§ 117.2 — Relief from Confirmation Order: Bankruptcy Rules 9023 and 9024
Revised: June 11, 2004
At first blush, Bankruptcy Rules 9023 and 9024 apply in Chapter 13 cases, and Rules 59 and 60 of the Federal Rules of Civil Procedure are available to challenge the order of confirmation. Rule 59(e) would permit a motion to alter or amend the order of confirmation if the motion is served not later than 10 days after entry of the order.1 Rule 60 permits a later challenge if the creditor can demonstrate one of the reasons listed in Rule 60(b)—mistake, inadvertence, surprise, excusable neglect, newly discovered evidence, fraud, misrepresentation, misconduct and so forth. But Bankruptcy Rule 9024 specifically limits the availability of Rule 60: “a complaint to revoke an order confirming a plan may be filed only within the time allowed by . . . section 1330.”2 Under § 1330(a), a confirmation order can be revoked only if procured by fraud and only “on request of a party in interest . . . within 180 days” after entry.3
A fair number of reported decisions cite Rule 59 or Rule 60 as a vehicle for relief from a confirmation order, though most do so without analysis.4 Other reported decisions discuss motions to “reconsider” or to “modify” confirmation orders without clearly pinning the procedure on any particular bankruptcy rule.5
On closer inspection, there are arguments from statutory construction that confirmation orders in Chapter 13 cases are not subject to relief in the usual ways under Bankruptcy Rule 9023 or 9024. Section 1329 of the Code deals comprehensively with the modification of plans after confirmation.6 Modifying a confirmed plan under § 1329 and altering or amending a confirmation order under Bankruptcy Rule 9023 are redundant in some respects and inconsistent in others. Modification is available at any time “before the completion of payments”7 under the plan; a Rule 9023 motion “must be filed no later than 10 days after entry”8 of the confirmation order. Rule 9023 provides relief to “any of the parties”;9 only “the debtor, the trustee, or the holder of an allowed unsecured claim”10 have standing to seek modification of a plan after confirmation. Alteration or amendment of an order under Rule 9023 can be for “any of the reasons”11 traditionally recognized by equity courts; modification after confirmation is limited to the three specific classes of changes listed in § 1329(a).12
Similarly, Bankruptcy Rule 9024 (Rule 60 of the Federal Rules of Civil Procedure) supports relief from a confirmation order for reasons that overlap some of the modifications contemplated by § 1329, but Rule 60 as modified by Bankruptcy Rule 9024 has different time constraints and its standards are more rigorous in some respects, less rigorous in others, than the tests for modification of a plan under § 1329.13
Relief from a confirmation order under Bankruptcy Rule 9024 overlaps in part but is manifestly different from revocation of an order of confirmation under § 1330. Discussed in more detail below,14 § 1330(a) provides that the bankruptcy court may revoke an order of confirmation on request of a party in interest “at any time within 180 days . . . if such order was procured by fraud.” The only ground stated in § 1330(a) for revocation of an order of confirmation is fraud, and there are no statutory exceptions to the 180-day limit on a revocation request. Rule 60(b) also lists fraud as a ground for relief from a final order, but Rule 60 relief is available for a full year after entry of the confirmation order, and Rule 60 lists many grounds other than fraud for general relief from an order. Section 1330(a) is thus substantially more limited than Bankruptcy Rule 9024, both with respect to the grounds for relief and the time periods within which relief must be sought. That Congress has specifically provided by statute the circumstances under which an order of confirmation can be revoked leads directly to the argument that a bankruptcy rule cannot provide broader or inconsistent relief. Several courts have reached exactly this conclusion.
