Alexandria, Va. — The Supreme Court’s upcoming consideration of Bullard v. Hyde Park Savings Bank, which looks at whether an order denying confirmation of a bankruptcy plan is appealable, could have a broad impact on consumer chapter 13 and possibly chapter 11 cases, according to the lead article in the February edition of the ABI Journal. “Chapter 13 cases comprise more than 30 percent of all bankruptcy filings, and any decision on Bullard may extend to confirmation denials in chapter 11 cases as well, so the Supreme Court’s final word on finality will finally have far-reaching effects,” Bonnie L. Clair and Byron E. Hale of Summers Compton Wells LLC (St. Louis) write in “Supreme Court Finally Takes Up Chapter 13 Confirmation Finality.”

The issue that comes before the Court stems from cases involving bankruptcy court denials of chapter 13 plan confirmation. This situation leaves most debtors with a choice between agreeing to an amended plan, which may or may not be acceptable to the debtor or confirmable, or enduring a dismissal or conversion of the bankruptcy case, according to Clair and Hale. Consequently, some chapter 13 debtors who have been denied plan confirmation seek to appeal those orders. “Courts of appeals generally apply a flexible standard in determining whether an order or decree is final in bankruptcy cases,” Clair and Hale write. “In applying this flexible standard, they deem an order or decree final if it finally disposes of a discrete dispute within a larger bankruptcy proceeding. However, this finality standard does not necessarily suffice to permit chapter 13 debtors to proceed to immediate appeals when a bankruptcy court denies plan confirmation under existing precedent.”

Clair and Hale write that courts taking the majority view have stated that an order denying confirmation of a chapter 13 plan cannot be considered final if the debtor can propose an amended plan without his/her case being dismissed. “Courts in the majority also believe that allowing debtors immediate appeals from confirmation denials inevitably results in judicial inefficiency,” according to Clair and Hale.

Courts holding the minority view take the position that allowing debtors to appeal confirmation denials is compelled by practicality. “Those courts find that the unavailability of an immediate appeal from a confirmation denial forces a debtor to ‘choose between filing an unwanted or involuntary plan and then appealing his own plan, or dismissing his case and then appealing his own dismissal,’” Clair and Hale write, quoting the Fourth Circuit’s decision in Mort Ranta v. Gorman. “Courts espousing the minority view counter the majority view’s efficiency argument with one of their own: They argue that forcing a debtor to propose and obtain confirmation of an unwanted plan in order to obtain an appellate review also results in the debtor wasting scarce resources,” write Clair and Hale.

Six circuits have taken the majority view, while three have taken the minority view.  Oral argument in Bullard v. Hyde Park Savings Bank has been scheduled for April 1.

To obtain a copy of “Supreme Court Finally Takes Up Chapter 13 Confirmation Finality,” published in the February issue of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at [email protected].

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ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.