§ 124.3     Does Confirmation Dissolve the Stay?
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 124.3, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

It is an odd discontinuity in the Code that, absent careful architecture of the plan, confirmation dissolves the automatic stay with respect to some creditor action. One of the effects of confirmation under § 1327(b) is that “except as otherwise provided in the plan or the order confirming the plan, the confirmation of a plan vests all of the property of the estate in the debtor.”1 There is some disagreement about the impact of the vesting effect in § 1327(b) on the existence and content of the Chapter 13 estate after confirmation.2 Arguably, property is either property of the estate or property of the debtor, but not both. At confirmation, absent a provision of the plan or order of confirmation to the contrary,3 many courts have concluded that some or all of the property defined in §§ 541 and 1306 leaves the estate and becomes property of the debtor.4

[2]

Section 1327(b), so the argument goes, then reacts with § 362(c)(1) to dissolve the automatic stay: “The stay of an act against property of the estate . . . continues until such property is no longer property of the estate.”5 Analyzing §§ 1327(b) and 362(c)(1) together, some courts have concluded that the automatic stay terminates with respect to property that vests in the debtor at confirmation.6

[3]

These courts have it partly right. There are eight separate subparts to the automatic stay in § 362(a). Some components of the stay prohibit acts of collection against the debtor, some prohibit acts against property of the debtor and some prohibit only acts against property of the estate. Some parts of the stay concern only claims that arose before the commencement of the case; other prohibitions apply without regard to whether the debt arose before or after the petition. Section 362(c)(1) terminates the automatic stays described in § 362(a), but only with respect to acts “against property of the estate.7 Section 362(c)(1) has no effect on the subsections of § 362(a) that prohibit acts against “property of the debtor.”

[4]

For example, § 362(a)(5) prohibits “any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case.”8 If property of the Chapter 13 estate vests in the debtor at confirmation under § 1327(b), that property becomes “property of the debtor” and it continues to be protected from prepetition creditors by the automatic stay in § 362(a)(5).9 Similarly, subsections 362(a)(6) and (a)(7) prohibit the collection of a claim “against the debtor that arose before the commencement of the case”10 and prohibit the setoff of any debt “owing to the debtor that arose before the commencement of the case . . . against any claim against the debtor.”11 These “stays” are not dissolved by the vesting of property in the debtor because they concern actions to collect prepetition debts from property of the debtor or from the debtor. Under § 362(c)(2), these other stays continue until the earliest of the time the case is closed, the case is dismissed or a discharge is granted or denied.12 Reasoning more carefully, several reported decisions conclude that property vesting in the debtor at confirmation under § 1327(b) remains protected by the automatic stay with respect to prepetition claims.13

[5]

Property that vests in the debtor at confirmation under § 1327(b) is not protected by any automatic stay if the claim asserted against that property is a postpetition claim.14 If the plan or the order of confirmation contains a provision overcoming the vesting effect in § 1327(b), then even a postpetition claim remains subject to the automatic stay because § 362(a)(4) prohibits any act to create, perfect or enforce a lien “against property of the estate” without regard to when the claim arose.15

[6]

If the courts were in agreement about the meaning of the vesting effect in § 1327(b), then the interaction of §§ 1327(b) and 362(c)(1) would reduce to two simple questions: (1) Is the item property of the estate or property of the debtor? (2) Is the debt a pre- or postpetition claim? But the courts do not agree whether the Chapter 13 estate continues to exist after confirmation, and the courts disagree about what constitutes property of the estate after confirmation. The four views on the effect of § 1327(b) on property of the estate discussed in detail above16 can be summarized as follows:

 

 1.
Some decisions hold that the Chapter 13 estate ceases to exist at confirmation and all property of the estate whether acquired before or after confirmation becomes property of the debtor.
 

 

 

 

 2.
Other courts hold that at confirmation all property of the estate vests in the debtor except that portion of property and income that is necessary to fund the plan.
 

 

 

 

 3.
Some courts hold that the vesting effect in § 1327(b) does not change the estate and property of the estate continues unaffected by confirmation.
 

 

 

 

 4.
The so-called fourth approach holds that all property of the estate at the moment of confirmation vests in the debtor and becomes property of the debtor, but the estate continues to exist to receive all property and income acquired by the debtor after confirmation.
 

 

 

[7]

Depending on which view of § 1327(b) the court adopts, the interaction of § 1327(b) and § 362(c)(1) produces very different outcomes. In a jurisdiction adopting the view that the estate continues to exist and to hold all property notwithstanding § 1327(b), even a postpetition creditor is subject to the automatic stay with respect to all property of the estate. In contrast, if all property of the estate vests in the debtor at confirmation, a postpetition creditor is not subject to the automatic stay with respect to that property. The intermediate position—that property of the estate vests in the debtor except the portion necessary for the debtor’s performance under the plan—produces a different result: a postpetition creditor would be free of the stay with respect to postconfirmation wages not committed to funding the plan, but subject to the stay with respect to the portion of income used to fund the plan. Not surprisingly, based on differing views of § 1327(b), there is a hodgepodge of reported decisions analyzing which portions of the automatic stay terminate at confirmation with respect to what property.17

[8]

A couple of reported cases illustrate the point. In EconoLube N’ Tune, Inc. v. Frausto (In re Frausto),18 the confirmed plan required funding from the debtor’s future income. Eighteen months after confirmation, the debtor entered into a franchise agreement with EconoLube. The debtor breached the agreement, and EconoLube took a $94,438.09 judgment. Also after confirmation, the Chapter 13 trustee settled a prepetition lawsuit against Subway Restaurants for $100,000. EconoLube sought to garnish the settlement proceeds to collect its postpetition judgment.

