§ 127.7 — To Surrender Collateral, Account for Repossession or Change the Treatment of a Secured Claim

Revised: July 14, 2004

[1]

Imagine a confirmed Chapter 13 plan that pays $250-per-month to a creditor with a lien on a car worth $5,000. Three months after confirmation the engine blows and the transmission falls out and the car is now worth $1,000 as scrap. The debtor moves to modify the plan to surrender the car and pay the deficiency the same 10 percent as other unsecured claims.

[2]

Or imagine that the debtor defaults in payments under the plan just described and the car lender is granted relief from the stay, repossesses and sells the car for $4,000. The debtor moves to modify the plan to treat the $1,000 deficiency as an unsecured claim.

[3]

Is the debtor bound by § 1327 to pay the secured claim consistent with the original confirmed plan?1 Is modification of the plan necessary, or does claims allowance adjust for the surrender or repossession? Does the debtor or the lienholder bear the risk of depreciation in the value of collateral after confirmation? Would it matter if unusual depreciation was caused by debtor misconduct?

[4]

Section 1329 permits modification of a confirmed plan to surrender collateral to a secured claim holder. To accomplish confirmation, the original plan was required to provide for each secured claim holder.2 Typically, the Chapter 13 plan provides that a lienholder retains its lien and receives periodic payments until the allowed secured claim is paid in full with interest.3 With respect to home mortgages and other long-term secured debts, the debtor might use § 1322(b)(5) to cure default and maintain contract payments during the life of the plan.4 Under any of these circumstances, the plan provides for the secured claim holder.

[5]

Sections 1322(b)(8) and 1325(a)(5)(C) contemplate that the plan can surrender collateral to a secured claim holder.5 Section 1322(b)(8) permits a Chapter 13 plan to “provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor.”6 Section 1325(a)(5)(C) provides that the plan satisfies the rights of a secured claim holder when “the debtor surrenders the property securing such claim to such holder.”7 Both §§ 1322(b)(8) and 1325(a)(5)(C) are applicable at modification of a plan under § 1329(b)(1).8

[6]

Section 1329(a)(1) permits a Chapter 13 debtor to “increase or reduce the amount of payments on claims of a particular class provided for by the plan.”9 Section 1329(a)(2) permits modification to “extend or reduce the time” for payments on claims of a particular class provided for by the plan.10 Section 1329(a)(3) permits modification to alter distribution to a creditor to account for payment other than under the plan.11 If the original Chapter 13 plan provided for payment of the secured claim, then a modified plan that surrenders the collateral and changes the payments to the claim holder falls squarely within § 1329(a).

[7]

Except in the (rare) case when the original plan requires surrender of collateral, surrender or repossession after confirmation constitutes satisfaction of the secured claim “other than under the plan.”12 Section 1329(a)(1) then permits modification to reduce payments under the plan to reflect that the secured claim holder has received satisfaction of some or all of its claim by surrender or repossession of its collateral. Section 1329(a)(2) authorizes the debtor to reduce the time for completion of payments of the allowed secured claim to reflect that surrender or repossession has accelerated satisfaction of the claim. Section 1329(a) thus fully circumscribes the possibility that a Chapter 13 debtor will modify a plan after confirmation to satisfy a secured claim holder by surrender or to account for repossession.

[8]

Section 1329 contemplates that modification after confirmation can change the entitlements of secured claim holders. Section 1329(b)(1) states that § 1323(c) “appl[ies] to any modification under subsection (a) of this section.”13 Section 1323(c) provides that “any holder of a secured claim that has accepted or rejected the plan is deemed to have accepted or rejected . . . the plan as modified, unless the modification provides for a change in the rights of such holder from what such rights were under the plan before modification and such holder changes such holder’s previous acceptance or rejection.”14 Section 1329 itself thus recognizes that secured creditors may be affected by plan modifications after confirmation, and a mechanism is in place for secured claim holders to change a prior acceptance or rejection.

[9]

When the modified plan surrenders collateral or accounts for repossession, § 506(a) requires that the remaining allowable secured claim be determined based upon the value of the collateral.15 In the example, if the value of the creditor’s collateral fell from $5,000 at the petition to $4,000 at the time of repossession, then the modified plan could require the creditor to accept the $4,000 car in satisfaction of its allowed secured claim. The balance of the claim would be unsecured to be paid in the manner provided for unsecured claims.

[10]

Some courts have mischaracterized the effect of modification to surrender collateral or account for repossession as “reclassifying” the secured claim as an unsecured claim.16 Perhaps it could be said that § 506(a) always has a “classifying” effect in the sense that every allowed claim passes through § 506(a) analysis to become in whole or in part a secured claim or an unsecured claim.17 But claim classification as part of a plan is specifically dealt with by other sections of the Code.18 Section 506(a) is the heart of the claims allowance process with respect to secured claims. Mischaracterizing the use of § 506(a) in this context as “reclassifying” secured claims has the harmful side effect of obscuring the availability of § 1329(a) to surrender collateral or to account for repossession after confirmation. More appropriately, the surrender of collateral pursuant to a modified plan reduces the amount of the allowable secured claim to the extent of the value of the collateral surrendered as required by § 506(a). This effect was available to the debtor at confirmation of the original plan. There is no statutory reason why § 506(a) would not have its normal application at modification of a plan under § 1329.

[11]

To preclude a Chapter 13 debtor from modifying the plan to reflect that a creditor repossessed its collateral and is thus no longer the holder of an allowable secured claim turns the Code on its head. Courts adopting this view grant the repossessing creditor a windfall at the expense of unsecured claim holders and in the process distort the fundamental scheme of the Bankruptcy Code with respect to the treatment of secured and unsecured claims. Once a lienholder has received all of its collateral by surrender or by repossession, it cannot be the holder of an allowable secured claim under § 506(a). To permit a creditor to repossess its collateral after confirmation and then continue to be treated as a secured claim holder grants the creditor a double recovery that cannot occur over the objections of unsecured claim holders in any other context in a bankruptcy case. Unsecured claim holders inevitably end up paying for this odd outcome. Once collateral is surrendered or a repossession is accounted for, the modified plan must satisfy the usual tests for confirmation in § 1325.19 If the surrender or repossession frees up income, most courts will require an increase in the dividend to unsecured claim holders.20 Even in a jurisdiction that requires changed circumstances to justify modification after confirmation,21 that the creditor received relief from the stay, repossessed its collateral, and is now unsecured surely constitutes a sufficient change.

[12]

Efforts by Chapter 13 debtors to modify confirmed plans to surrender collateral or to account for repossession have met with mixed success in the courts. The reported cases have struggled with facts similar to the hypotheticals above. Several courts have concluded that § 1329(a) permits modification of a confirmed plan to reflect repossession or surrender of collateral and to reduce the allowable secured claim, if the debtor otherwise meets the standards for a modified plan.22 One court reached the same result by a different route, analyzing the issue as an effect of relief from the stay under § 362(d) rather than as a postconfirmation modification under § 1329: when a secured claim holder repossessed a mobile home after confirmation and sold the collateral for less than the balance of its allowed secured claim, the deficiency was an unsecured claim.23

[13]

Perhaps a majority of the reported decisions interpret § 1329 to prohibit modification to surrender collateral or to account for repossession when the modified plan treats the deficiency as an unsecured claim.24 The U.S. Court of Appeals for the Sixth Circuit leads this group with Chrysler Financial Corp. v. Nolan (In re Nolan).25 In Nolan, the plan confirmed in September of 1997 treated Chrysler’s $12,291 claim as secured to the extent of $8,200. In August of 1998, the debtor moved to modify the plan to surrender the car and treat the deficiency as an unsecured claim. The Sixth Circuit found five reasons to refuse modification:

First, section 1329(a) does not expressly allow the debtor to alter, reduce or reclassify a previously allowed secured claim. . . . Instead, section 1329(a)(1) only affords the debtor a right to request alteration of the amount or timing of specific payments. . . . Second, the proposed modification would violate section 1325(a)(5)(B), which mandates that a secured claim is fixed in amount and status and must be paid in full once it has been allowed. . . . Third, proposed modification would contravene section 1327(a), because a contrary interpretation postulates an unlikely congressional intent to give debtors the option to shift the burden of depreciation to a secured creditor by reclassifying the claim and surrendering the collateral when the debtor no longer has any use for the devalued asset. . . . Fourth, only the debtor, the trustee, and holders of unsecured claims are permitted to bring a motion to modify a plan pursuant to section 1329(a). The [In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989),] interpretation would create an inequitable situation where the secured creditor could not seek to reclassify its claim in the event that collateral appreciated, even though the debtor could revalue or reclassify the claim whenever the collateral depreciated. . . . Fifth, Jock’s interpretation is at odds with the plain language of section 1329. “This section does not state that the plan may be modified to increase or reduce the amount of claims. This is of significance in relation to secured claims.” . . . We hold that a debtor cannot modify a plan under section 1329(a) by: 1) surrendering the collateral to a creditor; 2) having the creditor sell the collateral and apply the proceeds toward the claim; and 3) having any deficiency classified as an unsecured claim. . . . Section 1329(a) only permits modification of the amount and timing of payments, not the total amount of the claim. This principle holds true as to the portion of a claim that is secured, where the claim is partially instead of fully secured.26
[14]

A third cluster of decisions, led by the Bankruptcy Court for the District of Arizona, answers Nolan by holding that the allowable secured claim of a lienholder is reduced by § 506(a) when collateral is repossessed or surrendered after confirmation without resort to modification under § 1329. In In re Zieder,27 the plan confirmed in December 1999 treated Ford as secured to a value of $18,062 and unsecured for $4,468. A year later, the debtor surrendered the pickup truck that secured Ford. Ford sold the truck and after all credits, asserted a balance on its “secured” claim of $6,930. The debtor moved to modify the plan to terminate payments to Ford on the (no longer) secured portion of its debt. Rejecting Nolan, the Arizona bankruptcy court explained that claim reconsideration rather than plan modification was at issue:

Section 502(j) provides that “A claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered claim may be allowed or disallowed according to the equities of the case.” . . . No language in § 502(j) or Rule 3008 limits such reconsideration by confirmation of a plan. To the contrary, because the Code provision deals extensively with the effect such reconsideration might have on distributions already made on claims, it contemplates that such reconsideration might occur after confirmation. . . . [L]iquidation of the collateral by the secured creditor is adequate cause to reconsider a previously allowed secured claim, even after confirmation of the plan . . . . [T]here has been no modification of the confirmed plan. Ford’s claim, however, has become a wholly unsecured claim by operation of §§ 502(j) and 506(a). Nor is any modification of the plan necessary to increase Ford’s unsecured claim by the amount of the deficiency . . . . The plan already defines a class of unsecured claims . . . . The plan itself does not establish the amounts of the claims held by creditors in this class. . . . So what modification is required? Simply a modification to reduce to zero the scheduled payments on Ford’s secured claim . . . . This modification is not the reclassification of a claim, which [Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000),] concluded is not permitted by § 1329, but does “reduce the amount of payments on claims of a particular class provided for by the plan,” which is permitted by both the express language of § 1329 and by the Nolan opinion. This modification is also permitted by the express terms [of] § 1329(a)(3) because it simply alters the distribution to Ford to the extent necessary to take account of the satisfaction of its secured claim by payment other than under the plan, i.e., by surrender of the collateral and application of § 506(a). . . . Because the modification of the amount of the secured claim occurs pursuant to §§ 502(j) and 506(a), Nolan’s conclusion that § 1329 does not permit claim modifications or claim reclassifications, as distinguished from payment modifications, has no significance even if correct. . . . [T]he plan as modified does not violate the requirement of § 1325(a)(5), because the value of the property distributed to Ford equals the amount of Ford’s allowed secured claim, once it is properly reconsidered pursuant to §§ 502(j) and 506(a). . . . [T]he modification does not “shift the burden of depreciation to a secured creditor.” That is a burden that a secured creditor always has, simply by virtue of §§ 502(j) and 506(a). It is also a risk the secured creditor always runs by virtue of § 1307(a) . . . . [T]he secured creditor should have objected to confirmation of the plan if the plan payments were insufficient to cover normal depreciation . . . . [I]f the excess depreciation is due to some fault of the debtor such as failing to maintain the vehicle adequately, the creditor may have a basis to object to the modification for lack of good faith.28
[15]

Among the decisions following the logic of Zeider, a small subgroup has allowed Chapter 13 debtors to account for the surrender or repossession of collateral after confirmation using reconsideration of claims under § 502(j) with the twist that some or all of the lienholder’s deficiency may be entitled to administrative expense status.29 This is an odd outcome. These cases explain the administrative expense allowance as a “failure of adequate protection.” As detailed elsewhere,30 the “superpriority” allowed by § 507(b) when a trustee is required to provide adequate protection and the lienholder ends up with a claim allowable as an administrative expense under §§ 507(a)(1) and 503(b) is rarely if ever available to an ordinary lienholder that fails to receive payments required by a confirmed Chapter 13 plan. In the name of “equity,” after reconsideration of claims under § 502(j) these courts are finding an administrative expense that is not supported by the Bankruptcy Code.

