Cite as: Keith M. Lundin, Lundin On Chapter 13, § 53.6, at ¶ ____, LundinOnChapter13.com (last visited __________).
In most jurisdictions, the debtor prepares and prosecutes the Chapter 13 plan. This is consistent with § 1321, which requires that “the debtor shall file a plan.”1
However, the Code imposes on the Chapter 13 trustee the duty to “appear and be heard” at any hearing on confirmation of a plan.2 To be adequately familiar with the plan and the debtor’s circumstances, most Chapter 13 trustees get involved in every case soon after filing. In some jurisdictions, the standing trustee has a required or preferred form for the Chapter 13 plan.3 In many jurisdictions, the Chapter 13 trustee actively participates in preparation of plans. In some jurisdictions, at the meeting of creditors, the trustee will work through the debtor’s plan, making modifications and fine-tuning to bring the plan within the trustee’s view of the limits on confirmation in the district. In other jurisdictions, the Chapter 13 trustee meets with debtors and counsel before (or after) the meeting of creditors, and the trustee authors and presents the plan to the court. There is no standard practice with respect to Chapter 13 trustees’ participation in the plan process. Debtors’ and creditors’ counsel have to divine the local culture to know how to play the game. If debtor’s counsel and the trustee disagree about the content of the plan, then the trustee becomes an adversary and may appear in opposition to confirmation.
The statutory requirement that the Chapter 13 trustee appear and be heard at any hearing regarding confirmation of a plan seems to require that the trustee must be physically present at every confirmation hearing in every case and that the trustee must have something to say with respect to confirmation. It has been held that the trustee’s attendance at the hearing on confirmation is mandatory.4 The requirement that the trustee be heard at the confirmation hearing has been interpreted to require that the trustee must have a recommendation for or against confirmation.5 The statutory role of the Chapter 13 trustee to participate in confirmation of plans has not been imputed to the U.S. trustee—for example, it has been held that the U.S. trustee does not have standing to object to confirmation under 11 U.S.C. § 1325(b).6
The trustee is also required by statute to appear and be heard with respect to any modification of a plan after confirmation.7 There is no specific requirement that the trustee participate in plan modification before confirmation.8 In most jurisdictions, preconfirmation modifications are not separately set for hearing, but the modified plan becomes the plan that is addressed at the confirmation hearing. Thus indirectly, the trustee’s obligation to be present and heard at the confirmation hearing covers any preconfirmation modifications that may have been filed.
The limits on the responsibility of a Chapter 13 trustee to appear and be heard with respect to confirmation are not clear. Some of the reported decisions suggest that the Chapter 13 trustee is a sort of guardian for all of the players in a Chapter 13 case.
Like the trustee in a Chapter 7 case, it has been said that the Chapter 13 trustee is a “representative of the estate . . . charged with representing the interests of the unsecured creditors.”9 This court concluded that the Chapter 13 trustee had standing to object to confirmation of a plan that accelerated the payment of a secured claim because unsecured creditors would suffer delay in distributions and elevated risk of nonpayment.
It has been held that the Chapter 13 trustee has standing to object to confirmation even when the ground is specific to the rights of a creditor.10 For example, in Andrews v. Loheit (In re Andrews),11 the Chapter 13 trustee objected to confirmation because the proposed plan affected secured claim holders in a manner that was unacceptable to the trustee. No secured claim holder objected to confirmation. The debtor resisted the trustee’s objection on the ground that the trustee was without standing to represent the interests of secured claim holders that had not filed objections. The Bankruptcy Appellate Panel for the Ninth Circuit found that the duty of the Chapter 13 trustee to appear and be heard with respect to confirmation under § 1302(b)(2)(B) “encompasses the duty to review plans for compliance with confirmation requirements and to make a recommendation to the court on confirmation.”12 That the trustee’s objection arose under § 1325(a)(5)—a section of the Code protecting the rights of secured claim holders only13—did not deter the BAP from holding that the Chapter 13 trustee had standing to object to confirmation on behalf of secured claim holders.14
On further review, the Ninth Circuit affirmed the BAP’s conclusion that § 1302(b)(2) conferred standing on the Chapter 13 trustee to object to confirmation.15 The Circuit panel declared, “[T]he primary purpose of the Chapter 13 trustee is not just to serve the interests of the unsecured creditors, but rather, to serve the interests of all creditors.”16 Disagreeing with the BAP’s analysis of § 1325(a)(5), the Ninth Circuit found authority for the trustee’s objection to confirmation on behalf of secured claim holders in the “kitchen sink” condition for confirmation in § 1325(a)(1)17 that the plan must “comply with the provisions of this chapter and with the other applicable provisions of this title.”
Andrews seems to say that the duty in § 1302(b)(2)(B), coupled with the condition on confirmation in § 1325(a)(1), confers standing on the Chapter 13 trustee to object to confirmation on any ground found in the Code, notwithstanding that the rights being protected are particular to a class of creditors.18 For example, in Meyer v. Hill (In re Hill),19 the Ninth Circuit BAP interpreted Andrews to give the Chapter 13 trustee standing to object to confirmation of a plan that the trustee believed unfairly classified unsecured debt.20 The broad responsibility to appear and be heard at confirmation could be misinterpreted to render the Chapter 13 trustee responsible for protecting the rights of all creditors in all cases—a daunting (impossible) undertaking for the Chapter 13 trustee.
