Great Lakes Higher Education Corp. v. Pardee (In Re Pardee)

Lundin, Bаnkruptcy, § IT that confirmation of Chapter 13 5.35 at IS ORDERED (2d ed.1994). proposed plan debtors’ is denied. financing If 5-96 debtors through month the sale of their deficit each to, assets, they

exempt plan if should part and made of their

have been disclosed

budget. to provide failure answers to

The debtors’ prevents the court from de questions

these plan disposable

termining meets test not met for income one test. McKnight In re Robert PARDEE and likely in this circuit that It is more reason. Daigle-Pardee, Darlene Debtors. objection by the trustee or upon triggering creditor, Chapter plan is GREAT LAKES unsecured HIGHER EDUCATION Appellant, CORP., not confirmable unless the debtors include plan provision promises payment “that v. disposable during income received net McKnight PARDEE and Darlene Robert Rowley plan period unsecured creditors.” Daigle-Pardee, Appellees. (8th Cir.1994). Yarnall, 22 F.3d Rowley The case of v. Yarnall involved BAP No. AZ-97-1038-RYKJ. 1225(b)(1)(B), disposable Chapter No. 92-02586-TUC-LO. Adversary nearly identical No. 96-00186. income 1325(b)(1)(B). held that Appellate Panel United States plan promise pay provision requires Circuit. Ninth received, disposable income that merely predicted what is to be received. March at 193. F.3d projects disposable no in

Debtors’ three-year period. during

come Debtors therefore,

propose, disposable in no

come, income, form of future will be In plan. to the view of the trustee’s

objection, the debtors’ cannot be con (Bankr. Markman,

firmed. 5 B.R. 196

E.D.N.Y.1980), debtors, cited does not contrary provide result. it

require Debtors support proposal pay

as for their to make

ments fixed amount over less than three

years. Markman does not aid debtors be disposable

cause was decided before requirement Chapter

income was added to

in 1984. Feasibility

Vagueness

I agree with the trustee Com

prehensive vague

timing carrying out means

Also, monthly deficits and lack financed, showing I as to how will be

find the is not feasible.

918 Ap- subsequently

Plan was confirmed. After pellees discharge, received their Appellant attempted to collect unpaid principal had accrued on after the filed. petition Appellees .was “Motion”) (the filed motion enforce the enjoin permanently Appel- and attempting lant from postpetition to collect interest on loan debt. the student The bank- ruptcy granted court the Motion en- joined Appellant from further collection ac- tivity. We AFFIRM.

I. FACTS undisputed. August The On facts are Appellees their filed 13 bank- petition. ruptcy September Ap- On (the “Claim”) pellant proof its of claim filed $26,015.22. in the amount of Claim did prepetition not seek either interest. pay

The Plan proposed (the “Trustee”) per trustee for 60 $515 month $30,900. months for a total Plan also purported pay Appellant’s loan student debt as follows: Loan(s): e. Education Debtors have separate obligations two for their student Madison, Lloyd Blaney, Blaney, Dew & J. loans which are as follows: WI, Higher Lakes Education Cor- for Great poration. (2) Education, Higher Lakes Great Robinson, Tucson, AZ, L. for Rob- James Way, International Madiseon [sic] WI McKnight

ert Pardee. $26,235.00. 53704 in the amount of This 1,and obligation incurred was Robert JONES, RYAN, KLEIN BEFORE: McKnight [is] Pardee and default. Judges. [Higher]

Great Education Lakes shall $26,235.00 receive the total amount OPINION any remaining unpaid for its claim and RYAN, Bankruptcy Judge. JOHN E. amounts, any, including any claims if interest, discharged by shall he (“Appellees”) Pardee Robert and Darlene for (the “Plan”) filed purported discharge postpetition (second added). emphasis (the on a student loan debt Provision”) 8, 1993, was On June the Plan confirmed “Discharge owed to Lakes (the Order”). Higher Corp. (“Appellant”). Ap- The Confirma- “Confirmation Education Plan, August 5, pellant object to the tion entered on 1993. failed to Order was Klein, designation. Christopher Bankruptcy Judge M. Hon. California, sitting Eastern District of object 21, 1997, Appellant January failed to to its treatment Appellant On filed a premature under the Plan.2 of appeal notice .4 9, 1996, April Appellees received their On II.ISSUES ON APPEAL paying after all obli- 1. Whether the erred pursuant gations Appellant to the Plan. After holding Appellant precluded principal full received collecting postpetition interest on the Claim Plan, prepetition Appel- interest under the because the Claim was in full under the attempted lant demanded and to collect Plan. $6,095.92 Appellees interest. case, reopen filed motion to Whether the court erred in granted, which was filed the Motion re- holding Appellant, who faded to questing that the court enforce to the Plan discharging postpetition discharge permanently enjoin Appel- and Claim, interest on by was bound the Plan collecting postpetition lant from interest on though even was contrary to the student loan debt. the Code. 6, 1997, January bankruptcy On court III.STANDARD OF REVIEW granted by the Motion minute order and law, We review including conclusions of Discharge entered its Order to Enforce and bankruptcy interpretation of the (the Injunction “Injunction Permanent Or Code, Bankruptcy de novo. Grey See der”) January bankruptcy 1997. The (In Group, Federated Inc. re Federated (1) Appellant court held that: was bound Inc.), (9th Group, Cir.1997) 107 F.3d language of the Plan and its failure to (citing Abele v. Phoenix Suns Ltd. Partner-

request postpetition interest in the or Claim ship Harrell), Discharge Provision constituted Cir.1996)). postpetition waiver of claim for inter (2) est; Appellant postpeti had no claim for principal pre-

tion interest because the IV.DISCUSSION petition nondischargeable Appellant A Not Was Precluded From paid loan in student debt was full under the Collecting Postpetition Interest On The Plan; (3) (the Bankruptcy Code Claim Because The Claim Was Paid In “Code”)3 502(b)(2) permit Appel did not Full Under The Plan. lant to assert a claim for bankruptcy interest on the Appellant’s student loan be court held that paid through cause the debt was in full claim for interest on the Claim discharged extinguished by Plan. was or Appellees’ completion Plan, principal of thе when the Accordingly, bankruptcy court ordered prepetition “paid in interest was full.” Appellant “cease in and desist its collec- disagree. We against tion efforts Debtors ...” and “file appropriate documentation with the vari- nondiseharge loan are Student debts bureaus, taxing ous governmental bankruptcy credit able unless either the agencies taxing agencies indicates first years became due more than seven be that the loan student has been in full.” filing bankruptcy peti fore the date of tion, Appellant court also ordered prove excepting or the debtor can pay attorney’s fees Appellees. impose and costs to the debt from will an undue Appellant appeal timely pursuant court found that re- 4.The notice of was filed ceived notice of its Federal Rule of Procedure treatment under the Plan. 8002(a). 8002(a) ("A See notice Appellant challenge finding. does not Fed.R.Bankr.P. appeal filed after the announcement of a deci- entry judgment, sion or before order but 3. The Code is set forth in 11 U.S.C. 101-1330 order, or decree shall be treated as filed after (1998). thereof.”). entry and on the date 523(a)(8).5 362-63, This 84 S.Ct. 908-09. The Court also

hardship. See U.S.C. chap provision applies denying post- that the nondischargeability recognized reasons for part: pertinent petition against ter 13. Section states interest as claim the bank- estate, ruptcy “the of unfairness as (a) avoidance completion practicable after As soon competing between and the avoid- creditors payments the debtor of all inconvenience,” a written approves ance administrative plan, unless brought against the debtor inapplicable executed action waiver under this personally. after the order for relief Id. chap- debtor ter, the debtor grant the court shall provided all

discharge of debts Here, court errone 502 of this or section disallowed under inapplicable ously Bruning held that was — title, except any debt Bruning was decid instant case because the. and is distin ed under Act (2) portion because the paragraph guishable “allowed” specified kind (9) (5), (8), nondisehargeable “paid in full” of this- debt was section estate, title; through the whereas only part underlying debt

