The Ties that Bind Chapter 13 Confirmation Orders

The Ties that Bind Chapter 13 Confirmation Orders

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The provisions of 11 U.S.C. §1327(a) clearly state:

The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.

Recent case law reaffirms the binding effect of a confirmation order. In the case of In re Sullivan, 2005 WL 428614 (Bankr. M.D. Fla.) (Jan. 14, 2005), the secured creditor obtained relief from stay prior to confirmation. At the subsequent confirmation hearing, the secured creditor did not appear or object to confirmation, and the court entered an order of confirmation that was not appealed. The confirmed plan contained a provision curing the mortgage arrears owed to the secured creditor. After confirmation, the debtor began making payments pursuant to the plan, which were subsequently distributed to the secured creditor. About six months later, the secured creditor filed a motion for an order requiring the trustee to suspend plan payments to the secured creditor. The debtor contested the motion, asserting that the secured creditor was bound by the confirmation order, despite the order granting relief from the automatic stay.

Stating that the binding effect of a chapter 13 confirmation order is a basic tenet of bankruptcy law, the court stated the issue to be whether the confirmation order is binding upon a creditor who obtained relief from stay prior to confirmation.

Citing In re Garrett, 185 B.R. 620 (Bankr. N.D. Ala. 1995), the court held that an order lifting the stay entered prior to confirmation did not impact confirmation unless the plan preserves the terms of the order lifting the stay. If the plan, as confirmed, provides for payments, it is binding upon the creditor who obtained relief from stay.

It should be noted that in Garrett, the creditor was seeking seizure of a mobile home and the debtor was not in default of the plan provisions. The creditor was relying on its pre-confirmation stay relief, and the debtor was in default of the pre-confirmation loan. The court found that the lien on the mobile home was still valid and perfected, but that the provisions of the confirmed plan are "res judicata as to all justifiable issues that were or could have been decided at the confirmation hearing." In re Garrett at p. 622. Other courts have held that the confirmation order precludes any party from relief from stay supported by pre-confirmation facts.1 The obvious remedy for the creditor is to object to confirmation to preserve the lifting of the stay in the plan. There is no protection for the secured creditor in having a motion for relief from stay pending at the time of confirmation.

In the recent case of In re Wellman, 2004 WL 3208766 (6th Cir. BAP) (Ohio) (Dec. 28, 2004), the creditor filed the relief-from-stay motion prior to the confirmation hearing, but the matter had not been heard. At the post-confirmation hearing, the bankruptcy court held that the confirmation order pretermitted the motion to lift the stay. The bankruptcy court noted that the secured creditor had filed a motion to dismiss based on repetitive filings, which was resolved by a mutual agreement barring another filing for six months if the current case was dismissed for any other reason. This was found to have resolved any objection.

The Sixth Circuit BAP agreed, saying that 11 U.S.C. §1327 was clear in precluding any creditor from asserting, after confirmation, any other interest except as provided for in the confirmed plan. All issues of adequate protection, lack of equity, or necessity of the property for the debtor are precluded from post-confirmation litigation by the transcendence of the confirmed plan.

Unless an objection is timely filed and sustained, the only remedies a secured creditor has after confirmation are those based on a plan payment default, waste or failure of an adopted covenant such as a failure to insure the collateral. Creditors must insure that the plan continues any pre-confirmation stay relief or adopts the terms of stipulated relief, or they must file timely objections. Failure to do any of the above binds the creditor to the confirmation plan.


1 Lawson v. Lackey, 148 B.R. 626, 627; Lomas Mortgage USA v. Wiese, 980 F.2d 1279, 1284 (9th Cir. 1992); In re Minzier, 158 B.R. 720 (Bankr. S.D. Ohio 1993). Return to article

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Friday, April 1, 2005