[16]

A fourth group of reported decisions finds no categorical bar in § 1329 to modification to surrender collateral or account for repossession, but the modified plans are rejected for reasons found in § 1322 or § 1325. For example, one court applied § 1325(b) to refuse a modified plan when the debtor’s car was destroyed after confirmation, insurance paid more than the balance of the car lender’s allowed secured claim and the modified plan proposed to use the excess insurance proceeds as the down payment on a new car.31 Modification to surrender real property to an undersecured lienholder “in full satisfaction” was rejected in In re Jefferson32 because the lienholder’s deficiency claims would be paid nothing—a classification that unfairly discriminated in violation of § 1322(b)(1). Another court found that destruction of the debtors’ van two and one-half years after confirmation was a substantial unanticipated change in circumstances justifying postconfirmation modification under § 1329; however, because the debtors allowed insurance to lapse in violation of the original confirmation order, modification was denied on good-faith grounds under § 1325(a)(3).33 Along these same lines, the bankruptcy court in In re Starnes34 refused modification to surrender an uninsured residence that was destroyed by fire because the proposed modification was “unquestionably an alteration of HUD’s rights under the note and mortgage and is clearly prohibited by § 1322(b)(2).”35 Another court rejected a modified plan that surrendered property to a mortgage holder in full satisfaction of claims based on the debtor’s lack of good faith in failing to make postconfirmation payments.36 Similarly, when a debtor proposed to modify a confirmed plan to surrender a car in full satisfaction of the lienholder’s secured claim, but the car was in possession of a transmission repair shop, the bankruptcy court assumed statutory authority to modify the plan but held that “surrender” required delivery of possession.37 One reported decision states eloquently that the good-faith test in § 1325(a)(3) determines whether a debtor can force a secured claim holder to accept surrender of collateral after confirmation because “there [is] no ‘general rule’ to be universally applied in cases in which the decision to look to the collateral itself is sought to be compelled by the debtor rather than freely chosen by the lender.”38

[17]

To preclude the surrender of a car with a blown engine, the court in Sharpe v. Ford Motor Credit Co. (In re Sharpe)39 held that § 1329(a)(1) cannot be used to “individualize” the treatment of class members by “reclassifying” a secured creditor to unsecured status. Despite substantial contrary authority,40 the court held it was “implausible” that each secured claim holder was in a separate class in a Chapter 13 case. The court interpreted § 1329(a)(1) to permit an increase or reduction in the amount of payments “on claims of a particular class,” but not with respect to the individual members of a class.

[18]

The Sharpe court’s misreading of § 1329(a)(1) prohibits postconfirmation modification with respect to any secured claim unless all secured claims are modified identically. This would be true because § 1322(a)(3) mandates that if a Chapter 13 plan classifies claims, the plan must “provide the same treatment for each claim within a particular class.”41 The Sharpe court’s misinterpretation of classification in Chapter 13 cases puts all secured claims in a single class; § 1322(a)(3) would then require the same treatment for each secured claim within that class. This is an absurd outcome because secured claims are each unique and are each provided different treatments under Chapter 13 plans—different interest rates, different values of collateral, different monthly payments and so forth. Read more clearly, Chapter 13 contemplates the separate classification of each allowed secured claim.42 Modifying a plan to surrender collateral to one secured claim holder then fits neatly into the postconfirmation modifications allowed by § 1329(a).

[19]

Some of the reported decisions refuse modification to surrender collateral based on a fundamental misconception of the claims allowance process. In In re Banks,43 the court interpreted § 1329(a)(1) to prohibit modification to surrender a car with a blown engine and treat the deficiency as an unsecured claim. The court reasoned that § 1329(a)(1) permits postconfirmation modification to increase or reduce “the amount of payments on claims” but, by negative implication, does not permit a modified plan to increase or reduce “the amount of claims.” Stated another way by the Sixth Circuit in Chrysler Financial Corp. v. Nolan (In re Nolan),44 “section 1329(a) does not expressly allow the debtor to alter, reduce or reclassify a previously allowed secured claim. . . . Instead, section 1329(a)(1) only affords the debtor a right to request alteration of the amount or timing of specific payments.”45

[20]

The distinction between “payments” and “the amount” of claims is obscure in this context. If the debtor proposes to “reduce to zero” the payments to a secured claim holder provided for by the original plan because the debtor surrenders or the creditor repossesses all of its collateral, the effect will be no more payments on account of that claim. The allowable amount of the creditor’s secured claim will be reduced to zero because surrender of all of a creditor’s collateral has that effect under §§ 1325(a)(5) and 506(a). 11 U.S.C. § 1329(b)(1) says that § 1325(a) applies to any modification under § 1329(a). Section 1325(a)(5)(C) permits a debtor to satisfy an allowed secured claim (that is, reduce the amount to zero) by surrendering the property securing such claim.46 The effect of surrender is to reduce to nothing the amount due to that (previously secured) claim holder—an outcome permitted by § 1329(a)(1).

[21]

More fundamentally, Banks, Nolan and similar cases confuse the claims allowance process with modification of plans. Section 1329(a) is not about the allowance of claims. Section 1329 incorporates many powerful provisions of Chapter 13 that permit debtors to modify the rights of claim holders, including those holding claims secured by liens. Claims allowance is a wholly separate process. As explained above in Zieder, § 506(a) accounts for the surrender or repossession of collateral by reducing the allowable amount of a secured claim without regard to whether the confirmed plan is also modified under § 1329.

[22]

Reconsideration of the allowable amount of a secured claim is explicitly authorized by § 502(j) of the Code: “A claim that has been allowed or disallowed may be reconsidered for cause.”47 Section 502(j) states that reconsideration should be based on the “equities of the case.” To adjust the allowed amount of a secured claim to account for the surrender of collateral or the liquidation of repossessed collateral is a compelling equitable argument under § 502(j).

[23]

In contrast to the reasoning of Banks and Nolan, much of the debate about the effects of confirmation on liens centers on the perception by some courts of appeals that confirmation cannot determine the extent of a secured claim, only the claims allowance process can do so.48 Ironically, Banks and Nolan turn this discussion into a weapon for lienholders: confirmation is forever preclusive of the allowable amount of any secured claim provided for by the plan.

[24]

There is a suspicion from reading decisions like Banks and Nolan that the courts just don’t like the way the Bankruptcy Code allocates risk between debtors and secured claim holders in Chapter 13 cases. These decisions lose sight entirely that risk in a Chapter 13 case is allocated at confirmation. If the plan accurately values collateral and if payments equal or exceed reasonable depreciation—rights that cannot be taken away from a diligent lienholder at confirmation49—then the creditor should be whole at anytime after confirmation when repossession or surrender occurs, except to the extent that payments are in default or depreciation is not ordinary. But payments in default are payments due under the plan before modification. Modification might cure the default over some period of time,50 but payments in default must be accounted for consistent with the confirmed plan at modification.51 In other words, modification is not a way for a Chapter 13 debtor to escape defaults under a confirmed plan; it is only a way to manage those defaults consistent with the rights of creditors under other provisions of the Code.

[25]

Similarly, unreasonable depreciation is an issue at modification that is otherwise managed by the Bankruptcy Code. The good-faith standard for confirmation,52 applicable to a modified plan under § 1329(b)(1), protects creditors when the debtor proposes to surrender collateral. If the decrease in value of collateral between confirmation and surrender results from misconduct by the debtor—for example, neglect of routine maintenance, driving without insurance, reckless driving—the lienholder will win the argument that surrender of now worthless collateral lacks good faith. As explained by the court in In re Rimmer:53

[A] debtor possibly may modify a confirmed plan by surrender of collateral, by reduction of the secured claim in the amount of the liquidation of the collateral, and by increase of the unsecured claim in the amount of the remaining deficiency, if any. However, such a modification motion must be properly noticed to all creditors . . . and the debtor bears the burden of proof on the attempted modification meeting the requirements of § 1329(b)(1). An extremely important element of this proof will be the good faith requirement of § 1325(a)(3). . . . Evidence of a debtor’s abuse of the depreciable collateral or failure to properly maintain it would be important factors in the good faith equation.54
[26]

And before leaving the subject of risk, Nolan and other decisions that prohibit accounting for the surrender or repossession of collateral after confirmation seem unaware that debtors are substantially at risk in Chapter 13 cases that improved financial circumstances will be captured for the benefit of creditors by a motion to modify under § 1329. As detailed elsewhere,55 when a Chapter 13 debtor’s income increases after confirmation, many reported decisions hold that the trustee or the holder of an allowed unsecured claim can force the debtor to increase payments to creditors with a motion to modify the plan under § 1329. When assets appreciate after confirmation or the debtor acquires assets by inheritance, injury or the like, many courts have concluded that creditors can claim a forced share of the new value by modification under § 1329. It is hardly “inequitable” that creditors in a Chapter 13 case bear some of the same risks they bear outside bankruptcy with respect to the value of collateral over time.

[27]

And don’t forget who is financing the mistaken outcome that prohibits a Chapter 13 debtor from treating a deficiency as an unsecured claim when collateral is surrendered or repossessed after the petition. The answer, of course, is other creditors that don’t get a share of the money the debtor is forced to pay for collateral the debtor doesn’t have. But for cases like Nolan, Chapter 13 debtors would be required by other tests at modification to distribute the funds that are freed up by a surrender or repossession to other, typically unsecured creditors under the plan. So the real penalty here isn’t just that debtors are forced to pay for nonexistent collateral; in addition, other creditors are paying that same price in lost distributions under the plan.

[28]

Perhaps there is a hidden valuation problem distorting this debate. When the debtor retains collateral, the allowable amount of a secured claim is determined under § 506(a) at confirmation using a “replacement value” standard after the Supreme Court’s decision in Associates Commercial Corp. v. Rash.56 Replacement value is almost always higher than liquidation or foreclosure sale value. When a creditor repossesses or the debtor surrenders collateral after confirmation, the proposed use of the collateral becomes “liquidation,” and valuation for purposes of liquidation (by the auction market or otherwise) almost always produces a lower value than replacement value. In other words, there will be a difference between the allowed amount of the secured claim based on replacement value and the liquidation value that the creditor can realize at surrender or repossession at any moment after confirmation until late in the plan when the secured claim is almost paid in full.

[29]

Does it make sense to take the difference in valuation standards out of the pockets of unsecured creditors when the debtor surrenders collateral or a lienholder repossesses collateral after confirmation? The difference in valuation is not “caused” by the debtor in any sense. It is purely a product of the Supreme Court’s unfocused analysis in Rash and the use of different valuation standards at different times. This deficiency is not caused by use of the collateral or depreciation. Even if the debtor has made every single payment required by the Chapter 13 plan, the valuation standard by itself is likely to cause a deficiency between the balance of the allowed secured claim and the liquidation value at surrender or repossession. This difference is in no sense a “property interest” or entitlement of the lienholder—it is an artificial happenstance of different valuation standards at different times during the case. Nolan and cases that follow its logic overlook what is really happening when through no misconduct by the debtor a lienholder becomes an unsecured claim holder after confirmation. Rewarding the lienholder with an artificial increment of value is not consistent with any articulated bankruptcy policy and is inconsistent with several important bankruptcy policies, not the least of which is equality of distribution among similarly situated creditors.