Bruning, supported paid. This conclusion is added). (emphasis by principles ‍‌​​‌​​​‌‌​‌‌‌‌​​‌​​​​​‌​​​​​‌​‌‌​​‌‌‌​​‌​​​‌‌‌​​‍statutory construction However, the is silent as to whether Code expressly Congress stare decisis. Unless postpetition nondisehargeable interest on a change its intent well-estab manifests nondisehargeable in bank student loan interpretation judicial bankrupt lished seminal this issue is ruptcy. The case on cy prior laws as existed to enactment States, 358, Bruning 376 U.S. 84 v. United 1978, pre Code in we must (1964). 906, In Brun 11 772 S.Ct. L.Ed.2d pre-Code interpretations that sume ing, a ease decided under the Act have survived the Unit enactment. See 1898, that Supreme Court held Act of Enter., Inc., ed States v. Ron Pair 489 U.S. a although postpetition interest on nondis- 235, 244-45, 1026, 1032, 103 109 S.Ct. paid by the chargeable tax debt could not be (1989); Rodriguez 290 v. L.Ed.2d United estate, bankruptcy it nevertheless survived States, 522, 1391, 525, 480 U.S. 107 S.Ct. bankruptcy personal be recovered could curiam). (1987) 1393, (per 533 94 L.Ed.2d As 361, ly from the debtor. Id. at 84 S.Ct. Eighth aptly Circuit stated: an The Court that “interest is reasoned debt,” together, be sim- integral part continuing Taken sections 502 and 523 360, part ply codify Congress’ of the debt itself. Id. at demonstrate intent comes distinguished general principle applied be that under S.Ct. at 908. Court postpetition Bruning. Postpetition inter is disal- tween the disallowance of interest against a non- against est estate on lowed estate under debt, right dischargeable Priority the creditor’s section 502. tax remain claims postpetition nondisehargeable to recover interest on nondis- for individual debt- _Thus, postpetition chargeable personally debt ors interest is non- from the debtor discharge dischargeable Id. at lia- after the has been entered. and the remain [debtors] loan, (A) benefit, scholarship, stipend or 5. Section states as follows: such 1141, 727, (a) overpayment first than 7 became due more discharge A under section 1228(a) 1228(b), 1328(b) (exclusive years any applicable suspension this title does or of debtor from repayment period) individual before the date of the debt— filing petition; or (B) excepting debt from (8) overpayment or an educational benefit for hardship paragraph impose will an undue made, insured, gov- guaranteed loan or dependents. the debtor and debtor’s on unit, any program or ernmental made by governmental part whole funded in or in 523(a)(8)(A) expressed Neither limitation institution, nonprofit or for an obli- unit gation (B) applicable here. repay education- funds received as an benefit, stipend, scholarship, or unless— al subsequent interest specifically incorporates ble. for the non- bankruptcy proceedings. dischargeability provisions 523(a)(8), §of Bmning principle applies also (In Hanna), Hanna v. United States re Cir.1989). (8th turn 829, 831 postpetition We next to whether in- F.2d discharged the Claim terest or extin- Additionally, although the Ninth Cir guished paid because the Plan the Claim in Bruning has not addressed whether the cuit court, full. The citing In re Code, apply under the rule continues five Wasson, (Bankr.D.N.M.1993), 152 B.R. 639 Bruning circuit courts have held that re payment held full of the Claim under the good Leeper mains law under the Code. See discharged any Plan postpetition claim for Pennsylvania Higher Educ. Assistance disagree interest. We with the Wasson hold- (In 98, Agency Leeper), re 49 F.3d 101-02 ing and conclude that the (3d Cir.1995); Fullmer v. United States reliance on Wasson was erroneous. (10th Fullmer), re 962 F.2d Cir. Wasson, provided 1992); (In Burns), Burns v. United States principal for full prepetition Hanna, Cir.1989); 887 F.2d interest student loan (8th Cir.1989); and Brad objected debt. The student loan creditor States, ley v. United F.2d 709-10 n. the debtor’s because it did (2d Cir.1991) (stating in dictum that provide postpetition interest. The weight authority supports view objection court overruled the on the basis personally postpetition debtor is liable for interest is disal- taxes). unpaid Accordingly, interest on we 502(b)(2), lowed under join the authority unanimous circuit court may on student loans discharged when the that has addressed this issue and conclude allowed claim is in full. Bmning vitality retains its under the However, the Wasson confused Bankruptcy Code. ' concept claim disallowance under Furthermore, overwhelming 502(b)(2), § in which a claim for unmatured majority bankruptcy courts have extended paid interest cannot bankruptcy be from the Supreme Bmning principle Court’s to estate, concept with the of nondischargeabili apply postpetition to interest on nondisc 523(a)(8) 1328(a)(2). ty §§ under Sec hargeable Wagner student loans. See v. 502(b)(2) tion clearly recovery disallows6 (In Wagner), Ohio Student Loan Comm’n re bankruptcy unmatured interest from the es (Bankr.N.D.Ohio 160, 163 1996); B.R. Therefore, recovery tate. this rule bars from (Bankr. Sullivan, 649, re 195 B.R. bankruptcy postpetition estate of interest W.D.Tex.1996); Unipac/Nebhelp Branch v. nondischargeable H.R.Rep. on a debt. See (In Branch), (Bankr.D.Neb. re 175 B.R. 732 95-595, (1978), Cong., No. 95th 2nd Sess. 62 1994); 332, Shelbayah, In re 165 B.R. 337 reprinted 5848, in 1978 U.S.C.C.A.N. 6308- (Bankr.N.D.Ga.1994); Ridder v. Great Lakes 502(b)(2) However, § proscribe does not (In Ridder), Higher Corp. Educ. re 171 B.R. reсovery personally from the debtor for non- (Bankr.W.D.Wis.1994); 347-48 and Jor dischargeable paid debts that are not from Program dan Colorado Student Loan bankruptcy postpetition estate. Because Jordan), (D.Colo.1992). 146 B.R. 32-33 nondischargeable on a debt cannot Because we find no reason to limit the Bmn estate, bankruptcy be from the the hold ing principle debts, nondischargeable to tax unpaid may er of the claim seek to recover postpetition we conclude that interest on a discharge injunction on that claim once the (i.e., nondischargeable student loan debt is nondis plan payments has been lifted once have case). chargeable Finally, completed under the Code. because been in a While entirely bankruptcy 6. The term "disallowed” is not accurate. would receive if the estate were postpetition Unsecured creditors are entitled to liquidated under an unsecured credi- 726(a) pursuant § interest on their claims if postpetition tor entitled is to collect interest in bankruptcy chap- estate is solvent. Because bankruptcy 13 if estate is solvent. adopts ter 13 the "best interest of test” creditor’s 1325(a)(4). § See 11 U.S.C. provide creditors with at the amount that least n prepetition interest principal and generally ment of provision extinguished Plan or dis- pursuant provided for discharges all debts interest on the Claim. charged postpetition loan debts student or disallowed in full” “paid was not because discharge. The Claim excepted from specifically are 1328(a)(2). postpetition inter- not receive applying Appellant did See 11 U.S.C. fully paid. Only claim” was est. the “allowed postpetition interest Bruning principle, precluded Appellant was not Consеquently, are loan debts nondischargeable student on the recovering postpetition interest from excepted from also Appellees completed their just Claim disagree with Although we payments. Plan the dis- Additionally, overlooked Wasson reasoning, as dis- “allowed “claims” and between tinction below, grounds. on other cussed we affirm 1328(a)(2), 523(a)(8) §§ claims.” Under excepted dis- from student loan “debts” Regarding B. The Plan Res Judicata Was “liability on a charge. Debt defined Discharge Provision. 101(12), claim,” and “claim” argues whether or “right payment, Appellant as a defined Appellant unma- erroneously concluded that right [or] ... matured not such added). 101(5)(A) (emphasis postpetition interest elaim for Id. waived tured.” in- Discharge Provision precludes and is bound Although the Code 523(a)(8) claim,” §§ disagree. We terest on an “allowed Plan. exceptions not limit their do claim. discharge to an allowed Object To The Appellant’s Failure To A Discharge Constituted Provision “al- used the term We note Congress n Postpe- Right Its To Collect Waiver Of parts of the Code. claims” certain

