not be enough “procedure” with respect to the rights of lienholders—adversary proceedings will have to be filed and, if possible, queued up for trial contemporaneously with the hearing on confirmation.

[81]

These extra procedural steps are expensive, time consuming, inefficient and unnecessary. The substantive rights of creditors are the same whether the judicial determination occurs at a hearing on confirmation, at a valuation hearing under Bankruptcy Rule 3012 or on an objection to claim under Bankruptcy Rule 3007. The findings of the bankruptcy court with respect to the value of collateral, the extent of a lien, and the allowed amount of a claim are binding on all parties whether the hearing is a confirmation hearing, a valuation hearing, a hearing on an objection to claim or a combined hearing on some or all of the above.118

[82]

No matter how poorly constructed the plan or thinly noticed the hearing on confirmation, no creditor should purposefully forgo objecting to confirmation in favor of some anticipated limitation on the effects of confirmation. There is no effective substitute for a timely objection to confirmation.119 When in doubt, object to confirmation and appeal the order confirming an adverse plan.120

[83]

One not-so-loose end in this discussion is the interaction of the effects of confirmation under § 1327 and the reconsideration of claims under § 502(j). 11 U.S.C. § 502(j) broadly provides that “a claim that has been allowed or disallowed may be reconsidered for cause.”121 The section explains that reconsideration “does not affect the validity of any payment or transfer from the estate,” thus suggesting that reconsideration of claims can occur after confirmation of a Chapter 13 plan.122

[84]

Section 502(j) could be characterized as an exception to the normal preclusive effect of confirmation when the Chapter 13 plan provides for the allowance (or disallowance) of a claim.123 More precisely, § 502(j) is a limit on the finality of any order allowing or disallowing a claim, whether it comes as part of the confirmation process, the claims allowance process or otherwise. Not unlike modification after confirmation under § 1329,124 § 502(j) is a statutory statement of policy that claims allowance demands some flexibility in bankruptcy cases. It is not carte blanche to ignore the effects of confirmation on claims under § 1327. It has been held that § 502(j) permits reconsideration of the allowance of a claim when an allowed claim is inconsistent with a confirmed Chapter 13 plan.125 Some reported decisions suggest that § 502(j) functions before confirmation but has limited utility as a procedure for assault on the provisions of a confirmed plan.126

[85]

Finally, a word about Bankruptcy Rule 7001. Describing the scope of Part VII of the Bankruptcy Rules, Bankruptcy Rule 7001(2) states that “adversary proceedings” includes “a proceeding to determine the validity, priority or extent of a lien or other interest in property.”127

[86]

This rule is often cited by courts for the proposition that an adversary proceeding must be filed when a Chapter 13 plan challenges a lien. Put another way, Bankruptcy Rule 7001 is cited to support the holding that the confirmed plan does not have an effect described in § 1327 because what the plan does—limit or eliminate a lien based on valuation (or absence of value) under § 506(a)—required an adversary proceeding.128

[87]

Much of the discussion above could be recharacterized as a debate whether the distinction between an adversary proceeding and a contested matter makes a difference in the effects of confirmation under § 1327 when a Chapter 13 plan defines the lien rights or distribution rights of a creditor.

[88]

Some reported decisions dispute head-on whether Bankruptcy Rule 7001 applies at all when the plan challenges a lien based on the value of collateral. The argument against application of the adversary proceeding requirement in Rule 7001 is well stated by the bankruptcy court in In re King.129

This Court agrees with Matter of Beard, 112 B.R. 951 (Bankr. N.D. Ind. 1990), that, as used in Bankruptcy Rule 7001(2), the term “validity” means the existence or legitimacy of the lien itself, “priority” means the lien’s relationship to other claims or to interests in the collateral, and “extent” means the scope of the property encompassed by or subject to the lien. . . . The determination of secured status based upon the value of the secured property is a contested matter by Bankruptcy Rule. F.R.B.P. 3012. . . . It follows directly that voiding a lien for lack of collateral value, pursuant to Section 506, is outside the scope of Bankruptcy Rule 7001(2) and is properly accomplished as part of the Chapter 13 plan confirmation process. . . . “[A] creditor’s lien may be avoided through confirmation of a Chapter 13 plan where the basis is lack of collateral value and where the plan properly ‘provides for’ the creditor through language sufficiently specific to put the affected creditor on notice that its lien will be lost if an objection to the plan is not made.”130

 

1  See, e.g., § 104.1 [ The Power to Modify ] § 74.11  The Power to Modify.

 

2  See § 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1  Valuation, Claim Splitting and Dewsnup. This general rule is subject to an exception for claims secured only by real property that is the debtor’s principal residence that are protected from modification by § 1322(b)(2) as interpreted by the Supreme Court in Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993). 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.

 

3  See § 78.2  Calculating Payments to Secured Claim HoldersSee also § 78.6  Oversecured Claims after BAPCPA.

 

4  Fed. R. Bankr. P. 3015(d). See §§ 38.2 [ Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents ] § 37.4  Time for Filing Schedules, Statement of Financial Affairs, Plan and Other Documents, 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan and 97.2 [ Time for Filing Plan ] § 72.3  Time for Filing Plan.

 

5  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

6  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.

 

7  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.

 

8  See §§ 275.1 [ 1994 Code Amendments Changed the Rules ] § 132.1  1994 Code Amendments Changed the Rules281.1 [ Postpetition Claims ] § 132.9  Postpetition Claims.

 

9  11 U.S.C. § 501(a) provides: “A creditor . . . may file a proof of claim.”

 

10  11 U.S.C. § 502(a).

 

11  Fed. R. Bankr. P. 3007.

 

12  Fed. R. Bankr. P. 7001(2).

 

13  11 U.S.C. § 506(a).

 

14  Fed. R. Bankr. P. 3012.

 

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

 

16  See § 272.1 [ Official Bankruptcy Form 10 and Variations ] § 131.1  Official Bankruptcy Form 410 and Variations.

 

17  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

18  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

19  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.

 

20  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.

 