[30]

When the proposed modification of the treatment of a secured claim does not involve surrender or repossession, the courts have not imposed suffocating interpretations of § 1329(a). Consider the debtor who erroneously believed that a second mortgage was secured only by the principal residence and thus could not be modified under § 1322(b)(2).57 After confirmation, the debtor discovers that the debt is also secured by a rental house and is subject to modification.58 On precisely these facts, one court concluded that the debtor can modify the plan after confirmation to change the treatment of the second mortgage.59 On similar facts, another court held that § 1329(a) should be read broadly, absent bad faith or unfair prejudice, to permit modification to bifurcate a mortgage that was to be paid in full under the original plan and to pay 5 percent of the unsecured portion in a new separate class.60 In In re Manderson,61 the debtor was permitted to amend a confirmed plan to change the treatment of a secured claim when the collateral for the claim was destroyed in a fire after confirmation.

[31]

There is no good policy support for the hostility of some courts to postconfirmation modification that changes the treatment of secured claims. Chapter 13 is well designed to protect the rights of secured claim holders. Repossession or surrender of collateral after confirmation should not adversely affect the rights of secured claim holders if the lienholder protected itself at confirmation. Congress was aware that things change with time in Chapter 13 cases and debtors must be able to modify the treatment of secured claims to reflect changes. Repossessions and the surrender of collateral are dramatic events in the financial lives of most Chapter 13 debtors that must be translated into modification of the plan else the debtor will be forced to convert, dismiss or refile. Modifying the treatment of secured claim holders after confirmation, so long as the modification is consistent with the tests in § 1329(b)(1) should be facilitated, not suffocated by judicial interpretations of § 1329(a).

[32]

A quick comment or two about procedure to close out this discussion. Because of the uncertainty about modification when collateral is repossessed or surrendered after confirmation, Chapter 13 trustees can’t assume that relief from the stay, repossession or surrender changes the terms of the confirmed plan. In Systems & Services Technologies, Inc. v. Davis (In re Davis),62 a car lender was granted relief from the stay to repossess and liquidate its collateral. Thinking that further distributions under the confirmed plan would overpay the lenders, the trustee reduced the secured claim to the amount paid. The debtor completed payments to other creditors and received a discharge. The car lender challenged this outcome and was vindicated by the Eleventh Circuit:

Absent bankruptcy court order of modification, the confirmation [sic] plan must be executed as originally approved. . . . [T]he trustee unilaterally reduced SST’s secured claim to the value received and disallowed entirely the unsecured claim after the bankruptcy court lifted the automatic stay. . . . [T]he trustee’s modification of the Plan was invalid. Because the Plan modification was ineffective, Davis did not fulfill the payments required by the Plan and the Chapter 13 discharge was improper.63
[33]

To deal with Davis, the Bankruptcy Court for the Southern District of Georgia set up the following scheme triggered when a secured creditor is granted stay relief after confirmation:

[T]he Court will enter an Order requiring the trustee to make disbursements on the creditors’ claims for a period of 60 days following entry of the stay relief orders. During that time, the creditors may file amended claims to which a party in interest may object. . . . If the creditors take no action during the 60-day period, the terms of the Order will provide that the secured claim was satisfied by the foreclosure proceeds and will designate the creditors’ secured claims as paid in full. The effect of this Opinion and Order is to require the creditors to take steps within a reasonable time to report on the change in the status of their claims, if any. . . . This Opinion, however, does not decide the question of what will happen when the creditors file amended claims pursuant to the Order in this case.64
[34]

Finally, there is always the headache awaiting the lienholder that is asleep when the debtor modifies the plan to surrender collateral. As the bankruptcy court reminded in In re Schanlaber,65 the failure to object to modification of a plan that surrenders a car and treats the deficiency as an unsecured claim leaves the car lender bound by the modified plan. Any claim that the car lender files after it disposes of the collateral will be characterized and paid according to the plan as modified.


 

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

 

2  See § 74.1  General Rules before BAPCPA and § 74.2  General Rules Changed by BAPCPA.

 

3  See discussion of providing for secured creditors beginning at § 74.1  General Rules before BAPCPA§ 75.1  In General: Modification Without § 506§ 76.1  Valuation, Claim Splitting and Dewsnup§ 77.1  “Value, As of the Effective Date of the Plan” Means Interest and § 78.1  Full Payment of Allowed Secured Claim.

 

4  See discussion regarding home mortgages beginning at § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman§ 80.1  In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence§ 81.1  Overview: General Rules for Saving Debtor’s Home§ 82.1  Prepetition Defaults—When is Property “Sold” at Foreclosure?§ 83.1  In General: Rake and Contracts before October 22, 1994§ 84.1  In General and § 85.1  Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994.

 

5  See § 74.5  Surrender or Sale of Collateral before BAPCPA and § 74.6  Surrender, Sale, Vesting in Lienholder and Payment with Property after BAPCPA.

 

6  11 U.S.C. § 1322(b)(8).

 

7  11 U.S.C. § 1325(a)(5)(C).

 

8  See § 126.2  Application of Tests for Confirmation and § 126.6  Modification after Confirmation after BAPCPA.

 

9  11 U.S.C. § 1329(a)(1). See §§ 265.1 [ To Decrease Payments to Creditors ] § 127.8  To Decrease Payments to Creditors and 266.1 [ To Increase Payments to Creditors ] § 127.9  To Increase Payments to Creditors.

 

10  11 U.S.C. § 1329(a)(2). See § 268.1 [ To Extend or Reduce the Time for Payments ] § 127.11  To Extend or Reduce the Time for Payments.

 

11  11 U.S.C. § 1329(a)(3). See § 267.1 [ To Account for Payments Other Than under the Plan ] § 127.10  To Account for Payments Other Than under the Plan.

 

12  See 11 U.S.C. § 1329(a)(3), discussed in § 267.1 [ To Account for Payments Other Than under the Plan ] § 127.10  To Account for Payments Other Than under the Plan.

 

13  11 U.S.C. § 1329(b)(1).

 

14  11 U.S.C. § 1323(c) (emphasis added).

 

15  See valuation discussion beginning at § 76.1  Valuation, Claim Splitting and Dewsnup.

 

16  See, e.g., In re Abercrombie, 39 B.R. 178 (Bankr. N.D. Ga. 1984) (Chapter 13 debtor cannot effect the “reclassification” of an allowed secured claim as an unsecured claim when creditor was granted relief from the stay to repossess and liquidate its collateral after confirmation.).

 

17  But see the treatment of home mortgages under § 1322(b)(2) and Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993), discussed in §§ 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman and 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA.

 

18  See, e.g., 11 U.S.C. § 1322(b)(1), discussion of claim classification beginning at § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination§ 88.1  In General and § 89.1  Direct Payments by Debtor.

 

19  See § 126.2  Application of Tests for Confirmation and § 126.6  Modification after Confirmation after BAPCPA.

 

20  Application of the disposable income test in § 1325(b) at modification after confirmation is somewhat controversial. See § 126.3  Does Disposable Income Test Apply? and § 126.6  Modification after Confirmation after BAPCPA.

 

21  See § 126.5  Changed-Circumstances Requirement? and § 126.6  Modification after Confirmation after BAPCPA.

 