[9]

The Alabama bankruptcy court was bound by Telfair v. First Union Mortgage Corp.19 to the view of § 1327(b) that “all of the property the debtor owned when his case was confirmed (other than that, ‘necessary for the fulfillment of the plan’) vested in the debtor at confirmation.”20 The property that vested in the debtor at confirmation in Frausto included the Subway lawsuit and the $100,000 settlement because the plan was funded from the debtor’s future earnings. The bankruptcy court then deduced that the settlement proceeds were not protected by the automatic stay because EconoLube was a postpetition creditor:

While confirmation vests all property of the estate in the debtor upon confirmation free and clear of any claim or interest of pre-petition creditors provided for by the plan, it does not have that effect on post-petition creditors. Section 362(c) provides that the automatic stay of an act against property of the estate continues only until such property is no longer property of the estate. Once property of the estate is transferred back to the debtor pursuant to 1327(b), only pre-petition creditors, who are bound by the plan pursuant to 1327(a) and have been specifically divested of any interest in that property pursuant to 1327(c), are precluded from pursuing that property. On the other hand, post-petition creditors who were not required to participate in the plan or permitted to participate in the confirmation process; who will receive nothing under the plan; who are not bound by the plan; and whose rights in the property vesting in the debtor were not extinguished pursuant to 1327(c); are not specifically forbidden by any section of the Code from pursuing that property.21
[10]

Applying a somewhat different view of § 1327(b), the bankruptcy court in Montclair Property Owners Ass’n, Inc. v. Reynard (In re Reynard)22 held that a homeowner’s association did not need relief from the stay to sue the debtor for postpetition assessments, but relief from the stay would be necessary to collect that postpetition debt from postconfirmation earnings. The court explained the connection between confirmation, property of the estate and the automatic stay this way:

[A] post-petition creditor who has the right to initiate a suit against a debtor and obtain a judgment for a post-petition debt without violating the automatic stay may not have recourse to execute on all assets that would have been, but for the filing of a chapter 13 petition, property of the debtor. Recourse is limited to property that is not property of the estate. . . .  All post-confirmation earnings—not just the amount of the plan payment—are necessary for the success of a chapter 13 plan and must be property of the post-confirmation chapter 13 estate. They are protected by the automatic stay.23
[11]

The postpetition creditor in Frausto was free of the automatic stay to collect from prepetition property that vested in the debtor at confirmation. The postpetition creditor in Reynard was not free of the automatic stay to collect from postpetition wages—not even from the portion of wages that was not committed to funding the plan. This is a challenging environment for creditors reluctant to risk sanctions for violating the stay.

[12]

There will be no certainty about the extent to which the automatic stay terminates as a result of the vesting effect of confirmation under § 1327(b) until there is agreement about the meaning of § 1327(b). This is no small issue for the creditor that is contemplating collection action against a Chapter 13 debtor’s property after confirmation. Prepetition creditors are almost always best advised to first seek relief from the stay before commencing collection action after confirmation, notwithstanding that confirmation may have vested some or all property of the estate in the debtor. Postpetition creditors are more likely to be freed from the stay by the vesting effect in § 1327(b); yet this release may be limited or nonexistent based on the court’s interpretation of § 1327(b).

[13]

Alimony, maintenance or support debts are a partial exception to much of this discussion because of § 362(b)(2). Detailed elsewhere,24 § 362(b)(2) contains an exception to the automatic stay for the collection of alimony, maintenance or support “from property that is not property of the estate.”25 If § 1327(b) has its full effect, and all property of the estate vests in the debtor at confirmation, that property ceases to be protected by the automatic stay from the collection of alimony, maintenance or support.26 If the plan or order of confirmation overcomes the vesting effect in § 1327(b), even the collection of alimony, maintenance or support is stayed after confirmation with respect to all property that remains property of the estate, including a debtor’s wages during the Chapter 13 case.27

[14]

Most of this controversy evaporates if the plan or order of confirmation preserves the Chapter 13 estate at confirmation.28 A provision overcoming the vesting effect of § 1327(b) eliminates the argument that § 362(c)(1) terminates the automatic stay. Such a provision benefits the debtor with protection from the postconfirmation collection efforts of postpetition claim holders.29 Arguably, this benefits all (prepetition) creditors by avoiding disruption of the debtor’s performance of the confirmed plan.

[15]

Even if the confirmed plan does not preserve the entire Chapter 13 estate from the vesting effect of § 1327(b), it seems reasonable that at least the portion of the debtor’s future earnings committed to the trustee for payments to creditors remains protected by the automatic stay. The provision of the plan or confirmation order that states the amount of money that the debtor will pay to the Chapter 13 trustee can be interpreted as a provision contrary to the vesting effect without regard to the court’s general view on the effect of confirmation under § 1327(b). Otherwise, the potential is great for postconfirmation disruption of the funding of Chapter 13 plans.

[16]

Notwithstanding the logic of this position, the U.S. Court of Appeals for the Eighth Circuit held that undistributed and future payments to the Chapter 13 trustee do not constitute property of the estate and are not protected by the automatic stay when, after confirmation, the IRS levied upon payments by the debtor to the trustee to collect taxes owed by the debtor’s counsel.30 Contrast this holding with the later holding by the Eighth Circuit that the Chapter 13 estate continues to exist after confirmation notwithstanding § 1327 for purposes of determining whether postpetition services to the debtor are administrative expenses under § 503.31 One bankruptcy court concluded it was the rule in the Eighth Circuit that the automatic stay continues after confirmation without regard to the content of the plan or the order of confirmation because the estate survives confirmation for § 362(c)(1) purposes.32 Perhaps it is the Eighth Circuit’s view that the Chapter 13 estate continues for some purposes (payment of administrative expenses) but not for other purposes (protecting the debtor’s payments to the trustee from levy by the IRS).

[17]

The creditor that takes action against the debtor’s property after confirmation without first seeking relief from the stay runs the risk that the court will find the automatic stay is applicable notwithstanding the vesting effect of § 1327(b). The cautious creditor will always first request relief from the stay.


