519 B.R. 559
D. Mass.2014Background
- Debtor Beth A. Austin filed Chapter 13 and submitted a proposed 16.5‑month plan that relied on a pending loan modification for treatment of her mortgage claim; at filing only ~4.5 months remained.
- Proposed Plan: $523/month to trustee for unsecured creditors; payments to mortgagee contingent on loan modification approval; pre‑petition mortgage arrears (~$60K–$73K) were not addressed in the plan.
- Nationstar (servicer for First Horizon) had previously objected to earlier plans and obtained relief from the automatic stay, but did not object to this Proposed Plan and received proper notice.
- Chapter 13 Trustee Bankowski objected to confirmation under 11 U.S.C. §1325(a)(6) on feasibility grounds because the modification was still pending and unlikely to be approved before plan expiration, risking failure to satisfy mortgage arrears or discharge issues.
- Bankruptcy Court sustained the Trustee’s objection and denied confirmation as premature because confirming a plan contingent on an unapproved modification would be "a vain thing." District Court appeal followed.
Issues
| Issue | Austin's Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether the mortgagee’s silence constitutes acceptance of plan treatment under §1325(a)(5) | Non‑objection equals acceptance; therefore §1325(a)(5) satisfied | N/A (Trustee did not contest acceptance) | Court: Non‑objection + proper notice raises rebuttable presumption of acceptance; §1325(a)(5) satisfied. |
| Whether the Chapter 13 Trustee has standing to object once a secured creditor is deemed to have accepted the plan | Trustee lacks standing absent creditor objection | Trustee has statutory standing to appear and object under §1302(b) and may object to other confirmation requirements | Court: Trustee had standing to object here because objection was based on §1325(a)(6) feasibility, not §1325(a)(5). |
| Whether a plan contingent on a pending loan modification is "feasible" under §1325(a)(6) | Plan feasible; debtor engaged counsel and can make trustee payments; mortgagee’s non‑objection supports confirmation | Plan is not feasible because loan modification was unapproved and unlikely before plan end; contingency too speculative | Court: Affirmed bankruptcy court — plan not feasible; contingency on unapproved modification so close to plan expiration is speculative and confirmation premature. |
| Whether In re Mayberry requires confirmation despite pending modification | Mayberry supports denial of dismissal and suggests prematurity of action based only on possible denial | Mayberry is distinguishable (different factual posture; dealt with dismissal/bad faith, not imminent plan end) | Court: Mayberry inapposite; does not require confirmation here. |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (2010) (bankruptcy court must ensure statutory confirmation requirements are met even without creditor objection)
- In re Flynn, 402 B.R. 437 (1st Cir. BAP 2009) (failure to object to plan after proper notice raises presumption of acceptance by secured creditor)
- In re Fantasia, 211 B.R. 420 (1st Cir. BAP 1997) (debtor bears burden to show feasibility; bankruptcy court should assess evidence under §1325)
- In re Hamilton, 401 B.R. 539 (1st Cir. BAP 2009) (denial of confirmation is interlocutory when debtor may propose another plan)
- In re Mayberry, 487 B.R. 44 (Bankr.D.Mass.2013) (denial of dismissal where possible denial of loan modification alone was premature; distinguished on facts)
- Andrews v. Loheit (In re Andrews), 49 F.3d 1404 (9th Cir. 1995) (trustee has statutory standing to appear and object to plan confirmation under §1302(b))
- In re Szostek, 886 F.2d 1405 (3d Cir. 1989) (secured creditor’s failure to object may be treated as acceptance under §1325(a)(5))
- U.S. v. Jones (In re Jones), 530 F.3d 1284 (10th Cir. 2008) (creditor’s failure to object binds it to confirmed plan treatment)