An Elusive Finality: The Illusive Standard for the Modification of Confirmed Chapter 13 Plans
Norton Bankruptcy Law Adviser, July 2020, at 1
24 Pages Posted: 11 May 2021 Last revised: 14 May 2021
Date Written: 2020
Amongst the group of related sections touching upon the creation and administration of a plan of debt adjustment pursuant to Chapter 13 of the Bankruptcy Code (“Code”), just one—§ 1329—concerns post-confirmation modification. This section’s first lettered paragraph enumerates the permissible bases for modification; its second paragraph renders any modified plan subject to four of the same provisions applicable to its original confirmation and effective upon filing “unless, after notice and hearing, such modification is disapproved” by the court; and its third places a temporal check on any such efforts. For decades, this language's smooth operation has been stymied by a single statutory elision: the Code contains no explicit standard by which to determine whether a modification, otherwise consistent with § 1329, merits judicial acquiescence. Although Congress expected “judicial evolution” to engender reasonably uniform criteria, its bet went bad. Instead, in their effort to assay “the equities of the situation,” federal courts fragmented over two interrelated issues: (1) the application of res judicata to a confirmed plan in light of the explicit text of § 1329(a) and § 1327(a), and (2) the engraftment of a popular lodestar, one traceable to two appellate opinions, onto a hushed § 1329(a): that a debtor, trustee, or holder of an unsecured claim must demonstrate a substantial and unanticipated change in the debtor’s financial condition to justify adjustment to the payment amount set in the original plan.
This short article attempts a path through this jumbled thicket of incoherent precedent and superficial, almost nonexistent commentary. Part II narrates two real-world cases in which § 1329(a)’s indefinite standard played a key role. Part III illuminates the prevailing statutory scheme and the extant legal divisions. Part IV outlines a new methodology that strives to sidestep the existing jurisprudence’s entrenched errata and accord with Chapter 13’s prose and purpose, one inspired by an opinion issued in 2013 by the United States Bankruptcy Court for the Eastern District of New York.
Reprinted from Norton Bankruptcy Law Adviser with permission of Thomson Reuters. Copyright © 2020. Further use without the permission of Thomson Reuters is prohibited. For further information about this publication, please visit https://legal.thomsonreuters.com/en/products/law-books or call 800.328.9352.
Note: Reprinted from Norton Bankruptcy Law Adviser Issue 7 with permission of Thomson Reuters. Copyright © 2020. Further use without the permission of Thomson Reuters is prohibited. For further information about this publication, please visit https://legal.thomsonreuters.com/en/products/law-books or call 800.328.9352.
Keywords: Chapter 13, 1329, 1322, 1323, 1325, 1327, Bankruptcy Code, bankruptcy, reorganization, Salpietro, substantial, unanticipated, Zellner, Arnold, Chandler Act, BAPCPA, Chapter XIII, BAFJA, wage earner, canons, specific, general, legislative history, res judicata
JEL Classification: K10, K11, K12, K13, K19, K20, K22, K23, K29, K30, K35, K36, K39, K40, K41, K42, K49, N11, N12, N21
Suggested Citation: Suggested Citation