lowed tition Interest On Claim. 1129(b)(2). See, These e.g., general rule that support Generally, a creditor is not re sections paid through the quired provision “allowed claims” will to a does However, Congress, by postpetition interest pay estate.' not be purport “allowed claim” using any attempt the term to collect in cause limit 1328(a)(2), pre intend to the dis- through did estate is terest 502(b)(2). Ridder, provisions to “allowed claims.” chargeability See cluded under However, limit liabili- Certainly, Congress how to knew when the B.R. at 347.7 to allowed ty purports debts contains a However, intent. the if this was its debt in viola claims 523(a) 1328(a), exceptions extend to certain dischargeability the student tion of “debts,” rights pay- plan provi which are defined with notice of this loan creditor ment, unmatured.” object appeal matured or the “whether must to the sion 502(b)(2) only precludes § the Accordingly, The failure to do so confirmation order. the postpetition right collaterally interest from payment of of its constitutes a waiver discharge in- the bankruptcy plan postconfirmation estate. Once attack the confirmed completion of provi at the junction is lifted that the contains a on the basis creditor, the loan creditor plan payments, contrary 13 student to the Code. The sion unpaid therefore, interest on nondis- may by collect the the terms of the con is bound 1327(a). personally. the debtor chargeable plan pursuant debt from firmed 1327(a), provisions of “[t]he Under Similarly, disagree with the bank we each pay- plan bind the debtor and percent a confirmed ruptcy court that one hundred (holding is not barred request at 165 that a creditor Similarly, required to B.R. is not creditor proof merely postpetition claim because collecting postpetition interest in its of interest be- from interest is disallowed under did not file claim for cause it thus, 502(b)(2), request such a would expressly optional made Inc., Co., States v. River Coal futile. See United 1305). §. 1103, Cir.1984); Wagner, 200 1108 923 creditor, affirmed, thereby whether or not the claim of ment. The Fifth Circuit rendering appellant’s judgment provided the final. Id. creditor is to, objected or not such creditor has whether subsequently Celotex filed a 11 rejected plan.” the 11 accepted, has has bankruptcy petition in the United States 1327(a). purpose of “‘The U.S.C. Bankruptcy Court for the Middle District 1327(a) the purpose the same as served In stay, addition to the Florida. automatic general judicata. the doctrine rеs bankruptcy equitable the court exercised its finality or- There must be powers injunc- and issued an parties may rely upon der so that all augment protection tion “to the afforded Cel- may without concern that actions which 303, stay.” the otex automatic Id. at upset of a thereafter take could be S.Ct. at 1493. change later or revocation the order.... Appellees a motion then filed in the district Walker, 465, B.R. seeking permission against court to execute 1991) (Bankr.D.Idaho (quoting 5 Lawrence surety brought the on the Id. bond. Celotex King al., P. et Collier to the district attention the fact that ¶ (15th ed.1990)). 1327.01[1] bankruptcy the court had reaffirmed the injunction § 105 made “and clear that concept preclusive The effect injunction prohibited judgment like creditors principle of final orders is a basic of Ameri respondents proceeding against from sureties Gottlieb, jurisprudence. can In Stoll v. permission.” without Court’s (1938), 165, 134, 83 L.Ed. 104 U.S. S.Ct. Despite Id. court’s reaffirma Supreme Court the enforce addressed tion injunction, and clarification of the ability corporate in a debtor’s permitted appellees the district court to exe provided for the cancellation against surety. cute on the bond Id. at guaranty. bond The creditor did 304, 115 S.Ct. at 1497. However, confirmation, after affirmed, holding Fifth Circuit filed a state court action to creditor injunction bankrupt- issued guaranty. Supreme recover cy was court issued error. Id. at finality Court held S.Ct. at 1497-98. The court that al- held confirmation order barred the creditor though jurisdiction court had 171-72, litigating its claim. Id. at 59 S.Ct. stay proceedings involving parties, third judicata res 137-38. was even injunction was issued error because though have did not “ supersedeas posted bond ‘to cover subject jurisdiction matter release preсisely type eventuality which oc- guarantor guaranty on his of the debtor’s case, judg- insolvency curred obligations. n. Id. at 171 & 59 S.Ct. at 137 ” (Ed- (citing ment creditor.’ Id. Edwards & n. 8. II) Indus., Inc., Armstrong v. World wards (5th Cir.1993)). 312, 319 F.3d Edwards, Similarly, in Corp. Celotex 1493, 1501, 131 Supreme accept- U.S. 115 S.Ct. The United States Court (1995), Supreme L.Ed.2d af- Court ed certiorari and reversed. The Court stat- principle firmed its enunciated in that a ed: Stoll

party appeal that does not a final order háve made clear that is for the “‘[i]t We precluded collaterally attacking that or- the court first instance determine Celotex, appellees der. In in the filed suit law, validity question of the of the and the States the United District Court for its decision until is reversed error for against Northern District of review, Texas Celotex orderly either itself or a alleging injuries. and others court, asbestos-related higher its its orders based on deci- ” $281,025.80judg- The district court a entered respected.’ sion are to be [citations omit- appellees against ment in favor of Celo- If respondents believed the Section ted]. 302, Injunction tex. at improper, they Id. 115 1493. Celotex should S.Ct. 105 was posted supersedeas Bankruptcy in stay challenged a bond to execution have Court, judgment appealed judg- similarly of the like bonded while it other situated point is that a direct If dis- court.... have done.... judgment- creditors attack is ulti- attack is available and collateral Court’s satisfied with decision, respondents appeal can “to unavailable.” mate judicial for the district in district King al., P. (quoting Id. 5 LawRence et serving,” bankruptcy judge is which ¶ n. 17a 1141.01[1] Collier On Appeals the Court ... and then to (15th ed.1995)).8 Respondents Circuit.... the Eleventh this, ap- action, Additionally, reasoning has been course of pursue chose not to plied plans. In re collaterally Bank- to confirmed attack the but instead (9th 1118, Cir.1983), Injunction Gregory, in 705 F.2d ruptcy Section Court’s in court confirmed thе debtor’s Texas. This the Federal Courts payment plan provided serious- for no permitted to do without cannot be orderly process a of all ly undercutting the to unsecured creditors and Nobody objected plan to the at the law. debts. However, hearing. two months confirmation enforces basic Id. at 313. Celotex confirmed, plan Lawrence after that a final or- principle enunciated Stoll creditor, Co., an unsecured filed Tractor appealed cannot collateral- that is not der dischargeability complaint to determine the even if the ly in a proceeding attacked later including of a debt for a number of reasons order was entered error. “only ‘provided for’ allegation debts recently addressed The Ninth Circuit dischargeable under section plan in a binding effect issue 1328(a), for which zero and debt Barton, reorganization. In Trulis v. plan of proposed provided so for.” Id. The is not (9th Cir.1995), several creditors 107 F.3d 685 Ninth Circuit stated: plan in a confirmed challenged consenting creditors’ claims released legality not rule on the court need [TJhis principals. The credi- against the debtor’s zero-payment plans general Grego- or of tors, argued that the re- postconfirmation, confirming ry’s particular. The order provisions lease were enforceable plan has become final. Lawrence’s rejected this The Ninth state law. Circuit objection failure to raise this at the confir- “[sjince plaintiffs argument held that appeal from order hearing mation or to bankruptcy court’s confir- appealed the never preclude attack of confirmation should order, judgment a final mation the order is any provision therein as plan on the plaintiffs challengе bankrupt- cannot illegal subsequent proceeding. in a subject mat- cy jurisdiction over the Id. at 1121. court also ter.” Id. at 691. The stated: finality similarly recognized to release third We have “Creditors who do not wish Sys., principal orders. In Ground Inc. party pursuant debtors Inc.), Sys., v. Albert 213 B.R. plan reorganization should ob- Ground debtor’s (9th 1997), BAP ject on the Cir. to confirmation of 11 trustee’s ground plan provision is viola- court confirmed that such reorganization. The pow- amended tive of section 524 and not within the open er, required the case to remain until the jurisdiction, of the even 1269, Woldson, (9th Cir.) (recognizing, County, dic Boundary 1275 n. 13 8. See Idaho also Cir.1944) ("‘Whether (9th tum, 144 F.2d reorganization may hind decree were issues rightly wrongly the Idaho determined erroneous), legally even if it is cert. creditors determined, open longer by is no denied, U.S. 113 S.Ct. 121 L.Ed.2d inquiry having a court been rendered Harlan, (1992). Equities, Inc. v. Western Cf. it, jurisdiction having had to render 1986) (holding Cir. final, decree, though long since become even clearly provide plan that the because the did not erroneous, parties on the is valid and conclusive ” disregard the a se debtor intended to terms of claiming persons under them.’ thereto and all residence, promissory the cured note on debtor’s denied, 843, (citations omitted)), 324 U.S. cert. plan provision to creditor was not bound the 678, (1945); S.Ct. 89 L.Ed. 1405 Carnico Televi modify purported to its secured (In extent that it the claim). Broadcasting, Co. re De sion Inc. v. National Inc.), Group F.2d Laurentiis Entertainment object- during pendency case, fully No one been raised plan consummated. provision. typical liability to this Howev- at confirmation lender causes of ac ed tion.”) er, F.D.I.C., a mo- the debtor filed postconfirmation, (citing Eubanks v. 977 F.2d granting 166, (5th a final decree. An Cir.1992)), for an order aff'd, tion 59 F.3d 175 argu- opposed (9th the motion Cir.1995); Szostek, unsecured creditor 1405, In re 886 F.2d plan expressly authorized the ing (3d Cir.1989) (“[Although prior to con open plan payments until all estate to remain bankruptcy firmation court and trustee bankruptcy court were made. The denied responsibility verify do have a that a that, although plan the motion and stated Chapter plan complies Bankrupt with the unacceptable is conflict with cy provisions, plan Code after the is con con- the Code and should have survived policy favoring finality firmed the of con firmation, confirmed, once the had been stronger bankruptcy firmation is than the specific provisions must be obligations verify court’s and the trustee’s Id. at carried out. 1018.. Code.”). plan’s Thus, compliance with the bankruptcy Appellant affirmed the court’s order We was bound the terms of the denying request a final for decree. We Plan. Code, not violate the held did recognize holding contrary We that this however, agreed if we with the bank “[e]ven Ridder, to the conclusion reached ruptcy court violated the Ridder, disagree. we Great Lakes Code and the Federal Rules (the here) object same creditor failed to to a Procedure, agree we with ASI plan provision that denied interest proper it was for [unsecured creditor] student loan claim. After the debtor re- bankruptcy give judicata res discharge, ceived her Great Lakes demanded plan’s terms.” Id. at 1019. effect We pay postpetition that the all debtor interest Trulis, holdings 107 F.3d at followed that accrued. The' court held 691, Republic Supply Shoaf, v.Co. that because the student loan debt was non- (5th Cir.1987), 1049-50 and Bowen v. dischargeable, Great Lakes could collect (In Bowen), re 174 B.R. United States postpetition interest post-discharge from the (Bankr.S.D.Ga.1994), for 847-48 which stand debtor. The court stated that since Great proposition plan provision that that a Lakes was not entitled to inter- contrary illegal to the Code or is otherwise Code, est had no reason to may challenged posteonfirmation not be for thus, object “[a]ny attempt finality the first time.9 of confir object to Great Lakes to confirmation principle mation orders a bedrock Ridder, would have been frivolous.” law the Ninth Circuit. B.R. at 348. While the Plan should not been have Provision, Discharge reject analysis