21  See Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 828–34 (11th Cir. 2003) (Although mortgage holder is bound by confirmed plan that stated different amount of arrearage claim than preconfirmation proof of claim, lien survives confirmation in the amount asserted by the creditor, and res judicata effect of confirmation is limited to denial of mortgage holder’s postconfirmation motion to dismiss. “Given the ‘deemed allowed’ language of § 502, the explicit procedures set forth in Rule 3007 to effect a proper disallowance, the existence of a secured home mortgage claim, and the failure by the debtor here, not the creditor, to follow the proper procedures, we refuse to permit an inconsistent plan provision to constitute a constructive objection by reason of the Plan’s notation of disputes alone . . . . That the Plan states an amount in conflict with the proof of claim demands a resolution of the inconsistency, but a debtor’s post-confirmation objection is not the appropriate vehicle by which to do so. . . . Universal’s proof of claim and the Plan’s listed distribution amount, however improper, was within the definition of claim preclusion because it very well might have been and, as we have articulated should have been, presented before the bankruptcy judge prior to the Plan confirmation. . . . We are persuaded by the reasoning in [Simmons v. Savell, 765 F.2d 547 (5th Cir. 1985),] that a secured creditor’s lien survives a contrary plan confirmation. . . . [I]f a lien on a mortgage survives the § 1327 res judicata effect of a confirmed plan, then so must any corresponding arrearage claim, such as [the] one Universal asserts here. . . . Although Universal’s lien and arrearage claim survives, we will not reverse the . . . order denying Universal’s motion to dismiss the bankruptcy altogether. . . . We hold that although the parties are bound to the terms of the Plan, as confirmed, Universal’s secured claim for arrearage survives the Plan and it retains its rights under the mortgage until Universal’s claim is satisfied in full.”); General Elec. Capital Auto Lease v. Eron (In re Eron), No. 00-2343, 2001 WL 985113, at *1–*2 (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. Confirmed plan provided “payments of $282 or more per month to GE Capital until the net balance of claim plus 8.25% interest has been paid in full.” GE Capital did not object to confirmation and filed proofs of claim for the prepetition arrearage and remaining monthly payments under lease. GE did not file a claim for the residual value of the car. When lease term expired, GE sought relief from the stay. Bankruptcy court held that GE Capital was bound by the confirmed plan and could file an amended proof of claim to recover the purchase option with interest. The Fourth Circuit reversed. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999): “Here, all the Erons did was list GE Capital as a secured creditor and state that the claim would be paid in full with payments of $282 per month plus interest. There was no affirmative action taken to determine the extent of the Erons’ interest in the truck. . . . The Erons did not file a preconfirmation adversary proceeding hearing [sic], did not object to GE Capital’s proof of claim, which listed the amount of the claim as $3100, did not seek to value the claim, and did not undertake any affirmative step to modify the parties’ interests under the agreement. . . . [W]here the debtor has not taken affirmative action to avoid a creditor’s lien or to change an interest in property, such interests pass through bankruptcy unaffected unless the plan ‘provides for’ the interest. . . . [T]he Erons’ plan—by not characterizing the interest of GE Capital, not stating the amount of the claim, and not otherwise notifying GE Capital of their intent to convert the lease-purchase agreement to a financing agreement—did not provide for GE Capital’s claim. Therefore, contrary to the bankruptcy court’s conclusion, upon confirmation of the plan and completion of the relevant terms of the plan, the truck did not vest in the Erons free and clear of GE Capital’s claim or interest.”); Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999) (Ambiguous Chapter 13 plan that “camouflaged” the treatment of IRS as a priority claim rather than a secured claim does not release IRS’s liens upon completion of payments.); Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160, 162–63 (4th Cir. 1993) (“[A] bankruptcy court confirmation order generally is treated as res judicata. However, we cannot defer to such an order on res judicata grounds if it would result in a denial of due process in violation of the Fifth Amendment of the United States Constitution. The United States Supreme Court has concluded that ‘an elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise the interested parties of the pendency of the action and afford them an opportunity to present their objections.’ Mullane v. Central Hanover Bank & Trust, 339 U.S. 306, 314 (1950). . . . [W]e cannot accord the bankruptcy court’s order the finality which would attach if the notice given to [the creditor] was adequate. . . . The procedural framework for valuing collateral as a part of a section 506(a) determination is contained in Bankruptcy Rule 3012. . . . In order to satisfy due process requirements . . . the information required by statute is that . . . notice to creditors must state that [a valuation hearing] will be held. . . . [T]he notice . . . was inadequate as it did not make reference to an intent to reevaluate the secured claims pursuant to § 506(a). . . . A debtor should inform the secured creditor of an intent to reclassify its claim into partially secured and partially unsecured status. Placing such a responsibility with the debtor is both logical and not unduly burdensome. . . . The violation of [the creditor’s] due process rights, resulting from the district court’s determination that notice of a § 506 valuation was inadequate, was a sufficient ground for vacating, with respect to [the creditor], the final order of the bankruptcy court.”); Sun Fin. Co. v. Howard (In re Howard), 972 F.2d 639, 641–42 (5th Cir. 1992) (Confirmation of a plan providing that $500 would be paid in full satisfaction of a disputed secured debt is not binding under principles of res judicata when claim holder filed a preconfirmation proof of claim for $4,590.47, the summary of the plan served on the creditor did not provide actual notice that the secured claim would be compromised by the plan and the debtor did not file an objection to the secured claim holder’s proof of claim. “[A] confirmed Chapter 13 plan is res judicata as to all parties who participate in the confirmation process. The general applicability of res judicata to bankruptcy plan confirmations must give way, however, to the interest of the secured creditor . . . that its lien is secure unless a party in interest objects to it. . . . The filing of an objection is all that [is required]. Once a debtor has objected to a claim, the creditor is on notice that full participation in the confirmation proceedings is required or its lien will be at risk. . . . We hold only that a debtor who wishes to challenge the amount of a secured claim either by asserting a counterclaim or offset against it or by disputing the amount or validity of the lien must file an objection to the creditors’ claim in order to put the creditor on notice that it must participate in the bankruptcy proceedings. A Chapter 13 plan may by its very nature change the terms of payment and otherwise modify the terms of the debt underlying the lien. Creditors are put on notice of the possibility of these types of modifications by notice of the filing of a Chapter 13 proceeding and must object to the confirmation of a plan in order to prevent their effect. These plan provisions will be final as to all creditors in those respects because they do not conflict with other provisions of the bankruptcy code.”); Simmons v. Savell, 765 F.2d 547 (5th Cir. 1985) (Statutory lien valid under state law remains valid notwithstanding confirmation of plan treating creditor as unsecured when no objection was filed to creditor’s secured claim and no other provision of Code invalidates the lien or permits avoidance of the lien.); Shook v. CBIC (In re Shook), 278 B.R. 815, 824–25 (B.A.P. 9th Cir. 2002) (Confirmed plan that was silent with respect to a timely filed secured claim does not avoid the creditor’s lien. “We now acknowledge that a plan can effectively determine value and/or avoid a lien only if the creditor receives clear notice that the plan will do so. A plan that is silent about the fate of a secured claim provides no notice of what will happen to the secured claim and therefore cannot effectively avoid a lien or determine its value. . . . Debtors listed the CBIC debt as unsecured in their bankruptcy schedules, but did not refer to it in the plan. . . . Nothing in the plan alerted CBIC that Debtors intended simultaneously to avoid its lien and pay it nothing. . . . [S]uch ‘treatment’ did not meet the due process requirements for the discharge of a secured debt, pursuant to § 1328(a). Due process is the linchpin to determining the rights of secured creditors in chapter 13.”); Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318, 321 (B.A.P. 9th Cir. 1991) (Due process prohibits plan to reduce the allowed amount of a mortgage arrearage claim below the amount shown on the creditor’s timely filed proof of claim when the debtor has not objected to the proof of claim. Former Local Rule No. 2, which provided that secured claims and tax claims would be paid the lesser of the amount of the claim or the amount provided in a confirmed plan, improperly impaired secured claim. Creditor had notice of the Chapter 13 case but did not get copy of plan and was unaware that plan would reduce arrearage claim from $36,800 to $4,500. Creditor filed “motion for allowance of claim” a year and a half after confirmation. Confirmed plan violated due process by reducing the allowed secured claim without notice and a hearing as required by Bankruptcy Rules 3007 and 9014. The creditor “had a right to expect that if the debtor wished to object to its claim for arrearages, the debtor would file, in accordance with the Bankruptcy Rules, a written objection with notice of a hearing on the matter. Because the [creditor’s] claim was compromised without the requisite notice, [the creditor] was deprived of its constitutionally protected right of due process. . . . [T]he plan that was confirmed here was fatally defective in its arbitrary reduction of [the creditor’s] secured arrearage claim. We do not believe the need for finality of confirmed plans extends to circumstances present in this case: where a debtor misuses, whether or not intentionally, the plan confirmation process to reduce a valid claim without the requisite notice and opportunity to be heard. In any event, §502(a) is the statutory provision which specifically governs questions of claims allowance and, consequently, should control over the more general policy considerations embodied in § 1327(a).”); Keene v. Charles (In re Keene), 222 B.R. 511, 512–14 (E.D. Va. 1998) (Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), plan provision that valued collateral and treated creditor as an unsecured claim holder based on that value was not sufficient notice to avoid lien. Confirmed plan recited, “The Deed of Trust in favor of Dave Charles on the Debtor’s residence is not supported by the real estate’s value. Because of this, the claim of Dave Charles is allowed only as unsecured since the real estate is worth $70,700.00. The order confirming this Plan shall be deemed to avoid the lien and shall be a judicial determination of the property’s value. In order to conform the land records, Dave Charles shall release the Deed of Trust upon confirmation of this Plan.” Charles received a copy of the plan, had notice of confirmation and did not object to confirmation. Plan was confirmed in 1992, and debtor completed payments and was granted a discharge in 1995. Charles refused to release his lien, and the bankruptcy court refused to enforce the confirmation and discharge orders. “The Bankruptcy Court ruled that in order to avoid the lien, the debtors needed to file a lien avoidance action as an adversary or in the alternative file a motion for valuation of the real estate under Section 506. . . . [T]he Bankruptcy Court ruled that the due process requirements articulated in Cen-Pen were applicable, in that Cen-Pen was not limited to issues other than valuation. This Court agrees. . . . [I]t does not appear that the Fourth Circuit intends to distinguish lien avoidance based upon valuation versus lien avoidance for any other reason. . . . This Court agrees with the Bankruptcy Code that the Fourth Circuit would conclude that valuation is encompassed by Bankruptcy Rule 7001. . . . [T]he notice provided to Charles in this matter was more extensive than the notice provided to the creditor in Linkous. . . . [I]t still does not rise to the level that is necessary to extinguish the lien. . . . Although a section 506(a) valuation hearing may be held in conjunction with a confirmation hearing, ‘“[m]ere notice that the bankruptcy court will hold a confirmation hearing on a proposed bankruptcy plan, without inclusion of notice specifically directed at the security valuation process, does not satisfy the requirement of Rule 3012.”’ Linkous, 990 F.2d at 162 . . . . [T]he notice does not specifically state that the value attributed to the property in the plan would be evaluated at the confirmation hearing.”); Coffin v. Malvern Fed. Sav. Bank (In re Coffin), 189 B.R. 323, 326–27 (E.D. Pa. 1995) (Confirmed plan setting forth exact amount of mortgage arrearage is not binding with respect to the extent of the mortgage holder’s lien. In re Penrod, 50 F.3d 459 (7th Cir. 1995), does not suggest a different result because the proof of claim and the confirmed plan in this case “addressed the arrearage amounts, and not the entire debt secured by the liens. . . . The liens in question were not ‘properly dealt with by the plan’ . . . as a result, . . . the Penrod decision is largely inapplicable here.”); Wright v. Commercial Credit Corp. (In re Wright), 178 B.R. 703, 705–06 (E.D. Va. 1995) (Citing Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), plan cannot be confirmed that provides for valuation and lien stripping of wholly unsecured mortgage without an adversary proceeding. “When a party asks the bankruptcy court to determine the extent of a lien or the value of the collateral forming the basis of the lien, adversary proceedings are required as contemplated by Bankruptcy Rule 7001(2) and Bankruptcy Rule 3012. Although § B-11 of the Chapter 13 plan filed by the [debtors] put the [creditor] on notice that the debtors/appellants sought a ruling on the extent of their liens and a valuation of the collateral, this notice does not comport with due process. . . . The plan put the creditor on notice of the potential reclassification of its lien, and the creditor responded appropriately, by filing an objection to the Chapter 13 plan. The Chapter 13 plan did not, however, clearly state that a § 506(a) valuation hearing would be held, as Linkous requires. . . . [I]n Linkous the Fourth Circuit determined that notice and an adversarial hearing were necessary to comport with due process in this situation. . . . [A]n adversary proceeding is necessary before appellee Commercial Credit Corporation’s status as a secured or unsecured creditor is determined based on the valuation of the property underlying appellee’s lien.”); In re Luarks, 301 B.R. 352, 355–60 (Bankr. D. Kan. 2003) (Footnote to confirmed plan that treated interest and penalties on tax claims as general unsecured debt was not binding when trustee objected to taxing authority’s proofs of claim after confirmation. Distinguishing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), “[t]his Court agrees that the distinction between a student loan debt, which Congress expressly provided could be discharged with certain factual findings, and a priority tax claim, which cannot be discharged under any circumstance, without consent of the taxing authority, is an important distinction. . . . [T]he creditors here are governmental entities, and the Tenth Circuit has been loathe to estop the government from mere inaction. . . . [T]he Plan was not as clear. . . . [I]t is entirely understandable that IRS thought its . . . claim was . . . safe and would be paid. . . . [T]he plan is further ambiguous because it indicates, unfortunately, only in a footnote, that although ‘taxes’ would be treated as priority and paid in full, interest and penalties shall be treated as general unsecured. . . . [T]he intentional insertion of a plan provision that bypasses clear and unambiguous language of the Bankruptcy Code and controlling case law is unacceptable, and potentially sanctionable. . . . [C]ounsel appearing before it 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 nonconfirmable. . . . [I]n those cases where debtor’s counsel has a good faith factual and legal basis to insert plan provisions that appear to bypass Code requirements, counsel should do so in a very clear and a very conspicuous fashion, such as bold, capital letters within the text, so any due process concerns are remedied.”); In re Harris, 293 B.R. 438, 440–42 (Bankr. N.D. Ohio 2003) (Confirmed plan that boldly surrendered pickup “in full satisfaction” does not preclude deficiency claim when earlier order for relief from the stay provided that car lender had 60 days in which to file deficiency claim. “The binding effect of § 1327(a) is not absolute . . . . [D]ue process clearly requires greater notice than what was provided in this case. . . . [W]here a subsequent order entered by a bankruptcy court is in direct contravention to the terms of the debtor’s proposed, but preconfirmation plan of reorganization, due process requires that, notwithstanding the later confirmation of the plan, a party be given notice in specific terms that their rights under the court order are being placed in jeopardy.”); In re Fiore, 290 B.R. 138 (Bankr. E.D. Mo. 2003) (Confirmed plan that treated priority support claim as a general unsecured claim did not eliminate claim holder’s right to payment because preconfirmation proof of claim asserting priority could not be overcome by plan that made no provision for the priority support claim.); In re Abrams, No. 01-11493-MAM-13, 2002 WL 1404761, at *3–*4 (Bankr. S.D. Ala. Mar. 8, 2002) (unpublished) (Car lender is entitled to relief under Bankruptcy Rule 9024 because change in order of payments in confirmation order was not noticed to creditors. Plan provided that Nuvell was secured but did not provide a preferential monthly payment or postconfirmation interest. Nuvell did not object to confirmation. Wells Fargo did object and negotiated a preference payment of $426.23 per month and an interest rate of 18%. Because of its preference, Wells Fargo received most of the distributions after confirmation. Nuvell moved for relief from the confirmation order. “The order confirming the plan is ambiguous in one respect. It states that Wells Fargo will be paid a preference and it also states that payments to Wells Fargo and Nuvell will be ‘pro rata.’ . . . Nuvell had no way of knowing that it would be paid after Wells Fargo. The amendment that gave Wells Fargo a preference, based upon the manner in which payments are made, should have been noticed to all creditors, particularly Nuvell, because it adversely affected Nuvell. . . . Nuvell should be able to object to the treatment of Wells Fargo and to seek amendment to its own treatment in this case.” But with respect to interest after confirmation, “[n]o mention of any interest payment was made. The language was sufficient to put Wells Fargo on notice to object to the lack of interest being paid; Nuvell had the same documents sent to it. . . . When Nuvell did not object to its treatment under the plan as to interest when that treatment was clear, it cannot now seek an amendment.”); In re Johnson, 274 B.R. 445, 449 (Bankr. D.S.C. 2001) (Confirmed plan that valued collateral is not binding on lienholder “[b]ecause Debtor failed to comply with Rule 2002(g) and serve his Second Amended Plan on Conseco at the address it provided in its Proof of Claim . . . Conseco was denied due process for lack of notice.”); In re Chang, 274 B.R. 295, 302 (Bankr. D. Mass. 2002) (County is not bound by confirmation of plan that failed to provide interest on tax lien because pro se debtor failed to give notice. “Provisions of confirmed Chapter 13 plan are not binding on creditors to extent that the confirmation order was entered in violation of those creditors’ due process rights. . . . [T]he Debtor failed to provide Pinellas County with timely notice of the Original Plan. . . . [S]he prevented the County from objecting to confirmation . . . . The County need not seek revocation of the confirmation order for the simple reason that it is not bound by it. To hold otherwise would violate an elementary and fundamental requirement of due process.”); In re Walsh, 264 B.R. 482, 483–84 (Bankr. N.D. Ohio 2001) (Confirmed plan is not binding on creditor without notice of Chapter 13 case. Confirmed plan provided for payment of taxes without interest. Purchaser of real estate tax certificates learned of Chapter 13 case seven months after the petition and filed a proof of claim that included postpetition interest. Debtors objected to interest. “Generally, a confirmed Plan is binding upon all creditors, whether or not it provides for their claim . . . . Where a creditor does not have notice of the bankruptcy case, however, the Plan will not be given that binding effect . . . . GLS did not receive notice of the Debtors’ bankruptcy case until . . . approximately four months after their Plan was confirmed, and approximately seven months post-petition. Therefore, the confirmed Plan is not given the binding effect of § 1327(a).”); In re Callahan, 251 B.R. 170, 172–73 (Bankr. S.D. Fla. 2000) (Bankruptcy court vacates order of confirmation because debtor failed to check box on plan indicating that collateral would be valued at confirmation hearing under Bankruptcy Rule 3012; confirmed plan could not cram down car lender’s claim. Local rules provide that the value of collateral for cramdown purposes can be determined in conjunction with confirmation hearing in Chapter 13 cases if the debtor’s counsel checks a box on the plan that recites “If checked, the plan seeks to value the collateral securing the claims of the creditors listed below pursuant to 11 U.S.C. § 506(a) and Bankruptcy Rule 3012.” Debtor’s counsel did not check the box, but an amended plan was confirmed, without objection, that valued a car and crammed down the allowed secured claim. Bankruptcy court reads Green Tree Acceptance, Inc. v. Calvert, 907 F.2d 1069 (11th Cir. 1990), to permit valuation of collateral at the confirmation hearing when notice is given. Failure to check the box rendered notice insufficient under Calvert: “Creditor was entitled to a negative inference that the debtor would not seek cramdown of its secured claim at the confirmation hearing. For this reason only, the Court rules in favor of the Creditor, on the basis that notice was insufficient pursuant to the holding in Calvert.”); In re Moore, 247 B.R. 677, 690 & n.12 (Bankr. W.D. Mich. 2000) (In dicta, bankruptcy court acknowledges this limit on the effect of confirmation on unscheduled creditors: “As an aside, the court would note that this district’s practice of confirming Chapter 13 plans before the claims period expires creates a potential problem, for it is possible that a debtor’s amendment of the schedules and notification to the omitted creditor could precede the claims cutoff date but still be after the plan was confirmed. . . . It would clearly be unfair to bind a creditor to a plan for which it was not given the opportunity to object. However, this problem can be alleviated by the omitted creditor filing a Rule 9024 motion to set aside the confirmation order.” In a footnote, “In the Braileys’ case, the Braileys did notify the omitted creditor of their bankruptcy case on October 25, 1999, which was 18 days before the November 12, 1999 confirmation. Given that at least 25 days notice must be given of both the time fixed for filing objections to confirmation and to consider confirmation, Fed. R. Bankr.P.2002(b), it would appear that notice to this omitted creditor was not sufficient to bind it to the confirmed plan should it wish to object.”); In