 

1  11 U.S.C. § 1327(b).

 

2  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.

 

3  See § 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b).

 

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  11 U.S.C. § 362(c)(1).

 

6  Telfair v. First Union Mortgage Corp., 216 F.3d 1333, 1340 & n.14 (11th Cir. 2000) (Mortgage holder did not violate automatic stay by applying plan payments to attorney’s fees and reimbursement of insurance expense because confirmation vested the estate in the debtor and payments directly by the debtor to the mortgage holder were not protected by the automatic stay. The confirmed plan provided for mortgage under § 1322(b)(5). The debtor was required to pay the regular postconfirmation mortgage payments directly to the mortgage holder. Arrearages were cured through the Chapter 13 trustee. The debtor defaulted in the direct payments and the mortgage holder filed three motions for relief from the stay during the Chapter 13 case. The mortgage holder also force wrote hazard insurance. After completion of payments and entry of discharge, the mortgage holder recovered its attorney’s fees and insurance premiums from the debtor’s escrow account or from the payments received directly from the debtor and/or the payments from the trustee. The debtor sought damages for violation of the automatic stay and the discharge injunction. With respect to the automatic stay, and without mention of § 362(a)(5), court holds that First Union could not have violated the automatic stay because the payments it applied to fees and expenses were not property of the estate: “[T]he estate transformation approach . . . should be the law of this circuit. We therefore echo the conclusion of the Seventh Circuit and ‘read the two sections, 1306(a)(2) and 1327(b) to mean simply that while the filing of the petition for bankruptcy places all the property of the debtor in the control of the bankruptcy court, the plan upon confirmation returns so much of that property to the debtor’s control as is not necessary to the fulfillment of the plan.’ [Black v. United States Postal Service (In re Heath), 115 F.3d 521, 524 (7th Cir. 1997)]. In this case, after confirmation, only the amount required for the plan payments remained property of the estate. Telfair’s regular loan payments, made outside of the plan, were therefore no longer property of the estate and First Union’s application of a portion of those payments to attorney’s fees pursuant to the Deed did not violate section 362(a).” In a note, “Even if First Union technically applied plan payments to attorney’s fees and then applied a regular loan payment towards the plan payments, our conclusion would not be different because, ultimately, all the plan payments were properly applied, as evidenced by the bankruptcy court’s discharge of Telfair’s plan.”); Eden v. Robert A. Chapski, Ltd. (In re Eden), No. 03 CV 00116, 2003 WL 21147830 (N.D. Ill. May 14, 2003) (Citing Black v. United States Postal Service (In re Heath), 115 F.3d 521 (7th Cir. 1997), because state court-ordered payments to ex-spouse did not interfere with confirmed plan, payments were not property of the Chapter 13 estate and were not protected by the automatic stay after confirmation.); Shell Oil Co. v. Capital Fin. Servs., 170 B.R. 903, 905–06 (S.D. Tex. 1994) (“When the court confirms a plan, the property of the estate vests in the debtor unless the plan says otherwise. 11 U.S.C. § 1327(b). When property vests in the debtor, it is no longer property of the estate. Because the automatic stay, as it applies to acts against property of the estate, ends when the property is no longer property of the estate, confirmation of a bankruptcy plan terminates the stay. . . . When Gibson’s bankruptcy plan was confirmed on May 23, 1988, the property in the estate vested in Gibson. The IRS did not make an assessment against Gibson until August of 1989. Since the assessment was against Gibson’s property, not property of the bankruptcy estate, the IRS’s assessment and lien did not violate the protections provided to the property of a debtor’s estate.”); In re Honey, 186 B.R. 409, 410 (Bankr. E.D. Mich. 1995) (Secured claim holder does not need relief from the stay after confirmation where the plan provides that property of the estate vests in the debtor as permitted by § 1327(b). “Because each of the plans filed by these debtors provides for the vesting of all estate property in the debtor upon confirmation, the stay terminated as to such property upon confirmation. . . . [S]ection 362(a)(5) never applied to the property in question, because after the petition was filed, the property was not ‘property of the debtor’; rather, it was ‘property of the estate.’ The subsection applies primarily to exempt property.”); In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. 1987) (After confirmation, property of the estate vests in the debtor, and a secured claim holder’s rights and interests are defined strictly by the plan—the plan itself constitutes a new agreement between the debtor and the secured claim holder. If the debtor defaults after confirmation, the secured claim holder’s remedy is to foreclose the lien that was granted by the terms of the plan. The foreclosure of this lien does not constitute an act to enforce a lien that arose before the commencement of the case, nor does it constitute an act to collect a prepetition claim within the meaning of 11 U.S.C. § 362(a)(5) or (a)(6). Foreclosure of the lien is instead enforcement of the new agreement evidenced by the plan and is not subject to the automatic stay.); In re Johnson, 63 B.R. 550 (Bankr. D. Colo. 1986) (When the Chapter 13 plan does not provide otherwise, confirmation vests property of the estate in the debtor. Property vesting in the debtor remains subject to the lien of a secured party, but enforcement of the lien is no longer stayed by § 362, and the adequate protection provisions of § 362(d) are no longer applicable.).

 

7  11 U.S.C. § 362(c)(1) (emphasis added).

 

8  11 U.S.C. § 362(a)(5) (emphasis added).

 

9  But see In re Honey, 186 B.R. 409, 410 (Bankr. E.D. Mich. 1995) (“Because each of the plans filed by these debtors provides for the vesting of all estate property in the debtor upon confirmation, the stay terminated as to such property upon confirmation. . . . [S]ection 362(a)(5) never applied to the property in question, because after the petition was filed, the property was not ‘property of the debtor’; rather, it was ‘property of the estate.’ The subsection applies primarily to exempt property.”).