22  In re Arencibia, No. 01-40647-BKC-RAM, 2003 WL 21004969, at *2 (Bankr. S.D. Fla. Apr. 1, 2003) (unpublished) (Plan can be modified after confirmation to reflect that the debtor has surrendered part of the collateral and to treat any deficiency as an unsecured debt. Puiggros held a claim secured by a mobile home and a truck. Confirmed plan valued both and provided for combined value as a secured debt. After confirmation, lessor of lot on which the mobile home stood was granted relief from the stay and evicted the debtor. Debtor then surrendered mobile home to Puiggros and moved to reduce secured claim to just the value of the truck and to permit unsecured deficiency claim to the extent mobile home failed to bring its confirmation value. “This Court agrees with . . . the cases which have permitted modification under § 1329(a) after surrender of collateral.”); In re Taylor, 297 B.R. 487, 490–91 (Bankr. E.D. Tex. 2003) (Distinguishing Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), and adopting In re Zieder, 263 B.R. 114 (Bankr. D. Ariz. 2001), debtor can modify plan three weeks after confirmation when debtor surrendered car to GECC complaining of mechanical failure, GECC took possession and sold the car at auction. “GECC took possession of the vehicle. In so doing, GECC received the indubitable equivalent of its claim. . . . [H]aving sold the Vehicle at auction, GECC received payment on its claim as contemplated under 11 U.S.C.A. § 1329(a). . . . [T]here has been a novation between the parties. . . . Debtor is not seeking to surrender a vehicle. It has already been surrendered to Creditor and sold by Creditor. It would be grossly unfair to engage in a legal fiction and declare Creditor’s debt secured when the collateral has already been sold. There can be no secured debt if there is no collateral. . . . Any lender who lends and takes a security interest in collateral runs the risk of collateral depreciation and runs the risk of ultimately foreclosing on worthless collateral and being left with an unsecured claim. This Court can ascertain no reason why this Creditor should suddenly be placed in an extremely favorable position of having received its collateral, liquidated it and still be able to collect on the debt as if it were secured. The filing of the bankruptcy did not cause the decline in the value of the collateral and the Creditor has exercised the same remedies it would have been able to exercise under general commercial law . . . . This Court has no alternative, given the facts, but to allow modification of the confirmed plan for the limited purpose of taking account of the payment received from another source. . . . [T]he amount of scheduled payments on GECC’s secured claim as of the date of the sale of the collateral, should be reduced to zero.”); In re Hernandez, 282 B.R. 200, 205–08 (Bankr. S.D. Tex. 2002) (Debtor can modify plan after confirmation to surrender a pickup truck in satisfaction of the allowed secured claim when the debtor can no longer afford both a house and the pickup. “[Section] 1325 . . . explicitly permits surrender of collateral in satisfaction of secured claims. . . . [Section] 1329(a)(3) . . . allows modification to change the method of payment . . . . Surrender of collateral to a secured creditor is the indubitable equivalent of payment of the secured claim. . . . Section 502(j) allows reconsideration of the claim ‘according to the equities of the case.’ . . . Even if the Court were to sustain Household’s objection, Household will not be paid any more on its secured claim. The Hernandezes just don’t have enough income. If the entire amount due Household as a secured claim under the original plan must be paid, then the plan is not feasible and the case must be converted or dismissed . . . . [T]o hold that the Debtors cannot surrender the pickup truck in satisfaction of Household’s secured claim is to hold that Mr. and Mrs. Hernandez cannot keep their house because they cannot pay for their car. This Court does not see that rule in the statute.”); In re Knappen, 281 B.R. 714, 717 (Bankr. D.N.M. 2002) (Plan can be modified after confirmation to reduce secured claim to zero when debtor defaults in payments and car lender repossesses and disposes of the car. Rejecting Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000): “The language of § 1329(a)(1) of the Code explicitly allows the debtor to ‘reduce the amount of payments on claims of a particular class.’ Since each secured claim is generally treated as a separate class . . . reducing to nothing the amount of payments on Ford’s secured claim fits within the language of the statute. . . . [Section] 1329(a)(3) allows the Debtor to ‘alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan.’ Ford’s repossession and sale of the vehicle and application of the sale proceeds to the debt was not provided for in the Plan.”); In re Townley, 256 B.R. 697, 699–700 (Bankr. D.N.J. 2000) (Based on a decrease in income, debtor can modify the plan three years after confirmation to surrender a car and pay nothing further on account of the secured claim. “This court believes that the [In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989)] line of cases which construe Code section 1329(a)(1) to permit post-confirmation modification of secured claims is correct as a matter of statutory construction. The cases which hold otherwise essentially read an exception into section 1329(a)(1) which does not exist, i.e., that a modified plan may ‘reduce the amount of payments on claims of a particular class’ unless the class consists of secured claims. Code section 1329(a)(1) is not limited by its terms to classes of unsecured claims.” With respect to the argument that modification to surrender collateral unfairly shifts the risk of loss to the secured creditor: “The solution is for the secured creditor to object to confirmation of the original plan unless the timing and amount of payments is [sic] at least equal to the rate of depreciation. . . . If a secured creditor asserts its rights in that manner under the original plan, a postconfirmation plan modification such as is proposed here will cause little or no harm to the secured creditor, since it will have received compensation under the original plan for the collateral’s depreciation. Proceeding in that manner avoids the necessity to engraft a fictitious exception on to Code section 1329(a)(1).”); In re Conley, No. 97-16705-SSM, 2000 WL 1805324, at *4 (Bankr. E.D. Va. Sept. 28, 2000) (Acknowledging split of authority, Chapter 13 debtor can surrender pickup truck 27 months after confirmation and treat the deficiency as an unsecured claim, subject to review for good faith. “The modified plan estimates a liquidation value for the Ford pickup truck of $5,000.00. Assuming the accuracy of that figure, Chrysler’s collateral has depreciated by $5,625.00 in the 28 months since plan confirmation, but Chrysler has received only $3,845.00 in plan payments. The bottom line is that the modified plan effectively takes away $1,780.00 of Chrysler’s original $10,625.00 secured claim. . . . [T]here is no evidence suggestive of bad faith. It is an unfortunate fact of life that motor vehicles sometimes depreciate more rapidly than the debt against them is paid down. . . . [A] secured creditor is not unprotected against such conduct. . . . Abusive depreciation between the original confirmation and plan modification is a factor that may properly be considered on the issue of good faith. . . . [T]he better reasoned view—one that gives effect both to the binding effect of plan confirmation under § 1327(a) and to the right under § 1329(a) to modify a confirmed plan—is to permit a post-confirmation plan modification that provides for the voluntary surrender of collateral, and for the payment of any deficiency as an unsecured claim, even though the effect is to reduce the payment the secured creditor would have received under the original plan. This, of course, is subject to the qualification that the modification has been proposed in good faith and, in particular, that there has been no abusive depreciation of the secured creditor’s collateral.”); In re Day, 247 B.R. 898, 899, 903 (Bankr. M.D. Ga. 2000) (Debtor can modify plan two years after confirmation to surrender a truck and reclassify the balance as an unsecured claim. Debtor was in the armed services and two years after confirmation was advised that she would be transferred overseas. Debtor no longer needed pickup truck and moved to modify plan to surrender the truck to a lienholder. Acknowledging that “[t]he courts are divided on whether a debtor may modify a confirmed Chapter 13 plan to surrender collateral to the secured creditor and then reclassify the unpaid balance of the claim as unsecured,” bankruptcy court approves the modification: “Surely Congress intended such a result when it provided that Chapter 13 plans could extend for up to five years. The requirements for postconfirmation modification, which include a good faith requirement, have the needed protection to ensure that secured claimants are adequately protected.”); In re Waller, 224 B.R. 876, 879 (Bankr. W.D. Tenn. 1998) (After post-confirmation grant of relief from the stay and repossession of the debtor’s car, plan can be modified to reclassify car lienholder as an unsecured claim holder with respect to the deficiency, but payments due under the plan before the grant of relief from the stay remain secured claims. Confirmed plan treated bank as a secured claim holder to the extent of the value of a car. After confirmation, debtor defaulted in payments, and bank was granted relief from the stay on June 17, 1998. On July 30, 1998, debtor moved to modify the plan to reclassify the bank as an unsecured creditor. Applying In re Rimmer, 143 B.R. 871 (Bankr. W.D. Tenn. 1992), “[f]or the time before entry of [the order for relief from the stay], First Citizens remains a secured creditor, and any plan payments on the bank’s secured claim that accrued before June 17, 1998 must be paid as a secured claim. Upon entry of that June 17 Order, Mr. Waller could classify any remaining deficiency on the bank’s claim as an unsecured claim.”), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000); In re Anderson, 153 B.R. 527, 528 (Bankr. M.D. Tenn. 1993) (In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989), is still the law of this district. “[T]he Debtors may modify their plan to reflect the satisfaction of the Bank’s secured claim by its repossession of the Debtors’ automobile.” Court rejects bank’s argument that modification violates the disposable income test in § 1325(b)(1): “According to § 1329(b)(1), however, compliance with § 1325(b) is not required for post-confirmation modification of a Chapter 13 plan.” The debtors’ proposed modification fits within § 1329(a)(1) because each secured claim is in a separate class.), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000); In re Rimmer, 143 B.R. 871 (Bankr. W.D. Tenn. 1992) (Section 1329(a)(1) authorizes modification to surrender a car, to allow liquidation of the collateral and to add the deficiency as an unsecured claim. Surrendering collateral alters the amount of a prepetition creditor’s secured and unsecured claims as contemplated by § 1329(a)(1). “[Section] 1322(b)(8) permits the payment of a claim from property of the estate or of the debtor. . . . [T]he debtor is permitted by § 1325(a)(5)(C) to satisfy a secured claim by surrender of the collateral. . . . [A] debtor possibly may modify a confirmed plan by surrender of collateral, by reduction of the secured claim in the amount of the liquidation of the collateral, and by increase of the unsecured claim in the amount of the remaining deficiency, if any. However, such a modification motion must be properly noticed to all creditors . . . and the debtor bears the burden of proof on the attempted modification meeting the requirements of § 1329(b)(1). An extremely important element of this proof will be the good faith requirement of § 1325(a)(3). . . . Evidence of a debtor’s abuse of the depreciable collateral or failure to properly maintain it would be important factors in the good faith equation. Also, evidence of the reasons behind a debtor’s failure to pay the ongoing plan payments prior to the filing of the motion to modify should be considered. . . . [T]he secured creditor ‘is entitled by § 1327(a) to the binding effect of the original confirmation order through the date the debtor surrendered the car.’ . . . [I]f the debtor has not paid the secured creditor in compliance with the confirmed plan, any amount not paid through the date of surrender is still a part of the secured claim which must be paid.”), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000); In re Rincon, 133 B.R. 594 (Bankr. N.D. Tex. 1991) (Debtor can modify plan after confirmation to surrender car that was “totaled.” Surrender of collateral after confirmation by modification under § 1329 requires notice and an opportunity to object. When notice is adequate and there is no ambiguity in the proposed modification and the creditor fails to object, the creditor is bound by the modification, including the value of collateral stated in the modification. That the creditor filed a timely proof of claim that is inconsistent with the modification does not upset the effect of confirmation of the modified plan. An amended proof of claim filed by the secured claim holder is an ineffective objection to modification. Creditor’s argument that it did not know that its collateral had been damaged and was worth substantially less is a “good-faith” objection that had to be raised before confirmation of the modified plan.); In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989) (Chapter 13 debtor can modify confirmed plan to surrender a car to a secured claim holder and pay the deficiency as an unsecured claim. The proposed modification reduces the amount of payments on a class of secured claims as permitted by § 1329(a)(1). Section 1327(a) is not a limit on permitted modification of a confirmed Chapter 13 plan. Sections 1322(a), 1322(b), 1323(c) and 1325(a) are the limits on modification under § 1329.), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000); In re Stone, 91 B.R. 423 (Bankr. N.D. Ohio 1988) (Section 1329(a)(3) permits debtor to modify a confirmed plan to surrender collateral, reclassify a secured claim holder as an unsecured claim holder and pay the deficiency as an unsecured claim. Abercrombie and In re Johnson, 25 B.R. 178 (Bankr. N.D. Ga. 1982), failed to consider § 1329.), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000). See also In re Christian, No. 99-50632 RFH, 2000 WL 33740253, at *2 (Bankr. M.D. Ga. May 8, 2000) (unpublished) (Plan can be modified after confirmation to surrender leased pickup truck when confirmed plan provided that the debtors would make lease payments “outside of their Chapter 13 plan” and confirmed plan neither assumed nor rejected the lease.).

 

23  In re White, 169 B.R. 526, 529–31 (Bankr. W.D.N.Y. 1994) (Confirmed plan called for payment of secured claim in full. Three years after confirmation, the debtors “suffered the repossession” of their mobile home. The lender did not obtain relief from the stay, and the debtor did not protest the “possible violation of the automatic stay.” After repossession and sale, the lender claimed its $1,700 deficiency should be paid in full as a secured claim because the original plan called for payment in full of the lender’s secured claim and § 1327 binds the debtor to that plan. “Although . . . some courts consider the present question to be one of . . . ‘reconsideration of claims’ (11 U.S.C. § 502(j)), and others consider it to be a matter for construction of . . . post-confirmation modification of plans (11 U.S.C. § 1329), the present Court considers today’s issue to be a matter of common sense, common law, and custom and practice that form the foundation of motions under Section 362(d) . . . . [W]hen a debtor elects to retain the property and therefore provide for the lienor to ‘retain its lien,’ all incidents of the lien and the relationship between the parties . . . remain intact. . . . When an order of this Court denies the Debtors such retention, or acknowledges the Debtors’ inability to retain the collateral, it is necessarily implicit and understood that the creditor’s claims will be ‘deemed amended’ accordingly. . . . To the extent, if any, that today’s holding must be reconciled with § 1329 it may simply be said that after repossession and sale the secured claim is simply being ‘valued to 0’ and the amounts to be paid on the secured claims are being reduced to 0, while the unsecured claim is being modified upwardly if necessary. . . . [O]nce the § 362(d) Order lifting stay was granted, any and all deficiencies as to the claims secured by the collateral were (after sale) rendered unsecured, and the lender was obliged to advise the Chapter 13 debtors of the results of the sale so that the creditor’s claims and the Plan payments could be adjusted accordingly. Any Chapter 13 payments received by the lender on the ‘secured’ claims after the date of the sale are recoverable by the Chapter 13 trustee for the benefit of all creditors.”).

 