re Tucker, 231 B.R. 284, 286–87 (Bankr. E.D. Tenn. 1999) (Confirmed plan that stated the value of car as “$1” and proposed to pay the one dollar at the rate of $450 per month was ambiguous and failed to have binding effect under § 1327. “The use of the nominal $1.00 is well understood in legal circles. It is the legal equivalent of the mathematic ‘x’—it stands for something else and is not intended to be taken literally. . . . [T]he efficient working of the bifurcation process depends on a certain level of specificity in the debtor’s plan provisions. Thus, before a claim can truly be ‘provided for’ in a plan within the meaning of either 11 U.S.C. § 1327(a) or 11 U.S.C. § 1328(a), the debtor must definitively value the secured portion of the claim and propose its satisfaction under the Code. This debtor’s plan lacks the necessary specificity because it is facially ambiguous. . . . Only a ‘provision’ of a confirmed plan can bind the parties under § 1327(a), and this plan, because of its facial ambiguity, does not contain a provision that actually deals with the claim, actually bifurcates it, or actually resolves it according to law. Consequently, the confirmation of this plan cannot have the res judicata effect intended by 11 U.S.C. § 1327(a), because the bifurcation issue was not actually decided (judicata). . . . The court emphasizes that it would unhesitatingly hold a creditor to be bound by the provisions of the plan wherein the debtor had assigned a specific but incorrect value to the creditor’s security and thus to his allowed secured claim. This is because an incorrect valuation is still a specific valuation. The bifurcation, although arguably wrong, can nevertheless occur and become res judicata under § 1327(a). . . . [T]here is no provision in this plan capable of binding the parties with respect to the claim in question because there is no way of knowing what they are bound to. Does the debtor pay $1.00 or $450 per month? The creditor’s claim was filed on October 21, 1997, and shortly thereafter, on November 10, 1997, the debtor converted his chapter 13 case to a case under chapter 7. At that point the creditor’s lien had not been stripped. The allowed secured claim had not been paid because it had not been determined. It is undisputed that the creditor’s lien was not avoided in the chapter 7 case, and so it results that the creditor still has its lien on the automobile in question.”); In re Scott, 229 B.R. 811, 814 (Bankr. E.D. Okla. 1999) (Inadequacy of notice that oversecured claim holder’s rights to postpetition attorney’s fees and costs would be precluded by confirmation overcomes binding effect. “Since Rule 3012 requirement has not been met and this case is distinguishable from [In re Holmes, 225 B.R. 789 (Bankr. D. Colo. 1998),] and [Dupree v. Lomas Mortgage USA (In re Dupree), 183 B.R. 270 (Bankr. W.D. Okla. 1995)], res judicata does not apply. There was no language in any notice or motion similar to that in Holmes and no motion as in Dupree. There is nothing in the Plan which would put the Creditor on notice that the Plan is reducing its claim. In this District, when a debtor writes down a debt to the value of the collateral, a § 506 motion is required, thus satisfying any due process notice requirements. Although the Debtors are not writing down the debt to the value of the collateral, the same effect results. In order for the order confirming plan to be given res judicata effect, the creditor must have been given minimum notice.”); In re Gates, 214 B.R. 467, 470–71 n.4 (Bankr. D. Md. 1997) (Confirmed plan that paid automobile lender’s allowed secured claim “to the extent that such claim is not greater than the value of said automobile” does not bind the lender to the value stated in the debtor’s schedules; rather, value is appropriately determined in a separate proceeding after confirmation. “[Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997),] . . . does not . . . overrule case law which holds that the confirmed plan is not binding upon creditors for the purpose of valuing the collateral when those creditors were not notified that an 11 U.S.C. § 506 value determination would be made at the confirmation hearing. . . . In [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993)], the court held that while a bankruptcy court’s confirmation order is typically res judicata, due process requires that the confirmed plan cannot bind parties to a specific valuation without actual notice that the bankruptcy court would make a Section 506 valuation at the confirmation hearing . . . . [O]ther courts within this circuit have held that a contest between debtor and creditor regarding the value of a given secured claim should not be heard in the context of confirmation, but rather in a separate adversary proceeding as governed by Federal Rules of Bankruptcy Procedure 3012 and 7001.” In a note, “[w]here the issue is the value of the collateral, a formal adversary proceeding is not required. . . . Nonetheless, a separate proceeding upon motion (or objection to claim) is required. Such a separate proceeding may be heard concurrently with the hearing upon confirmation, if the valuation proceeding has been noticed for hearing.”); Strong v. United States (In re Strong), 203 B.R. 105, 114 (Bankr. N.D. Ill. 1996) (When confirmed plan is not specific with respect to the allowed components of the IRS’s claim, neither § 1327 nor res judicata precludes debtor’s adversary proceeding more than three years after confirmation seeking a declaration of the extent of the IRS’s tax lien, priority claim and general unsecured claim. “At the time of confirmation, the IRS had not filed its proof of claim and the Debtors had not objected thereto . . . . [T]he Plan did not set a value on the residence. The issue of the extent or amount to which the IRS’s claim was secured was not raised until the IRS filed its proof of claim and the Debtors objected thereto several years after confirmation of the Plan. The precise amount of the IRS’s claim was not set forth in the Plan, and the Debtors did not raise the challenge to the allowed amount of the claim through a provision in the confirmed Plan. . . . [T]he doctrine of res judicata does not bar the Debtors from challenging the extent of the IRS’s liens through the claims objection process after confirmation of their Plan. . . . [B]ecause confirmation of a Chapter 13 plan is res judicata only as to issues that can be raised in the less formal procedure for contested matters, confirmation generally cannot have preclusive effect as to the validity of a lien, which must be resolved in an adversary proceeding . . . . See Cen-Pen Corp. v. Hanson[, 58 F.3d 89 (4th Cir. 1995)] . . . . Unless the lien avoidance is actually litigated, confirmation has no preclusive effect and does not bind a secured creditor on the scope or validity of its lien.”); In re Rodnok, 197 B.R. 232, 235 (Bankr. E.D. Va. 1996) (Confirmation of amended plan valuing car at $9,300 is not binding on secured claim holder because plan did not adequately notice creditor that valuation would occur at confirmation. “[T]he [first modified] plan listed the fair market value of the van at $9,300.00. On its face, a copy of the plan would appear to have been sufficient to alert Moore Loans that debtors were modifying its secured claim. Under the standard set out in [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993)], however, the notice provided by debtors falls short. Nowhere does section E of debtors’ first modified plan state that a valuation hearing was to take place in conjunction with the confirmation hearing. Nor have debtors submitted any evidence that notice was provided by another method. Accordingly, Moore Loans was not provided the appropriate notice that debtors were going to modify their secured claim, and therefore Moore Loans cannot be bound by the $9,300.00 value assigned to the van in debtors’ first modified plan.”); In re Stewart, 190 B.R. 846, 850 (Bankr. C.D. Ill. 1996) (Confirmed plan is not binding on creditor that failed to receive notice in time to object. “[A] creditor without notice or actual knowledge of a bankruptcy is not bound by the terms of a confirmed plan.”); In re Friedman, 184 B.R. 883, 888–90 (Bankr. N.D.N.Y. 1994), aff’d, 184 B.R. 890 (N.D.N.Y. 1995) (On a debtor’s objection to the claim of the New York State Department of Taxation and Finance, confirmation did not bar the state’s claim because the notice given by the debtor was insufficient. Plan was captioned “Bernard Friedman, a/k/a: Bernie Friedman.” The caption and notices failed to list the debtor’s d/b/a as Bernie’s Wine & Liquor Cabinet. Apparently, Bernie’s Wine & Liquor Cabinet owed the state of New York more than $250,000 in taxes. The plan provided that no payment would be made to the state on account of any priority tax claims and that upon discharge “‘the Department’s lien against Debtor’s property shall be terminated and vacated.’” The plan also provided, “‘The failure of the Department to object to the confirmation of this Plan shall constitute an agreement by the Department to this different treatment of this claim pursuant to 11 U.S.C. § 1322(a)(2).’” The Department failed to connect the debtor to Bernie’s Wine & Liquor Cabinet. The Department did file a timely proof of claim after confirmation, asserting a secured claim in the amount of $258,858.23. The debtor objected on the ground that confirmation precluded allowance. Ordinarily, § 1327 would have the effect asserted by the debtor. However, debtor’s failure to acknowledge his former business name violated Bankruptcy Rule 1005, and notice to the Department was insufficient to satisfy due process. “The Department was afforded no specific notice that the Debtor was electing to categorize its secured claim as an unsecured priority claim and that it was the Debtor’s intent that the Plan serve as the final determination as to any conflicts between its provisions and any proofs of claims that might be subsequently filed. A plan which addresses matters concerning claim allowance and/or lien disposition must provide notice sufficient to inform the secured creditor of an intent to reclassify its claim. . . . In making its determination that the notice provided by the Debtor was not sufficient to bar the Department from enforcing its lien, the Court is not embracing the view that a Chapter 13 creditor with a secured claim can simply ignore the ‘confirmation process’ and rely solely on the ‘claims process’ to protect its interests. Initially, however, it is the debtor who has the responsibility for providing creditors with specific substantive notice on which they can make an informed decision as to whether to involve themselves in the ‘confirmation process.’ . . . [W]hat constitutes sufficient notice for the ‘claims process’ may not be sufficient for the ‘confirmation process’ because of the binding effect the latter is intended to have on all parties once the order of confirmation is issued.”); In re Olson, 175 B.R. 30, 32 (Bankr. D. Neb. 1994) (Confirmation of a plan that treats the IRS as a priority unsecured claim holder does not defeat the portion of the IRS’s claim that is secured by setoff in tax refund. The IRS received notice and did not object to confirmation. The debtor did not object to the IRS’s claim asserting partially secured status. Citing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985), “a debtor must object to a proof of claim in accordance with Bankruptcy Rules 3007, 9004 and 9014 to put the creditor on notice that the claim is in dispute. . . . Since the Code and the Rules do not contemplate the use of a plan as a means for objecting to proofs of claims, . . . the debtors’ plan does not act as an objection to the proof of claim, and therefore, if no objection has been made prior to confirmation, the claim must be deemed allowed for purposes of the plan. . . . The debtors’ confirmed plan does not void the IRS’s setoff right because the debtors failed to object to the IRS’s setoff claim that was set forth in the IRS’s amended proof of claim.”); Fleet Real Estate Funding Corp. v. Fewell (In re Fewell), 164 B.R. 153, 156–57 (Bankr. D. Colo. 1993) (Confirmed plan calling for payment of mortgage arrearages of $6,000 is binding notwithstanding timely filed claim for mortgage arrearages in the amount of $9,001.69; however, the difference between the amount in the plan and the amount in the allowed proof of claim is not dischargeable upon completion of payments under the plan and survives as an in rem lien against the debtors’ property. Plan stated that the mortgage arrearages were $6,000. The motion to confirm the plan did not provide this information. The motion to confirm was copied to the creditor holding the mortgage, but the Chapter 13 plan was not mailed to the creditor. “This Court concludes that the Creditors’ timely-filed Proof of Claim—not objected to by the Debtors or any other interested party—will not be supplanted, or overturned, by a Plan which materially understates the amount of the secured claim. . . . [T]he Trustee must distribute pursuant to the Plan proposed by the Debtors and confirmed by the Court. Provisions of a confirmed plan do, indeed, bind the debtor, creditors, . . . . [T]he portion of the Creditor’s allowed claim that remains unpaid after the payments have been received through the Plan survives and is an enforceable claim against the Debtors. A bankruptcy discharge will not prevent enforcement of valid liens. As an in rem action on a secured claim, the secured creditor may proceed to enforce the lien and is not barred by Section 524 of the Code. Unavoided liens pass through Section 506(d) without action by the lienholder.”); Sears Roebuck & Co. v. Burgess (In re Burgess), 163 B.R. 726, 729–30 (Bankr. M.D. Pa. 1993) (Although Sears is bound by confirmed plan treating it as an unsecured claim holder, the plan’s failure to “provide for” the secured claim of Sears limits the effect of confirmation and leaves Sears with an entitlement to relief from the stay with respect to its lien. Applying the Rake v. Wade, 508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (1993), definition of “provided for,” plan that ‘listed Sears as an unsecured creditor did not “provide for” Sears where it is now stipulated that Sears was a secured creditor. “Because Section 1327(c) has the rather harsh impact of actually dislodging a lien of a creditor who is ‘provided for by the plan’, it is imperative that this Court consider not only the wording of the plan but also the adequacy of notice and a determination of whether the due process rights of a secured creditor have been protected. A Chapter 13 plan must bear ‘constitutional and statutory muster as to the vested property rights of secured creditors’. . . . Without the measure of protection afforded by clear language in the plan and sufficient notice to the creditor, the plan can be no more binding than if it had sat, unfiled, on the lawyer’s desk.” Sears was listed in the schedules as an unsecured creditor and received notice of a plan to which it did not object. Sears filed a timely proof of claim before confirmation to which no objection was raised by the debtors. “[T]he Debtors originally scheduled Sears as an unsecured creditor. . . . Since the parties now stipulate that Sears is a secured creditor, the Debtors, understandably, did not provide for Sears as a secured creditor.”); Kuebler v. Commissioner (In re Kuebler), 156 B.R. 1012, 1016–17 (Bankr. E.D. Ark. 1993), aff’d, 172 B.R. 595 (E.D. Ark. 1994) (Res judicata effect of confirmation discharges IRS’s claim in excess of that provided for by the plan, but IRS’s lien survives confirmation and remains enforceable after discharge; reclassification of IRS claim from secured to long-term priority is not effective because IRS failed to receive satisfactory notice. Modified plan confirmed without objection provided that the IRS claim would be paid through the plan “at $450.00 per month for 36 months for a total of $16,200.00.” The modified plan characterized the IRS claim as an unsecured priority debt. The IRS did not object to confirmation of the modified plan. Prior to confirmation, the IRS filed a timely proof of claim asserting a secured claim against the debtor in the amount of $60,428.62. Although the IRS’s proof of claim characterized the debt as “secured,” the Chapter 13 trustee’s “combined motion and order allowing the IRS claim . . . listed the IRS’s claim as an unsecured long-term priority debt.” After confirmation, “the IRS amended its proof of claim, adding a priority claim of $7,357.00 in addition to its $60,428.62 secured claim. The debtors did not object to the amended proof of claim, which was allowed . . . as a continuing, priority claim to be paid 100%. . . . The trustee’s action of unilaterally changing the IRS’s claim from secured to long-term priority is ineffective because it was done without sufficient notice to the IRS to satisfy due process. . . . Since no objection was filed to the IRS’s proof of claim, the IRS’s claim is allowed as filed. Therefore, the IRS is allowed a priority claim of $7,357.00 and a secured claim of $60,428.62. . . . The debtors’ modified plan provides for payment to the IRS of $16,200.00 as a priority debt and proposes to discharge the balance of the IRS’s claim. The IRS filed no objection to the modified plan and an order was entered confirming the modified plan. . . . The IRS fails to argue that it had no notice or opportunity to object to the modified plan. 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. . . . Since the IRS did not object to the modified plan that proposed to discharge all but $16,200.00 of its claim, the principles of res judicata prohibit further consideration of the issue, whether the issue was decided correctly or incorrectly.” With respect to the IRS’s secured claim, “a secured creditor’s lien cannot be avoided except by some affirmative act of the debtor or a party in interest which adequately advises the secured creditor that its lien rights are being challenged. . . . Where a debtors’ plan does not address a creditor’s secured claim, the lien simply passes through the bankruptcy and remains enforceable in rem after the discharge is granted and the case closed. . . . Here, since the debtors’ confirmed plan provided no treatment for the IRS’s secured claim, the IRS will retain its tax lien on the debtors’ property.”); In re Parker, 148 B.R. 604, 606 (Bankr. D. Idaho 1992) (Citing concurring opinion in Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (B.A.P. 9th Cir. 1991), “it is inconsistent with section 502(a) and Fed. R.Bankr.P. 3007, regarding allowance of and objection to claims, if a plan effectively determines the amount of the secured claim. . . . [A]ll of the statutory elements of the allowance and disallowance of claims must be applied before a secured creditor’s lien may be ‘crammed down.’ The res judicata effect of a Chapter 13 plan can no more act to bind the creditor in an objection to its proof of claim than it could if no such objection were filed.” Plan provided that bank had secured claim of $8,700. Bank filed a timely proof of claim for $12,955. The debtors objected to the bank’s claim before confirmation, but plan was confirmed before disposition of the objection. Court rejects argument that confirmation of the plan is res judicata of the amount of the bank’s secured claim and holds that the debtors’ objection to the bank’s proof of claim was “untimely,” apparently because the debtors failed to insist on resolution of that objection before confirmation. The plan “binds the parties to the amount the trustee will distribute under the plan, but is not binding as to the amount of the claim.”); In re Smith, 142 B.R. 862, 865 (Bankr. E.D. Ark. 1992) (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 Roberts, 138 B.R. 84, 86 (Bankr. N.D. Okla. 1992) (Confirmation order treating Sears as unsecured does not void security interest where Sears timely filed proof of its secured claim and the debtor did not object or file an adversary proceeding contesting Sears’s security interest. Sears was “properly notified” but did not attend the meeting of creditors and did not object to confirmation. “The basic rule of law is a debtor may not void a security interest by the terms of a confirmed plan. . . . An order confirming a plan is res judicata only as to those issues actually decided or which could have been decided. The validity of Sears’ lien was not decided at the confirmation hearing and, in fact, could not be because the terms of a plan cannot be used to void a security interest. If the debtor wishes to challenge the validity of the Sears’ secured claim, it should have filed an adversary proceeding . . . or filed a motion objecting to the claim.”); In re Beard, 112 B.R. 951 (Bankr. N.D. Ind. 1990) (Chapter 13 debtor cannot invalidate tax lien through provision of confirmed plan notwithstanding absence of objection from IRS. The determination of the amount due to a creditor and the value of the lien securing a timely filed claim are contested matters that can properly be dealt with during the confirmation process. However, a challenge to the validity or existence of a lien requires an adversary proceeding and cannot be determined by the confirmation process.); In re Glow, 111 B.R. 209 (Bankr. N.D. Ind. 1990) (Absent invocation of § 506(d) at cramdown or an independent adversary proceeding, confirmation of a Chapter 13 plan that fails to make reference to or deal with a lien does not affect the lien.); Still v. Tennessee, Dep’t of Revenue (In re Rogers), 57 B.R. 170 (Bankr. E.D. Tenn. 1986) (Confirmation of plan treating taxing authorities’ secured claim as a priority unsecured claim does not avoid the state’s lien, notwithstanding failure to object to confirmation.); In re Stein, 63 B.R. 140 (Bankr. D. Neb. 1985) (Confirmed plan that treats creditor as partially secured and partially unsecured does not invalidate lien or affect extent of the creditor’s secured claim when creditor filed a proof of claim listing the value of its security as greater than the amount contained in the order of confirmation, and neither the debtor nor the trustee has objected to the proof of claim. Creditor’s statutory purchase money security interest is not invalidated by confirmation order.). See also Jauregui v. Ricci (In re Jauregui), 197 B.R. 673, 674, 675–76 (Bankr. E.D. Cal. 1996) (Distinguishing Multnomah County v. Ivory (In re Ivory), 70 F.3d 73 (9th Cir. 1995), confirmed plan that generally described claim secured by principal residence does not upset rights of purchaser at foreclosure sale conducted after dismissal of prior Chapter 13 case and before filing of current case. Before first Chapter 13 case, mortgage holder noticed a nonjudicial foreclosure sale. Sale was stayed by first case, but “[a]s permitted by California law the sale was continued from time to time during the pendency of the Chapter 13 case.” After dismissal of first case, residence was sold at a continued foreclosure sale. Debtors then filed second case containing a plan provision for retention of the lien secured by the residence and regular monthly payments and arrearage payments. Plan was confirmed without objection. “Nothing in the Ivory opinion discusses the form of notice given regarding the plan: but apparently it was the view of the Bankruptcy Court, the District Court, and the Court of Appeals . . . that the form of notice given was adequate to make the taxing entity bound by the confirmed plan. . . . The notice with attached plan in the present case . . . in no way warns a party that a failure to object to confirmation of the plan will make every fact, inference and conclusion of law asserted in the plan binding on every party referred to in the plan. Unlike the taxing entity in Ivory, [the mortgage holder] held full legal and equitable title to the property at the time this case was filed by virtue of his purchase of the residence at the trustee’s sale. . . . Unlike the debtor in Ivory, the plaintiffs at filing had no vested, existing right to regain full title to the property. . . . Given the vagueness and deficiencies of the plan noticed in this case and the factual differences between the instant case and In re Ivory, plaintiffs cannot invoke principles of res judicata to establish legal title to the subject property.”); In re Williams, 51 B.R. 627 (Bankr. S.D. Ohio 1985) (Notwithstanding finality of confirmation order, when debtor’s counsel knew that creditor was represented but failed to give creditor’s counsel notice of confirmation, creditor is entitled to attack confirmation order.).