 

10  11 U.S.C. § 362(a)(6) (emphasis added).

 

11  11 U.S.C. § 362(a)(7).

 

12  11 U.S.C. § 362(c)(2).

 

13  In re Whigham, 195 B.R. 667, 673 (E.D. Mich. 1996) (Stay continues to be effective after confirmation notwithstanding plan provision that vested all property of the estate in the debtor at confirmation. Secured claim holder needs relief from the stay to foreclose its lien upon default after confirmation. “[T]he Court rejects creditor’s argument that the confirmation of debtor’s Chapter 13 plan created a ‘new debt’ excepting it from 11 U.S.C. § 362(a)(5) and (c)(2)’s provisions . . . . Although [the bankruptcy court] ruled that the stay was no longer in effect under 11 U.S.C. § 362(c)(1) based on Paragraph I.D of the Plan (because the property was no longer property of the estate), the Court believes that creditor’s secured claim is subject to the automatic stay under 11 U.S.C. § 362(a)(5) which under Section 362(c)(2) remains in effect. In rejecting the [In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. 1987)] holding, this Court specifically disagrees with that court’s conclusion that the lien involved was not one that arose before the commencement of the Chapter 13 case. . . . [T]he lien sought to be enforced in this case was created pre-petition.”); Far W. Fed. Bank v. Vanasen (In re Vanasen), 81 B.R. 59 (D. Or. 1987) (In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. 1987), incorrectly assumes that a confirmed Chapter 13 plan creates a new obligation and a new lien between the debtor and a mortgage holder. Court rejects bank’s argument that automatic stay is not applicable when the debtor defaults on payments under a confirmed plan.); Allen v. Jim Walter Homes, Inc. (In re Hartley), 75 B.R. 394 (S.D. Ala. 1987) (Vesting of property of the estate in the debtors at confirmation under § 1327(b) and (c) does not dissolve the automatic stay of § 362. Under § 362(c), stay of actions against the debtor’s property continues notwithstanding confirmation.); Sedgwick v. Rubin (In re Sedgwick), 266 B.R. 185, 186 (Bankr. N.D. Cal. 2001) (Creditor violated automatic stay based on erroneous advice of counsel that stay terminated at confirmation. After confirmation, creditor filed a lien and a state court action. Creditor’s counsel “did not take into account § 1327(c), which provides that revested property is free and clear of creditors’ claims, and § 362(a)(5), which prohibits an act to create, perfect or enforce a lien against property of the debtor. . . . [D]efendant’s acts violated the automatic stay regardless of whether the residence was still property of the estate or had revested in [the debtor].”); In re Carona, 254 B.R. 364, 366–67 (Bankr. S.D. Tex. 2000) (Although property vesting in the debtor at confirmation is free of some parts of the stay described in § 362(a), § 362(a)(5) continues to apply and a prepetition creditor must seek relief from the stay to foreclose its security interest; that the debtor defaulted in payments under the plan after confirmation is cause for relief from the stay. “[A]s of the date that the chapter 13 plan was confirmed, the trucks and trailers ceased to be property of the estate and became property of the debtor. Therefore, the stay effected by Bankruptcy Code § 362(a)(2), (3), and (4) was terminated. However, Bankruptcy Code § 362(a)(5) provides . . . . [T]he trucks and trailers are now property of the debtor and there is no question that Sterling’s security interests were liens to secure a pre-petition claim. The stay effected [by] § 362(a)(5) remains in effect.”); In re Henline, 242 B.R. 459, 465 (Bankr. D. Minn. 1999) (Confirmation of plan that did not overcome the vesting effect in § 1327(b) did not dissolve the stay of foreclosure by condominium association holding a prepetition claim. “[A]ll property of the estate vested back in Debtors upon confirmation of their plan. See, 11 U.S.C. § 1327(b). But . . . the stay applies against the enforcement of a lien on a debtor’s property under 11 U.S.C. § 362(a)(5), and the stay . . . remains in effect against foreclosure . . . to collect Movant’s prepetition claim.” However, relief from the stay is warranted because plan failed to provide for association’s prepetition claim.); In re Binder, 224 B.R. 483, 490 (Bankr. D. Colo. 1998) (Default in mortgage payments “outside” confirmed plan is cause for relief from the stay; mortgage holder is not limited to remedy of conversion or dismissal. “Granting relief from stay for Debtor’s default in performance of post-confirmation obligations to Chase Manhattan does not upset the plan; it implements it. To restrict Chase Manhattan to dismissal or conversion of this case would be inconsistent with the plan terms, as well as the purpose of Chapter 13. Denial of relief from stay would be contrary to the implicit meaning of ‘payment outside the plan’ . . . . Cause exists for granting Chase Manhattan’s Motion.”); Cox v. Billy Pounds Motors, Inc. (In re Cox), 214 B.R. 635, 639 (Bankr. N.D. Ala. 1997) (Absence of provision overcoming § 1327(b) does not upset protection of stay for property that vested in the debtor at confirmation with respect to collection of a prepetition debt. Car lender that repossessed debtor’s car after confirmation on mistaken belief that trustee’s motion to dismiss relieved creditor of stay was sanctioned for payment of attorneys’ fees and compensatory damages for debtor’s loss of a job. Damages can be recouped from the creditor’s claim. “[E]ven if the debtors’ automobile was, by virtue of 11 U.S.C. § 1327(b), ‘property of the debtor,’ following confirmation rather than ‘property of the estate,’ the automatic stay forbad repossession of the automobile by the defendant.”); Honesdale Nat’l Bank v. Mordenti (In re Mordenti), 164 B.R. 37 (Bankr. M.D. Pa. 1993) (Automatic stay protects property of the debtor and property of the estate, thus stay continues after confirmation notwithstanding that the plan fails to “provide for” a second mortgage holder’s claim. Second mortgage holder is entitled to relief from the stay after confirmation because the plan does not provide for the second mortgage holder’s claim and the debtor has made no offer of adequate protection.); Sears Roebuck & Co. v. Burgess (In re Burgess), 163 B.R. 726, 728–29 (Bankr. M.D. Pa. 1993) (Although confirmation vested all property of the estate in the debtors, automatic stay remained applicable under § 362(a)(5). “The plan having been confirmed . . . the collateral of Sears was no longer ‘property of the estate’ since this property now became vested in the Debtors. Nevertheless, Section 362(a)(5) provides that the bankruptcy filing stays any entity from pursuing ‘any act . . . against property of the debtor . . . .’ Accordingly, although 11 U.S.C. § 362(c)(1) would not apply post confirmation, Section 362(c)(2) would be applicable and would continue the stay against property of the debtor until closing of the case, dismissal of the case or discharge of the debtor, whichever first occurs.”); Littke v. Trust Corp. Mortgage Co. (In re Littke), 105 B.R. 905 (Bankr. N.D. Ind. 1989) (Even if estate disintegrates at confirmation, automatic stay under § 362(a)(1), (5) and (6) remains in effect. When debtor defaults in payments to a creditor “outside” the plan after confirmation, the creditor cannot enforce its debt without first seeking and receiving relief from the stay.); Mellon Fin. Servs. Corp. #9 v. Broman (In re Broman), 82 B.R. 581 (Bankr. D. Colo. 1988) (In re Nicholson, 70 B.R. 398 (Bankr. D. Colo. 1987), correctly holds that after confirmation 11 U.S.C. § 362(a)(3) and (4) no longer apply and the secured claim holder’s rights and interests are defined strictly by the confirmed plan. However, it does not follow that the confirmed plan constitutes a “new agreement.” Section 362(a)(5) and (6) do apply postconfirmation to creditors whose claims arose prepetition, and “the only remedy for a debtor’s default post-confirmation is to seek dismissal of the case.”).