Creditors are responsible for representing their own interests in Chapter 13 cases, including objecting to confirmation when appropriate. The Chapter 13 trustee cannot substitute for diligent creditor policing of Chapter 13 plans. That the trustee shall appear and be heard with respect to confirmation should not be misinterpreted to mean that the Chapter 13 trustee has the duty to identify all objections to confirmation and to raise those objections without regard to whether creditors are protecting themselves.
There is no statutory requirement that a Chapter 13 trustee be a lawyer. Standing trustees are nonlawyers in many jurisdictions. It is the practice in some districts that nonlawyer standing trustees file objections to confirmation and represent themselves at confirmation hearings. The question whether this constitutes the unauthorized practice of law has produced no useful decisions.21
2 11 U.S.C. § 1302(b)(2)(B).
4 In re Perskin, 9 B.R. 626 (Bankr. N.D. Tex. 1981). Accord Colandrea v. Colandrea, 17 B.R. 568 (Bankr. D. Md. 1982); In re Fizer, 1 B.R. 400 (Bankr. S.D. Ohio 1979).
5 In re Foulk, 134 B.R. 929, 930–31 (Bankr. D. Neb. 1991) (Requirement that standing Chapter 13 trustee “appear and be heard” at any hearing regarding confirmation of a plan requires trustee to make a recommendation for or against confirmation. “[T]he trustee filed a motion specifically requesting entry of a confirmation order. The trustee’s motion states that upon ‘faith and belief’ no objection to confirmation had been filed and that the plan should be confirmed. However, the trustee’s motion falls short of containing a specific confirmation recommendation. . . . [T]he requirement that the trustee ‘be heard’ suggests that the trustee must make a recommendation for or against confirmation. . . . The form motion used by the Chapter 13 standing trustee to request confirmation is deficient because it does not clearly state that the trustee recommends that the plan be confirmed. The trustee may not equivocate about confirmation. The trustee must either recommend confirmation or object to confirmation. The Chapter 13 standing trustee should thus review all Chapter 13 plans in detail and should file objections to confirmation and claimed exemptions where warranted. . . . [T]he United States Trustee should get involved . . . and require the . . . standing trustee to thoroughly review Chapter 13 plans for compliance with § 1325, and in particular subsection (a)(4) thereof. The trustee should also be required to examine the validity of claimed exemptions and, where appropriate, to file objections to confirmation and to claimed exemptions.”).
6 In re Eaton, 130 B.R. 74 (Bankr. S.D. Iowa 1991). See § 219.1 [ Standing to Object ] § 116.1 Standing to Object.
7 11 U.S.C. § 1302(b)(2)(A), discussed in § 58.7 [ Appear and Be Heard with Respect to Modification of Plans after Confirmation ] § 53.8 Appear and Be Heard with Respect to Modification of Plans after Confirmation.
8 11 U.S.C. § 1323 is discussed at § 114.1 Timing, Procedure and Form.
9 In re Liles, 292 B.R. 138, 139 (Bankr. E.D. Tex. 2002).
10 See § 219.1 [ Standing to Object ] § 116.1 Standing to Object.
11 155 B.R. 769 (B.A.P. 9th Cir. 1993), aff’d, 49 F.3d 1404 (9th Cir. 1995).
12 155 B.R. at 771.
13 See § 101.1 [ General Rules ] § 74.1 General Rules before BAPCPA.
14 Andrews v. Loheit (In re Andrews), 155 B.R. at 772 (“We hold that the Chapter 13 trustee has standing to raise an objection to confirmation under § 1325(a)(5).”).
15 Andrews v. Loheit (In re Andrews), 49 F.3d 1404 (9th Cir. 1995). Accord In re Dingley, 189 B.R. 264 (Bankr. N.D.N.Y. 1995) (Chapter 13 trustee has duty to object to confirmation of plan that proposes to pay interest to an undersecured claim holder in excess of that necessary to preserve present value under § 1325(a)(5). The trustee’s standing arises from § 1302(b)(2)(B). Overpayment of interest to one secured claim holder reduces disposable income available for distribution to other creditors.).
16 49 F.3d at 1407.
17 See § 203.1 [ Plan Complies with Bankruptcy Code ] § 113.1 Plan Complies with Bankruptcy Code.
18 The argument was made but rejected in Andrews that the specific grant of standing to the Chapter 13 trustee and to the holders of allowed unsecured claims to object to confirmation under the disposable income test in 11 U.S.C. § 1325(b) restricted, by negative implication, the standing of a Chapter 13 trustee to object to confirmation on other grounds. Andrews v. Loheit (In re Andrews), 49 F.3d 1404, 1409 (9th Cir. 1995). The standing of a Chapter 13 trustee to object to confirmation of a Chapter 13 plan is discussed further in § 219.1 [ Standing to Object ] § 116.1 Standing to Object.
19 268 B.R. 548 (B.A.P. 9th Cir. 2001).
20 See also § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1 Power to Classify Unsecured Claims: Tests for Unfair Discrimination.
21 See Harshbarger v. Pees (In re Harshbarger), 66 F.3d 775, 777 n.3 (6th Cir. 1995) (In a footnote, court declines to address debtor’s argument that standing Chapter 13 trustee’s objection to confirmation was improper because it “constituted the unauthorized practice of law by the Trustee.”).