confirmed with the in Ridder. It would We judicata Plan is res as to all issues that could not have been for Lakes to frivolous litigated have or should have been at the to confirmation Ridder here. hearing. Heritage Appellant collect See Hotel While is not entitled to I, Partnership Valley Bank es- Ltd. Neva unmatured interest from the I), 502(b)(2), Heritage Partnership pursuant Discharge da re 160 tate Hotel (9th 1993) (“It Appellant collecting BAP precludes B.R. Cir. is now Provision Appellees by well-settled that a court’s confir interest from dis- order, Appellees’ liability any postpeti- binding, charging mation order is a final accord clearly judicata precludes full res tion on the Claim. The Plan ed effect and interest rights. raising Appellant’s of issues which could or should have altered The Ridder court adequate 9. See also Anaheim Sav. and Loan Assoc. v. Ev in the confirmed The issues of (In Evans), 30 B.R. Cir. BAP equity, necessity ans protection, lack of 1983) (citing Willey, Matter 24 B.R. 369 successful rehabilitation of the 13 debtor (Bankr.E.D.Mich.1982)) ("Section pre judicata were all res as of the confirmation'of the asserting, cludes a creditor from after confirma plan.”). tion, any provided other than that for it 926 binding effect of attempt a con- to cirсumvent the binding affect-of to address the

failed Discharge plan when the creditor Provision. chapter 13 firmed object plan. to the Because timely fails to Object Appellant’s Failure To To The the creditors and debt- plan confirmed binds Chapter 13 Plan An Im- Constituted cannot, 1327(a), Appellant after or under plied Acceptance The Plan. is final and after of confirmation the order Of Plan, fully on the performed Appellees have Additionally, a failure creditor’s collaterally the confirmation order attack chapter plan plan at the to the on the Claim seeking to collect interest implied hearing constitutes an of the Plan. of the terms direct violation acceptance plan. Andrews v. Lo See Cir.1995) heit, (citing 49 F.3d that the Cir- are also mindful Seventh We 1121; Gregory, at In re In re 705 F.2d contrary position with which cuit has taken a Brown, Szostek, 1413; Escobedo, In re 886 F.2d at and In In re 28 F.3d disagree. we also (Bankr.C.D.Cal.1989)). (7th Cir.1994), 108 B.R. chapter plan that did plan “no ac This is because mechanism tax administrative and not include allowed ceptance by creditors exists required as priority claims (unlike case in a case where objection. confirmed was without may creditors vote for confirma years after confirmation and Nearly five tion)_” Brown, B.R. In re at 740. payment, final years after the debtor’s two implied objec “acceptance is when petitioned the court to either the trustee plan. to the Id. tion is not raised” plan’s payment schedule to in- modify the stipulate It is not unlawful “for creditor already allowed administrative and clude the claims, to be in a manner not or consent treated priority alto- tax dismiss technically stringent required in the as did not Id. at 34-35. The debtor gether. Walker, In re 128 B.R. at 467 Code.” modify plan and the court (Bankr.D.Idaho 1991). Having impliedly ac plan. at the entire Id. dismissed Plan, cepted including Discharge Pro Id. at 35. The Sev- district court affirmed. vision, Appellant precluded objecting also affirmed. The held enth Circuit Discharge for the first time to the Provision proposed plan that because the debtor’s ‍‌​​‌​​​‌‌​‌‌‌‌​​‌​​​​​‌​​​​​‌​‌‌​​‌‌‌​​‌​​​‌‌‌​​‍did above, appeal. on As stated mandatory with the comply Appellant court found that received notice of 1322(a)(2),“any supposed confirmation was Appellant its treatment under the Plan. does nugatory properly dismissed.” Id. Con- finding. not contest this sequently, court held that the was judicata priority not res as to omitted V. CONCLUSION

claims. Id. summary, court erred in respectfully disagree We nondischarge- concluding that a holder of a contrary holding it is in Escobedo because precluded from able student loan debt was authority overwhelming Ninth Circuit collecting postpetition interest on this debt if upholding preclu general principle paid in full the creditor’s allowed claim is of final orders. While the Plan sive effect pursuant We should not have been confirmed with holding Supreme bound Court’s Provision, confirmed, Discharge once reject Bruning and “nugatory” binding but was on Plan was reliance on Wasson. parties' pursuant and the However, party given this error harmless principle that a well-established Although this case. the Plan a final order cannot collateral the facts of appeal fails Celotex, at not have been confirmed because it ly attack that order. See 514 U.S. should Stoll, Provision, 313, 115 Discharge which was at 171- included the S.Ct. at U.S. confirmed, Code, 137-38, once Gregory, inconsistent with the 59 S.Ct. judicata binding Appellant. was res Accordingly, at 1121. we hold that under 1327(a), object to Additionally, Appellant’s failure to Appellant is bound the terms Plan, hearing consti- judicata the Plan at the confirmation and the Plan is res