24  Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000) (Chapter 13 debtor cannot modify a plan after confirmation to surrender a car and treat the deficiency as an unsecured claim.); Sharpe v. Ford Motor Credit Co. (In re Sharpe), 122 B.R. 708 (E.D. Tenn. 1991) (Debtors are not permitted to modify confirmed plan to surrender car with a “blown engine” because § 1329(a)(1) “does not permit individualized treatment of class members or the reclassification of a single creditor from a secured to an unsecured status.” Debtors’ argument that each secured claim holder is in a different class is “implausible since the same argument could be made for virtually all creditors. The plain language of the statute deals with modifications in the treatment of classes, not individual creditors.” Plan confirmed on February 27, 1990, treated creditor with lien on 1986 Chevrolet as secured in the amount of $2,500. Modification filed on March 15, 1990, proposed to surrender the Chevrolet because the car had “blown an engine.”); In re Jefferson, 299 B.R. 468 (Bankr. S.D. Ohio 2003) (Modification to surrender real property in full satisfaction of claims is prohibited by Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000).); In re Wilcox, 295 B.R. 155, 157 (Bankr. W.D. Okla. 2003) (Adopting Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), debtor cannot surrender van after confirmation in full satisfaction of allowed secured claim. “[L]ogic—however convincing—does not trump the letter of the law. This Court finds more legally convincing the reasoning of the Sixth Circuit Court of Appeals in Nolan.”); In re Miller, No. 99-81339, 2002 WL 31115656 (Bankr. M.D.N.C. Apr. 19, 2002) (unpublished) (Section 1329 does not support modification to surrender collateral and reclassify deficiency as an unsecured claim.); In re Jackson, 280 B.R. 703, 705 (Bankr. S.D. Ala. 2001) (Confirmed plan cannot be modified to surrender car in full satisfaction of the secured claim. “This Court finds the reasoning of the Sixth Circuit in [Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000),] persuasive. The decision is a harsh one for debtors. It will force them to make decisions about the retention or surrender of vehicles before confirmation. Otherwise, deficiency payments after surrender will continue to be secured debts.” In a note, “[t]his decision means chapter 13 debtors should never voluntarily surrender collateral postconfirmation—whether through a plan or relief from stay—without a clear understanding with the creditor about the status of any deficiency claim.”); In re Barclay, 276 B.R. 276, 278–84 (Bankr. N.D. Ala. 2001) (Debtor can modify plan after confirmation to surrender car but not “in full satisfaction” of allowed secured claim. “By surrendering collateral, a payment is being made in addition to the regular plan payment. . . . [U]nder the express language of § 1329(a)(1), this type of modification (surrender) is allowed by the Bankruptcy Code. . . . [W]hile § 1329(a) allows for the modification of a confirmed plan by surrender, as a payment on a claim, the statute does not allow the debtor to alter the allowed amount of the secured claim or to reclassify such claim as an unsecured claim. . . . Although § 502(j) and Fed. R. Bankr. P. 3008 allow for the reconsideration of the allowance of claims, they do not provide for the reconsideration of the classification (status) of those claims. . . . The status of the claims was established at confirmation. . . . [T]he deficiency between the amount of the secured claim and the amount realized by sale of the collateral must continue to be classified as and treated as a secured claim. . . . Debtors bear the risk the collateral will reduce in value after confirmation at a rate much faster than anticipated.”); In re Cameron, 274 B.R. 457, 459, 461 (Bankr. N.D. Tex. 2002) (Section 1329(a) does not authorize modification of confirmed plan to surrender car in full satisfaction of secured claim. Confirmed plan valued car at $5,628 and provided for payment in full in monthly installments with interest. Lienholder did not file a proof of claim. After the claims bar date, the debtor filed an objection to the lienholder’s “claim,” and an order was entered sustaining that objection. Bankruptcy court states that the effect of these orders “was to grant CPS an allowed secured claim in the Case in the amount of $5,628.00 . . . and to disallow any unsecured deficiency claim that CPS could have asserted in the Case.” A year later, the debtor moved to modify the plan to surrender the car in full satisfaction of the lienholder’s secured claim. “[S]ection 1329(a) does not permit the requested Modification. . . . [S]ection 1325 provides a debtor with three alternative ways in which to satisfy an allowed secured claim . . . . [S]ection 1329(a)(1) and (2) only permits post-confirmation modification of a plan if the debtor chose one of the payment options provided in section 1325(a)(5)(A) or (B). . . . Nowhere in section 1329(a) is the debtor given the right to go back and elect a different method by which to satisfy an allowed secured claim. . . . [H]aving elected payment as the method by which CPS’ allowed secured claim will be satisfied here, the Debtor has no right to modify the Plan under section 1329(a) to elect a different method—surrender—as the way in which CPS’ allowed secured claim will be satisfied.”); In re Coffman, 271 B.R. 492, 496–98 (Bankr. N.D. Tex. 2002) (Embracing Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), and rejecting In re Zieder, 263 B.R. 114 (Bankr. D. Ariz. 2001), Chapter 13 debtor cannot modify plan to surrender a car that failed mechanically 18 months after confirmation. “As noted by the Sixth Circuit in In re Nolan, section 1329(a) does not expressly permit a modification that reclassifies or changes the nature of a claim. . . . [S]ection 502(j), as well as the cases that have interpreted it, address the allowance or disallowance of a claim, not the reclassification of a claim. . . . [E]ven assuming that section 502(j) review of a claim is available postconfirmation, and further assuming that In re Zieder correctly holds that section 502(j) applies . . . the question still remains whether the court should allow such a reclassification pursuant to section 502(j). . . . Courts, including the Fifth Circuit, have likened the ‘cause’ standard found in section 502(j) with the substantive requirements of Bankruptcy Rule 9024 and Rule 60(b) of the Federal Rules of Civil Procedure. . . . [T]he Coffmans seek a reclassification of ACFCU’s claim largely because it is no longer convenient for the Coffmans to keep the car. This does not warrant Rule 60(b) relief.”); In re Smith, 259 B.R. 323, 326 (Bankr. S.D. Ill. 2001) (Debtor cannot modify plan after confirmation to surrender car and treat deficiency as an unsecured claim; postconfirmation death of the debtor’s husband is irrelevant because the proposed modification is not permitted by § 1329. Citing In re Witkowski, 16 F.3d 739 (7th Cir. 1994), “under Witkowski’s precise reading of § 1329(a), a debtor is precluded from modifying a plan in order to reclassify a secured claim as unsecured following the surrender of collateral post-confirmation. . . . [T]he debtor, despite having surrendered her vehicle to GMAC, must pay the full amount of GMAC’s secured claim in order to complete her plan as confirmed.”); In re Goos, 253 B.R. 416, 420–21 (Bankr. W.D. Mich. 2000) (Debtors cannot modify plan after confirmation to surrender collateral and treat deficiency as an unsecured claim. Plan confirmed on May 22, 1998, treated GMAC as secured to value of $18,000. On November 17, 1999, the debtors amended the plan to abandon the car to GMAC and to treat any deficiency as an unsecured claim. GMAC objected. By agreement, GMAC took possession of the car, sold it and filed a claim for $7,439 as the remaining secured claim after credits for payments under the confirmed plan. The debtors objected. “This court agrees with those decisions which hold a debtor may not voluntarily surrender a vehicle postconfirmation and reclassify a secured creditor’s deficiency after sale as an unsecured claim. The statutory language in § 1329(a) does not permit such a modification. . . . [V]aluation of collateral in a confirmed plan is a two-edged sword. A secured creditor is unable to seek revaluation of collateral by a modification. . . . [O]nce a chapter 13 plan is confirmed, an undervaluation or an appreciation of collateral inures to the benefit of a debtor. To the contrary, an overvaluation will benefit a secured creditor and depreciation of the collateral will not detrimentally affect that creditor’s allowed secured claim. Confirmation locks in both the collateral valuation and the respective rights of a debtor and a creditor which holds an allowed secured claim.”); In re Meeks, 237 B.R. 856, 860–61 (Bankr. M.D. Fla. 1999) (Section 1329 does not permit debtors to surrender car after confirmation and treat the deficiency as an unsecured claim. Confirmed plan treated GMAC as secured with a value of $5,888.16. Four months after confirmation, a new baby caused financial problems, and debtor moved to surrender the car to GMAC, to reduce the plan payment by the amount allocated for GMAC’s secured claim and to treat any remaining claim of GMAC as unsecured. “Nowhere in § 1329(a) does the statute permit a debtor to modify the amount of an allowed secured claim. Likewise, § 1329(a) does not allow a debtor to reclassify an allowed secured claim as an unsecured claim. The claim amount is fixed at the confirmation hearing, and no provision in § 1329 allows for the later modification or reexamination of the claim amount. . . . [T]he modification of payment amounts cannot alter the allowed amount of the secured claim or eliminate the requirement in § 1325(a)(5) that the claim be paid in full. . . . The fact that the debtor can return collateral post-confirmation and receive a credit against future plan payments as contemplated by § 1329(a)(3) has no connection to the subsequent reclassification of the remaining amount due as an unsecured claim. . . . The Bankruptcy Code does not allow the Debtors’ [sic] to modify the amount of an allowed secured claim post-confirmation.”); In re Coleman, 231 B.R. 397, 398–400 (Bankr. S.D. Ga. 1999) (Debtor cannot modify plan to surrender car and treat the balance as unsecured. Confirmed plan required payment in full of claim for $25,867.69 secured by a Corvette. Just over a month after confirmation, debtor moved to reduce payments as a result of a reduction in pay and to “[s]urrender the ‘95 Chevy to First Liberty and allow a deficiency claim. . . . Courts are split as to whether a plan can be modified to reclassify a secured creditor to unsecured status. . . . I . . . follow the . . . line of cases . . . that Section 1329(a)(1) permits a post-confirmation modification only to alter the amount of specific periodic payments. . . . Section 1329(a)(1) could be clearer; however, it does not expressly permit a debtor to alter, reduce or reclassify a previously allowed secured claim. Once allowed, a secured claim is fixed in amount and status and must be paid in full. . . . [A] change in the amount of payment may be employed only to accelerate or to slow the rate at which the claim is paid, not to alter the amount of the claim. . . . If the car is surrendered or is the subject of an insurance loss, the claim is reduced by the amount of proceeds of the policy or the sale, but again, the secured status of the balance of the claim is unaffected. . . . The only change allowed in a modification under subsection (a)(3) is to the ‘distribution’ to a creditor from the Chapter 13 Trustee.”); In re Dunlap, 215 B.R. 867, 869–70 (Bankr. E.D. Ark. 1997) (Debtor cannot modify plan 10 months after confirmation to surrender car and treat deficiency as unsecured claim notwithstanding that “there was no bad faith on the part of the Debtor in surrendering the vehicle . . . nor was there any abuse of Chrysler’s collateral.” Confirmed plan valued car at retail under [Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997)]. Ten months later, debtor proposed to surrender car to car lender and treat unpaid balance as an unsecured claim. At the time of the proposed modification, debtor was behind in payments under the plan because of a loss of a job. Stipulated facts included “that there was no bad faith on the part of the Debtor in surrendering the vehicle . . . nor was there any abuse of Chrysler’s collateral. . . . [I]f the Debtors’ modified plan is confirmed and they are permitted to surrender the automobile, Chrysler will probably recover, at a maximum, only the depreciated wholesale value of its secured claim plus any deficiency to the extent unsecured creditors receive a distribution. This outcome is unacceptable . . . . [A] Chapter 13 plan must propose to pay the value of the vehicle calculated at the retail, not wholesale, market. [Citing Rash,]. . . . Here, the proposed modified plan will probably pay less than the retail value of the vehicle despite the fact that the Debtors have retained the collateral for more than a year. . . . Debtors seek to bifurcate a claim, which is already classified as fully secured, into a secured claim measured by the depreciated wholesale value and an unsecured claim measured by the unpaid deficiency. Consequently, the proposed modified plan values Chrysler’s claim a second time, rendering the requirement of § 1325(a)(5)(B)(ii) nugatory. . . . [S]ection 1329 does not specifically authorize a modified plan to alter the amount of a previously determined secured claim or to reclassify a claim from secured to unsecured.”); In re Banks, 161 B.R. 375, 378–79 (Bankr. S.D. Miss. 1993) (Chapter 13 debtor cannot modify plan after confirmation to surrender a car with a blown engine and treat any deficiency as an unsecured claim to be paid 10% under the plan. “Section 1329(a)(1) provides that the plan may be modified to ‘increase or reduce the amount of payments on claims of a particular class provided for by the plan.’ This section does not state that the plan may be modified to increase or reduce the amount of claims. . . . Valuation of secured claims is adjudicated by the order of confirmation. A debtor’s confirmed plan is res judicata as to claims determinations. . . . If the amount of a secured claim were to be subject to postconfirmation modification, Section 1329 undoubtedly would not have explicitly omitted secured creditors from the list of those who are permitted to request modifications. . . . [T]he mechanical problems with the debtor’s vehicle do not qualify as a justifiable basis upon which the debtor should be allowed to modify her confirmed plan in the manner proposed. . . . The Court is empathetic with the debtor who, through no fault of her own, has experienced mechanical difficulties requiring expensive repairs, and has insufficient funds to pay for repairs out of pocket. However, the Court cannot conclude that there is sufficient justification found in the Bankruptcy Code for allowing the debtor to shift the burden of unexpected collateral depreciation to [the creditor], after confirmation of her chapter 13 plan, particularly when the creditor has already experienced a cram down of valuation at the time of confirmation.”); In re Holt, 136 B.R. 260 (Bankr. D. Idaho 1992) (Postconfirmation modification to return a car to a creditor “is not an allowed modification under § 1329. . . . 11 U.S.C. § 1329(a)(1) ought to be limited to adjustments in amounts of payments under the plan as opposed to material changes in the treatment of secured creditors. Court rejects Jock and adopts Sharpe.). See also In re Cruz, 253 B.R. 638, 642–43 (Bankr. D.N.J. 2000) (Mc Donald v. Master Financial, Inc. (In re McDonald), 205 F.3d 606 (3d Cir.), cert. denied, 531 U.S. 822, 121 S. Ct. 66, 148 L. Ed. 2d 31 (2000), does not apply retroactively; but, even if it did, debtors cannot use § 1329 to change the treatment of a second mortgage from fully secured to unsecured. Confirmed plan treated second mortgage holder as a secured claim holder based on value stated in schedules. A year after confirmation, the Third Circuit decided McDonald. Eighteen months after confirmation, debtors moved to modify the plan to treat the second mortgage as wholly unsecured. “[Section] 1329(a)(1) can only be read to allow a modification in the amount of payment on a secured claim to accelerate or slow the rate at which the claim is paid, not to alter the amount of the claim. . . . Since the amount and status of a claim is fixed at confirmation and § 1329 does not permit revaluation of collateral or reclassification of claims post-confirmation, the parties are bound by the amount of a secured claim under § 1327 and the amount of the claim must be paid in full. . . . [Section] 1329 does not permit a debtor to modify the classification of a creditor’s allowed secured claim from secured to unsecured. . . . [T]he debtors are not proposing to change the payments to an entire ‘class’ of claims. They are seeking to change the classification of an individual creditor’s claim and, as a result, how that creditor will be treated under the plan. . . . The debtors assert that they are merely attempting to reduce the payments to Foremost from $6,859.03 to zero. Aside from the fact that confirmation of the debtors’ plan fixed the amount of Foremost’s secured claim at $6,859.03, the only basis for reducing the payments to zero would be the reclassification of Foremost’s claim to unsecured. . . . [Section] 1329 does not permit debtors to modify a secured claim by reclassifying it as an unsecured claim.”).