 

22  See, e.g., Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995) (Confirmed plan treating lienholder as an unsecured creditor does not have res judicata effect because the validity of a lien can be resolved in a Chapter 13 case only through an adversary proceeding. Plan provision that voided the lien of any secured claim holder that failed to file a proof of claim did not affect lienholder that failed to file a proof of claim, because the debtor did not initiate an adversary proceeding against the creditor, and the plan, rather than providing for payment in full of the secured claim holder’s (unfiled) claim, treated the lienholder as an unsecured claim holder. That lienholder did not object to confirmation is of no moment because the “less formal procedure” of confirmation of a Chapter 13 plan cannot affect even the lien of a secured claim holder that failed to file a proof of claim or to otherwise participate in the Chapter 13 case.); Southtrust Bank of Ala. v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989) (Secured claim holder’s lien was not invalidated by the confirmed plan, notwithstanding that the claim holder failed to timely file a proof of claim and notwithstanding that the plan provided for payment in full of all “allowed secured claims.” Secured claim holders are free to fail or refuse to file proofs of claim and simply ride through confirmation and then move for relief from the stay, at which time a Chapter 13 debtor cannot remain in possession of a secured creditor’s collateral during the pendency of the plan where the debtor’s plan makes no provision for the creditor’s value of its security and where the sole reason for disallowance of the creditor’s secured claim was the creditor’s failure to file a timely proof of claim.); In re Kressler, Nos. CIV. A. 00-5286, 99-22646, 2001 WL 919860, at *2 (E.D. Pa. Aug. 9, 2001) (Plan cannot cram down wholly unsecured second mortgage and cancel lien notwithstanding that lienholder did not file a timely claim and cannot have an allowed secured claim; debtor must take additional step of filing adversary proceeding. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), “Rule 7001(2) . . . makes sense because to allow a debtor to invalidate a lien without some form of adversary proceeding would render meaningless the settled rule that a lien passes through the bankruptcy unaffected.”), aff’d, 40 Fed. Appx. 712, 714 (3d Cir. 2002) (Disallowance of untimely filed mortgage claim does not void lien, and lienholder has standing to object to confirmation of plan that would cancel the lien. “Debtors are required to initiate an adversary proceeding or something akin thereto to avoid the lien.”); In re Harpole, 260 B.R. 165, 172–73 (Bankr. D. Mont. 2001) (Confirmation of plan that treated statutory lien as an unsecured, nonpriority claim does not affect enforceability of lien. Debtor scheduled holder of a construction lien as an unsecured, nonpriority creditor. Lienholder did not file a proof of claim and did not object to confirmation. Bankruptcy court denied debtors’ motion to void the statutory lien under § 522(f). “As an aside, the construction lien further was not affected by 11 U.S.C. § 1327(c). . . . Pierce did not file a proof of claim, did not object to confirmation and did not otherwise participate in Debtors’ reorganization efforts. Pierce is scheduled in Schedule F as holding an unsecured, nonpriority claim . . . . Technically, its unsecured claim is provided for by the confirmed plan, but the likelihood of any payment through the plan is nonexistent as it did not file a proof of claim. However, it had filed a prepetition construction lien . . . . The confirmation of Debtors’ plan did not effect an avoidance of Pierce’s construction lien; Pierce could rely on its construction lien and did not need to file a proof of claim. . . . [T]he construction lien . . . remains enforceable and was not affected or avoided by the confirmation of Debtors’ plan.”); In re Geiger, 260 B.R. 83, 85–86 (Bankr. E.D. Pa. 2001) (Mortgage holder is not bound by confirmation of plan that stated “ANY LIEN ALLEGED OR EXISTING OF ANY KIND, TYPE OR NATURE TO BE CANCELED OF RECORD AT DISCHARGE OF DEBTOR AND CLOSING OF DEBTORS CASE” because debtor did not take additional “affirmative step” of filing an adversary proceeding or an objection to claim. Debtor scheduled Ford as secured and stated at the § 341 meeting that the debtor would make mortgage payments directly to Ford. Ford did not file a proof of claim. After confirmation, Ford moved for relief from the automatic stay. “[A] debtor may not cramdown and/or avoid a secured creditor’s lien through the plan confirmation process but rather must first take the ‘affirmative step’ of filing an adversary complaint to avoid the lien under 11 U.S.C. § 506(d) and Fed. R. Bankr. P. 7001(2) or filing an objection to claim which contains a request to determine the extent or validity of the lien and which would then become an adversary proceeding pursuant to Fed. R. Bankr. P. 3007 . . . . Debtor did not take such an affirmative step and did not file an adversary complaint . . . or an objection to proof of claim. Hence, to the extent that Debtor’s confirmed plan purported to avoid, cancel, reduce or in any other way modify Movant’s judgment lien, it was ineffective and Movant’s judgment lien survived the confirmation process. . . . As Debtor’s confirmed plan does not provide for Movant’s secured claim or lien . . . confirmation of Debtor’s amended plan did not extinguish Movant’s lien or its in rem rights . . . and Movant may seek relief from the automatic stay in order to satisfy the debt owed to it by Debtor from its lien.”); In re O’Neal, 214 B.R. 405, 407 (Bankr. N.D. Ala. 1997) (Because debtor failed to give ex-wife notice of the bankruptcy case or notice of the confirmation hearing in time for her to object to confirmation, confirmation order that affects her right to prepetition child support and alimony is “vacated” as to ex-spouse and a new confirmation hearing is scheduled in which the ex-spouse will have “all rights and remedies with respect to the debtor’s proposed plan of reorganization and hearing on confirmation as [she] would have had in the first instance.” The court also extended the bar date for filing proofs of claim for 30 days with respect to the debtor’s ex-spouse.); Clark v. Transamerica Fin. Servs., Inc. (In re Clark), 205 B.R. 140, 141–42 (Bankr. S.D. Ill. 1997) (Confirmed plan reciting that the debtor has filed a “motion to remove” the wholly unsecured lien of a mortgage holder has no effect on the lien because the lienholder did not file a proof of claim and no claim was filed on the lienholder’s behalf. Confirmed plan “makes no provision for payment of the obligation owing to Transamerica but merely recites that the debtor has filed a ‘motion to remove’ Transamerica’s lien.” Simultaneously with filing plan, the debtor filed complaint to avoid Transamerica’s wholly unsecured second mortgage lien under § 506(a) and (d). Transamerica defended that § 1322(b)(2) and Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993), precluded stripdown of its mortgage. “Since no proof of claim was filed regarding the debtor’s obligation to Transamerica, Transamerica has no ‘claim’ in the debtor’s Chapter 13 proceeding that can be modified by the debtor’s plan. Indeed, in the absence of a claim to be paid under the debtor’s plan, the plan itself has no effect on Transamerica’s rights as a secured creditor. Transamerica, therefore, may not invoke the protection of § 1322(b)(2) when it has not filed a proof of claim that can be modified by the debtor’s plan. . . . However, . . . liens for which no proof of claim has been filed may not be avoided for that reason under § 506(d), and the lien securing that creditor’s claim thus remains unaffected by a bankruptcy filing. . . . Transamerica’s lien thus survives the debtor’s bankruptcy filing, and Transamerica may pursue whatever remedies such lien may afford it outside of bankruptcy. Application of § 506(d)(2) does not unfairly prejudice the debtor’s fresh start in this case because he had the ability to file such a claim on Transamerica’s behalf in order to avoid the lien under § 506(a) and (d).”); In re Lee, 182 B.R. 354, 359 (Bankr. S.D. Ga. 1995) (When plan is silent with respect to the lien of an automobile-secured creditor and the creditor does not file a proof of claim, confirmation binds the creditor to accept nothing in full satisfaction of its in personam rights against the debtor; however, the in rem lien survives, and relief from the stay is appropriate after confirmation upon a showing that the collateral will depreciate more quickly than there is equity to protect the creditor’s lien. “The effect of a secured creditor’s failure to file a proof of claim is that it may look to its lien for satisfaction of its claim. 11 U.S.C. § 506(d)(2). The effect of the failure of a debtor to ‘provide for’ a secured claim is that the property will not vest in the debtor free and clear of any liens. 11 U.S.C. § 1327(c). . . . Where the secured creditor is not provided for under a plan, its in rem rights survive confirmation of the debtor’s bankruptcy plan. In such a case, the creditor may seek to protect those rights through stay relief.”); Washington v. Nissan Motor Acceptance Corp. (In re Washington), 158 B.R. 722, 723 (Bankr. S.D. Ohio 1993) (The general provisions of § 1327(c) cannot “vitiate the express language of § 506(d)(2).” Undersecured claim holder’s failure to file a proof of claim is not fatal to its lien. “Debtor’s plan indicates that Nissan was listed as a secured creditor, and was to receive a monthly payment of $170.00 on account of its secured claim in the amount of $4,000.00. The unsecured portion of Nissan’s claim was to be paid through the plan at the 70% distribution rate proposed for the payment of unsecured debts. Nissan filed an objection to the plan. The objection was resolved when Nissan and the debtor entered into an agreement increasing to $4,437.50 the allowed secured claim of Nissan. Nissan then withdrew its objection. Nissan, however, failed to file a proof of claim in the case. The plan was confirmed. . . . Debtor was issued a discharge and the case was closed. . . . Nissan received no distribution under the plan.” Citing Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992), Long v. Bullard, 117 U.S. 617, 6 S. Ct. 917, 29 L. Ed. 1004 (1886), and Southrust Bank of Alabama v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989), cert. denied, 497 U.S. 1007, 110 S. Ct. 3245, 111 L. Ed. 2d 756 (1990), debtor cannot avoid Nissan’s lien under § 1327(c) because of the exception to the lien-voiding power in § 506(d)(2). In an alternative holding, the objection to confirmation filed by Nissan was an “informal proof of claim.” Court does acknowledge that the unsecured portion of Nissan’s claim was discharged.); In re Van Hierden, 87 B.R. 563 (Bankr. E.D. Wis. 1988) (Undersecured claim holder that fails to file a proof of claim does not forfeit its lien, but creditor is not entitled to distribution under the plan, and when its collateral is sold after confirmation and a deficiency results, the deficiency is dischargeable and cannot be collected from payments to the trustee. Undersecured claim holder would have been entitled to full payment of its deficiency had it timely filed a proof of claim.); Riley v. Wisconsin, Dep’t of Revenue (In re Riley), 88 B.R. 906 (Bankr. W.D. Wis. 1987) (A confirmed plan that fails to provide for satisfaction of allowed secured claims is not binding on the secured claim holders and will not invalidate liens, notwithstanding the absence of an objection to confirmation and without regard to whether the secured claim holder has filed a proof of claim. Tax liens must be paid first from the proceeds of the sale of the debtors’ residence, notwithstanding confirmed plan that calls for first payment of unsecured priority taxes.); In re Bradshaw, 65 B.R. 556 (Bankr. M.D.N.C. 1986) (Failure of a secured claim holder to file a proof of claim in a Chapter 13 case does not destroy the secured claim holder’s lien. The portion of the “claim” defined as the “lien” never became part of the bankruptcy estate and thus did not vest in the debtor at confirmation under § 1327(c).); In re Hager, 65 B.R. 27 (Bankr. N.D.N.Y. 1986) (Section 1327(c) does not discharge judgment lien, notwithstanding that underlying debt was provided for in the plan and payments under the plan have been completed, without regard to whether lienholder filed allowed proof of claim.); In re Harris, 64 B.R. 717 (Bankr. D. Conn. 1986) (Lien of secured claim holder who chooses not to file a proof of claim is not invalidated by confirmation and may be enforced after obtaining relief from or upon termination of the stay.); In re Spohn, 61 B.R. 264 (Bankr. W.D. Wis. 1986) (Although unsecured claim holders are bound by the terms of a confirmed plan, even if the plan erroneously treats their claims, the lien held by a secured claim holder cannot be defeated by the terms of a confirmed plan, even if a secured claim holder fails to file a proof of claim.); Spadel v. Household Consumer Discount Co., 28 B.R. 537 (Bankr. E.D. Pa. 1983) (Provision of confirmed plan avoiding mortgage lien is inconsistent with § 506(d)(1) and is not effective.); Second Nat’l Bank v. Honaker, 4 B.R. 415 (Bankr. E.D. Mich. 1980) (Section 1327 allows avoidance of “claim” or “interest” and does not provide for lifting of “liens” upon confirmation.).

 