927 acceptance By the Plan. I. implied tuted an failing the Confirmation Order appeal to join majority While I in conclud- Plan, accepted Appel- having impliedly ing that postpeti- interest continues to accrue collaterally the Plan. lant cannot now attack debt, nondischargeable tion on I think it Accordingly, we AFFIRM. appropriate straightforward set to forth a explanation howof web seamless of the KLEIN, Bankruptcy Judge, concurring in Bankruptcy Code mandates that result. dissenting part: part and The nub of the matter is that interest at join majority I in the conclusions that a nonbankruptcy contractual rates under law postpetition chapter 13 is liable for debtor postpetition continues to accrue on all unse- loan, nondischargeable student interest on a because, though cured debt even unmatured “paid that was not full” as a debt by interest is not “allowed” virtue of regardless matter of fact law what the 502(b)(9) paid and cannot be a bank- plan says, omission of 13 that trustee,, ruptcy the statutory disallowance proof reference unmatured in the to interest nonbankruptey obligation does not erase the waiver, of claim was not a and that pay Rather, to interest. it is the bankruptcy court erred when it confirmed a discharge obligation. that eliminates the If purported discharge that (which discharged debt is not can occur nondischargeable debt. for a ranging host of reasons from denial of I respectfully dissent from the affirmance case), to dismissal of then the obli- injunction pro- of the that gation remains. (“Great Lakés”) appellant from hibits collect- ing illegally discharged nondischargeable debt, including offsets from income tax re- A funds, orders and that Great Lakes to inform 1898, Bankruptcy Under the Act of it was governmental agencies and credit bureaus nondischargeable settled that interest on a “paid though the loan was- in full” even debt was itself

we are that it unanimous was not full. part “an integral interest was of a con (1) I believe that: that, matures, tinuing debt” becomes provision purporting a nondis- Bruning part v. United of the debt itself. (2) unenforceable; chargeable debt States, 358, 360, 376 U.S. 84 S.Ct. 907- jurisdic- court exceeded its (1964)(9-0 decision). L.Ed.2d appropri- tion to “necessary issue orders Bruning involved interest on carry ate” to Code when out nondischargeable tax in a bankruptcy debt injunction it issued an enforce liquidation. taxpayer-debtor argued plan provision plainly violates the Bank- judicially-imposed that the bar ruptcy Code. interest the estate estab- appeal An affirmance would license v. Dreyjus, Sexton lished 219 U.S. judicial leg- ambushes would function as (1911),, applied S.Ct. L.Ed. 244 substituting judgment islation our for that of preclude postpetition an underly- interest on Congress exception by enacting a new ing discharged. tax debt that was As the not. nondischargeability student loan majority explains, dispositive distinction by repealing part was the difference between 1328(a)(2). have debtors still available individually. estate and the debtor remedy discharging the balance liable, debtor is estate not. way adversary proceed- student loan of an Bruning ing paying agree loan I majority establish balance with the hardship” would be an “undue -under survived the enactment 523(a)(8). Congress should not relieve them of Code in 1978. codified Sexton We statutory provided when it burden demonstrate undue a debt for unmatured hardship paying to be is a “claim” but order excused “allowed and, hence, the debt. claim” ineligible distribu- agrees to different treat- particular claimant chapter 7 estate. U.S.C. from a tion 726(a). 502(b)(2), 101(5), An individu ment. U.S.C. & debts, regard encompasses all al’s only payments need The deferred cash not, is the claim “allowed” less of whether amount of the claim because total the face excepted from explicitly except that are those require priority that § 1322 does not 1228(a), 727(b), 1141(d), & discharge. Id. the “value” of the claim. creditor receive statutory 1328(a). construct Nothing in this words, sufficiency § of under 1322 the other application of continued with 'is inconsistent measured the sum of the payments nondischargeable Bruning rule to all than net payments of rather stream debts. payments. present value of the stream of 1129(a)(9)(C) (chapter Compare 11 U.S.C. § B. 11), 13); (chapter with U.S.C. 11 by the debtors war- argument raised One King see 15 LAWRENCE al., P. et Collier on analysis appears in than more detailed rants. ¶ rev.1997). ed. TX4.05[3] majority opinion. payments makes all the After the debtor debtor, correctly postpeti- noting that - plan, chapter 13 the debtor required priority claims paid on tax tion interest is not that “superdischarge” receives so-called 13, incorrectly that chapter concludes in chapter- nondischargeable 7 eliminates all statutorily over- Bruning must have been except alimony support, student debt Code. ruled loans, liabilities, criminal driving drunk chapter debtors can 13 The reason 1328(a). fines and restitution. priority on taxes ignore postpetition interest If, juncture. A at this conundrum arises tax are dis- underlying debts is that case, priority as must be the 507 debt statutory chapter The overall charged in 13. paid been in full under the already has accom- in result was scheme which superdiseharge for then what is left Bruning. vitality preserved the plished super- accomplish? The answer is that the post-1978 in which the statu- The manner any liability discharge eliminates residual Bruning rule is tory incorporates the scheme debt, respect including postpeti- to the by using prism understood best nonbank- tion interest accrued under spectrum .C. 1322 to examine U.S ruptcy law. inter- chapter postpetition 13’s treatment however, consequences, All these are (1) can be priority debts that dis- est on: pay- upon completion actual conditional 7; chapter in chapter 13 not charged in but plan. payments If all re- ments under (2) discharged priority that cannot be debts made, chapter quired by the are not (3) 13; nonpriority debts that chapter in can do is to obtain a then the best the debtor discharged chapter in cannot be . 1328(c) “hardship discharge” so-called chapter discharge any not 7 nondis- does discharged in Priority that can be debts 1328(e). chargeable debt. U.S.C. chapter represent one chapter 13 but 1328(c) only If the receives debtor debts, spectrum. These end of the (or if hardship the ease is dis- debts, are in full priority tax include 7), chapter then the missed or converted plan. Although inter- chapter priority debt permitted by nonbankruptcy law accrues est chapter 7 has the same status as it would postpetition, such interest is not allowed chapter Any portion have had under paid through a required claim that is to be filing of the date of that remains debt as (and if) discharged if plan and is and, discharged, unpaid completes payments under the all debtor doctrine, Bruning accruing postpeti- interest discharged. tion is not for full provide A must discharged of a debtor is payments of all whether in deferred cash any liability postpеtition by § 507 unless a residual priority claims’as defined exceptions nondiseharge- superdiseharge. that is priority §a 507 debt 1328(a). discharged chapter 7 but that can be U.S.C. able depends upon whether provided by nonbankruptey Interest law actually payments completed. Since pri- continues to accrue on these accruing postpetition in- discharge status of (as debts). ority debts does all Since events, upon depends subsequent terest category priority debts cannot be actually turn out to the debtor will whether discharged interest man- be liable for interest cannot by nonbankruptcy similarly dated law is non- known in advance. disehargeable. category priority of tax This debts includes qualify The debts that for such treatment priority of tax debt because definition alimony support are and debts that are owed 507(a)(8)10 § tax non- under mirrors the debt nonbankruptcy directly under law to a 523(a)(1). § dischargeability provision at spouse, spouse, alimony, former or child for nondischargeable in tax debts that are And maintenance, or support and that have not 523(a)(1) discharged § chapter 7 under are assigned entity. been to another Such debts 1328(a) by superdischarge § but not 507(a)(7) priority § became claims under 1328(c) § hardship discharge. pursuant to a 1994 amendment to the Bank conclusion that the This leads to the debt- ruptcy Code.11 ors’ assertion that interest is not paid priority on tax on a debts is based Rather, of the law. interest flawed view category The third of consists debts that prescribed by nonbankruptcy law does ac- § priority are but that debts are debts, priority on tax but crue nondischargeable chapter in paid chap- interest need not under a such be category, loans in Student are as are if, discharged ter 13 and it is alimony support debts have been if, payments completed are so under entities, assigned governmental drunk § If superdischarge that a issues. debts, driving tort and criminal restitution payments completed, post- are not then 523(a)(5), (8)-(9) §§ and fines. 11 U.S.C. & petition discharged by interest is not 1328(a). § 1328(c)hardship § discharge because the tax § nondischargeable debt is priority The absence of status means that paid such debts in full in need be de- payments ferred cash under the Nev- Priority discharged that cannot debts be ertheless, they nondischargeable are chapter including alimony support discharges. all forms of debts, occupy spectrum. the middle of the debts, that, priority they paid preceding analysis § It As must be follows from the permitted the full amount of the as of the claims time extent that interest is law, payments, by nonbankruptcy post- deferred cash interest accrues 1322(a). they petition is U.S.C. And are nondis- debts and ehargeable similarly nondischargeable 13 to the same extent under the Bnm- explicit ing as 7 because doctrine. record, priority designated The tax order of a court of determination made as before the Reform Act of 1994 creat- in accordance with State or territorial law a priority ed ahead tax unit, an additional governmental property or settlement debt. agreement, but not to the extent that such (A) assigned entity, volun- is another debt— tarily, by operation priority

