962 F.3d 1133
9th Cir.2020Background:
- Multiple debtors filed Chapter 13 plans in the Northern District of California that deviated from the court’s new Model Chapter 13 Plan by (1) proposing an "estimated" plan duration (instead of a fixed number of months) and (2) setting a $0 pro rata dividend to unsecured creditors.
- The Chapter 13 trustee and unsecured creditors did not object; nonetheless the bankruptcy court moved the cases to a trustee "pending list," held additional hearings, and refused to confirm the original plans.
- The bankruptcy court concluded estimated-duration provisions were impermissibly "self-modifying," violated the Code (citing §§ 1328/1329) and were proposed in bad faith; the BAP affirmed.
- Debtors removed the estimated-duration provisions, refiled fixed-term plans and obtained confirmations; they appealed the original rejection to the Ninth Circuit via direct appeal certification.
- The Ninth Circuit reversed the BAP on the core statutory question, vacated the bad-faith finding and remanded, but affirmed the court’s handling of the timing of confirmation hearings (it held the court satisfied § 1324 by holding, not concluding, a hearing within 45 days).
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chapter 13 plans may be confirmed with an estimated (non-fixed) duration absent objection | Debtors: Code contains no prohibition; §1322(b)(11) allows other provisions and §1328 conditions discharge on completion of payments, not time elapsed | Bankr. Ct./BAP: Estimated terms undermine creditors’ §1329 modification rights and are "self-modifying," so plans must state a fixed duration | Held: Permissible. Code does not prohibit estimated-duration plans absent objection; reversal of BAP on this point |
| Whether §1329’s post-confirmation modification scheme requires fixed plan lengths at confirmation | Debtors: §1329 governs modification after confirmation and does not mandate fixed pre-confirmation durations; discharge upon completion is distinct from modification | Bankr. Ct./BAP: Allowing estimated durations nullifies creditors’ modification remedies under §1329 | Held: Rejected. §1329 does not imply a pre-confirmation fixed-term requirement; modification rights remain subject to §1328 discharge rules |
| Whether the BAP/bankruptcy court correctly found plans were proposed in bad faith | Debtors: Good-faith inquiry cannot be used to impose requirements not in the Code; following prior local model plan was not bad faith | Bankr. Ct./BAP: Estimated terms disadvantaged unsecured creditors and frustrated BAPCPA purposes, showing bad faith | Held: Vacated. Bad-faith finding rested on erroneous legal interpretation; remand for factfinding on any remaining issues |
| Whether the bankruptcy court violated §1324 by not concluding confirmation within 45 days or by creating a de facto local rule | Debtors: Additional hearings exceeded the statutory 45-day window and transfer to pending list created an unlawful local practice | Bankr. Ct./BAP: §1324 requires only that a hearing be held (not concluded) within 45 days; court may manage docket and require further hearings | Held: Affirmed as to procedure. §1324(b) requires a hearing within 45 days, not conclusion; court properly exercised discretion |
Key Cases Cited
- Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (U.S. 2015) (plan confirmation and discharge framework under Chapter 13)
- Flores v. (In re Flores), 735 F.3d 855 (9th Cir. 2013) (interpreting §1325(b) to require minimum duration when plan is objected to)
- Fridley (In re Fridley), 380 B.R. 538 (B.A.P. 9th Cir. 2007) (distinguishing completion of payments where plan expressly commits to fixed term)
- Anderson (In re Anderson), 21 F.3d 355 (9th Cir. 1994) (court may not impose more burdensome requirements than the Code or evade §1329 procedures)
- Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013) (limits on using good-faith inquiry to add requirements not in the Code)
- Goeb (In re Goeb), 675 F.2d 1386 (9th Cir. 1982) (good-faith standard for plan confirmation)
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (U.S. 2002) (statutory-construction principle: inclusion/exclusion interprets congressional intent)
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (U.S. 2016) (standing: concrete and particularized injury required)
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (U.S. 2010) (bankruptcy courts’ duty to assure plans comply with the Code)