Cite as: Keith M. Lundin, Lundin On Chapter 13, § 123.4, at ¶ ____, LundinOnChapter13.com (last visited __________).
Effective representation of a postpetition claim holder requires some investigation and some finesse. As detailed elsewhere, the treatment of postpetition claims is complicated in Chapter 13 cases: the plan can only provide for the payment of allowed postpetition claims;1 if the claim holder declines to file a proof of claim,2 the postpetition claim will not be allowed, will not be paid and will not be discharged.3 Depending on what the plan says, confirmation may vest all property of the Chapter 13 estate in the debtor,4 leaving a postpetition claim holder free of the automatic stay to collect from the debtor’s property;5 or the estate may be preserved by the plan, and the postpetition claim holder is in Neverland, neither paid through the plan nor able to collect its debt from property of the estate.6 The postpetition claim holder may be entitled to relief from the stay, putting at risk the debtor’s performance under the plan.7
If the confirmed plan provides for full payment of postpetition claims allowed under § 1305, the holder of a postpetition claim may be best advised to file a proof of claim and accept payment through the plan. If the confirmed plan is silent with respect to postpetition claims, but the debtor is willing and able, then the postpetition claim holder might join in the debtor’s motion under § 1329 to modify the plan to create a class of postpetition claims to be paid in full.8 If the confirmed plan pays less than 100 percent of postpetition claims or fails to provide for postpetition claims and if the debtor is not willing or not able to modify the plan, then the postpetition claim holder should not file a proof of claim and should consider seeking relief from the stay to proceed against the debtor or the debtor’s property.9 If the court grants relief from the stay, the postpetition claim holder can collect its claim directly from the debtor, from the debtor’s property and even from property that remained property of the Chapter 13 estate after confirmation. If the court denies relief from the stay, at worst, the postpetition claim will survive discharge and be collectible from the debtor after the case is over.10
The postpetition creditor should consider whether its claim is a postpetition claim of the sort described in § 1305 or whether the debt is really an administrative expense under § 503 that could be entitled to priority and full payment through the plan under § 1322(a)(2).11 This characterization determines the strategy that will best advantage the postpetition creditor with respect to the debtor’s plan: administrative expenses typically are paid in full through the plan but without interest; however, if the holder of an administrative expense fails to timely file a request for payment, the administrative expense will not be paid through the plan and may be discharged upon completion of payments to other creditors.12 If the debt is a postpetition claim described in § 1305,13 the claim holder may be better off to file a proof of claim, depending on whether the plan calls for full payment (with interest). If the holder of a § 1305 claim declines to file a proof of claim, the postpetition claim will not be allowed, cannot be provided for by the plan, and will survive discharge.14
Usually it is in the debtor’s best interests to pay a postpetition claim holder in full through the plan. Ideally, the confirmed plan will contain a provision for full payment of postpetition claims.15 If the original plan neglected to do so, the debtor can attempt to modify the plan after confirmation to provide for full payment of postpetition claims.16 This avoids a stay relief battle, avoids the certainty that the postpetition claim will survive discharge, and permits the debtor to manage the postpetition debt within the discipline of the Chapter 13 case. If the debtor disputes liability or the amount of the postpetition claim, the bankruptcy case is the most immediate forum in which to litigate with the claim holder.
If counsel is lucky enough to be consulted before the creditor becomes a postpetition claim holder, then advise the creditor not to lend until it is determined whether the credit will be an administrative expense under § 503 or an allowable postpetition claim under § 1305. To satisfy § 1305, the postpetition debt must be taxes or a consumer debt “for property or services necessary for the debtor’s performance under the plan.”17 If the postpetition credit fits this description, the claim is still not allowable “if the holder of such claim knew or should have known that prior approval by the trustee of the debtor’s incurring the obligation was practicable and was not obtained.”18 Representing a postpetition claim holder in a Chapter 13 case may include seeking the approval of the trustee before extending credit to the debtor.
2 See § 281.1 [ Postpetition Claims ] § 132.9 Postpetition Claims.
4 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.
5 See § 243.1 [ Does Confirmation Dissolve the Stay? ] § 124.3 Does Confirmation Dissolve the Stay?.
6 See, e.g., Montclair Property Owners Ass’n, Inc. v. Reynard (In re Reynard), 250 B.R. 241 (Bankr. E.D. Va. 2000) (Homeowner association does not need relief from the stay to collect postpetition assessments from property that is not property of the estate and does not need relief from the stay to take a judgment against the debtor for the postpetition assessments; however, the vesting effect of confirmation in § 1327(b) does not eliminate the Chapter 13 estate, and homeowner association must return to the bankruptcy court for relief from the stay to collect from postpetition wages that remain property of the estate.).
7 See § 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5 Postpetition Claims and Relief from the Stay.
8 See § 261.1 [ To Provide for Postpetition Claims ] § 127.4 To Provide for Postpetition Claims.
10 See § 350.1 [ Postpetition Claims ] § 158.6 Postpetition Claims.
12 See § 73.2 What Claims Are Priority Claims?, § 73.3 Priority Claims Added or Changed by BAPCPA, § 73.5 Interest Not Required, with Exceptions, § 73.6 Treatment of Priority Claims Changed by BAPCPA, § 132.9 Postpetition Claims, § 136.1 Treatment of Priority Claims, § 136.16 Postpetition Interest on Priority Claims before BAPCPA, § 136.17 Postpetition Interest on Priority Claims after BAPCPA, § 137.1 Postpetition Claims before BAPCPA, § 137.2 Postpetition Claims after BAPCPA, § 158.6 Postpetition Claims and § 162.5 On Administrative Expenses.
15 See § 204.1 [ Providing for Postpetition Claims ] § 113.6 Providing for Postpetition Claims.
16 See § 261.1 [ To Provide for Postpetition Claims ] § 127.4 To Provide for Postpetition Claims.