11. A new seventh was added law, otherwise; (B) or or Act of 1994: Reform liability designated alimony, includes maintenance, Seventh, (7) allowed for debts to claims support, liability unless such debtor, spouse, spouse, former or child of the alimony, actually in the nature of mainte- to, for, alimony support maintenance support. nance or child, spouse or in connection with 507(a)(7) (1994). 11 U.S.C. separation agreement, divorce decree or other sure, To be the form disallowance postpetition interest the fact that usually subject litigation is the of contested discharged if the debtor priority debt is tax court is’that the claim is unen- chapter 13 payments under the completes all or estate under continuing against forceable the debtor with the fully consistent 502(b)(1). Bruning nonbankruptcy law. U.S.C. vitality of within scheme. many that are enforceable un- But claims nonbankruptcy law are disallowed under der

C amalgam policy reflects by Congress that are embod- bankruptcy court determinations When the found that categories. for unma- in ten enumerated of claims ied statutory disallowance (e). 502(b)(2)-(9), (d) mandated & tured 502(b)(2) post- the debtors from exonerates Unmatured interest is disallowed. interest, the trial court confused the petition 502(b)(2). termination So are lease U.S.C. concept concept of claim allowance with damages employment contract termi- and, underlying debt fur- liability for the specified caps. 11 damages nation above ther, of a claim with confused disallowance 502(b)(6)-(7). U.S.C. discharge of a debt. Every entity claim of that is a transfer transfer, prefer an avoidable such as a ee of in the broadest The term “claim” defined ence, property that should be holds .that encompass rights manner to all possible automatically turned over to the trustee is including rights that are contin- payment, property until is turned over disallowed unmatured, from disputed, or derived gent, liability paid in full. 11 or the U.S.C. remedy. 11 Sierra-Cal, rights equitable to an U.S.C. 502(d); In re § 210 B.R. 168 101(5). § term “debt” is defined to (Bankr.E.D.Cal.1997). a claim.” 11 “liability oh U.S.C. mean it is also unenforceable under non- Unless 101(12). extension, And, by § debt means law, claim retains the disallowed claim on liability on an allowed both “claim,” though its status as a even it cannot claim that is allowed. consequence of be an “allowed claim.” The chap- being an allowed claim varies from chapter of the Code. ter to payment on a claim will be made Whether depends upon in often case ineligible that are not allowed are Claims chapter claim is “allowed.” In whether the chapter in from participate distributions precludes paymént liquidations, disallowance contrast, liquidation estate.12 In disallowed trustees are not from the estate because automatically disqualified from claims are not on claims authorized to make distributions 11, 12, chapter plans payment in or 13 726(a)(2)- § 11 U.S.C. are not allowed. proposed good Every in faith. are (5). 11, 12, chapters holders of pass applicable must all confirmation stan leverage claims have more than mere allowed' dards, such as the “best-interests” tests respective best holders of claims because keyed to whether holders of “allowed keyed tests are to allowed claims. interests receiving claims” are at least as much as 1225(a)(4)-(5) 1129(a)(7)(B), §§ & U.S.C. liquidation. in a would receive chapter 1325(a)(4)-(5). 1129(a)(7)(A)(ii), 1225(a)(4), & U.S.C. 1325(a)(4).

b absolutely in forbids being Nothing a claim “disallowed” is The effect of payment of a disallowed claim. The term ambiguous. Disallowance does not necessar- appear in ily non- “allowed claim” does not mean that the claim is invalid under may in- specifies provisions bankruptcy law. what assets, law) ruptcy only legal and is at the rate from 12. If the estate has sufficient interest is claims, paid regardless petition. of whether filing on all allowed 11 U.S.C. date of the accrues, interest otherwise interest is but.such (not statutory right nonbank- based on a federal

93I claims, plans regarding payment of on the in sentence debtor’s conviction- of a eluded appears twenty though the term “claim” even crime. mere, is, That this in that section. no times 1328(a) (emphasis supplied).13 U.S.C. by Congress is evident from the oversight This does not gave protection expressly to the holder of discharge postpetition interest on the student form of the an allowed unsecured claim the because, loan debt although disallowed under confirmation, thereby forc- power to interest, part 502 as unmatured it is of an payment objecting ing either full al- obligation specified the'Mnd pro- claim or all lowed unsecured the use of excepted discharge.” that is

jected disposable plan payments. income for 1325(b)(1). Hence, postpetition interest a nondis- chargeable student loan debt 13 is There is at least one circumstance which similarly nondischargeable. plainly permitted to be unmatured interest under a When the last payment secured unsecured obli- D gation is due after the date of the final The trial court’s conclusion that the claim “paid full” under the may provide curing any default in principal Great Lakes received all of the obligation within a reasonable time and main- prepetition begs interest that was owed payments taining pending. while the case is question whether is a 1322(b)(5). obligation If the in- U.S.C. claim. interest, ability eludes then the to curé a following The trial court was re payments necessarily and maintain default ported supports decision that the debtors’ permits of interest that was unma- Wasson, (Bankr. position, In re 152 B.R. 639 filing. as time of tured D.N.M.1993), which contains dictum that the Bruning apply rulé does not to student loan The real reason that creditors are not ordi- fully paid chapter debts that are in the narily paid unmatured interest is that discharge obligation. eliminates the interest agree majority I with the that if was error claim, pre- The disallowance of the when it dictum, rely on the Wasson which confuses payment, merely vents adds insult to the the disallowance .of unmatured interest and injury. chapter discharge Each has its own the accrual interest ón a provisions, the terms of which must be con- debt. specific sulted to determine whether the debt 727(b), 1141(d), discharged. 11 U.S.C. IAnd see an even more fundamental flaw 1328(a)-(c). 1228(a)-(c), & emerges parses in when Wasson one 1328(a). in

The debtors this instance received analogizes Wasson student loans chapter “superdischarge” that is available priority taxes and reasons that because plan if payments actually all the priority tax debts is They discharged made. were from: ‍‌​​‌​​​‌‌​‌‌‌‌​​‌​​​​​‌​​​​​‌​‌‌​​‌‌‌​​‌​​​‌‌‌​​‍discharged logically 13 “it follows provided plan Bruning apply all debts or disal- should not to student title, except fully paid lowed under section 502 of this loan debts which are out of the (1) provided for under section estate.” 152 B.R. at 642. The falla debt — Wasson 1322(b)(5) (2) title; cy premise in- of this- the kind this lies the false that both (8), (9) (5), specified paragraph Priority types dischargeable. or of debts are 528(a) (3) 1328(a) title; discharged section of this for resti- tax debts are under but tution, fine, criminal not.14 included student loan debts are completed payments Ironically, may correctly had under the have been If Wasson wrong for the reasons. The narrow decided plan, the court have so- could authorized the holding objection overruled an “hardship discharge” called that mirrors by a student loan creditor who 1328(c). chapter discharge. complained being paid statutorily-disal- of not discharging confirming on the proponents