 

25  232 F.3d 528 (6th Cir. 2000).

 

26  232 F.3d at 532–35. See also In re Woods, 257 B.R. 876, 878 (Bankr. W.D. Tenn. 2000) (At destruction of car after confirmation, debtor cannot use insurance proceeds to purchase another car because generic plan provision that car lender would “retain lien” did not free the proceeds from the car lender’s lien. “[T]his Court is persuaded to adopt the view that, absent mandatory release language in the confirmed plan, the Chapter 13 debtor may not obtain an order over the lien creditor’s objection that would require the lien creditor to release its lien prior to the debtor’s Chapter 13 discharge. . . . The impact of [Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000),] on the present issue is one of realization that the Court of Appeals recognizes the effects of changing in any way the confirmed treatment of a secured claim, and the holding discourages such changes as would amount to alterations of the secured status. . . . [A]lthough the secured portion of Ford’s claim has been paid in the plan and the debtor currently remains in Chapter 13, the reality, as previously noted, is that nothing would prevent the debtor, after receipt of the title from Ford, from voluntarily dismissing her case. The loss of Ford’s pre-bankruptcy position in the event of case dismissal would appear to be as significant a change in its status as the postconfirmation change rejected in Nolan.”). But see In re Wallace, 259 B.R. 646, 648 (Bankr. E.D. Tenn. 2001) (Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), is not controlling when daughter surrenders wrecked car with “major mechanical problems” after confirmation of a plan that provided the car lender would be paid “outside the plan by the Debtors’ daughter.” Car lender argued that daughter’s surrender of car was a “de facto plan modification” prohibited by Nolan. Bankruptcy court found that car lender acquiesced to confirmation of plan that released the debtors’ liability and car lender was bound by confirmation to look to the daughter for payment. “The ‘de facto modification’ asserted by the Credit Union does not involve conduct of the Debtors. Clearly, a third party has failed to comply with the plan’s provisions. That third party’s breach, however, cannot be considered a plan modification by the Debtors where the Credit Union freely released the Debtors from any further liability on this debt.”).

 

27  263 B.R. 114 (Bankr. D. Ariz. 2001).

 

28  263 B.R. at 117–19. Accord In re Arencibia, No. 01-40647-BKC-RAM, 2003 WL 21004969, at *3 (Bankr. S.D. Fla. Apr. 1, 2003) (unpublished) (Plan can be modified after confirmation to reflect that the debtor has surrendered part of the collateral and to treat any deficiency as an unsecured debt. “[W]hile § 1329 standing alone might not authorize reclassification of a secured claim, § 502(j) provides the necessary authorization to reconsider a claim and allow the type of plan modification requested in this case. . . . [A] court may consider the equities of the case pursuant to § 502(j) and modify a plan such that the balance of a secured claim following the liquidation of collateral may be reclassified as unsecured.”); In re Taylor, 297 B.R. 487 (Bankr. E.D. Tex. 2003) (Adopting In re Zieder, 263 B.R. 114 (Bankr. D. Ariz. 2001), debtor can modify plan three weeks after confirmation when debtor surrendered car to GECC complaining of mechanical failure.); In re Rayborn, Case No. 98-12083, 2002 WL 1404751, at *11 (Bankr. S.D. Ala. Apr. 4, 2002) (unpublished) (Text available at www.alsb.uscourts.gov) (FMCC is not entitled to relief from order that reduced its allowed secured claim to the amount paid based on a (mistaken) letter from FMCC that its debt was paid in full. Confirmed plan provided FMCC with a monthly payment of $250 and a collateral value of $15,000. Three years after confirmation, the debtors received a letter from FMCC that the debt was paid in full. FMCC sent the title to the car to the debtors. The letter and release of lien were a mistake. Based on the letter, the trustee moved to reduce FMCC’s claim to the amount paid. FMCC did not respond, and an order was entered reducing FMCC’s claim to the amount paid. On FMCC’s motion to reconsider, with respect to reconsideration under § 502(j), “[t]he salient point of [In re Zeider, 263 B.R. 114 (Bankr. D. Ariz. 2001),] applicable here is that where there is no longer any collateral to secure a debt, the debt is then unsecured. It makes little, if any, difference how the collateral for the debt is extinguished in determining FMCC’s claim status. The bottom line is that the Rayborns’ debt to FMCC became unsecured after FMCC released the lien and the collateral was sold.”); In re Hernandez, 282 B.R. 200, 207 (Bankr. S.D. Tex. 2002) (Debtor can modify plan after confirmation to surrender a pickup truck in satisfaction of the allowed secured claim when the debtor can no longer afford both a house and the pickup. “Section 502(j) allows reconsideration of the claim ‘according to the equities of the case.’”); In re Knappen, 281 B.R. 714, 718 (Bankr. D.N.M. 2002) (Plan can be modified after confirmation to reduce secured claim to zero when debtor defaults in payments and car lender repossesses and disposes of the car. “The express language of § 1329(a) does not preclude application of § 502(j).”); In re Adams, 270 B.R. 263, 269–72 (Bankr. N.D. Ill. 2001) (Section 1329 is not implicated on debtors’ motion to value secured claim at zero when collateral is repossessed and sold after confirmation and creditor did not file a proof of claim before confirmation. Distinguishing Adair v. Sherman, 230 F.3d 890 (7th Cir. 2000), and In re Fareed, 262 B.R. 761 (Bankr. N.D. Ill. 2001), “[a] motion for valuation of a security can be made at any time, as there are no time limits for doing so set in § 506(a) or Rule 3012. . . . The only limitation on a post-confirmation ‘strip down’ motion under Rule 3012 or valuation under § 506(a) is that the parties are bound by any valuation included in a confirmed plan where the secured creditor filed a claim pre-confirmation and its asserted collateral value was not challenged before confirmation . . . or the confirmed plan itself specifies collateral value. . . . Debtors cannot use § 1329 to strip down Ford’s claim. . . .  [Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000),] did not discuss the possibility of reaching the same result if sought under Code § 502(j) and § 506(a) . . . . Here the plan was silent as to collateral value, and creditor’s claims were not filed until after the confirmation hearing. Since Ford filed no claim prior to Plan confirmation, and the Debtors therefore had no chance to seek strip down or otherwise object to the unfiled claims before confirmation, they are not precluded by collateral estoppel or otherwise from challenging those claims after confirmation. . . . Debtors’ Motion to disallow Ford’s secured claims . . . is . . . treated under 11 U.S.C. § 506(a) as a Motion to value the secured claims at zero . . . . The Motion is allowed . . . to reduce to zero the secured claims as to each car; since the security was sold, and the claims of Ford are no longer secured. . . . [T]he amounts of Ford’s remaining unsecured claims can now be reconsidered and determined under § 502(j).”); In re Adams, 264 B.R. 901, 906–07 (Bankr. N.D. Ill. 2001) (Modification under § 1329 is not implicated when confirmed plan provided that secured creditors would be “paid 100% of allowed claims,” Ford filed a partially secured claim after confirmation, Ford repossessed all of its collateral after confirmation and the debtors then moved to disallow Ford’s secured claim; car lender’s secured claim can be disallowed or reduced to zero under § 506(a) after confirmation. Citing Chrysler Financial Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000), “Debtors cannot use § 1329 to strip down Ford’s claim. . . . However, Nolan did not discuss the possibility of reaching the same result if sought under Code § 502(b) and § 506(a), and that opinion must be read to apply only to the § 1329 issue discussed there. . . . Here the plan was silent as to collateral value, and creditor’s claims were not filed until after the confirmation hearing. Since Ford filed no claim prior to confirmation and the Debtors therefore had no chance to seek strip down or otherwise object to the unfiled claims before confirmation, they are not precluded from challenging those claims after confirmation.”).

 

29  See, e.g., In re Miller, No. 99-81339, 2002 WL 31115656, at *4–*6 (Bankr. M.D.N.C. Apr. 19, 2002) (unpublished) (Bankruptcy court can reconsider claims under § 502(j) when collateral is surrendered in good faith, and after reconsideration, the lender is entitled to an administrative expense to the extent a deficiency is caused by depreciation in excess of plan payments. A year and one-half after confirmation, debtors moved to surrender a Freightliner tractor no longer needed in their trucking business. “This Court finds that modifying a plan in order to reclassify a secured claim does not fall within the scope of § 1329(a) standing alone; however, a claim may be reconsidered pursuant to Section 502(j) for cause. . . . The Court is not persuaded that Congress intended to allow a debtor to use § 1329 to essentially revalue collateral that has depreciated while the debtor had the benefit of possession . . . . Nevertheless, the secured claim of Associates may be reconsidered pursuant to Section 502(j) for cause. . . . [I]n order to accomplish both the modification of the plan and the reclassification of Associates’ claim, the Debtors’ circumstances must satisfy both the good faith requirement of § 1329 and the equitable requirement of § 502(j). . . . The Court does not find that the depreciation of the 1999 Freightliner was a result of abuse or neglect by the Debtors. The Court finds that the Debtors have proposed the modifications in good faith and the equities of the case justify reconsideration of the claim. Associates will be permitted to liquidate the collateral. After Associates forecloses, it has no collateral and the balance of the claim will be allowed as a general unsecured claim. . . . At the time the Debtors filed their bankruptcy petition, Associates’ claim was secured by a vehicle with a value of $68,500.00. . . . During the course of the plan, Associates was paid $38,785.13 and the parties agree that the vehicle depreciated in the amount of $46,550.00 . . . . The plan did not adequately protect Associates, therefore, it is entitled to an administrative expense claim caused by this failure of adequate protection in the amount of $7,764.87 . . . pursuant to § 507(b).”). See also In re Johnson, 247 B.R. 904, 906–11 (Bankr. S.D. Ga. 1999) (Chapter 13 debtors can surrender collateral after confirmation and then reconsider the allowable amount of the remaining claim under § 502(j); creditor may be entitled to an administrative expense for failed adequate protection between confirmation and surrender. Plan confirmed in June of 1998 valued collateral at $1,000. In February of 1999, debtors moved to modify the plan to surrender the collateral and treat deficiency as an unsecured claim. “Courts are in agreement that collateral may be surrendered to pay down a secured claim after the chapter 13 plan has been confirmed, although they are not in agreement on the subsequent treatment of any unpaid balance of the secured claim. . . . I agree with [In re Coleman, 231 B.R. 397 (Bankr. S.D. Ga. 1999),] that § 1329 does not permit a postconfirmation reclassification of a secured claim. However, Section 1329 deals with plan modification not claim allowance. Section 502 provides for the allowance or disallowance of claims. In this instance, § 502(j) controls. Section 502(j) provides: ‘(j) A claim that has been allowed or disallowed may be reconsidered for cause.’ . . . After surrender of collateral, the deficiency portion of the claim is no longer actually secured. A claim simply cannot be secured when nothing secures it. Any deficiency debt is therefore by definition unsecured. . . . [T]he plan must provide the same treatment for each claim within a particular class. . . . § 1322(a)(3). The Johnson’s [sic] confirmed Chapter 13 plan, like many Chapter 13 plans, classifies all unsecured claims together. The unsecured deficiency claim must be treated as all other unsecured claims allowed by the plan. To allow the claim as secured fails to treat all claims equally within a particular class. Section 502(j) is available to redress that inequity. Section 502(j) considers the good faith of both the debtor and the affected creditor. ‘A reconsidered claim may be allowed or disallowed according to the equities of the case.’ 11 U.S.C. § 502(j). Furthermore, a modified plan must be ‘proposed in good faith and not by any means forbidden by law.’ 11 U.S.C. §§ 1329(b), 1325(a)(3). Thus, the deficiency amount of the allowed secured claim may be treated as an unsecured claim if the request is in good faith and leads to an equitable result. . . . The Johnsons . . . testified that they wished to surrender the collateral because Annette Johnson was no longer working, they were living with her mother and they could no longer afford their current plan payment. The Bankruptcy Code allows the debtor to use collateral and subsequently surrender it. 11 U.S.C. § 1329(a)(3). . . . [U]nder the circumstances established by the debtor’s testimony, they are not acting in bad faith. . . . [R]econsideration of the claim is appropriate. . . . However, the existence of a deficiency amount demonstrates that the creditor’s claim was not adequately protected. . . . Therefore, the creditor may seek allowance of a claim for an administrative expense caused by this failure of adequate protection. 11 U.S.C. § 503(b) . . . . Payment of such an administrative expense has priority over unsecured claims and is paid in full. 11 U.S.C. § 507(a)(1) & (b). . . . Foreclosure value, not replacement value, should be the basis of the super priority administrative expense claim. The debtor’s payments on the secured claim and the cash received from the postconfirmation sale of the collateral should both be subtracted from that foreclosure value. The resulting dollar amount is the creditor’s allowable super priority administrative expense for failure of adequate protection. . . . When the super priority administrative expense (based on foreclosure value) is less than the deficiency amount (based on replacement value), the difference between the foreclosure value and the replacement value will remain an unsecured claim. The creditor’s total general unsecured claim will be the same no matter when the collateral is surrendered. . . . The administrative expense claim merely compensates the creditor for the unpaid devaluation of the collateral during the time that the debtor had the use of it.”).