In Branchburg Plaza Associates, L.P. v. Fesq (In re Fesq),15 a creditor failed to timely object to confirmation based on a calendaring mistake caused by human error and a computer glitch. After entry of the confirmation order, the creditor argued that Bankruptcy Rule 9024 required the bankruptcy court to consider whether excusable neglect permitted a late-filed objection to confirmation. A divided panel of the Third Circuit disagreed, explaining that Bankruptcy Rule 9024 could not be used to circumvent the fraud requirement in § 1330:
Rule 9024 cannot validly provide [the creditor] with a substantive remedy that would be foreclosed by Section 1330(a). . . . Section 1330(a) establishes fraud as the only permitted ground for obtaining relief from an order of confirmation. . . . Congress intended that reading of Section 1330(a) because it protects the finality of Chapter 13 confirmation orders. . . . Revoking a confirmation order is a measure that upsets the legitimate expectations of both debtors and creditors. Interpreting Section 1330(a) as a limiting provision permits such disruption in only a very narrow category of egregious cases.16
Citing Fesq, the Bankruptcy Appellate Panel for the Tenth Circuit concluded in Mason v. Young (In re Young)17 that a creditor could not use Bankruptcy Rule 9024 to attack confirmation after expiration of the 180-day period in 11 U.S.C. § 1330(a). The BAP elaborated on Fesq, stating an even clearer limitation on the use of Bankruptcy Rule 9024:
The Third Circuit held that § 1330 provides the complete substantive basis for revocation of Chapter 13 confirmation orders. [Branchburg Plaza Associates, L.P. v. Fesq (In re Fesq), 153 F.3d 113,120 (3d Cir. 1998)]. Fesq found that the language of the statute, the context and the background of the Bankruptcy Amendments and Federal Judgeship Act of 1984 as it relates to § 1144, the parallel statutory limitations in Chapter 11 and 12, the case law, and the policy of finality behind the Bankruptcy Code indicated that Congress intended § 1330 to limit all motions for revocation of a confirmation order to those based on fraud. Accordingly, they held that all such motions must be made within 180 days. . . . Rule 9024 cannot grant a substantive right foreclosed by § 1130(a). . . . [Section] 1329 . . . effectively addresses reconsidering confirmation due to new evidence. Importing 60(b) motions for relief based on new evidence via Rule 9024 would be redundant. . . . We hold that § 1330 provides the complete substantive basis for all motions for revocation of confirmed Chapter 13 plans.18
A dissenting judge in Fesq points out that at least the Ninth Circuit has permitted use of Bankruptcy Rule 9024 for relief from the discharge order in a Chapter 13 case notwithstanding that 11 U.S.C. § 1328(e) restricts revocation of a discharge order in a manner not unlike revocation of confirmation orders under § 1330(a).19 The Fesq opinion develops well the many facets of the collision between Bankruptcy Rule 9024 and § 1330(a).
The only sure way for a creditor to avoid getting trapped in this debate is to timely file objections before entry of the confirmation order and appeal any adverse decision. Especially in jurisdictions that impose a “change of circumstances” predicate to modification under § 1329,20 motion practice under Bankruptcy Rules 9023 and 9024 may be the only procedure available to correct simple errors and omissions in confirmation orders. Fesq and Young demonstrate that the strong policies favoring the finality of confirmation orders embodied in §§ 132721 and 1330 will trump the use of Rule 9023 and 9024 when the relief sought looks like an end run around the failure of a creditor to timely object to confirmation and when the relief sought exceeds the limits on modification of plans or revocation of confirmation orders under § 1329 or § 1330.
Perhaps the least questionable use of Bankruptcy Rules 9023 and 9024 in this context is to redress notice problems. Inadequate notice or ambiguity with respect to the content of the plan are mainstream grounds for equitable relief under Rule 59 of the Federal Rules of Civil Procedure and sometimes fit into “surprise” or “excusable neglect” for purposes of Rule 60. Bankruptcy courts have been receptive to Rule 9024 relief when notice of the plan is defective.
For example, in In re Abrams,22 Nuvell did not object to confirmation of a plan that provided a value for its collateral but specified no monthly payment or interest. Wells Fargo objected to confirmation and negotiated a preferred monthly payment of $426.23 and postconfirmation interest at 18 percent. The plan was confirmed without notice to Nuvell of the preference payment to Wells Fargo. After confirmation, Wells Fargo received essentially all of the money available for distribution by the trustee.