In stu order аgainst fought and lost battle block when defended the debtors’ motion dent loans 523(a)(8).15 short, injunction. making In for an Lakes was what Con Great became issue in a manner that gress has settled the a direct attack. judicial legislation. roota for

does not leave The distinction between collateral attack judica- and direct attack matters because res II judgment ta bars a collateral attack on a final majority’s respectfully I dissent from the but does not a direct attack on a final bar injunction by the conclusion that the issued Pinckney, judgment. Watts court, though predicated even (9th Cir.1985). I construe Great Lakes’ upon error about which we are a substantive prem- defense to have been direct attack unanimous, I should stand. would reverse jurisdiction ised on lack as to which res on several theories. judicata is not a bar. view, majority’s analysis my about 1327(a) binding effect under opposition Lakes an Great filed concept plan provi- of a binding confuses the injunction an enforcing debtors’ motion for concept discharge sion with the position which it took the proves much. I do not think that too only possible way that the for the debt to be can used to a debt discharged prosecute would be an adver- expressly nondisehargeable sary proceeding for a determination that 1328(a)(2). agree I Nor do paying the debt would constitute “undue any rights in the circumstances Lakes waived 523(a)(8)(B). hárdship” prescribed by § procedural posture in which the of the case here) (both nutshell, In a requires presump- contending Great Lakes was below $6,096 confirming that the order repaying merely would tion that hardship” possibly could not have functioned to dis- be inconvenient and not an “undue charge the debt for the interest that matured . . because the Code Moreover, majority incorrectly applies prohibits such result and mandates that the judicata preclude the doctrine res discharging sole method of a student loan be and, offending direct attack order prescribed under the narrow conditions at event, recognize not that the does order confirming perti- chapter 13 is in all respects nent either or void too defective sense, posi- In a functional Great Lakes’ injunction. support the issuance confirming chap- tion that the order ter 13 was void to the it extent ordered

A something that the court did not have the majority’s judicata analysis jurisdiction The opposition res is to do. If Great Lakes’ premised assumption elegant, on the mistaken that had been it would have included making judgment Great Lakes wás a collateral attack countermotion for relief or 95-595, (1977), H.R.Rep. reprinted lowed interest ahead of other al- No. at 132-62 accepts lowed If in 1978 unsecured claims. one the de- U.S.C.C.A.N.6093-6123. proposition separately classifying that batable argu- The House committee made two basic paying nonpriority, nondischarge- and in full a First, against nondischargeability. ments "an paying able debt before other allowed unsecured exception contrary to the two discrimination, is not an unfair claims then the important principles most permit refusal in Wasson to disallowed claims for debtor, equality laws: a fresh start for the and of interest to be ahead of allowed Second, treatment for all and creditors.” debts is, unexceptionable applica- unsecured claims an inappropriate [student loan] "it is to view the tion of the distribution scheme de- program loans, legislation grаnting as social when scribed herein. strictly attempting but as business when 133-34, collect." Id. at 1978 U.S.C.C.A.N.6094- report 15. The House committee's on the Bankruptcy thirty-one pages position prevail Code devoted The House committee did not Bankruptcy finally urging discharged. that student loans should be in the Code as enacted. guarantees. Rule of Civil Pro- The collateral attack pursuant to Federal bond order . 60(b)(4), incorporated by way through Federal as the state courts and cedure wended Bankruptcy ultimately 9024. Never- Supreme Rule of Procedure reached the U.S. Court theless, I that the court should have supreme believe on certiorari to the state court. 60(b)(4) a Rule opposition Supreme construed the The that U.S. Court held the dis- ruling motion. See Fed.R.Bankr.P. trict court’s adverse the direct at- ap- tack final when it had become was not short, contending In Lakes was pealed that -the action was an state-court adjusted ought to be either the order impermissible collateral attack. expunge offending provision or declared respect unworthy to be void in that of teaching juris- of Stoll is that when a enforcement. question actually litigated dictional decided, judgment, This was a direct attack on the binding the determination is judicata a collateral attack: prevent functions as res collateral in litigation attack in other forums. The judicial proceeding A on a direct attack says nothing decision what would have about it, it, in attempt to correct or to void happened if pursued Gottlieb had his direct provided by some manner law to accom- Judg- (Seoond) attack. See Restatement object. ... plish that It is an- attack Stoll); (discussing (1982) 12 cmt. c ments appropriate procеedings par- between the Wright, 11 Charles Alan Arthur R. Miller seeking, ties to it for sufficient cause al- Mary Kay Kane, annulled, reversed, & Federal Practioe & leged, to have vacat- (1995). §2d ed, or declared void. Procedure: Civil Watts, 410, quoting Moore, 1B J. F.2d key corollary Stoll is the res ¶ 0.407, at 282 n. Federal PRACTICE Mooee’s judicata effect of a tribunal’s determination (1984) (ellipsis original). competency preclude its own does not all determination, forms of review i.e. explained in direct attack. As Restate- primary upon by cases relied the ma- Stoll, virtually ment’s discussion “there is jority judicata analysis in the res confirm always procedure by available which to we are here confronted with direct original obtain review of the tribunal’s deter- attack and not a collateral attack. issue, by appeal mination of the either plainly In injunction extraordinary Stoll was a collateral attack. writ.” Restate- Judgments Act, the former (Seoond) case under 12 cmt. c. ment sitting bankrupt the federal district court contrast, Great Lakes did not contest cy reorganization in a confirmed confirmation, litigate question did purported Act 77B that to can jurisdiction subsequent in a motion for relief guarantees cel bond that had been made to appeal then to from the adverse and decline parties. by one Gottlieb third Stoll v. Gott ruling, and did not initiate collateral attack lieb, 134, 165, 59 S.Ct. 83 L.Ed. 104 U.S. dispute make other court. When did (1938). court, way very to it was in the same Gottlieb, participated who had not in the bankruptcy that of- court had confirmed the process, confirmation filed a motion in the fending very plan. proceeding And the was modify district court to vacate or the order of by different —an action the debtors'to obtain juris- ground on the of lack of 105, injunction necessary a fea- án under diction, which motion was denied and not obligation by the court ture of which was the appealed. This was a direct attack that en- jurisdiction to that there to have assure was litigation actual that thereaf- tailed Gottlieb original place. in the first entered the order by taking an ter allowed to become final dealing timely appeal a We are now appeal. injunction. from that Great Lakes by effectively posture in the same as Gottlieb pursuing Instead of his direct attack timely ap- way appeal, a would have been if Gottlieb had Gottlieb launched collateral ruling by filing pealed a action on the from the adverse on his motion. attack state-court Edwards, (In Simmons), 300, 313, 115 v. 514 U.S. Simmons v. Savell re Celotex (5th Cir.1985). 1493, 1501, 131 (1995), L.Ed.2d 403 has S.Ct. F.2d 547 message about essentially the same as Stoll Stoll, Celotex, significant It is also necessity orderly federal review plain- all involved that were orders Shoaf way beginning attack with the court direct ly applicable bankruptcy in violation of the judgment. initial In that issued the words, pre- In statute. other none of them case, bankruptcy court in the a Eleventh question judgment. sented the of a void injunction forbidding § 105 Circuit issued a appeal bonds obtained efforts to collect on The law the Ninth Circuit and elsewhere bankruptcy. A the debtor before district judicata inapplicable is that res to direct court in the Fifth ruled that Circuit judgments. Notwithstanding attacks on injunction preclude particular did riot appealed, an order is final and was not Supreme it. The held action before Court litigant may make a direct attack under Rule injunction binding that the was unless 60(b) upon judgment before that court it was reversed or modified and until d Watts, judgment. rendere orderly processes within Eleventh Circuit 410; Gilligan, F.2d at Jordon v. and that a collateral attack in the Fifth Cir (6th Cir.1974), denied, cert. 421 U.S. permitted. Although the cuit would not be (1975). 95 S.Ct. 44 L.Ed.2d 481 Supreme Court discusses the need to have appealed injunction, making Great Lakes was a direct attack on key point is that there remained available a confirming the order perfectly by way good avenue of direct attack very before the court that rendered the or- asking that issued court der. injunction modify it. to The nature of the direct attack contrast, litigated Lakes jurisdiction there was a total want of due to injunction in the same 523(a)(8) requirements the strict offending chap- court that confirmed the had now, us, prosecuting ter 13 and is before Congress prescribed require- has strict timely injunction. appeal from the discharging ments for loan a student obligation up had an own require that it either be of original compound to its error and decline to (§ 523(a)(8)(A)) age a certain or be an “un- by issuing injunction. its error (§ 523(a)(8)(B)) hardship” repay due majority also relies on the Fifth Cir (and discharge has forbidden Republic Supply cuit’s decision Co. 1141(d)(2) 1228(a)). Any disagree- Cir.1987), Shoaf, 815 F.2d 1049-50 discharge ment about status must be judicata nonobjec- which invoked res bar a by way adversary proceeding. resolved ting suing third-party guar creditor from Hence, jurisdiction there is a total want of pursuant who was to released antor discharge a student loan debt other of a confirmed Not does terms Watts, means. See 752 F.2d at 409. involve a collateral attack on the same Shoaf way there is no other Since model as Stoll and Celotex instead of a direct debt, confirming student loan the order attack, Fifth has a but the Circuit line of pur- was void insofar as it significantly cases that circumscribe Shoaf ported require of a student Tay Internal Rеvenue Serv. v. Taylor compliance statutory loan without with the (5th lor), Cir.1998); Boyle 132 256 F.3d requirements. (In Cook), Mortgage v.Co. Cook re No. 93- (5th 1994) (unpublished);16 analysis 7459 June Cir. The is identical to what would (In Howard), majori- Sun Finance Co. v. Howard re occur in to other situations which the Cir.1992) (5th (chapter ty’s prevent 972 641 logic F.2d 13 would review. If the con- plan plan purported confirmation cannot se 13 compromise firmed to dis- debt, notwithstanding judicata); charge fully-secured partial cured res a claim after a 1, 1996, "Unpublished opinions January precedent.” issued before are 5th Cir.R. 47.5.3. nondischargeable purported require judgment if it to the debt. “A void payment or creditor, nobody would imprisonment legal nullity considering and a court anything void that the order was but to has no think motion vacate discretion in deter timely was regardless of whether there mining it whether should be set aside.” provision is far re- appeal. Any Watts, Jordon, too quoting at F.2d permitted to Congress has moved from what 704; F.2d at Graziadei v. Graziadei cf. by way Bankruptcy the accomplished be Graziadei), 32 F.3d Cir. 409; Watts, at 11 CHARLES Code. 1994); Escobedo, 28 F.3d at 35. Mary WRight, R. AlaN Arthur Miller & This warrants reversal. Kay Kane, Praotioe Proce- Federal (1995). § So it is this dure: Civil 2d B instance. if Even the one discounts distinction be- may to line While it be difficult draw the direct and collateral attacks and does tween judgment merely and a between a erroneous offending portion not view the of the order view, my judgment, the void void, confirming plan as the we should re- jurisdiction- line court crossed the from mere injunction verse on the basis the that jurisdiction. lack of al error to total jurisdiction. question exceeded the court’s recently The Seventh Circuit reached ap- question The narrow before us this we result in a similar situation that same Escobedo, injunc- peal whether we shоuld affirm an In re F.3d 34 should follow. (7th Cir.1994). Specifically, timely appeal this tion. is a court con- injunction plan to unopposed chapter 13 that did from forces Great Lakes firmed an activity, including full from at- provide priority not for refrain collection 1322(a)(5). refunds, tempts Five to tax required by claims as offset income years years requires governmental agencies two after it inform after confirmation and plan payment, the debtor’s final the trustee credit bureaus that the debt has been (in out, majority “paid (falsely moved a direct attack in full” we turns attack) re- misconstrues collateral was are unanimous that debt not modify plan quire full), so as to pay debtor requires and that it to debtors’ n comply context, or to the con- have attorney’s In fees. the order firmation and the dis- order vacated confirming is mere back- modify missed. When debtor did ground.