 

14  See, e.g., Eden v. Robert A. Chapski, Ltd. (In re Eden), No. 03 CV 00116, 2003 WL 21147830, at *4 (N.D. Ill. May 14, 2003) (Judgment for attorney fees entered by state court after confirmation was a postpetition debt that could be collected from the debtor’s wages without interfering with plan payments to the trustee; payments were not from property of the Chapter 13 estate and were not prohibited by the automatic stay. Confirmation order provided that “[p]roperty of the estate shall revest in the debtor upon confirmation of the plan.” More than a year after confirmation, domestic relations court ordered debtor to pay several thousand dollars to former spouse’s attorney. “Under [Black v. United States Postal Service (In re Heath), 115 F.3d 521 (7th Cir. 1997),] to the extent Eden’s wages were not necessary to fulfill his $1088.00 monthly payment to the bankruptcy trustee, they were not the property of the bankruptcy estate.”); Chicago v. Fisher (In re Fisher), 203 B.R. 958 (N.D. Ill. 1997) (City did not violate the automatic stay by booting, towing and destroying debtor’s car after confirmation based on postconfirmation unpaid parking tickets because car was prepetition property that vested in the debtor at confirmation, and the car was not property of the estate and was not protected by § 362(a)(3).); Mason v. Williams, 51 B.R. 548 (D. Or. 1985) (Because estate ceases to exist upon confirmation under § 1327, postconfirmation creditor can collect postconfirmation judgment from the debtor’s postconfirmation wages.); EconoLube N’ Tune, Inc. v. Frausto (In re Frausto), 259 B.R. 201 (Bankr. N.D. Ala. 2000) (Applying “estate transformation approach” from Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666 (2001), $100,000 settlement of prepetition lawsuit vested in debtor at confirmation and is not property of Chapter 13 estate; postpetition creditor can garnish the proceeds without violating stay.); Montclair Property Owners Ass’n, Inc. v. Reynard (In re Reynard), 250 B.R. 241 (Bankr. E.D. Va. 2000) (Postpetition homeowner association debts are not subject to the automatic stay after confirmation with respect to a suit against the debtor or an action against property that vested in the debtor and is not property of the estate.); In re Markowicz, 150 B.R. 461, 462 (Bankr. D. Nev. 1993) (IRS did not violate automatic stay when it levied upon debtor’s postconfirmation wages to collect a postpetition tax claim where plan contained a provision that “[u]pon confirmation of this plan, all property of the estate shall vest in the debtor.” The IRS did not need relief from the stay because, by virtue of § 1327(b), “property acquired by a chapter 13 debtor post-petition that is not committed to the funding of a plan is not property of the estate.”); In re Thompson, 142 B.R. 961 (Bankr. D. Colo. 1992) (Upon confirmation, the postpetition earnings of the debtor other than the portion paid to the trustee revest in the debtor in accordance with § 1327(b) and are no longer protected by the automatic stay. Because the IRS seeks to levy against property that has revested in the debtor, the IRS’s postconfirmation collection of a postpetition claim does not violate the automatic stay.); American Gen. Fin., Inc. v. McKnight (In re McKnight), 136 B.R. 891, 894 (Bankr. S.D. Ga. 1992) (“The stay of § 362(a) does not apply to the collection efforts of . . . a post-petition creditor, to enforce payment of its debt by continuing garnishment under applicable state law to the exclusion of postpetition earnings devoted to plan payments, which remain property of the estate.”); In re Ziegler, 136 B.R. 497 (Bankr. N.D. Ill. 1992) (Earnings from a debtor’s postpetition services that are not needed or committed to funding the Chapter 13 plan are the debtor’s property and are not automatically protected by the automatic stay from the collection efforts of a postpetition claim holder); Lambright v. United States, 125 B.R. 733 (Bankr. N.D. Tex. 1991) (Absent a provision to the contrary in the plan or the order of confirmation, upon confirmation property of the estate vested in the debtor under § 1327(b), and the automatic stay no longer applied. The debtor’s right to receive civil service annuity benefits was not protected after confirmation from a notice of levy by the IRS with respect to postpetition taxes.); In re Petruccelli, 113 B.R. 5 (Bankr. S.D. Cal. 1990) (After exhaustive review of § 1327(b) cases, court concludes that Mason v. Williams, 51 B.R. 548 (D. Or. 1985), is persuasive. Upon confirmation, property of the estate vests in the debtor and is no longer property of the estate unless the plan or order of confirmation provides otherwise. IRS did not violate stay when it levied upon postpetition earnings to collect a postpetition tax claim when the plan did not undo the revesting effect of § 1327(b). Revesting of property in the debtor under § 1327(b) is complete unless expressly postponed by the plan or order of confirmation. IRS was entitled to entire $8,500 in the debtor’s bank account at the time of levy notwithstanding that the debtor’s plan called for payments of $1,800 per month. If the debtor intended to interrupt revesting to the extent of the $1,800-per-month payment, the plan or order of confirmation should clearly have so stated.); In re Walker, 84 B.R. 888 (Bankr. D.D.C. 1988) (When Chapter 13 plan does not provide otherwise, residence revested in debtor upon confirmation of the plan and is no longer property of the estate. The automatic stay does not apply to effort of condominium association to collect postpetition condominium fees owed by the debtor.). But see In re Osei, 90 B.R. 910 (Bankr. N.D. Ill. 1988) (Citing Mason v. Williams, 51 B.R. 548 (D. Or. 1985), with approval but adopting “the pragmatic approach used by the court in [In re Clarke, 71 B.R. 747 (Bankr. E.D. Pa. 1987)].” although the Chapter 13 estate terminated upon confirmation under § 1327(b), a postpetition creditor has some burden to demonstrate cause for relief from the stay to pursue the debtor’s postconfirmation wages.); In re Clarke, 71 B.R. 747 (Bankr. E.D. Pa. 1987) (Confirmation vests property of the estate in the debtor; however, the estate does not disappear, and the property that vests in the debtor at confirmation remains subject to the automatic stay. A postpetition creditor needs relief from the stay to seek collection from the debtor or from property that vested in the debtor upon confirmation.).