Seven months after confirmation, Nuvell realized its mistake and moved for relief from the confirmation order under Bankruptcy Rule 9024. The bankruptcy court concluded that Bankruptcy Rule 9024 relief was available to Nuvell with respect to the preferential monthly payment to Wells Fargo that was negotiated without notice to Nuvell; but Bankruptcy Rule 9024 was no help with the undisguised failure of the plan to provide postconfirmation interest:
Although some courts never allow relief under Rule 9024, this Court concludes that a rigid rule is inappropriate in this case. When a due process concern has been raised, the Court will vacate the order. . . . The burden under Rule 60(b) for setting aside a final order is a heavy one for the movant since res judicata is being negated. . . . 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.” . . . 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. . . . No 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. . . . 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.23
Similarly, in In re Kelly,24 the confirmed plan ambiguously provided both 100 percent payment of the IRS claim and surrender of trucks to the IRS in partial payment of its debt. Citing the Supreme Court’s decision in Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership,25 the bankruptcy court found excusable neglect under Bankruptcy Rule 9024 gave the IRS relief from the confirmation order:
The IRS’s failure to correctly interpret the Debtors’ plan was neglect under the [Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993),] Court’s definition . . . . [T]he plan copy received by the IRS was ambiguous. Paragraph 2a of the Debtors’ plan indicates that the IRS’s priority claim will be paid in full through the Debtors’ plan payments. However, paragraph five says “See attached” and the second page states that the Debtors will turn over certain trucks for the indubitable equivalent cash value of $100,000.00. The two provisions conflict, and are therefore ambiguous. . . . The ambiguity was not intended by the Debtors and is not due to any misconduct on their part. . . . The law requires the Debtors, as drafters of the plan, to bear the ill effects of any ambiguity in its provisions. . . . [T]he ambiguities created by the Debtors’ plan made [the IRS’s] neglect excusable. . . . [T]he IRS’s failure to fully review the Debtors’ plan was excusable neglect under Bankruptcy Rule 9024. . . . [T]he confirmation order . . . should be set aside and vacated.26
Abrams and Kelly counsel that Bankruptcy Rules 9023 and 9024 become uncomplicated procedures for relief from confirmation orders when the failure to timely object can be characterized as a failure of notice. As demonstrated in Abrams, when lack of notice explains only part of the missed opportunity to object to confirmation, Bankruptcy Rule 9024 is not a second bite at the apple for the creditor who was asleep at the switch.
1 The ubiquitous “motion to reconsider” is really a motion to alter or amend under Rule 59(e) of the Federal Rules of Civil Procedure.
2 Fed. R. Bankr. P. 9024.
3 11 U.S.C. § 1330(a). See § 224.1 [ Revocation of Confirmation ] § 117.3 Revocation of Confirmation.
4 See Green Tree Fin. Servicing Corp. v. Karbel (In re Karbel), 220 B.R. 108 (B.A.P. 10th Cir. 1998) (Notice of plan that included a motion to value collateral and set 25-day deadline for objections to confirmation sent to the address provided by the creditor precluded untimely objection to confirmation. Bankruptcy court appropriately rejected Green Tree’s Rule 60 motion because Green Tree unreasonably delayed its objection to confirmation and valuation for cause that was “within the reasonable control of Green Tree.”); In re Corke, 161 B.R. 64 (D. Kan. 1993) (On appeal of denial of a creditor’s Rule 60 motion to reconsider order of confirmation, district court remands with instructions that bankruptcy court consider whether creditor’s failure to appear in opposition to confirmation was “excusable neglect” under Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993).); 1st Franklin Fin. Corp. v. Barkley (In re Anthony), Nos. 00-13385, 02-1105, 2003 WL 22931323, at *13 (Bankr. N.D. Miss. Oct. 31, 2003) (Claims reconsideration under § 502(j) and relief from the confirmation order under Bankruptcy Rule 9024 support conclusion that trustee’s lawsuit against 1st Franklin for deceptive credit life and credit disability insurance transactions is not barred by confirmation order or by order allowing claims. “If indeed, 1st Franklin filed fraudulent proofs of claim previously in the aforementioned twenty-one bankruptcy cases, then those claims can be reconsidered pursuant to § 502(j) of the Bankruptcy Code in keeping with the ‘cause’ requirements specified by Bankruptcy Rule 9024 . . . . This, in effect, would allow the court to abrogate the effects of the confirmation orders and the orders previously allowing 1st Franklin’s claims.”); In re Abrams, No. 01-11493-MAM-13, 2002 WL 1404761 (Bankr. S.D. Ala. Mar. 8, 2002) (unpublished) (Bankruptcy Rule 9024 provides relief seven months after confirmation when creditor did not have adequate notice that a change in the order of payments would delay distributions; disfavored creditor cannot use Bankruptcy Rule 9024 to demand interest when confirmed plan unambiguously did not provide for interest.); In re Kelly, 281 B.R. 62 (Bankr. S.D. Ala. 2001) (Confirmation order is vacated under Bankruptcy Rule 9024 for excusable neglect when the plan ambiguously provided both 100% payment of the IRS claim and surrender of trucks to the IRS in partial payment of its debt.); In re Norris, 228 B.R. 27 (Bankr. M.D. Fla. 1998) (Motion for relief from order confirming modified Chapter 13 plan filed less than a year after entry is analyzed under Rule 60(b)(1) of the Federal Rules of Civil Procedure; movant failed to prove excusable neglect in its miscalculation of interest, thus acquiescence to entry of confirmation order stating incorrect amount was not subject to attack under Rule 60. Court applied excusable neglect standard from Pioneer Investment Services Co. v. Brunswick Associates Ltd. Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993).); O’Connell v. Mann (In re Davila), 210 B.R. 727, 732–33 (Bankr. S.D. Tex. 1996) (“Confirmation of a chapter 13 plan does not foreclose reevaluation of appropriate attorney fees at any time.” On the trustee’s complaint for reduction, disallowance or disgorgement of attorney’s fees in 155 cases, “to the extent that the orders in the 155 cases confirming the plans providing for payment of Mann’s attorneys fees may be construed as final orders, the Court revisits Mann’s fee requests in these cases pursuant to Fed.R.Bankr.P. 9024 and Fed.R.Civ.P. 60(b).”); In re Cook, 205 B.R. 617, 623 (Bankr. N.D. Ala. 1996) (Bankruptcy Rules 9023 and 9024 are available to a creditor to alter, amend or vacate an order of confirmation based on a materially false proof of claim filed by the debtor that was not noticed to the creditor. Confirmed plan provided 100% distribution to unsecured claims and treated FMCC as secured to the extent of $3,500. Debtor knew there was a substantial unsecured portion to FMCC’s claim. Debtor filed a proof of claim on behalf of FMCC stating only $3,500 secured portion. Clerk failed to send FMCC notice that debtor had filed a claim on its behalf. FMCC did not object to confirmation. FMCC filed a motion to reconsider or to set aside the confirmation order and filed an untimely proof of claim for $21,699.23. Although FMCC’s untimely proof of claim could not supersede the claim filed on its behalf by the debtor, the court found “[b]ecause the debtors owed substantially more than $3,500, the proof of claim filed by [the debtor] is materially false.” Court reconsidered and allowed the claim in the amount of $20,074.15. Court reconsidered confirmation and because there was no finding that the plan satisfied the disposable income test in § 1325(b), vacated confirmation order.); In re Puckett, 193 B.R. 842 (Bankr. N.D. Ill. 1996) (IRS demonstrated no grounds for relief from the confirmation order under Federal Rule of Civil Procedure 60(b). IRS cannot collaterally attack confirmation order by motion to reopen after debtor completed payments under plan. IRS did not object to confirmation and failed to timely file a proof of claim.); In re Saulter, 133 B.R. 148 (Bankr. W.D. Mo. 1991) (When notice of Chapter 13 case was not received by claim holder in time for adequate review of plan, cause exists under Bankruptcy Rule 9024 to allow motion for “reconsideration” filed six days after confirmation.); Etchin v. Star Servs., Inc. (In re Etchin), 128 B.R. 662, 671 (Bankr. W.D. Wis. 1991) (Rule 60 permits a bankruptcy court sua sponte to grant relief from a confirmation order. In an adversary proceeding filed after confirmation, debtor’s use of § 506 to “lien strip” was rejected. Plan was confirmed upon assumption that lien stripping was permitted. Mortgage holder did not object to confirmation. Less than a year had passed since the order confirming the plan, and “no material intervening rights ha[d] arisen in that time.” Court vacated the order of confirmation.).
5 See, e.g., Young v. IRS (In re Young), 132 B.R. 395 (S.D. Ind. 1990) (Res judicata effect of confirmation codified at § 1327(a) precludes “reconsideration” of confirmation order. Confirmed plan treated IRS claim for prepetition interest as an unsecured, nonpriority claim. IRS filed an amended proof of claim including priority unsecured claim for prepetition interest. Five months after confirmation, bankruptcy court granted motion for reconsideration, vacated order of confirmation and entered an order according priority status to the IRS claim for prepetition interest. District court held “it was an abuse of discretion for the bankruptcy court to reconsider the terms of a confirmed Chapter 13 plan.”); In re Little, No. 03-17506-WHD, 2003 WL 21656215 (Bankr. N.D. Ga. June 16, 2003) (unpublished) (Without citation to Bankruptcy Rule 9023 or 9024, on bankruptcy court’s initiative, confirmation order is “modified and amended” to delete provision that discharged postpetition student loan interest.); In re Holmes, 225 B.R. 789 (Bankr. D. Colo. 1998) (On a mortgage holder’s motion to reconsider the order confirming a plan and disallowing a portion of its claim, debtors’ motion to confirm the plan adequately noticed mortgage holder that the amount of its secured claim was at issue, and thus the confirmation process resolved the allowable amount of the mortgage holder’s claim.).
6 See discussion of modification after confirmation beginning at § 126.1 Standing, Timing and Procedure.
7 11 U.S.C. § 1329(a). See § 253.1 [ Standing, Timing and Procedure ] § 126.1 Standing, Timing and Procedure.