 

30  See § 136.12  Failed Adequate Protection before BAPCPA and § 136.13  Failed Adequate Protection after BAPCPA for discussion of claims for failed adequate protection in Chapter 13 cases.

 

31  In re Boothe, 167 B.R. 943, 945 (Bankr. D. Colo. 1994) (Confirmed plan treated car lender’s $4,969 claim as secured to the extent of $1,900. After confirmation, the debtors’ car was destroyed, and the insurance company tendered $2,900. The balance on the car lender’s secured claim at the time of destruction of the car was $1,038. The debtors proposed to pay the balance of the allowed secured claim and to use the remainder of the insurance proceeds as the down payment on a replacement car. “[The car lender] is asserting its rights as a general unsecured creditor and demands that before a modified plan can be confirmed the plan must comply with the mandates of 11 U.S.C. § 1325, which requires, inter alia, that the debtor commit all of his projected disposable income to the plan payments. Because the Debtors now have an additional amount of disposable income not otherwise accounted for, i.e., approximately $1,852 [sic], that sum should now be contributed to any plan proposed by the Debtors.”). Accord Collier v. Valley Fed. Sav. Bank (In re Collier), 198 B.R. 816, 817 (Bankr. N.D. Ala. 1996) (On its own motion, court applies disposable income test to modify plan to pay creditors excess insurance proceeds from destruction of rental property. Confirmed plan paid mortgage on rental property directly by the debtor and 55% dividend to unsecured creditors. After confirmation, rental property was destroyed by fire, and insurance company tendered $25,600 more than the balance due on the mortgage. “[T]he insurance proceeds constitute an unexpected and extraordinary change in the debtors’ financial circumstances necessitating the modification of the debtors’ confirmed Chapter 13 plan to conform with the debtors’ increased disposable income. ‘The confirmation order is res judicata on the disposable income test, except in extraordinary circumstances.’ . . .  However, where ‘substantial unanticipated changes’ occur, post-confirmation modification of plan payments is appropriate. . . . [T]he Court hereby modifies the debtors’ Chapter 13 plan to increase the dividend to the unsecured claim holders to reflect the debtors’ increased disposable income. The Court believes that this option is . . . in keeping with the best interest test under 11 U.S.C. § 1325(a)(4).”). Contra In re Baker, 194 B.R. 881, 885 (Bankr. S.D. Cal. 1996) (Proceeds of life insurance on codebtor who passed away after confirmation are not projected disposable income, but interest earned on proceeds is. “If the exempt asset in question is an anticipated stream of payments, it is included in projected income; if the exempt asset is other than a stream of payments, it is not included. In this case the Debtor satisfies the ‘projected disposable income’ test by including in her income the Interest generated by the Insurance Proceeds. She will not be required to invade the Proceeds to fund the Plan.”); In re Moore, 188 B.R. 671, 675–77 (Bankr. D. Idaho 1995) (“‘Income’ is not defined by the Code. Some courts have adopted the Internal Revenue Code’s definition of income. . . . I am not aware of any decision adopting a comprehensive definition of ‘income’. Instead the courts have adopted a piece meal [sic] approach. . . . I disagree with In re Boothe [167 B.R. 943 (Bankr. D. Colo. 1994)]. Under Boothe, any cash received during the pendency of the plan would be considered income. I believe this would undercut the rational [sic] of Chapter 13. If a debtor meets all the requirements of sections 1325(a) and (b), the debtor may keep all prepetition assets (whether exempt or nonexempt). . . . I would include within the definition of income for this purpose assets (monetary or otherwise) received by the debtor which are not attributable to the appreciation, sale or conversion of the debtor’s pre-confirmation assets. . . . Essentially the payment of insurance proceeds for the Ford Explorer was no more than the conversion of the Debtors’ property from one form to another. Had the Debtors simply traded the Ford Explorer for a similar vehicle, the Trustee would not be contending that the new vehicle was income. The fact that in this case the vehicle was forcibly converted into cash does not change this result. The mere conversion of the debtors’ pre-conversion assets from one form to another (even cash) does not produce income. . . . [T]he Trustee shall return the remainder of the insurance proceeds to the Debtors.”).

 

32  299 B.R. 468 (Bankr. S.D. Ohio 2003).

 

33  In re Butler, 174 B.R. 44, 48 (Bankr. M.D.N.C. 1994) (Although destruction of the debtors’ van two and one-half years after confirmation is a substantial, unanticipated change in circumstances, good-faith requirement in § 1325(a)(3) precludes confirmation of a modified plan that would reclassify lienholder as unsecured where debtors allowed insurance to lapse in violation of original confirmation order. “A debtor who proposes a modification which is necessitated by his own postconfirmation misconduct, neglect or unjustified failure to comply with the confirmed plan or confirmation order does not meet the good faith requirement of § 1325(a). . . . The debtor who has abused or neglected the collateral of a secured creditor following the confirmation of a plan likewise may not be permitted to modify the plan in order to shift the resulting loss to the secured creditor.”). Accord In re Cooper, 167 B.R. 889, 890 (Bankr. E.D. Ark. 1994) (Citing In re Banks, 161 B.R. 375 (Bankr. S.D. Miss. 1993), court denies confirmation of modified plan that would surrender a car in full satisfaction of a credit union’s secured claim where the car was wrecked approximately four years after confirmation in an accident that was the debtor’s fault and the debtor had allowed insurance to lapse. “This Court agrees that mechanical problems with the debtor’s vehicle, particularly at this late juncture of the case, ‘does not qualify as a justifiable basis upon which the debtor should be allowed to modify her confirmed plan in the manner proposed.’ . . . In addition, the Court finds that the modification is not filed in good faith as required by Bankruptcy Code sections 1325(a)(3), 1329(b)(1). The debtor failed to keep insurance on the vehicle and caused the accident by which the vehicle lost its value. . . . [T]he loss of value to the vehicle is solely the fault of the debtor. A modification to abandon the vehicle, at this juncture in the case, where the damage was caused by the debtor who failed to maintain insurance, is not filed in good faith.”).

 

34  208 B.R. 688 (Bankr. E.D. Ark. 1997).

 

35  208 B.R. at 689–90 (“In circumstances where a secured creditor’s collateral is destroyed or damaged postpetition, there is a split of authority as to whether a debtor can amend a Chapter 13 plan to surrender the depreciated collateral. . . . Although section 1325(a)(5)(C) permits the satisfaction of a secured creditor’s claim by surrendering the collateral, section 1322(b)(2) prohibits the Debtors’ proposal to surrender the collateral because the modification alters the rights of a holder of a secured claim secured only by a security interest in real property that is the Debtors’ principal residence. . . . The modification provides that the Debtors’ [sic] will surrender their ‘former’ residence in satisfaction of HUD’s claim and treat any deficiency remaining after disposition of the collateral as a general unsecured claim to be paid pro rata with other general unsecured claims. Such a modification is unquestionably an alteration of HUD’s rights under the note and mortgage and is clearly prohibited by § 1322(b)(2). The fact that the Debtors allowed the property to become uninsured and now no longer desire to maintain their residence at the premises because of fire damages suffered postpetition is immaterial.”).

 

36  See In re McNulty, 142 B.R. 106, 110 (Bankr. D.N.J. 1992) (Court denies confirmation of modified plan that surrendered property to mortgage holders in full satisfaction of claims. Modified plan was not proposed in good faith when debtor elected to pay tuition for children rather than making payments on mortgages. “[P]ostconfirmation misconduct in connection with a plan can result in inability to prove that a modified plan has been proposed in good faith. . . . By failing to make payments which they were obligated to make and by making payments which were impermissible, the debtors breached an obligation to their creditors which they undertook by the plan. . . . [T]he modified plan has not been proposed in good faith.”).

 

37  Hospital Auth. Credit Union v. Smith (In re Smith), 207 B.R. 26, 30, 32 (Bankr. N.D. Ga. 1997) (“Assuming that the statute permitted her to [surrender the car], whether as a payment under section 1329(a)(3) or as a distribution or surrender under section 1325(a)(5)(B) or (C) . . . she does not have the vehicle to surrender. . . . She cannot pay, distribute or surrender something that she can neither deliver nor tender. She offered no proof that telling Hospital Authority where it could find the vehicle was a tender of possession or control. The Debtor did not propose to abandon the vehicle. Section 1325(a)(5)(C) would be redundant, a needless repetition of section 554, if the phrase ‘surrender of such property to such holder’ meant merely ‘abandonment.’ ‘Surrender’ must mean something more. . . . [A] debtor must at least tender possession or control of the collateral to the creditor, without regard to whether the creditor’s consent is a further condition. Merely telling the creditor where it can find the collateral is not a surrender ‘to such holder.’ . . . To effect a payment, the Debtor must be able to transfer or at least tender something of value to Hospital Authority. . . . She can no more pay down Hospital Authority’s claim by telling it where to find the vehicle than she could pay its claim by telling it to retrieve some other property from a third party, particularly one who may be asserting prior lien rights in that property.” Court rejected creditor’s alternative argument that res judicata precluded modification: “[R]es judicata . . . cannot bar further litigation relating to a possible modification pursuant to section 1329, even if the matter was adjudicated by the confirmation order; otherwise, section 1329 would be meaningless. . . . [A] confirmation order, though final and not subject to appeal, is subject to modification.”).

 

38  In re Taylor, 243 B.R. 226, 230–31 (Bankr. W.D.N.Y. 2000) (“Some of what happens to cars (or computers, or tools of the trade, or other property that a Chapter 13 debtor might retain subject to a pre-petition security interest) is fully known and understood by a lender to be as much the lender’s risk as the borrower’s, such as the risk of mechanical breakdown too expensive to repair. Some of what happens to payments under a Plan, too, involve [sic] risks that ought not to be borne by the debtor alone, such as where innocent miscalculations or administrative errors result in insufficient payments going to the lender (to compensate for wear and tear) despite full compliance by the debtor with the duty to make the payments that the Plan called for. . . . So the question is a matter for case-by-case determination, based on whether the debtor is found to be acting in good faith under the circumstances and based on how the goal of fundamental fairness is to be served not only in such case, but by the Chapter 13 ‘program.’”). Accord In re Knappen, 281 B.R. 714, 720 (Bankr. D.N.M. 2002) (“[T]he requirement that the modification be proposed in good faith, § 1325(a)(3), is particularly relevant. For example, were the debtor to fail to maintain insurance on a vehicle, and then lose the value of the collateral for that reason, or were the debtor to fail to reasonably care for the collateral, such as periodically changing the oil in the vehicle with a resultant loss of value, the motion to modify would probably be denied.”).