 

15  See § 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5  Postpetition Claims and Relief from the Stay. See, e.g., Chicago v. Fisher (In re Fisher), 203 B.R. 958, 961 n.3 (N.D. Ill. 1997) (“[Section] 1327(b) authorizes the plan to clarify the nature of the property of the estate after confirmation, and thus careful planning could avoid the wasteful litigation arising from a plan that fails to address the issue.”); Montclair Property Owners Ass’n, Inc. v. Reynard (In re Reynard), 250 B.R. 241, 249–50 (Bankr. E.D. Va. 2000) (Although postpetition homeowner association debts are not subject to the stay with respect to a suit against the debtor or collection from property of the estate that vested in the debtor at confirmation, association is subject to the stay with respect to property that remains property of the estate after confirmation. “All post-confirmation earnings—not just the amount of the plan payment—are necessary for the success of a chapter 13 plan and must be property of the post-confirmation chapter 13 estate. They are protected by the automatic stay.”). But see Black v. United States Postal Serv. (In re Heath), 115 F.3d 521, 524 (7th Cir. 1997) (In dicta, “[i]t would presumably be an abuse of discretion for the bankruptcy judge to confirm a plan that retained more of the property in the hands of the trustee than was reasonably necessary to fulfill the plan, though we need not decide that in this case.”).

 

16  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.

 