23  See, e.g., General Elec. Capital Auto Lease v. Eron (In re Eron), No. 00- 2343, 2001 WL 985113, at *1–*2 (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. “There was no affirmative action taken to determine the extent of the Erons’ interest in the truck. . . . The Erons did not file a preconfirmation adversary proceeding hearing [sic], did not object to GE Capital’s proof of claim . . . did not seek to value the claim, and did not undertake any affirmative step to modify the parties’ interests under the agreement. . . . [W]here the debtor has not taken affirmative action to avoid a creditor’s lien or to change an interest in property, such interests pass through bankruptcy unaffected unless the plan ‘provides for’ the interest. . . . [T]he Erons’ plan—by not characterizing the interest of GE Capital, not stating the amount of the claim, and not otherwise notifying GE Capital of their intent to convert the lease-purchase agreement to a financing agreement—did not provide for GE Capital’s claim.”); Deutchman v. IRS (In re Deutchman), 192 F.3d 457, 460 (4th Cir. 1999) (“Deutchman did not take a sufficient affirmative step to modify or extinguish the IRS’s liens. First, if we assume that Deutchman intended to challenge the validity or existence of the IRS’s liens, he failed to effectively do so because he sought no preconfirmation adversary hearing. Second, Deutchman filed no objection to the proof of claim.”); Cen-Pen Corp. v. Hanson, 58 F.3d 89, 91, 92–94 (4th Cir. 1995) (Confirmed plan treating lienholder as an unsecured creditor does not have res judicata effect because the validity of a lien can be resolved in a Chapter 13 case only through an adversary proceeding. Chapter 13 plan treated Cen-Pen as an unsecured creditor. Plan required creditors to submit proofs of claim and objections to the plan within a specified time. Plan specifically provided that “all claims to be allowed must be filed; to the extent that the holder of a secured claim does not file a proof of claim, the lien of such creditor shall be voided upon the entry of the order of discharge.” Cen-Pen did not object to the plan; the plan was confirmed, all allowable claims were paid pursuant to the plan and the debtors received a discharge. After discharge, Cen-Pen filed a complaint to determine the validity of its lien on the debtors’ residence. “Although at first blush § 1327 appears to support [the debtors’] argument, we are persuaded that other provisions of the Bankruptcy Code and Rules undercut it. . . . [The debtors’] argument ignores the general rule that liens pass through bankruptcy unaffected. . . . [A] bankruptcy discharge extinguishes only in personam claims against the debtors, but generally has no effect on an in rem claim against the debtor’s property. . . . For a debtor to extinguish or modify a lien during the bankruptcy process, some affirmative step must be taken toward that end. . . . Here the Hansons did not take a sufficient ‘affirmative step’ to avoid Cen-Pen’s liens. Bankruptcy Rule 7001(2) expressly requires initiation of an adversary proceeding ‘to determine the validity, priority, or extent of a lien or other interest in property.’ . . . Because confirmation of a Chapter 13 plan is res judicata only as to issues that can be raised in the less formal procedure for contested matters, . . . confirmation generally cannot have preclusive effect as to the validity of a lien, which must be resolved in an adversary proceeding. . . . § 1327(c) does not permit the result [the debtors] seek.”); Sun Fin. Co. v. Howard (In re Howard), 972 F.2d 639, 641–42 (5th Cir. 1992) (“The general applicability of res judicata to bankruptcy plan confirmations must give way, however, to the interest of the secured creditor . . . that its lien is secure unless a party in interest objects to it. . . . The filing of an objection is all that [is required]. Once a debtor has objected to a claim, the creditor is on notice that full participation in the confirmation proceedings is required or its lien will be at risk. . . . We hold only that a debtor who wishes to challenge the amount of a secured claim either by asserting a counterclaim or offset against it or by disputing the amount or validity of the lien must file an objection to the creditors’ claim in order to put the creditor on notice that it must participate in the bankruptcy proceedings.”); Simmons v. Savell (In re Simmons), 765 F.2d 547, 552–53 (5th Cir. 1985) (Statutory lien valid under state law remains valid notwithstanding confirmation of plan treating creditor as unsecured when no objection was filed to creditor’s secured claim. “An objection to a proof of claim filed in accordance with Rules 3007, 9004 and 9014 clearly places in issue the allowance or disallowance of that claim as filed. . . . When the creditor files a proof of claim subsequent to the filing of the plan, the Code and the Rules clearly impose the burden of placing the claim in dispute on any party in interest desiring to do so by means of filing an objection.”); Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318, 321 (B.A.P. 9th Cir. 1991) (Due process prohibits plan to reduce the allowed amount of a mortgage arrearage claim below the amount shown on the creditor’s timely filed proof of claim when the debtor has not objected to the proof of claim. The creditor “had a right to expect that if the debtor wished to object to its claim for arrearages, the debtor would file, in accordance with the Bankruptcy Rules, a written objection with notice of a hearing on the matter. . . . [Section] 502(a) is the statutory provision which specifically governs questions of claims allowance and, consequently, should control over the more general policy considerations embodied in § 1327(a).”); SallieMae Servicing v. Banks, 271 B.R. 249, 251, 254–56 (W.D. Va. 2001) (Confirmed plan that barred accrual of postpetition interest and other charges did not preclude student loan creditor from collecting interest and other charges after discharge. Confirmed plan provided with respect to student loans: “no interest, penalties, late charges or costs of collection, including attorney’s fees, shall accrue. Payments made by the trustee shall be applied directly to principal and, upon his discharge, debtor . . . shall be liable for only the unpaid balance of his prepetition debt.” After discharge, Educational Credit Management Corporation sent the debtor a past due notice that included postpetition interest, attorney’s fees and costs. “[T]he language in Mr. Bank’s Chapter 13 Plan purporting to discharge post-petition interest was improper. . . . [A]n order may not operate as res judicata should it result in the denial of a creditors’ due process rights. . . . In analogous contexts, the Fourth Circuit has held that confirmed Chapter 13 plans operate as res judicata only with respect to issues arising out of mere ‘contested matters.’ . . . [C]onfirmation does not have preclusive effect over those issues which must be resolved in adversary proceedings . . . . Like the validity of a lien in [Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995),] or the valuation of a secured interest in [Piedmont Trust Bank v. Linkous (In re Linkous), 90 F.2d 160 (4th Cir. 1993)], the question of whether the post-petition interest on a student loan debt is dischargeable must be determined following a proper notice to and hearing with the concerned creditors—in this case, an adversary proceeding. . . . Although ECMC and its predecessors in interest concede that they had received Mr. Banks’ initial and amended Chapter 13 Plans, neither ECMC nor its predecessors were ever served formally with them, nor did Mr. Banks file an adversary proceeding to discharge his student loan debts prior to the confirmation of his Chapter 13 Plan. . . . [S]ophisticated lenders such as ECMC . . . should not turn a blind eye to the confirmation process . . . neither should they fall victim to a Chapter 13 plan that flouts both bankruptcy law and the Constitution. . . . For the reasons cited in Linkous and Cen-Pen, this Court believes that were the Fourth Circuit to have considered the issues in [Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee),193 F.3d 1083 (9th Cir. 1999)], it would not have ignored the Constitutional aspects of Great Lakes’ res judicata argument, and would have reached the opposite conclusion. . . . [W]hen a Chapter 13 plan contains language which not only attempts to achieve an improper goal, but does so in the absence of a proper statutory showing or adversary proceeding, the plan should not operate as res judicata.”), aff’d, Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296, 300–03 (4th Cir. 2002) (Declining to follow Andersen v. UNIPAC NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), “[t]he Bankruptcy Court and Rules require Debtors to bring an adversary proceeding to determine the dischargeability of their student loans. . . . Debtors also must bring an adversary proceeding to discharge post-petition interest on student loan debt. . . . 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. . . . [A] bankruptcy court confirmation order generally is afforded a preclusive effect. But we cannot defer to such an order if it would result in a denial of due process in violation of the Fifth Amendment to the United States Constitution. . . . [D]ue process entitles a student loan creditor to specific notice of the Debtor’s intent to discharge any portion of the debt. . . . For lack of adequate notice, the confirmation and discharge orders discharging the interest are not entitled to preclusive effect.”); In re Kressler, Nos. CIV. A. 00-5286, 99-22646, 2001 WL 919860, at *2 (E.D. Pa. Aug. 9, 2001) (Plan cannot cram down wholly unsecured second mortgage and cancel lien; debtor must take additional step of filing adversary proceeding. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), “Rule 7001(2) . . . makes sense because to allow a debtor to invalidate a lien without some form of adversary proceeding would render meaningless the settled rule that a lien passes through the bankruptcy unaffected.”), aff’d, 40 Fed. Appx. 712 (3d Cir. 2002); Keene v. Charles (In re Keene), 222 B.R. 511, 512–14 (E.D. Va. 1998) (Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), plan provision that valued collateral and treated creditor as an unsecured claim holder based on that value was not sufficient notice to avoid lien. “The Bankruptcy Court ruled that in order to avoid the lien, the debtors needed to file a lien avoidance action as an adversary or in the alternative file a motion for valuation of the real estate under Section 506. . . . [T]he Bankruptcy Court ruled that the due process requirements articulated in Cen-Pen were applicable, in that Cen-Pen was not limited to issues other than valuation. This Court agrees. . . . [I]t does not appear that the Fourth Circuit intends to distinguish lien avoidance based upon valuation versus lien avoidance for any other reason.”); Wright v. Commercial Credit Corp. (In re Wright), 178 B.R. 703, 705–06 (E.D. Va. 1995) (Citing Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), plan cannot be confirmed that provides for valuation and lien stripping of wholly unsecured mortgage without an adversary proceeding. “When a party asks the bankruptcy court to determine the extent of a lien or the value of the collateral forming the basis of the lien, adversary proceedings are required as contemplated by Bankruptcy Rule 7001(2) and Bankruptcy Rule 3012. Although § B-11 of the Chapter 13 plan filed by the [debtors] put the [creditor] on notice that the debtors/appellants sought a ruling on the extent of their liens and a valuation of the collateral, this notice does not comport with due process. . . . The plan put the creditor on notice of the potential reclassification of its lien, and the creditor responded appropriately, by filing an objection to the Chapter 13 plan. The Chapter 13 plan did not, however, clearly state that a § 506(a) valuation hearing would be held, as Linkous requires. . . . [I]n Linkous the Fourth Circuit determined that notice and an adversarial hearing were necessary to comport with due process in this situation. . . . [A]n adversary proceeding is necessary before appellee Commercial Credit Corporation’s status as a secured or unsecured creditor is determined based on the valuation of the property underlying appellee’s lien.”); Educational Credit Mgmt. Corp. v. Whelton (In re Whelton), 299 B.R. 306, 314–18 (Bankr. D. Vt. 2003) (Citing Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296 (4th Cir. 2002), with approval and rejecting Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), because “discharge by declaration” is inconsistent with the Bankruptcy Code and a denial of due process, provision of confirmed plan declaring an undue hardship is void, and the completion of payments does not discharge student loan debt. Confirmed plan provided that confirmation constituted a finding that excepting student loans from discharge would impose an undue hardship. One year after confirmation, debtor borrowed money from a family member, paid off the plan and received a discharge. “[T]he Debtor’s student loan dischargeability provision had no right to be in the Plan; it was a mere trespasser. The Confirmation Order enforces only those provisions of the Plan that are required or permitted to be there by the Bankruptcy Code and cannot be usurped to validate or enforce provisions that were never properly lodged in the Plan. The Debtor’s discharge declaration had no place in this Plan and, accordingly, it can be given no effect, even if encompassed by the Confirmation Order. . . . [R]es judicata is limited to those provisions of relief properly included in a plan. . . . Since the Bankruptcy Rules require an adversary proceeding be filed as a condition of student loan discharge and § 1328(a) of the Bankruptcy Code specifically states that plans cannot discharge debts described in § 523(a)(8), the fact that a debtor includes a discharge-by-declaration provision regarding a student loan in his or her chapter 13 plan is of no significance. . . . [R]eiterating such a plan provision in a confirmation order neither effects the relief sought nor operates as res judicata as to the viability of the student loan discharge. . . . [T]he Debtor’s failure to serve a summons and complaint upon ECMC deprived ECMC of proper notice of the Debtor’s intent to discharge the student loan and, hence, constituted an abrogation of ECMC’s due process rights. . . . ECMC’s failure to file a timely objection to the Plan is of no consequence since the dischargeability provision was not confirmable as a matter of law. An order of confirmation cannot confirm provisions in a plan which exceed the legal boundaries of the plan and conflict with the mandates of the Bankruptcy Code.”); In re Ruehle, 296 B.R. 146, 164 (Bankr. N.D. Ohio 2003) (Motion to vacate under Federal Rule 60(b)(4) is granted 18 months after entry of discharge when plan provided for finding of undue hardship and discharge of student loans. “A copy of a proposed chapter 13 plan and a confirmation hearing notice do not reasonably apprise a student loan creditor whose debt, pursuant to the Bankruptcy Code and Rules, can only be discharged through an adversary proceeding, that its debt is subject to dischargeability.”), aff’d, No. 03-8066, 2004 WL 527119 (B.A.P. 6th Cir. Mar. 17, 2004); In re Tumminello, 288 B.R. 224, 226–27 (Bankr. E.D. Mo. 2001) (Confirmed plan that listed secured debt as “$0.” did not extinguish judgment lien on marital residence when ex-spouse filed a secured proof of claim but did not object to confirmation. “Generally, confirmation of a Chapter 13 plan is res judicata as to all issues in the bankruptcy. . . . However, an exception to this general rule is the issue of the validity of a secured claim. Once the creditor files a proof of claim, the claim is deemed allowed and the claim is prima facie evidence of its validity and amount. . . . [T]he debtor has the burden of objecting to the claim before the court may disallow the claim. . . . Accordingly, provided the secured creditor has properly filed a proof of claim, the confirmation of a Chapter 13 plan cannot extinguish the secured claim unless the debtor, or another party in interest, has placed the validity of such claim before the court. . . . Here, James filed a valid proof of claim prior to confirmation asserting a secured claim. Sharon listed the judgment debt owed to James as a secured debt . . . . Sharon did not seek to avoid James’ lien prior to confirmation. Thus, this Court’s confirmation of Sharon’s Chapter 13 Plan did not extinguish James’ lien on the real property in question.”); Altegra Credit Co. v. Dennis (In re Dennis), 286 B.R. 793, 795, 796 (Bankr. W.D. Okla. 2002) (Confirmed plan that provided no monthly payment and no interest rate and stated that the allowed secured claim of mortgage holder was “0” and that mortgage holder was “‘TO BE TREATED AS AN UNSECURED CREDITOR AND DISCHARGED UPON COMPLETION OF THE PLAN,’ did not invalidate lien on the debtor’s home. “[A] debtor cannot morph the status of a secured lien in to an unsecured lien by simply stating it is so in its plan. To accomplish that task the debtor must file an adversary proceeding of which the creditor is entitled to specific notice. Attempts by some debtors’ counsel to by-pass the requirements of Rule 7001 by simply declaring in plan summaries that secured debts magically become unsecured, or that non-exempt property magically becomes exempt have been termed ‘gamesmanship’ and ‘unethical.’ . . . The Court equates the inclusion of the plan provision herein with . . . sanctionable gamesmanship.”); In re Zimmerman, 276 B.R. 606, 609 (Bankr. C.D. Ill. 2001) (When a Chapter 13 debtor “seeks to eliminate a lien on the basis of a challenge to its ‘validity, priority or extent,’ the debtor cannot do so through a provision of the plan but must instead file an adversary proceeding which provides a greater level of due process to the affected creditor.”); In re Geiger, 260 B.R. 83, 85–86 (Bankr. E.D. Pa. 2001) (“[A] debtor may not cramdown and/or avoid a secured creditor’s lien through the plan confirmation process but rather must first take the ‘affirmative step’ of filing an adversary complaint to avoid the lien under 11 U.S.C. § 506(d) and Fed. R. Bankr. P. 7001(2) or filing an objection to claim which contains a request to determine the extent or validity of the lien and which would then become an adversary proceeding pursuant to Fed. R. Bankr. P. 3007 . . . . Debtor did not take such an affirmative step and did not file an adversary complaint . . . or an objection to proof of claim. Hence, to the extent that Debtor’s confirmed plan purported to avoid, cancel, reduce or in any other way modify Movant’s judgment lien, it was ineffective and Movant’s judgment lien survived the confirmation process.”); In re Barton, 249 B.R. 561, 564–65 (Bankr. E.D. Wash. 2000) (Plan provision that valued Ford’s collateral at $15,000 is not preclusive of debtor’s postconfirmation objection to Ford’s claim. “Objections to claims must be raised in accordance with these statutes and rules which mandate pleadings separate and apart from any proposed plan. The Chapter 13 plan confirmation process simply does not meet all procedural and substantive safeguards collectively required by §§ 502(b), 506(a), F.R.B.P. 3007 and F.R.B.P. 9014 which apply to objections of claims. Any provision in a Chapter 13 plan which purports to modify a properly filed claim is not effective. . . . When the claim is filed pre-confirmation, the Code and the Rules impose on the debtor the burden of placing the claim in dispute by means of an objection to claim.”); In re Scott, 229 B.R. 811, 814 (Bankr. E.D. Okla. 1999) (Inadequacy of notice that oversecured claim holder’s rights to postpetition attorney’s fees and costs would be precluded by confirmation overcomes binding effect. “In this District, when a debtor writes down a debt to the value of the collateral, a § 506 motion is required, thus satisfying any due process notice requirements.”); In re Gates, 214 B.R. 467, 470–71 n.4 (Bankr. D. Md. 1997) (Confirmed plan that paid automobile lender’s allowed secured claim “to the extent that such claim is not greater than the value of said automobile” does not bind the lender to the value stated in the debtor’s schedules; rather, value is appropriately determined in a separate proceeding after confirmation. In a note, “[w]here the issue is the value of the collateral, a formal adversary proceeding is not required. . . . Nonetheless, a separate proceeding upon motion (or objection to claim) is required. Such a separate proceeding may be heard concurrently with the hearing upon confirmation, if the valuation proceeding has been noticed for hearing.”); Strong v. United States (In re Strong), 203 B.R. 105, 114 (Bankr. N.D. Ill. 1996) (When confirmed plan is not specific with respect to the allowed components of the IRS’s claim, neither § 1327 nor res judicata precludes debtor’s adversary proceeding more than three years after confirmation seeking a declaration of the extent of the IRS’s tax lien, priority claim and general unsecured claim. “[B]ecause confirmation of a Chapter 13 plan is res judicata only as to issues that can be raised in the less formal procedure for contested matters, confirmation generally cannot have preclusive effect as to the validity of a lien, which must be resolved in an adversary proceeding . . . . See Cen-Pen Corp. v. Hanson[, 58 F.3d 89 (4th Cir. 1995)].”); In re Olson, 175 B.R. 30, 32 (Bankr. D. Neb. 1994) (Citing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985), “a debtor must object to a proof of claim in accordance with Bankruptcy Rules 3007, 9004 and 9014 to put the creditor on notice that the claim is in dispute. . . . Since the Code and the Rules do not contemplate the use of a plan as a means for objecting to proofs of claims, . . . the debtors’ plan does not act as an objection to the proof of claim, and therefore, if no objection has been made prior to confirmation, the claim must be deemed allowed for purposes of the plan. . . . The debtors’ confirmed plan does not void the IRS’s setoff right because the debtors failed to object to the IRS’s setoff claim that was set forth in the IRS’s amended proof of claim.”); In re Smith, 142 B.R. 862, 866 (Bankr. E.D. Ark. 1992) (“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 Roberts, 138 B.R. 84, 86 (Bankr. N.D. Okla. 1992) (Confirmation order treating Sears as unsecured does not void security interest when Sears timely filed proof of its secured claim and the debtor did not object or file an adversary proceeding contesting Sears’s security interest. “If the debtor wished to challenge the validity of the Sears’ secured claim, it should have filed an adversary proceeding . . . or filed a motion objecting to the claim.”); In re Beard, 112 B.R. 951 (Bankr. N.D. Ind. 1990) (Chapter 13 debtor cannot invalidate tax lien through provision of confirmed plan, notwithstanding absence of objection from IRS. The determination of the amount due a creditor and the value of the lien securing a claim are contested matters that can properly be dealt with during the confirmation process. However, a challenge to the validity or existence of a lien requires an adversary proceeding and cannot be determined by the confirmation process.); In re Glow, 111 B.R. 209 (Bankr. N.D. Ind. 1990) (Absent invocation of § 506(d) at cramdown or an independent adversary proceeding, confirmation of a Chapter 13 plan that fails to make reference to or deal with a lien does not affect the lien.).

 

24  765 F.2d 547 (5th Cir. 1985).

 

25  765 F.2d at 552–53. Accord Universal Am. Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821, 830–34 (11th Cir. 2003) (“We are persuaded by the reasoning in [Simmons v. Savell, 765 F.2d 547 (5th Cir. 1985),] that a secured creditor’s lien survives a contrary plan confirmation. . . . [I]f a lien on a mortgage survives the § 1327 res judicata effect of a confirmed plan, then so must any corresponding arrearage claim . . . . We hold that although the parties are bound to the terms of the Plan, as confirmed, Universal’s secured claim for arrearage survives the Plan and it retains its rights under the mortgage until Universal’s claim is satisfied in full.”); In re Olson, 175 B.R. 30, 32 (Bankr. D. Neb. 1994) (Confirmation of a plan that treats the IRS as a priority unsecured claim holder does not defeat the portion of the IRS’s claim that is secured by setoff in tax refund. The IRS received notice and did not object to confirmation. The debtor did not object to the IRS’s claim asserting partially secured status. Citing Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985), “a debtor must object to a proof of claim in accordance with Bankruptcy Rules 3007, 9004 and 9014 to put the creditor on notice that the claim is in dispute. . . . Since the Code and the Rules do not contemplate the use of a plan as a means for objecting to proofs of claims, . . . the debtors’ plan does not act as an objection to the proof of claim, and therefore, if no objection has been made prior to confirmation, the claim must be deemed allowed for purposes of the plan. . . . The debtors’ confirmed plan does not void the IRS’s setoff right because the debtors failed to object to the IRS’s setoff claim that was set forth in the IRS’s amended proof of claim.”).

 

26  972 F.2d 639 (5th Cir. 1992).