 

39  122 B.R. 708 (E.D. Tenn. 1991).

 

40  See § 103.1 [ Classification of Secured Claims ] § 74.7  Classification of Secured Claims.

 

41  See § 149.1 [ Power to Classify Unsecured Claims: Tests for Unfair Discrimination ] § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination.

 

42  See § 103.1 [ Classification of Secured Claims ] § 74.7  Classification of Secured Claims. See, e.g., In re Anderson, 153 B.R. 527, 528 (Bankr. M.D. Tenn. 1993) (“[T]he Debtors may modify their plan to reflect the satisfaction of the Bank’s secured claim by its repossession of the Debtors’ automobile.” The debtors’ proposed modification fits within § 1329(a)(1) because each secured claim is in a separate class.), probably overruled on other grounds by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000).

 

43  161 B.R. 375 (Bankr. S.D. Miss. 1993).

 

44  232 F.3d 528 (6th Cir. 2000). The criticism of Nolan that follows in the text is an example of what The Chief Judge of the Other End of the Hall, George C. Paine II (Bankr. M.D. Tenn.), would describe as “a bit dog barks.” See In re Jock, 95 B.R. 75 (Bankr. M.D. Tenn. 1989), probably overruled by Chrysler Fin. Corp. v. Nolan, 232 F.3d 528 (6th Cir. 2000).

 

45  232 B.R. at 532. Accord In re Meeks, 237 B.R. 856, 861 (Bankr. M.D. Fla. 1999) (“[T]he modification of payment amounts cannot alter the allowed amount of the secured claim or eliminate the requirement in § 1325(a)(5) that the claim be paid in full.”); In re Coleman, 231 B.R. 397, 399 (Bankr. S.D. Ga. 1999) (“I . . . follow the . . . line of cases . . . that Section 1329(a)(1) permits a post-confirmation modification only to alter the amount of specific periodic payments.”).

 

46  See § 74.5  Surrender or Sale of Collateral before BAPCPA and § 74.6  Surrender, Sale, Vesting in Lienholder and Payment with Property after BAPCPA.

 

47  11 U.S.C. § 502(j). See § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation, § 135.1  Timing, Procedure and Evidence Presumption and § 135.2  Allowance and Objections to Claims: Changes by BAPCPA.

 

48  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation. See, e.g., Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995) (Confirmed plan treating lienholder as an unsecured creditor does not have res judicata effect because the validity of a lien can only be resolved in a Chapter 13 case through an adversary proceeding in which the validity and extent of the lien are challenged.).

 

49  See § 74.1  General Rules before BAPCPA, § 74.2  General Rules Changed by BAPCPA, § 74.12  Lien Retention before BAPCPA§ 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases and § 78.1  Full Payment of Allowed Secured Claim.

 

50  See § 259.1 [ To Cure Postconfirmation Default ] § 127.2  To Cure Postconfirmation Default.

 

51  See In re Waller, 224 B.R. 876, 879 (Bankr. W.D. Tenn. 1998) (After postconfirmation grant of relief from the stay and repossession of the debtor’s car, plan can be modified to reclassify car lienholder as an unsecured claim holder with respect to the deficiency, but payments due under the plan before the grant of relief from the stay remain secured claims. “For the time before entry of [the order for relief from the stay], First Citizens remains a secured creditor, and any plan payments on the bank’s secured claim that accrued before [the order for relief from the stay] must be paid as a secured claim.”), probably overruled on other grounds by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000).

 

52  See discussion of good faith before and after BAPCPA beginning at § 103.1  In General§ 104.1  In General§ 105.1  Prepetition Conduct and Misconduct—In General§ 106.1  In General§ 107.1  Greed, Not Need§ 108.1  Economic Components of Good Faith—In General and § 109.1  Smell Tests.

 

53  143 B.R. 871 (Bankr. W.D. Tenn. 1992), probably overruled by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000).

 

54  In re Rimmer, 143 B.R. 871 (Bankr. W.D. Tenn. 1992), probably overruled on other grounds by Chrysler Fin. Corp. v. Nolan (In re Nolan), 232 F.3d 528 (6th Cir. 2000). Accord In re Knappen, 281 B.R. 714, 720 (Bankr. D.N.M. 2002) (Good-faith test in § 1325(a)(3) “is particularly relevant” when plan is modified after confirmation to reflect repossession of a car. “For example, were the debtor to fail to maintain insurance on a vehicle, and then lose the value of the collateral for that reason, or were the debtor to fail to reasonably care for the collateral, such as periodically changing the oil in the vehicle with a resultant loss of value, the motion to modify would probably be denied.”); In re Butler, 174 B.R. 44, 48 (Bankr. M.D.N.C. 1994) (Although destruction of the debtors’ van two and one-half years after confirmation is a substantial, unanticipated change in circumstances, good-faith requirement in § 1325(a)(3) precludes confirmation of a modified plan that would reclassify lienholder as unsecured where debtors allowed insurance to lapse in violation of original confirmation order. “A debtor who proposes a modification which is necessitated by his own postconfirmation misconduct, neglect or unjustified failure to comply with the confirmed plan or confirmation order does not meet the good faith requirement of § 1325(a). . . . The debtor who has abused or neglected the collateral of a secured creditor following the confirmation of a plan likewise may not be permitted to modify the plan in order to shift the resulting loss to the secured creditor.”); In re Cooper, 167 B.R. 889, 890 (Bankr. E.D. Ark. 1994) (Court denies confirmation of modified plan that would surrender a car in full satisfaction of a secured claim where the car was wrecked four years after confirmation in an accident that was the debtor’s fault and the debtor had allowed insurance to lapse. “[T]he Court finds that the modification is not filed in good faith as required by Bankruptcy Code sections 1325(a)(3), 1329(b)(1). The debtor failed to keep insurance on the vehicle and caused the accident by which the vehicle lost its value. . . . [T]he loss of value to the vehicle is solely the fault of the debtor. A modification to abandon the vehicle, at this juncture in the case, where the damage was caused by the debtor who failed to maintain insurance, is not filed in good faith.”). See also In re McNulty, 142 B.R. 106, 110 (Bankr. D.N.J. 1992) (Court denies confirmation of modified plan that surrendered property to mortgage holders in full satisfaction of claims. Modified plan was not proposed in good faith where debtor elected to pay tuition for children rather than making payments on mortgages. “[P]ostconfirmation misconduct in connection with a plan can result in inability to prove that a modified plan has been proposed in good faith. . . . By failing to make payments which they were obligated to make and by making payments which were impermissible, the debtors breached an obligation to their creditors which they undertook by the plan. . . . [T]he modified plan has not been proposed in good faith.”).

 

55  See § 126.2  Application of Tests for Confirmation, § 126.3  Does Disposable Income Test Apply?, § 126.6  Modification after Confirmation after BAPCPA, § 127.9  To Increase Payments to Creditors and § 127.11  To Extend or Reduce the Time for Payments.

 

56  520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997). See § 109.1 [ Rash and Valuation ] § 76.5  Rash and Valuation for discussion of Rash and valuation.

 

57  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

58  See § 122.1 [ Rental Property, Farmland and Other Income-Producing Property ] § 80.6  Rental Property, Farmland and Other Income-Producing Property.

 

59  Williams v. First Nat’l Bank (In re Williams), 108 B.R. 119 (Bankr. N.D. Miss. 1989). But see In re McColumn, No. 99-54106 RFH, 2001 WL 1855339, at *2 (Bankr. M.D. Ga. Feb. 12, 2001) (unpublished) (Bankruptcy court denies modification after confirmation to treat a wholly unsecured lien as an unsecured claim. Confirmed plan treated the city of Macon’s second and third liens on the debtor’s residence as secured claims. The city conceded there was no value in the property to secure the liens. The bankruptcy court acknowledged that the Eleventh Circuit permitted the strip-off of a wholly unsecured lien on a residence in Tanner v. FirstPlus Financial, Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000). “Movant does not propose to surrender the collateral, namely, her residence. Movant’s confirmed Chapter 13 plan provided that Respondent’s liens would be treated as secured claims. The Court is not persuaded that Movant’s loss of income changes the nature of Respondent’s secured claims as established by the order of confirmation.”).

 

60  In re Frost, 96 B.R. 804 (Bankr. S.D. Ohio 1989), aff’d, 123 B.R. 254 (S.D. Ohio 1990). See also In re Hendleman, 91 B.R. 475 (Bankr. N.D. Ill. 1988) (Original plan called for payment in full of all claims from proceeds of sale of debtor’s home. When proceeds proved insufficient, debtor moved to modify to treat the holder of an “equitable mortgage” as an unsecured claim holder. Court permitted modification on the finding that in a Chapter 7 case the best-interests-of-creditors test would include avoidance of the unrecorded equitable mortgage; thus, the equitable mortgage should be treated as an unsecured claim for purposes of modification under § 1329.). But see Taylor v. First Union Mortgage Co. (In re Taylor), 208 B.R. 828, 831–34 (Bankr. E.D. Pa. 1997) (Although mortgage is not protected by § 1322(b)(2), equitable considerations prohibit modification in the last year of a five-year plan to bifurcate mortgage claim and reallocate plan payments to retire allowable secured claim in full rather than cure defaults. Original confirmed plan contemplated payoff of mortgage of $36,733.80 over 60 months. Plan was modified from a “payoff plan” to a “cure plan” paying $14,119.19 to cure mortgage arrearages and maintain payments. With a year remaining in the five-year plan, debtor proposed a third modification reducing secured portion of mortgage to $10,000 payable with 6% interest and reallocating arrearage payments previously made “to the loan balance” such that the allowed secured portion of the mortgage would be paid in full. The court first noted that “§ 1322(b)(2) is inapplicable where, as here, a mortgagee holds a security interest in items in addition to a debtor’s residence, specifically the sort of broad security interest in appliances, fixtures, and machinery contained in the instant mortgage.” Next the court concluded that res judicata principles did not preclude the proposed modification because “there is much to be said for the [In re Witkowski, 16 F.3d 739 (7th Cir. 1994),] approach to § 1329(a).” However, the court refused the debtors’ modification because “equitable considerations should estop these Debtors from modifying the 2nd Plan at this late juncture, in light of the history leading to its confirmation. It must be recalled that the 2nd Plan was a negotiated compromise . . . . [The debtors] seek to retroactively credit all payments tendered under the 2nd Plan in a different fashion. . . . No reported case goes so far in allowing debtors to thus realign their obligations in effecting plan modification. . . . [T]he Motion comes too late in the history of this case, being about a year prior to its running its five-year course, and after the Debtors have accepted the benefits from the Stipulation to proceed with a cure plan in their 2nd Plan. It is inequitable to allow them to, for the second time, to completely change their course in their treatment of the Mortgagee.”); In re Algee, 142 B.R. 576, 582 (Bankr. D.D.C. 1992) (Res judicata and the absence of changed circumstances preclude debtor from modifying plan in the fifth year after confirmation to split second and third mortgages into secured and unsecured claims. Original plan treated all three mortgages as fully secured. Although at confirmation of the original plan, the debtor probably could have bifurcated the second and third mortgages, “all that has happened here is that the debtor—through new counsel—has finally ‘smelt the coffee’ and realized that he could have proposed a plan providing practically nothing to be paid to [the second and third mortgage holders] as secured creditors. That is not the type of changed circumstance that warrants modification of a plan.”).

 

61  121 B.R. 617 (Bankr. N.D. Ala. 1990).

 

62  314 F.3d 567 (11th Cir. 2002).

 

63  314 F.3d at 570–71. Accord Systems & Servs. Techs., Inc. v. Dykes (In re Dykes), No. 01-15683 (11th Cir. Apr. 26, 2002) (unpublished).

 

64  In re Morris, 289 B.R. 783, 786–87 (Bankr. S.D. Ga. 2002).

 

65  No. 01-91067, 2003 WL 245233 (Bankr. C.D. Ill. Feb. 4, 2003) (unpublished).