17  See, e.g., Telfair v. First Union Mortgage Corp., 216 F.3d 1333, 1340 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666 (2001) (Adopting the “estate transformation approach” and without mention of § 362(a)(5), payments by the debtor directly to a mortgage holder vested in the debtor at confirmation, ceased to be property of the estate and were not protected by the automatic stay from the mortgage holder’s decision to apply the payments to attorney’s fees and reimbursement of insurance expenses. “In this case, after confirmation, only the amount required for the plan payments remained property of the estate. Telfair’s regular loan payments, made outside of the plan, were therefore no longer property of the estate and First Union’s application of a portion of those payments to attorney’s fees pursuant to the Deed did not violate section 362(a).”); Eden v. Robert A. Chapski, Ltd. (In re Eden), No. 03 CV 00116, 2003 WL 21147830, at *4 (N.D. Ill. May 14, 2003) (Citing Black v. United States Postal Service (In re Heath), 115 F.3d 521 (7th Cir. 1997), postpetition judgment for ex-spouse’s attorney fees was a postpetition debt that could be collected from the portion of the debtor’s wages that revested in the debtor at confirmation and was not necessary to performance under the plan. “Like the plan in Heath, Eden’s plan provides that property of the estate will vest in the debtor upon confirmation of the plan. Furthermore, the plan requires Eden to submit his future income and earnings to the control of the Chapter 13 trustee ‘only as necessary for the execution’ of the plan. Under Heath, to the extent Eden’s wages were not necessary to fulfill his $1088.00 monthly payment to the bankruptcy trustee, they were not the property of the bankruptcy estate. Eden did not present either the Bankruptcy Court or this Court with evidence that the payments to Chapski interfered with his ability to meet his obligations under the Chapter 13 plan.”); Annese v. Kolenda (In re Kolenda), 212 B.R. 851, 853–55 (W.D. Mich. 1997) (Postconfirmation lender willfully violated automatic stay by retitling and repossessing a car acquired by the debtor after confirmation. A year after confirmation, the debtors acquired a car, then borrowed $1,316 using the car as collateral. Debtors “signed what purported to be a lease agreement by which debtors retained possession of the car and paid [the creditor] $133.56 every two weeks for six months. At the end of the lease, debtors could purchase the car back for $1,500.” After default and notwithstanding warnings from debtors’ counsel, creditor changed the title of the car, repossessed the car and sold it. Bankruptcy court found a willful violation of the stay and awarded damages of $7,316. Discussing the interaction of §§ 1327(b) and 1306(a), the district court found three approaches: “the ‘estate termination’ approach . . . the estate vests with the debtor and the estate ceases to exist. . . . [T]he ‘estate transformation’ approach . . . after confirmation, only plan-essential property remains in the estate . . . . [T]he ‘estate preservation’ approach . . . section 1327(b) is understood to remove no property from the estate. . . . [T]he third approach, the estate preservation approach, makes the most sense . . . . Section 1327(a) appears to address the vesting of property that is in the estate at the time of the confirmation. . . . Here, the car at issue was not acquired until after the confirmation of a plan. Accordingly, section 1327(b) does not appear to say anything about this particular property. Section 1306(a), in contrast, clearly provides that post-petition earnings and acquisitions are part of the estate. . . . I therefore conclude that even if the property in the estate at the time of confirmation is transferred to the debtor under § 1327(b), the estate continues to exist, and property acquired post-confirmation is added to the estate until the case is ‘closed, dismissed, or converted.’”); EconoLube N’ Tune, Inc. v. Frausto (In re Frausto), 259 B.R. 201 (Bankr. N.D. Ala. 2000) (Applying “estate transformation approach” from Telfair v. First Union Mortgage Corp., 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666 (2001), $100,000 settlement of prepetition lawsuit vested in debtor at confirmation and is not property of Chapter 13 estate; postpetition creditor can garnish the proceeds without violating stay.); Montclair Property Owners Ass’n, Inc. v. Reynard (In re Reynard), 250 B.R. 241 (Bankr. E.D. Va. 2000) (Homeowner’s association is not subject to the automatic stay with respect to collection of 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 personally for the postpetition assessments; however, vesting effect of confirmation in § 1327(b) does not eliminate the Chapter 13 estate and homeowner association needs relief from the stay to collect its postpetition debt from postpetition wages that remain property of the Chapter 13 estate after confirmation.); Holden v. United States (In re Holden), 236 B.R. 156, 164–65 & n.12 (Bankr. D. Vt. 1999) (Postconfirmation tax refund became property of estate, and IRS violated automatic stay by imposing a “V-freeze” when IRS did not have a right of setoff. “[W]e adopt the fourth view of the interplay between § 1306(a) and § 1327(b), and hold that upon confirmation of a Chapter 13 plan, all property of the estate is emptied from the estate and revested in the Debtors under § 1327(b). Such property is no longer property of the estate. Immediately after confirmation, the estate begins to be refilled by property acquired by Debtors post-confirmation. That property is protected by the automatic stay and remains so until the case is closed, converted, or dismissed.” IRS admitted that it did not have a right of setoff. “[T]he V-freeze, which indefinitely delayed Debtors’ receipt of their refund, was an exercise of control over estate property. . . . IRS violated § 362(a)(3) when it froze Debtors’ tax refund.” Debtors awarded $1,000 in general damages, $7,000 in emotional damages and $12,500 in attorney’s fees.); Oliver v. Toth (In re Toth), 193 B.R. 992, 994–97 (Bankr. N.D. Ga. 1996) (Adopting In re Petruccelli, 113 B.R. 5 (Bankr. S.D. Cal. 1990), automatic stay does not prohibit postconfirmation foreclosure sale on real property acquired by the debtor after confirmation where there is no provision of the plan or order of confirmation that defeats the vesting effect of § 1327(b) or (c). Court acknowledges three views on the subject: one line of cases holds that “property committed to the plan remains property of the estate but all other property becomes property of the debtor . . . . Another line of cases holds that all property of the estate vests in debtor at confirmation and is no longer property of the estate. . . . The third line of cases holds that vesting does not end the estate and, therefore, all property of the debtor, even that acquired postconfirmation, is property of the estate and is protected by the automatic stay until discharge or dismissal. . . . The most persuasive resolution of the ‘vesting’ and confirmation-effect issues is the comprehensive discussion contained in the case of Petruccelli . . . if the ‘vesting’ provided for in § 1327 does not act to end the estate, then § 1327 becomes redundant and the term ‘vest’ is deprived of any meaning separate from ‘possession.’ . . . Subjecting postpetition creditors to the automatic stay and blocking attempts to collect following postconfirmation defaults would make a debtor a credit pariah.”); In re Leavell, 190 B.R. 536 (Bankr. E.D. Va. 1995) (Postpetition creditor did not violate automatic stay by taking judgment and garnishing debtor’s postpetition earnings because, although estate continues to exist after confirmation, only postpetition earnings necessary to fund the Chapter 13 plan are property of the postconfirmation estate. Confirmed plan provided that property of the estate vested in the debtor. Court reserves the question whether property acquired postpetition would be protected by the automatic stay.); Gaertner v. Choske (In re Henry), 143 B.R. 811, 814 (Bankr. W.D. Pa. 1992) (Revesting effect of § 1327(b) does not subject a debtor’s postconfirmation earnings to attachment for the collection of a prepetition child support arrearage. “[T]he Debtor’s future earnings during the Chapter 13 reorganization, until either the plan is completed or the case is converted, are property of the bankruptcy estate and are not subject to attachment. Creditors are instructed to file claims. The future earnings of the Debtor fund this reorganization. Without the automatic stay to protect those earnings, reorganization would not be possible.”); In re Thompson, 142 B.R. 961 (Bankr. D. Colo. 1992) (To give proper effect to §§ 541, 1306 and 1327 in the context of a request from a postpetition claim holder for postconfirmation relief from the stay, property of the estate after confirmation consists of only those funds that are actually committed by the debtor to be paid from postpetition earnings to the Chapter 13 trustee. Upon confirmation, the postpetition earnings of the debtor other than the portion paid to the trustee revest in the debtor in accordance with § 1327(b) and are no longer protected by the automatic stay.); American Gen. Fin., Inc. v. McKnight (In re McKnight), 136 B.R. 891, 894 (Bankr. S.D. Ga. 1992) (When plan and order of confirmation provided that property of the estate revested in the debtor upon confirmation, “according to § 1327(b) and the order of confirmation, the property of the estate vested in the debtor. The bankruptcy estate did not disappear upon confirmation. . . . The bankruptcy estate continues and consists of the post-petition earnings of the debtor devoted to plan payments. . . . [O]nly post-petition earnings devoted to plan payments constitute postconfirmation property of the estate and are protected under the stay of § 362(a).”); In re Ziegler, 136 B.R. 497, 502 (Bankr. N.D. Ill. 1992) (Notwithstanding the revesting effect of § 1327(b), “earnings from a debtor’s services created postconfirmation needed or committed to fund the confirmed plan become property of the estate when they come into being to be later paid to the trustee and are protected by the stay of § 362(a)(3) and (a)(4) against post-petition claims. The remainder of the earnings are more properly characterized as the debtor’s property and not automatically protected by the automatic stay from post-petition claims.” The court “respectfully disagrees with the position taken in Mason and its progeny that all property of the estate vests in the debtor upon confirmation and thereafter no estate subsequently exists. . . . [V]esting, like confirmation, is a temporal event which occurs once in a case and does not preclude the coming into existence of property of the bankruptcy estate in futuro.”); In re Root, 61 B.R. 984 (Bankr. D. Colo. 1986) (Confirmation does not cause the disintegration of the Chapter 13 estate. Rather, any property that has been designated in the plan or order of confirmation as necessary for the execution of the plan—for example, postpetition wages up to the amount of the required plan payments—remains “property of the estate.” Any property that has not been designated as necessary for the execution of the plan revests in the debtor and is no longer property of the estate.).