 

27  972 F.2d at 641. Accord Boyle Mortgage Co. v. Cook (In re Cook), No. 93-7459 (5th Cir. June 2, 1994) (Table decision at 25 F.3d 1043) (Applying Sun Finance Co., Inc. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992), plan provision for payment of arrearages is trumped by contrary, timely filed proof of claim notwithstanding adequate notice of plan and confirmation. Plan set forth $6,270 as arrearage claim on mortgage. Mortgage holder had notice of plan and did not object to confirmation. After confirmation, but within the time for filing proofs of claim, mortgage holder filed arrearage claim of $12,409.40. Debtor objected to arrearage claim. “Howard turns not on the mere fact of notice to the secured creditor that the debtor seeks to modify its claim in a plan, but on a re-affirmance of [Simmons v. Savell (In re Simmons),] 765 F.2d 547 (5th Cir. 1985), which held that the debtor must affirmatively object to a secured claim, pursuant to 11 U.S.C. § 506(a), and the associated Bankruptcy Rules 3007 and 9014, in order to modify or avoid the creditor’s lien in bankruptcy. Simmons points out the difference between plan confirmation procedure, which is not ordinarily intended to be the arena for resolving individual claims, and the adversary process by which claims are disputed. . . . Simmons demonstrated that ‘a proof of secured claim must be acted upon—that is, allowed or disallowed—before confirmation of the plan or the claim must be deemed allowed for purposes of the plan.’ . . . When this procedure is followed, the § 506 valuation hearing will be binding on plan confirmation . . . . Simmons also rejects the contention that section 1327(a), which binds all parties to the provisions of a confirmed plan, may alone effectively reduce a creditor’s secured claim when the secured creditor did not appear to contest the plan. To permit such a reduction would grant the debtor an unjustified windfall that is utterly at odds with the longstanding rule that a secured creditor may ‘ignore the bankruptcy proceeding and look to the lien for satisfaction of the debt.’ . . . This is not to say that secured claims may never be reduced by a Chapter 13 plan, see section 1322(b)(2), but only that the procedures followed must conform to the requirements of Chapter 13, section 506, section 502, and Simmons.”); In re Goodman, 261 B.R. 415, 417 (Bankr. N.D. Tex. 2001) (Citing Sun Finance Co., Inc. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992), IRS can amend its claim after confirmation to increase the amount of its priority claim notwithstanding confirmation of a plan that stated the amount of the IRS claim in an amount consistent with the original proof of claim. IRS filed a proof of claim before confirmation for $3,812. The plan “included the original proof of claim amount.” The debtor did not object to the claim, and the plan was confirmed. More than a year after confirmation, the IRS filed an amended claim for $11,029.15. The debtor objected to the amended claim. “Goodman argues that confirmation of the plan should preclude the I.R.S. from increasing its claim for 1995. The plan included the original proof of claim amount for 1995. Goodman did not object to the claim and the court confirmed the plan. The allowance or disallowance of claim cannot be precluded solely by confirmation of a plan. . . . Furthermore, the court has discretion to allow amendments to a claim after confirmation.”).

 

28  331 F.3d 821 (11th Cir. 2003).

 

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

 

30  331 F.3d at 828.

 

31  See the discussion in this section of cases from the U.S. Court of Appeals for the Fourth Circuit, including Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993) and Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999).

 

32  331 F.3d at 830–34. Accord McCorkle v. Scott (In re Scott), 295 B.R. 686, 687–88 (Bankr. M.D. Ga. 2003) (Applying Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003), confirmed plan that provided “DEBT TO HOMES OF AMERICA IS DISPUTED AND WILL NOT BE PAID THROUGH THE PLAN. UPON COMPLETION OF THE PLAN AND DISCHARGE, THE SECURITY HELD BY HOMES OF AMER[I]CA WILL BE SATISFIED OF RECORD AND TRANSFERRED TO THE DEBTORS” was binding, but Homes of America’s claim survived confirmation and the completion of payments. “[Homes of America] was bound by Defendant’s confirmed Chapter 13 plan, but . . . [Homes of America’s] secured claim survives the confirmed plan and Defendants’ discharge. . . . [Homes of America] retains his rights under the second mortgage until his secured claim is satisfied in full.”); In re Mitchell, 281 B.R. 90, 94 (Bankr. S.D. Ala. 2001) (Confirmation of plan that treated mortgage holder as unsecured is binding but does not eliminate lien. “Under the plan SSFS will not receive a full distribution from the estate since the Mitchell’s [sic] plan proposes to pay unsecured, nonpriority claims 1% pro rata. This may mean forfeiting any right to a deficiency, but it does not waive the lien.” Mortgagee is not entitled to relief from the stay, and personal liability on the mortgage will be discharged but “[w]hen the Mitchells emerge from bankruptcy . . . SSFS will still have a lien on the property to the extent the debt has not been satisfied.”).

 

33  See discussion of Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), above in this section.

 

34  The binding effect of confirmation is discussed in § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors; the vesting and free and clear effects of confirmation in § 1327(b) and (c) are discussed in §§ 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 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 LiensSee also § 120.5  Effects of Confirmation after BAPCPA.

 

35  See § 49.2  Procedure for Lien AvoidanceSee also § 49.4  Section 522(f) after BAPCPA: Household Goods Corrupted.

 

36  990 F.2d 160 (4th Cir. 1993).

 

37  58 F.3d 89 (4th Cir. 1995).

 

38  58 F.3d at 91.

 

39  See § 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For.

 

40  58 F.3d at 92–93. Accord General Elec. Capital Auto Lease v. Eron (In re Eron), No. 00-2343, 2001 WL 985113, at *1–*2 (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. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999), “[h]ere, all the Erons did was list GE Capital as a secured creditor and state that the claim would be paid in full with payments of $282 per month plus interest. There was no affirmative action taken to determine the extent of the Erons’ interest in the truck. . . . The Erons did not file a preconfirmation adversary proceeding hearing [sic], did not object to GE Capital’s proof of claim, which listed the amount of the claim as $3100, did not seek to value the claim, and did not undertake any affirmative step to modify the parties’ interests under the agreement. . . . [W]here the debtor has not taken affirmative action to avoid a creditor’s lien or to change an interest in property, such interests pass through bankruptcy unaffected unless the plan ‘provides for’ the interest. . . . [T]he Erons’ plan—by not characterizing the interest of GE Capital, not stating the amount of the claim, and not otherwise notifying GE Capital of their intent to convert the lease-purchase agreement to a financing agreement—did not provide for GE Capital’s claim.”); In re Kressler, Nos. CIV. A. 00-5286, 99-22646, 2001 WL 919860, at *2 (E.D. Pa. Aug. 9, 2001) (unpublished) (Plan cannot cram down wholly unsecured second mortgage and cancel lien; debtor must take additional step of filing adversary proceeding. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), “Rule 7001(2) . . . makes sense because to allow a debtor to invalidate a lien without some form of adversary proceeding would render meaningless the settled rule that a lien passes through the bankruptcy unaffected.”), aff’d, 40 Fed. Appx. 712, 714 (3d Cir. 2002) (Disallowance of untimely filed mortgage claim does not void lien and lienholder has standing to object to confirmation of plan that would cancel the lien. “Debtors are required to initiate an adversary proceeding or something akin thereto to avoid the lien.”); SallieMae Servicing Corp. v. Banks, 271 B.R. 249, 251, 254–56 (W.D. Va. 2001) (“Like the validity of a lien in [Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995),] or the valuation of a secured interest in [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993)], the question of whether the post-petition interest on a student loan debt is dischargeable must be determined following a proper notice to and hearing with the concerned creditors—in this case, an adversary proceeding. . . . For the reasons cited in Linkous and Cen-Pen, this Court believes that were the Fourth Circuit to have considered the issues in [Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee),193 F.3d 1083 (9th Cir. 1999)], it would not have ignored the Constitutional aspects of Great Lakes’ res judicata argument, and would have reached the opposite conclusion. . . . [W]hen a Chapter 13 plan contains language which not only attempts to achieve an improper goal, but does so in the absence of a proper statutory showing or adversary proceeding, the plan should not operate as res judicata.”), aff’d by Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296, 300–03 (4th Cir. 2002) (Declining to follow Andersen v. UNIPAC NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), “[t]he Bankruptcy Court and Rules require Debtors to bring an adversary proceeding to determine the dischargeability of their student loans. . . . Debtors also must bring an adversary proceeding to discharge post-petition interest on student loan debt. . . . 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. . . . [A] bankruptcy court confirmation order generally is afforded a preclusive effect. But we cannot defer to such an order if it would result in a denial of due process in violation of the Fifth Amendment to the United States Constitution. . . . [D]ue process entitles a student loan creditor to specific notice of the Debtor’s intent to discharge any portion of the debt. . . . For lack of adequate notice, the confirmation and discharge orders discharging the interest are not entitled to preclusive effect.”); Wright v. Commercial Credit Corp. (In re Wright), 178 B.R. 703, 705–06 (E.D. Va. 1995) (Citing Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993), plan cannot be confirmed that provides for valuation and lien stripping of wholly unsecured mortgage without an adversary proceeding. “When a party asks the bankruptcy court to determine the extent of a lien or the value of the collateral forming the basis of the lien, adversary proceedings are required as contemplated by Bankruptcy Rule 7001(2) and Bankruptcy Rule 3012. Although § B-11 of the Chapter 13 plan filed by the [debtors] put the [creditor] on notice that the debtors/appellants sought a ruling on the extent of their liens and a valuation of the collateral, this notice does not comport with due process. . . . The plan put the creditor on notice of the potential reclassification of its lien, and the creditor responded appropriately, by filing an objection to the Chapter 13 plan. The Chapter 13 plan did not, however, clearly state that a § 506(a) valuation hearing would be held, as Linkous requires. . . . [I]n Linkous the Fourth Circuit determined that notice and an adversarial hearing were necessary to comport with due process in this situation. . . . [A]n adversary proceeding is necessary before appellee Commercial Credit Corporation’s status as a secured or unsecured creditor is determined based on the valuation of the property underlying appellee’s lien.”); Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653, 672 (Bankr. W.D.N.C. 2000) (Confirmation of plans and orders allowing claims are not preclusive of class action by Chapter 13 debtors to recover bankruptcy fees included by NationsBanc in its proofs of claim. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), “there is no preclusive force when predicate steps required by the Code and Bankruptcy Rules are not satisfied with regard to a particular order. . . . NationsBanc included the Attorney Fee in its proof of claim form without filing a fee application as required by Bankruptcy Rule 2016. Therefore, the allowance of NationsBanc’s claim is not res judicata as to the Plaintiffs’ claims. . . . [S]ince NationsBanc did not file a Rule 2016 fees application, and this Court has not been given the opportunity to determine the reasonableness of the claimed fee as required by § 506, it cannot be said that the allowance of the fee was adjudicated on the merits. . . . [A]n allowed or disallowed claim may be reconsidered at any time for cause. 11 U.S.C. § 502(j); Fed.R.Bankr.P. 9024. Cause is demonstrated here on these facts.”).

 

41  112 F.3d 1251 (4th Cir. 1997).

 

42  112 F.3d at 1256.

 

43  112 F.3d at 1256–57.

 

44  192 F.3d 457 (4th Cir. 1999).

 

45  192 F.3d at 461.

 

46  192 F.3d at 460. Accord General Elec. Capital Auto Lease v. Eron (In re Eron), No. 00-2343, 2001 WL 985113, at *1–*2 (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. Confirmed plan provided “payments of $282 or more per month to GE Capital until the net balance of claim plus 8.25% interest has been paid in full.” GE Capital did not object to confirmation and filed proofs of claim for the prepetition arrearage and remaining monthly payments under lease. GE did not file a claim for the residual value of the car. When lease term expired, GE sought relief from the stay. Bankruptcy court held that GE Capital was bound by the confirmed plan and could file an amended proof of claim to recover the purchase option with interest. The Fourth Circuit reversed. Citing Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), and Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999), “[h]ere, all the Erons did was list GE Capital as a secured creditor and state that the claim would be paid in full with payments of $282 per month plus interest. There was no affirmative action taken to determine the extent of the Erons’ interest in the truck. . . . The Erons did not file a preconfirmation adversary proceeding hearing [sic], did not object to GE Capital’s proof of claim, which listed the amount of the claim as $3100, did not seek to value the claim, and did not undertake any affirmative step to modify the parties’ interests under the agreement. . . . [W]here the debtor has not taken affirmative action to avoid a creditor’s lien or to change an interest in property, such interests pass through bankruptcy unaffected unless the plan ‘provides for’ the interest. . . . [T]he Erons’ plan—by not characterizing the interest of GE Capital, not stating the amount of the claim, and not otherwise notifying GE Capital of their intent to convert the lease-purchase agreement to a financing agreement—did not provide for GE Capital’s claim. Therefore, contrary to the bankruptcy court’s conclusion, upon confirmation of the plan and completion of the relevant terms of the plan, the truck did not vest in the Erons free and clear of GE Capital’s claim or interest.”).

 

47  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors. See, e.g., Great Lakes Higher Educ. Corp. v. Pardee (In re Pardee), 193 F.3d 1083, 1086–87 (9th Cir. 1999) (“We agree with the Tenth Circuit, [Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999)]. 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.’”); Multnomah County v. Ivory (In re Ivory), 70 F.3d 73, 75 (9th Cir. 1995) (Taxing authority’s argument that Chapter 13 debtor could not redeem property from tax foreclosure judgment was precluded by confirmation of a plan that proposed to cure default and redeem the real property with monthly payments. County obtained a foreclosure judgment in 1988 based on the debtor’s failure to pay property taxes. Debtor filed a Chapter 13 case shortly before the two-year statutory redemption period expired under Oregon law. Plan proposed to pay the delinquent taxes with interest in monthly payments. Plan was confirmed without objection. County then refused to accept payments, and debtor filed a motion to compel the county to accept the payments. “Even assuming that the order confirming the plan was in error to the extent it enabled the debtor to redeem the property subsequent to both the expiration of the redemption right provided by state law and the sixty day window created by 11 U.S.C. § 108(b) . . . res judicata precludes the County from bringing what amounts to a collateral challenge to that order.”). But see Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296, 300–03 (4th Cir. 2002) (Declining to follow Andersen v. UNIPAC NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), “[t]he Bankruptcy Court and Rules require Debtors to bring an adversary proceeding to determine the dischargeability of their student loans. . . . Debtors also must bring an adversary proceeding to discharge post-petition interest on student loan debt. . . . 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. . . . [A] bankruptcy court confirmation order generally is afforded a preclusive effect. But we cannot defer to such an order if it would result in a denial of due process in violation of the Fifth Amendment to the United States Constitution. . . . [D]ue process entitles a student loan creditor to specific notice of the Debtor’s intent to discharge any portion of the debt. . . . For lack of adequate notice, the confirmation and discharge orders discharging the interest are not entitled to preclusive effect.”); In re Luarks, 301 B.R. 352, 355–60 (Bankr. D. Kan. 2003) (Distinguishing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), footnote to confirmed plan that treated interest and penalties on tax claims as general unsecured debt was not binding when trustee objected to taxing authority’s proofs of claim after confirmation. “This Court agrees that the distinction between a student loan debt, which Congress expressly provided could be discharged with certain factual findings, and a priority tax claim, which cannot be discharged under any circumstance, without consent of the taxing authority, is an important distinction. . . . [T]he Plan was not as clear. . . . [I]t is entirely understandable that IRS thought its . . . claim was . . . safe and would be paid. . . . [T]he plan is further ambiguous because it indicates, unfortunately, only in a footnote, that although ‘taxes’ would be treated as priority and paid in full, interest and penalties shall be treated as general unsecured. . . . [T]he intentional insertion of a plan provision that bypasses clear and unambiguous language of the Bankruptcy Code and controlling case law is unacceptable, and potentially sanctionable.”); Educational Credit Mgmt. Corp. v. Whelton (In re Whelton), 299 B.R. 306 (Bankr. D. Vt. 2003) (Citing Banks v. Sallie Mae Servicing Corp. (In re Banks), 299 F.3d 296 (4th Cir. 2002), with approval and rejecting Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), and Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), because “discharge by declaration” is inconsistent with the Bankruptcy Code and a denial of due process, provision of confirmed plan declaring an undue hardship is void and the completion of payments does not discharge student loan debt.); Witaschek v. Sacramento County Bureau of Family Support (In re Witaschek), 276 B.R. 668, 679–80 (Bankr. N.D. Okla. 2002) (Completed plan that provided for child support arrearages with “no interest” did not discharge interest on support arrearages. Distinguishing Andersen v. UNIPAC-NEBHELP (In re Andersen), 179 F.3d 1253 (10th Cir. 1999), “[t]he general rule is that the provisions of a confirmed plan bind each creditor regardless of whether the creditor’s claim is provided for and regardless of whether the creditor has objected to, accepted, or rejected the plan. . . . However, that general rule does not apply if the claim of the creditor is nondischargeable. . . . Witaschek’s Plan does not contain unambiguous specific language that tolls the accrual of postpetition interest on the child support arrearage or that provides for the discharge of otherwise nondischargeable debt or that directs the manner in which [the support creditors] must apply the Trustee’s payments—if that were legally possible when dealing with child support debt.”).

 

48  130 B.R. 318 (B.A.P. 9th Cir. 1991).

 

49  130 B.R. at 321. Accord In re Parker, 148 B.R. 604, 606 (Bankr. D. Idaho 1992) (Citing concurring opinion in Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (B.A.P. 9th Cir. 1991), “it is inconsistent with section 502(a) and Fed. R.Bankr.P. 3007, regarding allowance of and objection to claims, if a plan effectively determines the amount of the secured claim . . . . [A]ll of the statutory elements of the allowance and disallowance of claims must be applied before a secured creditor’s lien may be ‘crammed down.’ The res judicata effect of a Chapter 13 plan can no more act to bind the creditor in an objection to its proof of claim than it could if no such objection were filed.” Plan provided that bank had secured claim of $8,700. Bank filed a timely proof of claim for $12,955. The debtors objected to the bank’s claim before confirmation, but plan was confirmed before disposition of the objection. Rejects argument that confirmation of the plan is res judicata of the amount of the bank’s secured claim. Holds that the debtors’ objection to the bank’s proof of claim was “untimely,” apparently because the debtors failed to insist on resolution of that objection before confirmation. The plan “binds the parties to the amount the trustee will distribute under the plan, but is not binding as to the amount of the claim.”).