8 Fed. R. Civ. P. 59(e).
9 Fed. R. Civ. P. 59(a).
10 11 U.S.C. § 1329(a). See § 253.1 [ Standing, Timing and Procedure ] § 126.1 Standing, Timing and Procedure.
11 Fed. R. Civ. P. 59(a).
12 See discussion beginning at § 127.1 To Suspend Payments.
14 See § 224.1 [ Revocation of Confirmation ] § 117.3 Revocation of Confirmation.
15 153 F.3d 113 (3d Cir. 1998), cert. denied, 526 U.S. 1018, 119 S. Ct. 1253, 143 L. Ed. 2d 350 (1999).
16 153 F.3d at 116–20.
17 237 B.R. 791 (B.A.P. 10th Cir. 1999).
18 237 B.R. at 802–03. Accord Educational Credit Mgmt. Corp. v. Robinson (In re Robinson), 293 B.R. 59, 64–65 (Bankr. D. Or. 2002) (Bankruptcy Rule 9024 (FRCP 60(b)) does not provide additional grounds for revocation of a Chapter 13 confirmation order when no fraud is alleged and due process was respected during the confirmation process. Student loan creditor failed to object to modified plan that discharged student loans because of the “convoluted assignment process” with respect to the student loan guarantee. “[T]his Court agrees with . . . the [Branchburg Plaza Associates, L.P. v. Fesq (In re Fesq), 153 F.3d 113 (3d Cir. 1998),] majority . . . § 1330(a) must be construed as Congress’ acknowledgment that confirmation orders are indeed different than other orders.”); In re Crumrine, No. 98-13599, 2000 WL 854987, at *2 (Bankr. N.D. Cal. June 21, 2000) (unpublished) (Rule 60 is not available to vacate a Chapter 13 confirmation order; even if the rule is applicable, the objecting creditor has shown no equitable ground for relief. Objecting creditors (the parents of the debtor) were given notice of the hearing on confirmation, but notice was not sent to the objecting creditors’ attorney. Eight months after confirmation, objecting creditors filed motion to revoke confirmation, citing Rule 60 of the Federal Rules of Civil Procedure. “[Rule 60 of the Federal Rules of Civil Procedure] is not fully applicable in bankruptcy proceedings. FRBP 9024 does provide that FRCP 60 applies generally to bankruptcy matters, with several exceptions. The last sentence of that rule provides that ‘a complaint to revoke an order confirming a plan may be filed only within the time allowed by . . . 1330.’ It is therefore almost certain that the court has no equitable power to ignore the bar date under any circumstances. . . . However, even if the court had the power to vacate the confirmation order on equitable grounds it would not do so. The [objecting creditors] have not rebutted the presumption that they received notice of the hearing on confirmation of the plan. . . . Their entire argument is that their counsel should have received the notice instead of them. This does not rise to anywhere near the level of denial of due process. . . . Even if the [objecting creditors] had received no notice at all, the court would not grant the motion because the [objecting creditors] did not act diligently. They have no valid excuse for the eight-month delay in filing their motion.”).
19 See Cisneros v. United States (In re Cisneros), 994 F.2d 1462 (9th Cir. 1993). But see Educational Credit Mgmt. Corp. v. Robinson (In re Robinson), 293 B.R. 59, 64 (Bankr. D. Or. 2002) (When due process was respected and no fraud is alleged, Bankruptcy Rule 9024 does not provide additional grounds for revocation of a Chapter 13 confirmation order. “[T]he confirmation of Debtor’s Chapter 13 plan cannot be revoked based upon a mistake of fact, such as existed in [Cisneros v. United States (In re Cisneros), 994 F.2d 1462 (9th Cir. 1993)].”). Revocation of discharge under 11 U.S.C. § 1328(e) is discussed in § 356.1 [ Revocation of Discharge and Relief from Discharge Order ] § 161.2 Revocation of Discharge and Relief from Discharge Order.
20 See § 257.1 [ Changed-Circumstances Requirement? ] § 126.5 Changed-Circumstances Requirement?.
21 See discussion beginning at § 120.1 11 U.S.C. § 1327: Overview.
22 No. 01-11493-MAM-13, 2002 WL 1404761 (Bankr. S.D. Ala. Mar. 8, 2002) (unpublished).
23 2002 WL 1404761, at *1–*4.
24 281 B.R. 62 (Bankr. S.D. Ala. 2001).
25 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993).
26 281 B.R. at 66–67.