Mattson v. Howe (In re Mattson), 468 B.R. 361, 367–73 (B.A.P. 9th Cir. 2012) (Jury, Hollowell, Kirscher)

When debtors’ income increased shortly after confirmation, plan can be modified to increase the monthly payment, but debtors failed to prove that shortening length of plan from 60 to 36 months was in good faith. There is no substantial unchanged-circumstances requirement at modification after confirmation, and disposable income test does not apply, thus the applicable commitment period is not a per se bar to modification that shortens the length of the plan. However, good-faith test does apply at confirmation and length of plan is proper consideration with respect to good faith. “Notably missing from § 1329 is any express requirement that a substantial and unanticipated change in the debtor’s financial circumstances is a threshold requirement to overcome the res judicata effect of a confirmed plan under § 1327(a). . . . The First, Fifth and Seventh Circuits . . . do not impose on parties seeking to modify a confirmed plan the threshold requirement of the substantial unanticipated change test. . . . Despite our not adopting the substantial and unanticipated change test as a prerequisite to plan modification, we have held, as did the Seventh Circuit in [In re Witkowski, 16 F.3d 739 (7th Cir. Feb. 14, 1994) (Posner, Wood, Manion)], that the bankruptcy court may consider a change in circumstances in the exercise of its discretion. . . . In this regard, the bankruptcy court acknowledged our holding in [Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. June 27, 2005) (Smith, Hollowell, Brandt),] that § 1329(b)(1) does not reference or otherwise incorporate the provisions concerning the disposable income test and applicable commitment period contained in § 1325(b). . . . [I]f a debtor’s plan modification was challenged, he or she need not show that all of their projected disposable income was devoted to making plan payments under the modified plan. . . . In re Sunahara did not leave a wide open field for modifications to be approved. . . . [T]he Panel instructed the bankruptcy court to ‘carefully consider whether modification has been proposed in good faith.’ . . . Debtors failed to meet their burden of proving that the shortened term of their plan was made in good faith under the [Goeb v. Heid (In re Goeb), 675 F.2d 1386 (9th Cir. May 3, 1982) (Choy, Schroeder, Hatter),] standards. . . . Debtors’ contribution of a portion of their increased income to their plan for a three year period does not amount to per se good faith. . . . Debtors do not . . . point to any facts in the record which showed they would be unable to continue their increased payments beyond the 36 month period that they proposed. Although the doctrine of res judicata did not prevent Debtors from shortening the term of their plan, they advanced no legitimate reason for doing so under the circumstances. . . . [W]e emphasize that the continued absence from § 1329(b)(1) of any reference to § 1325(b) is conclusive as to whether a debtor may modify his or her plan to reduce the term below the applicable commitment period required for an original plan. . . . [T]he plain language of § 1329(a)(2), which authorizes modifications to extend or reduce the time for payments under the plan, continues to control. . . . [A] debtor’s circumstances may justify a reduction in plan length.”

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