 

50  278 B.R. 815 (B.A.P. 9th Cir. 2002).

 

51  193 F.3d 1083 (9th Cir. 1999).

 

52  Great Lakes Higher Education Corp. v. Pardee (In re Pardee), 193 F.3d 1083 (9th Cir. 1999), is discussed in detail in § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

53  278 B.R. at 824–27.

 

54  152 F.3d 631 (7th Cir. 1998).

 

55  152 F.3d at 632.

 

56  See § 275.2 [ In General: Filing is Required for Allowance ] § 132.2  In General: Filing is Required for Allowance.

 

57  152 F.3d at 633.

 

58  152 F.3d at 634–36.

 

59  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

60  152 F.3d at 635.

 

61  230 B.R. 244 (Bankr. D.N.J. 1999).

 

62  See § 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7  Untimely Filed Claims in Cases Filed after October 22, 1994.

 

63  230 B.R. at 252–53.

 

64  11 U.S.C. § 502(j) is discussed further below in this section and in § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

65  905 F.2d 1107 (7th Cir. 1990).

 

66  905 F.2d at 1109.

 

67  213 F.3d 318 (7th Cir. 2000).

 

68  213 F.3d at 323. Compare In re Newburn, No. 00 B 18249, 2001 WL 101733, at *6 (Bankr. N.D. Ill. Feb. 6, 2001) (Distinguishing In re Harvey, 213 F.3d 318 (7th Cir. 2000), confirmed plan that provided for direct payment of mortgage holder did not bind mortgage holder that purchased the property at a foreclosure sale confirmed by state court before the Chapter 13 petition; mortgage holder protested treatment of its debt at confirmation hearing, and language of plan could not re-create lost property rights and nonexistent debt. Debtor’s real property was sold at a foreclosure sale confirmed by Illinois state court before the Chapter 13 petition. The proposed plan provided that the debtor would act as disbursing agent for regular monthly payments to the mortgage holder. At the hearing on confirmation, mortgage holder’s counsel “expressed concern that the plan included payments to Beneficial, even though the property was not property of the estate because it had been sold in the mortgage foreclosure case and the sale was confirmed before the debtor filed her petition.” The plan was confirmed with statements in open court that treatment of the mortgage holder would be dealt with at a future hearing on the mortgage holder’s motion to lift the stay. “[T]he plan merely states that the debtor apparently intends to pay a debt that she no longer owes. The court finds that the language of the plan is wholly insufficient to revive the debtor’s terminated interest in the property, reinstate the mortgage, and strip Beneficial of its ownership of the property. . . . [T]he debtor in Harvey was attempting to accomplish a goal that many courts have permitted in Chapter 13 plans under the Bankruptcy Code—stripping a creditor’s lien after only the secured portion of a claim is paid. . . . It is quite another [thing] to try to create property of the estate by resurrecting a mortgage and an ownership interest in real property in one party and taking away the ownership interest of another party, all without any basis in the law or even an express provision in the plan to accomplish these feats. . . . [T]he court will not interpret § 1327(a) in a manner that would divest a party of its ownership rights and recreate an extinguished mortgage and ownership rights in the debtor, all in direct contravention of Illinois law and § 1322(c)(1).”).

 

69  See also In re Ross, 162 B.R. 785, 789–90 (Bankr. N.D. Ill. 1993) (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. 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. . . . The Debtor’s plan bifurcated Edison’s claim and Edison received notice of that bifurcation on the plan summary. Edison did not dispute this bifurcation, but agreed to its claim as being classified into a secured and unsecured claim by filing a proof of claim which stated as much. Additionally, Edison did not dispute the Debtor’s valuation of his vehicle by estimating the value of his collateral in its proof of claim. Nor did Edison take advantage of its statutory right to object to the treatment of its secured claim at the confirmation hearing. . . . Edison failed to object to the value of the collateral in the Chapter 13 plan and is now bound by the terms of the plan.”); Lee Servicing Co. v. Wolf (In re Wolf), 162 B.R. 98, 106–08 (Bankr. D.N.J. 1993) (“An adversary proceeding is not required to modify a secured creditor’s rights in chapter 13. . . . Nor is a separate motion under Bankruptcy Rule 3012 necessary to modify a secured creditor’s rights in chapter 13. . . . Bankruptcy Rule 3012 is permissive, not mandatory. . . . The Rule provides a procedural mechanism to raise valuation issues in contexts not otherwise provided for by the Code. . . . Where, however, a plan does propose to determine the value of secured claims, such valuation of secured claims for the purposes of § 506(a) is properly part of the confirmation proceeding and no separate motion under Bankruptcy Rule 3012 is required. . . . The chapter 13 plan and confirmation process determines the amount of the allowed secured claims and no separate proceeding for allowance is required. . . . A summary of the plan’s terms in the notice to creditors puts the creditor on notice that its rights will be modified by the chapter 13 plan. . . . This notice and opportunity to be heard at the confirmation hearing is sufficient to satisfy the requirements of due process.”).

 

70  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

71  230 F.3d 890 (7th Cir. 2000).

 

72  230 F.3d at 894–95.

 

73  230 F.3d at 895 n.6. Contra Morton v. Morton (In re Morton), 298 B.R. 301, 309–10 (B.A.P. 6th Cir. 2003) (Confirmation does not preclude objection to claim on the ground that the debtor is not personally liable. “Neither the Bankruptcy Code nor Bankruptcy Rules contain a bar date or deadline for filing objections to claims in a chapter 13 case and we will not read one into the law where none exists.”); Hildebrand v. Hays Imports, Inc. (In re Johnson), 279 B.R. 218, 223–27 (Bankr. M.D. Tenn. 2002) (Confirmation does not preclude trustee’s complaint to avoid a security interest under §§ 547 and 549 when lienholder filed proof of claim after confirmation that revealed an avoidable security interest. “Although the value of collateral is determined through the confirmation process in this district, valuation does not morph into allowance of unfiled claims when a value is stated in the plan. . . . The validity of Hays’ lien and the allowance of Hays’ secured claim . . . were not mature and could not have been decided at the time of confirmation in this Chapter 13 case in advance of the claims bar date and before the defect in Hays’ lien was revealed by Hays. . . . The avoidance of Hays’ defective lien and the allowance of Hays’ unfiled claim were not actually litigated at confirmation. . . . Allowance and avoidance issues are unnecessary to confirmation in this district because the base plan addresses the requirements for confirmation without allowing or disallowing claims and without validating or avoiding security interests. This plan reserves all such questions until after the claims bar date when information is available to evaluate claims and liens. . . . The trustee (or a creditor) could not object to Hays’ claim before confirmation because no such claim was filed until after confirmation. . . . [T]he plan provided that Hays retained its lien consistent with § 1325(a)(5)(B)(i); but the predicate for that lien retention is plainly stated in the plan: only allowed secured claim holders retain liens. . . . [T]his plan was not silent with respect to lien retention, it simply provided for Hays’ lien only if Hays filed a proof of its claim and accomplished allowance of a secured claim.”).

 

74  See In re Adams, 270 B.R. 263, 268–71 (Bankr. N.D. Ill. 2001) (Distinguishing Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), and In re Fareed, 262 B.R. 761 (Bankr. N.D. Ill. 2001), confirmed plan providing secured creditors would “be paid 100% of allowed claims” does not preclude motion to value secured claim at zero when collateral is repossessed and sold after confirmation and creditor did not file claim before confirmation. “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, 230 F.3d at 894. 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 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 pre-confirmation and its asserted collateral value was not challenged before confirmation . . . or the confirmed plan itself specifies collateral value. . . . Here the plan was silent as to collateral value, and creditor’s claims were not filed until after the confirmation hearing. Since Ford filed no claim prior to Plan confirmation, and the Debtors therefore had no chance to seek strip down or otherwise object to the unfiled claims before confirmation, they are not precluded by collateral estoppel or otherwise from challenging those claims after confirmation.”); In re Adams, 264 B.R. 901, 904–07 (Bankr. N.D. Ill. 2001) (Distinguishing Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), confirmed plan providing that secured creditors would be “paid 100% of allowed claims” does not preclude debtors’ postconfirmation motion to disallow a secured claim that was filed after confirmation with respect to which the claim holder repossessed all of its collateral after confirmation. “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, 230 F.3d at 894. 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.”).

 

75  See In re Duggins, 263 B.R. 233, 237–42 (Bankr. C.D. Ill. 2001) (Valuation of undersecured creditor’s collateral in confirmed plan trumps contrary value on preconfirmation proof of claim. “[W]here the binding effect of a confirmed Chapter 13 plan is disputed by a creditor, courts engage in a two-part inquiry. First, the creditor must have received adequate notice that its rights would be modified by the plan’s treatment of its claim. . . . Second, the nature of the modification must be of a kind appropriate for determination through the plan confirmation process or in a contested matter, as opposed to the kind of issue requiring an adversary proceeding. . . . Determination of a secured claim amount is unquestionably an appropriate part of the plan confirmation process even though alternative valuation procedures exist. . . . 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. . . . [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. 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.”).

 

76  See In re Fareed, 262 B.R. 761, 765–71 (Bankr. N.D. Ill. 2001) (Interpreting Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), confirmation binds the debtor to the value of collateral stated in a preconfirmation proof of claim; debtor can object after confirmation to the allowance of the total amount of the claim asserted in the proof of claim. Bankruptcy court cites Dewsnup for the proposition that “claim allowance under § 502 is distinct from collateral valuation under § 506(a). . . . [T]he valuation of collateral under § 506(a) involves no objection to, or disallowance of, a claim under § 502. . . . [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.”).

 

77  167 B.R. 903 (Bankr. W.D. Mo. 1994).

 

78  In re Basham, 167 B.R. 903, 905–08 (Bankr. W.D. Mo. 1994). Accord In re Smith, No. 4:99-BK-43969, 2003 WL 261921, at *4–*6 (Bankr. E.D. Ark. Feb. 5, 2003) (unpublished) (When a confirmed Chapter 13 plan collides with an inconsistent proof of claim, the plan will prevail if notice was adequate. Plan treated creditor as secured with a value of $875. Creditor filed a $2,500 proof of claim before confirmation. Postconfirmation order allowing claims listed creditor with a claim of $2,500. Two and one-half years later, the debtor objected to the claim. “This Court follows the approach taken in [In re Basham, 167 B.R. 903 (Bankr. W.D. Mo. 1994)]: . . . because Jefferson had notice of his treatment under the Debtor’s plan but failed to object to the plan prior to confirmation, the Debtor’s plan is binding on Jefferson pursuant to § 1327(a). . . . [T]he process which results in a final order first controls the result, provided that due process was provided. In this case, an order confirming the plan was entered after notice to the creditor prior to the order allowing the creditor’s claim, and as a consequence, the confirmed plan determines the amount of the creditor’s claim, not the order entered later which allowed the claim.”), on reconsideration, 290 B.R. 102 (Bankr. E.D. Ark. 2003) (Because the evidence is insufficient to determine whether creditors had notice of the content of the plan for purposes of Bankruptcy Rule 3015(d), the court declines to determine the res judicata effect of the confirmed plan under § 1327(a).).

 

79  224 B.R. 91 (Bankr. N.D. Iowa 1998).

 

80  224 B.R. at 93.

 

81  See Harmon v. United States, 101 F.3d 574 (8th Cir. 1996); In re Be-Mac Transp. Co., 83 F.3d 1020 (8th Cir. 1996).

 

82  224 B.R. at 94.

 

83  290 B.R. 138 (Bankr. E.D. Mo. 2003).

 

84  See § 73.2  What Claims Are Priority Claims?§ 73.3  Priority Claims Added or Changed by BAPCPA, § 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and § 136.21  Domestic Support Obligations after BAPCPA for discussion of alimony, maintenance and support claims entitled to priority under § 507(a)(7).

 

85  290 B.R. at 140.

 

86  290 B.R. at 140.

 

87  See § 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For.

 

88  290 B.R. at 140.

 

89  225 B.R. 789 (Bankr. D. Colo. 1998).

 

90  225 B.R. at 791.

 

91  225 B.R. at 792–93.

 

92  293 B.R. 360 (Bankr. M.D. Pa. 2003).

 

93  293 B.R. at 362–64. Compare In re Geiger, 260 B.R. 83, 85 (Bankr. E.D. Pa. 2001) (Mortgage holder is not bound by confirmation of plan that stated, “ANY LIEN ALLEGED OR EXISTING OF ANY KIND, TYPE OR NATURE TO BE CANCELED OF RECORD AT DISCHARGE OF DEBTOR AND CLOSING OF DEBTOR’S CASE” because debtor did not take additional “affirmative step” of filing an adversary proceeding or an objection to claim.). See also McCorkle v. Scott (In re Scott), 295 B.R. 686, 687 (Bankr. M.D. Ga. 2003) (Applying Universal American Mortgage Co. v. Bateman (In re Bateman), 331 F.3d 821 (11th Cir. 2003), confirmed plan that provided “DEBT TO HOMES OF AMERICA IS DISPUTED AND WILL NOT BE PAID THROUGH THE PLAN. UPON COMPLETION OF THE PLAN AND DISCHARGE, THE SECURITY HELD BY HOMES OF AMER[I]CA WILL BE SATISFIED OF RECORD AND TRANSFERRED TO THE DEBTORS” was binding, but Homes of America’s lien survived confirmation and the completion of payments.); Altegra Credit Co. v. Dennis (In re Dennis), 286 B.R. 793, 795 (Bankr. W.D. Okla. 2002) (Confirmed plan that provided no monthly payment and no interest rate and stated that the allowed secured claim of mortgage holder was “0” and that mortgage holder was “‘TO BE TREATED AS AN UNSECURED CREDITOR AND DISCHARGED UPON COMPLETION OF THE PLAN’” did not invalidate lien on the debtor’s home. “[A] debtor cannot morph the status of a secured lien in to an unsecured lien by simply stating it is so in its plan. To accomplish that task the debtor must file an adversary proceeding of which the creditor is entitled to specific notice.”).

 

94  222 B.R. 524 (Bankr. E.D. Va. 1998).

 

95  See In re Rodnok, 197 B.R. 232, 235 (Bankr. E.D. Va. 1996) (Confirmation of amended plan valuing car at $9,300 is not binding on secured claim holder because plan did not adequately notice creditor that valuation would occur at confirmation. “[T]he [first modified] plan listed the fair market value of the van at $9,300.00. On its face, a copy of the plan would appear to have been sufficient to alert Moore Loans that debtors were modifying its secured claim. Under the standard set out in [Piedmont Trust Bank v. Linkous (In re Linkous), 990 F.2d 160 (4th Cir. 1993)], however, the notice provided by debtors falls short. Nowhere does section E of debtors’ first modified plan state that a valuation hearing was to take place in conjunction with the confirmation hearing. Nor have debtors submitted any evidence that notice was provided by another method. Accordingly, Moore Loans was not provided the appropriate notice that debtors were going to modify their secured claim, and therefore Moore Loans cannot be bound by the $9,300.00 value assigned to the van in debtors’ first modified plan.”).

 

96  222 B.R. at 525.

 

97  222 B.R. at 525–26.

 

98  249 B.R. 561 (Bankr. E.D. Wash. 2000).

 

99  249 B.R. at 564.

 

100  249 B.R. at 564–65.

 

101  251 B.R. 170 (Bankr. S.D. Fla. 2000).

 

102  251 B.R. at 172.

 

103  See Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), discussed above in this section.

 

104  See Spartan Mills v. Bank of Am. Ill., 112 F.3d 1251 (4th Cir. 1997), discussed above in this section.

 

105  See In re Pence, 905 F.2d 1107 (7th Cir. 1990), and United Feeds, Inc. v. Greenig (In re Greenig), 152 F.3d 631 (7th Cir. 1998), discussed above in this section.

