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.”

No Author Biography has been linked to this Article.

Related Articles

June 23, 2019
Members of the military and their families often qualify for special tax benefits. For example, members of the armed forces don’t have to pay taxes on some types of income. In addition, special rules could lower the tax they owe or allow them more time to file and pay their federal taxes. Here are some of these special tax benefits:...
April 25, 2021
By Pardis Akhavan, Resnik Hayes Moradi LLP (Encino, CA) The bankruptcy court in In re Ritter, 2021 WL 864092 (Bkrtcy C.D. Cal, 2021)(J. Tighe),denied debtors’ motion for an immediate discharge under Section 1328(i) ruling that Congress apparently did not intend that a chapter 13 debtor who obtains a loan modification should also receive a discharge, on that basis alone at...
Members
July 21, 2019
By John P. Gustafson, United States Bankruptcy Judge, Northern District of Ohio, Western Division Click here for Part 1 B. The Duty To Disclose Post-Petition Causes Of Action. 1. The Waldron Decision. The 11th Circuit Court of Appeals considered the issue of whether or not a post-petition cause of action is . . . It looks like you are not...
Members
Copy of Hildebrand-2016
July 30, 2023
By Henry E. Hildebrand, III, Chapter 13 Standing Trustee for the Middle District of Tennessee (Nashville) Post-petition, pre-conversion equity that accrues in a debtor’s residence during the pendency of a Chapter 13 plan is property of the estate in the Chapter 7 estate following conversion.  (Hastings) Goetz v. Weber (In re Goetz), 651 B.R. 292 (8th Cir. BAP, June 1,...
Members
moran_cathy
November 13, 2022
Community property works differently in bankruptcy. I probably don’t have to tell you that. On the issue of assets and debts, community property is pretty straightforward. All of the community property comes into the estate upon the commencement of a bankruptcy case, even when only one spouse files. §541(a)(2). Every creditor with a right to be paid from the community...
Members
December 6, 2020
By Scott F. Waterman, Chapter 13 Standing Trustee for the Eastern District of Pennsylvania (Reading) Modifying a first mortgage is one of the most common loss mitigation tools available to bring a loan current to prevent foreclosure. In this case the first mortgage was modified twice by capitalizing the unpaid interest, reducing the interest rate, and reducing the monthly payments...
Proof of Claim
In any given year Chapter 13 Trustees administer 400,000 to 500,000 cases and distribute almost $5 billion to creditors.  A critical duty for trustees is to be sure that distributions are correctly delivered to an allowed claimant. 11 USC § 501 governs the filing of a proof of claim and 11 USC § 502 sets forth the requirements for allowance...
Members
June 14, 2020
By The Honorable William Houston Brown (Retired) Attorney sanctioned for filing identical schedules in two cases without updating financial information. The same attorney represented a debtor in two cases filed sixteen months apart, but the attorney filed essentially identical schedules in both cases, violating Rule 9011 by failing to make reasonable inquiry before filing the second case. The schedules in...
Members
moran_cathy
March 6, 2022
Who knew 20 years ago how apparently hard it is to account for money paid to you? Even if accounting for money was your business? Today’s raft of mortgage accounting issues were not ones I foresaw when I became a bankruptcy lawyer.Yet every day we encounter cases where the foreclosure notice follows the “all current” filing at the close of...
Members
April 21, 2019
By Henry E. Hildebrand, III, Chapter 13 Standing Trustee (Nashville, TN) Section I. Student Loans, Part I Statutory Suggestions When the Commission asked participants to identify the most important issue in consumer bankruptcy, all three committees were told the same thing: the role of bankruptcy in the field of student loans. All three committees looked at the issue and proposed...
Members