 

18  259 B.R. 201 (Bankr. N.D. Ala. 2000).

 

19  216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666 (2001).

 

20  259 B.R. at 208.

 

21  259 B.R. at 216–17.

 

22  250 B.R. 241 (Bankr. E.D. Va. 2000).

 

23  250 B.R. at 244–50.

 

24  See § 58.5  Alimony and Support Exception and § 58.6  Domestic Support Obligation Exception after BAPCPA.

 

25  11 U.S.C. § 362(b)(2)(B).

 

26  See § 246.1 [ Alimony and Support Collection after Confirmation ] § 124.6  Alimony and Support Collection after Confirmation. See, e.g., In re Engel, 151 B.R. 542, 542–43 (Bankr. D. Idaho 1993) (“Upon confirmation of a chapter 13 plan all of the property of the estate becomes vested in the debtor. The child support payments as provided in the debtor’s plan are thus not property of the estate and section 362(b)(2) is applicable. Further §§ 523(a)(5) and 1328(a)(2) except child support obligations from discharge.” Citing Pacana v. Pacana-Siler (In re Pacana), 125 B.R. 19 (B.A.P. 9th Cir. 1991), and the “Congressional intent” that child support claimants need not wait in line with other creditors, state bureau “may proceed under the exception of § 362(b)(2) and stay relief is appropriate.”).

 

27  See, e.g., In re Price, 179 B.R. 209 (Bankr. E.D. Cal. 1995) (District attorney violated automatic stay by continuing wage assignment to collect child support arrearages before and after confirmation where plan provided that property of the estate did not vest in the debtor. Exception for collection of child support in § 362(b)(2) was not triggered by § 1327(b) because confirmation order provided otherwise.).

 

28  See §§ 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) and 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.

 

29  See § 245.1 [ Postpetition Claims and Relief from the Stay ] § 124.5  Postpetition Claims and Relief from the Stay. The downsides of a provision contrary to the vesting effect are discussed in § 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.

 

30  Laughlin v. United States, 912 F.2d 197 (8th Cir. 1990).

 

31  Security Bank of Marshalltown v. Neiman, 1 F.3d 687, 690–91 (8th Cir. 1993) (Postpetition debts incurred by Chapter 13 debtors to continue their farming operation were costs of preserving the estate under § 503(b)(1)(A) notwithstanding confirmation of a plan that did not specifically preserve the estate. Eighth Circuit states that it resolved Laughlin v. United States, 912 F.2d 197 (8th Cir. 1990), cert. denied, 498 U.S. 1120, 111 S. Ct. 1073, 112 L. Ed. 2d 1179 (1991), “without addressing” the issue whether confirmation terminated the existence of the Chapter 13 estate. “We join the line of cases holding the estate continues to exist after confirmation of the Chapter 13 plan. Upon reviewing § 1327 regarding the effect of confirmation, even if property of the estate vests in the debtor at confirmation, that does not necessarily mean that the estate no longer exists. The estate can continue to exist as a legal entity after confirmation even if it holds no property. . . . ‘There must be an “estate” upon and after confirmation, and that estate consists of the property and future earnings of the debtor dedicated to fulfillment of the Chapter 13 plan.’ . . . We think that the opposing line of cases is ‘premised upon the mistaken belief that revesting under § 1327(b) transforms property of the estate into property of the debtor.’ . . . The post-petition debts in the present case were incurred for feed and veterinary services for debtors’ hog herd and should be considered administrative expenses necessary to preserve the estate pursuant to § 503(b)(1)(A).”).

 

32  See In re Bunn, 170 B.R. 670 (Bankr. D. Minn. 1994) (Applying Security Bank of Marshalltown v. Neiman, 1 F.3d 687 (8th Cir. 1993), confirmation did not extinguish the Chapter 13 estate, thus the exception in § 362(b)(2) does not entitle county to relief from the stay to collect child support arrearages after confirmation.).