 

106  See § 67.3 [ Preconfirmation Valuation Disputes ] § 57.6  Preconfirmation Valuation Disputes.

 

107  See, e.g., In re Ramey, 301 B.R. 534, 538–45 (Bankr. E.D. Ark. 2003) (Because due process was respected, bank is bound by confirmed plan that treated its claim as unsecured notwithstanding that objection to proof of claim was unresolved. “The issues of the value of collateral and the validity of the creditor’s lien, including perfection of the lien, are routinely determined at the confirmation hearing. Seldom in this jurisdiction are the validity and extent of liens determined by resorting to the claims allowance procedure. . . . Nothing in the rules would prohibit a creditor or the debtor from using the claims allowance procedure, but a creditor must still raise the same issue and object to confirmation. Otherwise, without objection the plan will be confirmed as filed pursuant to local procedure. . . . The principles of res judicata should be applied except in cases where the notice to the creditor of the plan treatment of the lien is so insufficient that it violates due process of law. . . . First National had specific notice of the Debtor’s intention to treat its claim as unsecured because First National was served with a copy of the second amended plan, and the proposed treatment of the claim . . . is unambiguously stated as unsecured. 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 on the merits because of the principles of res judicata.”).

 

108  See § 115.1  Timing of Hearing on Confirmation before BAPCPA and § 115.2  Timing of Hearing on Confirmation after BAPCPA.

 

109  Fed. R. Bankr. P. 3004. See § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 134.3  Strategic Considerations: When to File Claims for Creditors.

 

110  See above in this section.

 

111  See, e.g., De Jesus v. United States (In re De Jesus), 268 B.R. 185 (Bankr. D. Minn. 2001) (Confirmed plan estimating tax claim at zero and classifying tax claim as “unsecured” did not defeat filed priority tax claim for $9,277.37 because classifying claim as “unsecured” did not determine whether the claim was also priority.); In re Minick, 63 B.R. 444 (Bankr. D.D.C. 1986) (When the amount of a secured creditor’s claim is not set forth in the confirmed plan, confirmation does not preclude later judicial determination of the amount of the claim, the extent of the secured claim under § 506 or the amount of arrearages that must be cured under § 1322(b)(5).).

 

112  See, e.g., Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999) (Ambiguous Chapter 13 plan that “camouflaged” the treatment of IRS as a priority claim rather than a secured claim does not release IRS’s liens upon completion of payments.); In re Luarks, 301 B.R. 352 (Bankr. D. Kan. 2003) (Footnote to confirmed plan that treated interest and penalties on taxes as general unsecured debt was ambiguous when taxes were otherwise treated as priority to be paid in full.); In re Tucker, 231 B.R. 284 (Bankr. E.D. Tenn. 1999) (Confirmed plan that stated the value of car as “$1” and proposed to pay the one dollar at the rate of $450 per month was ambiguous and failed to have binding effect under § 1327.).

 

113  Perhaps the ultimate test of this principle is when the Chapter 13 plan is silent with respect to the treatment of a claim. See above in this section and see §§ 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors and 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For. See, e.g., Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000) (Debtor’s failure to object to proof of claim filed before confirmation precludes challenge to the value stated on the proof of claim when confirmed plan was silent with respect to value.); In re Adams, 270 B.R. 263, 271 (Bankr. N.D. Ill. 2001) (Distinguishing Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), and In re Fareed, 262 B.R. 761 (Bankr. N.D. Ill. 2001), confirmed plan providing secured creditors would “be paid 100% of allowed claims” does not preclude motion to value secured claim at zero when collateral is repossessed and sold after confirmation and creditor did not file claim before confirmation. “Here the plan was silent as to collateral value, and creditor’s claims were not filed until after the confirmation hearing. Since Ford filed no claim prior to Plan confirmation, and the Debtors therefore had no chance to seek strip down or otherwise object to the unfiled claims before confirmation, they are not precluded by collateral estoppel or otherwise from challenging those claims after confirmation.”).

 

114  213 F.3d at 322.

 

115  See Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370, 374 n.7 (B.A.P. 1st Cir. 2001) (“We recognize that there is perceptible tension between the plan confirmation process and the claims allowance/disallowance process. That tension is particularly apparent where, as here, confirmation may precede the claims bar date’s expiration. . . . That tension is relaxed entirely with an appreciation that: Claim holders are entitled to have their rights in a Chapter 13 case determined after appropriate notice and opportunity for hearing. Notice and procedural due process can be satisfied in several ways without violating any fundamental principles of bankruptcy law.”).

 

116  See § 67.3 [ Preconfirmation Valuation Disputes ] § 57.6  Preconfirmation Valuation Disputes.

 

117  See § 134.1  Timing, Form, Superseding and Amended Claims before 2005§ 134.2  Filing of Claims by Debtor or Trustee after 2005 Amendments to Bankruptcy Rule 3004 and § 134.3  Strategic Considerations: When to File Claims for Creditors.

 

118  See, e.g., In re Hoskins, 262 B.R. 693, 696–99 (Bankr. E.D. Mich. 2001) (Properly noticed plan that treats wholly unsecured second mortgage as an unsecured claim satisfies procedural and due process requirements for confirmation without the filing of a separate adversary proceeding or a separate motion for valuation under Bankruptcy Rule 3012. “[A]n expansive reading of Rule 7001(2) is incompatible with Rule 3012 . . . . [T]he term ‘extent,’ as used in Rule 7001(2), refers not to collateral valuation, but rather to identification of the property to which a lien is alleged to be subject. . . . [Federal Rule of Bankruptcy Procedure] 3015(d) calls for parties in interest to be served with a copy of the plan, rather than a ‘motion’ . . . . [T]he very act of filing a plan constitutes a request that the Court enter an order confirming it and so the chapter 13 plan itself is a motion. . . . [T]he plan serves the same role in the context of a disputed confirmation as does a ‘conventional’ motion which initiates a contested matter. . . . Of course, the Debtor’s plan may not fully comply with the requirements of Rule 9013, which specifies that a ‘motion shall state with particularity the grounds . . . and shall set forth the relief or order sought.’ . . . That, however, goes to the question of whether the plan is a defective motion, not whether it is in fact a motion. . . . The plan gave ample warning that the Debtor was seeking to invalidate Providian’s security interest because it had no economic value. . . . Such notice is sufficient as a matter of law.”); In re Fuller, 255 B.R. 300, 305–06 (Bankr. W.D. Mich. 2000) (Plan can treat wholly unsecured third mortgage as an unsecured debt without filing adversary proceeding. “The court concludes that there is a second, albeit unstated, exception to the Rule 7001(2) requirement that the ‘validity, priority or extent of a lien’ be determined by an adversary proceeding. Section 506(a) provides that the collateral which secures an allowed claim may be valued so as to ascertain what portion of the claim is to be treated in the bankruptcy proceeding as secured and what portion is to be treated as unsecured. Rule 3012 provides that the valuation of the collateral may be accomplished by motion . . . . Section 506(d) provides that to the extent the claimed lien exceeds the amount of the allowed claim determined to be secured, the lien is void. . . . [L]ien avoidance under Section 506(d) does not require the commencement of a separate proceeding. Rather, it is the inevitable byproduct of the Section 506(a) valuation process. Rule 3012 permits a secured claim to be valued through general motion practice. Once the value of the secured claim is determined, the attendant lien is automatically ‘stripped.’ No further proceeding, either by motion or complaint, is required.”).

 

119  See discussions beginning at § 116.1  Standing to Object and § 117.1  Too Many Choices.

 

120  See § 117.4  Appeal of Grant or Denial of Confirmation and § 117.5  Appeal of Grant or Denial of Confirmation after BAPCPA.

 

121  11 U.S.C. § 502(j). See also § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

122  Under 11 U.S.C. § 1326(a)(2), payments in Chapter 13 cases are “retained by the trustee until confirmation.” See also § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, § 113.7  Order of Payments to Creditors before BAPCPA and § 113.8  Order of Payments to Creditors after BAPCPA.

 

123  See, e.g., United States v. Zieg (In re Zieg), 206 B.R. 974, 978 (D. Neb. 1997) (Confirmation does not preclude reconsideration of the IRS’s allowed claim on the debtor’s objection. Debtor admitted that 1986 income tax return was fraudulent. IRS filed a proof of claim that was allowed, and plan was confirmed to pay all priority claims in full. After confirmation, debtors objected that tax claims were not priority claims. Bankruptcy and district courts agreed that the IRS claim was a tax specified in § 523(a)(1)(C) and thus was not entitled to priority under § 507(a)(8)(A)(iii). IRS argued that § 1327(a) and confirmation precluded debtor’s objection to its claim. “[Section] 502(j) provides that ‘[a] claim that has been allowed or disallowed may be reconsidered for cause.’. . . .  [A] motion for reconsideration can be filed at any time before the case is closed. . . . [T]he bankruptcy court may consider a § 502(j) motion even after a Chapter 13 plan has been confirmed.”); Tate v. NationsBanc Mortgage Corp. (In re Tate), 253 B.R. 653, 672 (Bankr. W.D.N.C. 2000) (Confirmation of plans and orders allowing claims are not preclusive of class action by Chapter 13 debtors to recover bankruptcy fees included by NationsBanc in its proofs of claim. “[S]ince NationsBanc did not file a Rule 2016 fees application, and this Court has not been given the opportunity to determine the reasonableness of the claimed fee as required by § 506, it cannot be said that the allowance of the fee was adjudicated on the merits. . . . [A]n allowed or disallowed claim may be reconsidered at any time for cause. 11 U.S.C. § 502(j); Fed.R.Bankr.P. 9024. Cause is demonstrated here on these facts.”).

 

124  See discussions beginning at § 126.1  Standing, Timing and Procedure and § 127.1  To Suspend Payments.

 

125  See In re Smith, No. 4:99-BK-43969, 2003 WL 261921 (Bankr. E.D. Ark. Feb. 5, 2003) (unpublished) (Because Jefferson’s allowed claim is inconsistent with the Debtor’s confirmed plan, cause exists for the Court to reconsider Jefferson’s allowed claim under 11 U.S.C. § 502(j).), on reconsideration, 290 B.R. 102 (Bankr. E.D. Ark. 2003) (Jefferson’s allowed claim is reconsidered under § 502(j) and disallowed to the extent it exceeds the amount provided for by the confirmed plan.).

 

126  See, e.g., Snow v. Countrywide Home Loans, Inc. (In re Snow), 270 B.R. 38, 41–42 (D. Md. 2001) (Section 502(j) is not a limit on the res judicata effect of confirmation; confirmed plan providing for payment in full of mortgage arrearage precludes postconfirmation class action challenging inspection fees included in arrearage claim. Citing Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), Deutchman v. IRS (In re Deutchman), 192 F.3d 457 (4th Cir. 1999), and Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995), “[a]lthough 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.”); In re Bernardes, 267 B.R. 690, 693–94 (Bankr. D.N.J. 2001) (Without deciding whether § 502(j) permits reconsideration of a secured claim after confirmation, because the date of valuing a secured claim for § 1325 purposes is the effective date of the plan, wholly unsecured third mortgage holder’s postconfirmation motion to reconsider its claim under § 502(j) fails notwithstanding that real property appreciated from $114,500 to $202,500 in eight months between confirmation and debtor’s (withdrawn) motion to sell. Debtor valued real property in schedules at $114,500. Based on that value, third mortgage holder’s wholly unsecured claim was stripped down to zero. Eight months after confirmation, debtor moved to sell the property for $202,500. Third mortgage holder objected, moved for reconsideration of its claim under § 502(j) and moved to modify the plan to increase payments to unsecured claim holders. “Without deciding whether § 502(j) contemplates the reconsideration of claims after confirmation, the court concludes that there is no sound basis for reconsideration in this case. . . . Pursuant to § 1325(a)(5)(B)(ii), the value of collateral establishing the status of a secured claim is to be determined as of the ‘effective date of the plan.’ . . . 11 U.S.C. § 502(j) may not be employed to change the valuation date of collateral. . . . Old Republic bases its prayer for reconsideration solely upon the value of the subject realty as of July 2000, over eight months after confirmation. . . . [T]he July 2000 market value of the subject realty would not be a relevant consideration in reassessing the status of Old Republic’s claim.”); In re Bernard, 189 B.R. 1017, 1019–23 (Bankr. N.D. Ga. 1996) (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.”); In re Duke, 153 B.R. 913, 915, 916–17, 920 (Bankr. N.D. Ala. 1993) (The binding effect of confirmation under § 1327(a) precludes a creditor’s untimely motion to reconsider an order that sustained the trustee’s objection to a secured claim holder’s proof of claim. The proposed plan treated FNRS Financial Corporation with direct payments by the debtor. FNRS filed a proof of claim purporting to be secured but failed to attach any proof of security. The standing Chapter 13 trustee contested FNRS’s claim. “[T]he clerk of this Court sent notice to FNRS which stated that in order to oppose the trustee’s contest, a timely response and a request for a hearing must be filed and served within fourteen (14) days of the date of the notice. The clerk’s notice also informed FNRS that unless a timely response was received, ‘the contest of the claim may be deemed by the Court to have been confessed by the creditors . . . .’ [A]n order was entered which sustained the contest of the claim. As of that date, FNRS had failed to timely response [sic] to the trustee’s contest . . . . FNRS was allowed an unsecured claim for the full amount . . . . No appeal was taken by FNRS . . . . [T]he debtors modified their plan so that the allowed claim of FNRS would be paid by the trustee. . . . [T]he debtors’ plan, as modified, was confirmed . . . . Pursuant to the confirmed plan, FNRS will receive a pro rata distribution with all other unsecured claim holders until its allowed claim of $14,401.63 is paid in full. . . . [A]pproximately two months after the confirmation of the debtors’ plan of reorganization, FNRS filed its motion to reconsider the order . . . sustaining the trustee’s contest of claim. The motion alleges that its claim is secured by a mobile home, with its security interest perfected by a recorded UCC Financing Statement.” The court rejected FNRS’s argument that Bankruptcy Rule 3008 permitted reconsideration of the order disallowing its secured status: “Because of the binding effect of the confirmation order under § 1327(a), the rights of the creditors are fixed and subsequent reconsideration under Rule 3008 is not permissible. . . . If there were no order confirming the plan of reorganization, then a motion under Rule 3008 could be considered. . . . Because of the binding effect of 11 U.S.C. § 1327(a) on creditors when a confirmed plan fixes the allowed amount of a creditor’s claim, this Court is not permitted to reconsider the order entered which sustained the trustee’s contest of FNRS’s proof of claim.” The court distinguishes Sun Finance Co., Inc. v. Howard (In re Howard), 972 F.2d 639 (5th Cir. 1992), Simmons v. Savell (In re Simmons), 765 F.2d 547 (5th Cir. 1985), and Southrust Bank of Alabama v. Thomas (In re Thomas), 883 F.2d 991 (11th Cir. 1989). “FNRS was advised three separate times that it was required to file documents that would support its claimed secured status. . . . FNRS received adequate specific notice of the objection to its claim.”).

 

127  Fed. R. Bankr. P. 7001(2).

 

128  See discussion above in this section. See, e.g., Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995) (“Bankruptcy Rule 7001(2) expressly requires initiation of an adversary proceeding” to determine whether mortgage holder had a valid lien; plan could not void mortgage lien notwithstanding that mortgage holder failed to file a proof of claim or to object to confirmation.); In re Kressler, Nos. CIV. A. 00-5286, 99-22646, 2001 WL 919860, at *2 (E.D. Pa. Aug. 9, 2001) (unpublished) (Plan cannot cram down wholly unsecured second mortgage and cancel lien based on absence of value because Bankruptcy Rule 7001(2) requires the debtor to take the additional step of filing an adversary proceeding. “Rule 7001(2) . . . makes sense because to allow a debtor to invalidate a lien without some form of adversary proceeding would render meaningless the settled rule that a lien passes through the bankruptcy unaffected.”), aff’d, 40 Fed. Appx. 712 (3d Cir. 2002); Altegra Credit Co. v. Dennis (In re Dennis), 286 B.R. 793 (Bankr. W.D. Okla. 2002) (Debtors’ counsel cannot bypass the requirements of Rule 7001 by simply declaring in plan that a secured debt is unsecured.).

 

129  290 B.R. 641 (Bankr. C.D. Ill. 2003).

 

130  290 B.R. at 647–50. Accord Nationsbanc Mortgage v. Williams (In re Williams), 276 B.R. 899, 908 (C.D. Ill. 1999) (Confirmed plan that bifurcated Nationsbanc Mortgage’s claim and fixed the secured amount at $8,000 limits Nationsbanc’s lien notwithstanding an inconsistent proof of claim timely filed after confirmation. “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.”); In re Zimmerman, 276 B.R. 606, 609 (Bankr. C.D. Ill. 2001) (“It is permissible for a Chapter 13 plan to bifurcate an undersecured creditor’s claim on the basis of collateral value or even eliminate the lien where the collateral is worthless or subject to a senior lien greater than its value. In order to accomplish this, the plan must specifically ‘provide for’ reduction or elimination of the lien pursuant to Section 1327(c). If, on the other hand, the debtor seeks to eliminate a lien on the basis of a challenge to its ‘validity, priority or extent,’ the debtor must file an adversary proceeding which provides a greater level of due process to the affected creditor.”).