plan, the court ordered dismissal. dismissal, affirming Escobedo injunction must clear that the We Seventh held that the failure of the Circuit discharge injunc- reviewing we are is not the statutory comply mandatory with 524(a)(2). provided by § tion requirement plans rendered injunction discharge follows “any supposed nugatory [i.e. discharges provided by the statutory Escobedo, properly void] dismissed.” 1328(a) discharge Code—the judicata F.3d res doctrine 1328(a) discharge in this instance. The applicable priority claims. omitted unambiguously excludes student loans that Although analysis in some- Escobedo is No sparse, squarely what its conclusion provision discharges anything. ever target. not, plan provision, no enforceable or And When Lakes on the basis defended change dis- can the terms of the 1328(a)(2) prohibited injunction only charge. §The compliance with a student loan debt without applies dischargеs that are authorized hardship” “undue Code. 523(a)(8), obliged court was 60(b)(4) injunction have issued authority under Rule must been exercise general equitable powers confirming to vacate the order 13 under recognized § purports to the extent to

C majority The “binding” holds that injunction The was issued under 1327(a) clause plans authorizes permits which court to “issue to provisions include that violate the Bank- order, any judgment process, or that is nec Code, ruptcy provisions which become en- essary appropriate carry provi or out the forceable if a object creditor does not Bankruptcy sions” of the Code. 11 U.S.C. appeal or the confirmation order. It 105(a). understanding This reflects the reasons, first, judicata that res requires that that courts equity are courts of object appeal failure to is a waiver of the authority modify “have broad credi right collaterally attack the confirmed relationships.” tor-debtor United v. States and, second, after confirmation that failure to Co., 545, 549, 110 Energy Resources 495 U.S. implied acceptance constitutes of the (1990). 2139, 2142, S.Ct. 109 L.Ed.2d 580 leading But 105 has bounds. As a trea I agree, do not as a statutory matter of notes, universally recog tise “it should be construction, trumps the more power granted nized that the to the bank specific command of ruptcy courts under section 105 is not Moreover, although already I have ex- employed boundless should be as a plained why appeal this involves a direct panacea for all ills confronted in the bank judicata attack to which res apply, does not ruptcy al., case.” 1 King Lawrence P. et - exceptions judicata there are also to res ¶ 105.01[2], Bankruptcy Collier on at 105-6 apply in regarded the event it is as a collater- rev.1997). 105-7 equitable ed. These al Similarly, implied attack. acceptance is a powers can be exercised within the con largely-discredited troublesome and doctrine Bankruptcy fines of the Code. Norwest Bank apply that does not to this case. Ahlers, 197, 206, Worthington v. 485 U.S. 963, 968, (1988). 108 S.Ct. 99 L.Ed.2d 169 Bankruptcy cannot courts “create substan analysis requires a brief review of rights unavailable,” tive that are otherwise some facts the record and some obser- creating such as exceptions additional to stu review, vations about the standard of nondischargeability provisions, dent loan “roving do not have a commission to do Great Lakes target was the main Sutton, and the

equity.” United States primary creditor in 1305, 1308(5th Cir.1986). 13 case. purported pay per- Applying “necessary appro- claims, cent allowed unsecured called for priate” injunction standard to the directed per payments month. The $515 against Lakes, plain it is it is completed were and the issued based on an impermissible plan provision. $28,840 $26,015 when paid, had been of which Enforcing prohibited by Lakes, went to Great por- with a substantial necessary Code neither $2,825 tion being balance attributable appropriate nor carry provisions out the to fees. And there was a student loan owed Code. by Mrs. Bank, Pardee First Interstate respect plan provision to which the was: In consequence, offending plan provi- obligation paid “This shall be outside of the (if void) outright sion remains on the directly to First Interstate Bank.” but, being ineligible books injunc- for a tion, way has no being enforced. It should offending plan provision reads: regarded merely there, be as sitting to be shall “[Great Lakes] receive the total amount unenforceable, ignored pathetic pre- in its $25,235.00 for its claim remaining tension. unpaid amounts, any, if including any claims interest, shall discharged by plan.” injunction

§The should be reversed as beyond authority There has explanation ‍‌​​‌​​​‌‌​‌‌‌‌​​‌​​​​​‌​​​​​‌​‌‌​​‌‌‌​​‌​​​‌‌‌​​‍why been no court. Great Lakes higher amount ceived notice of its treatment under than the sum certain proof claim rather (If This is reference to of law words Plan.” a .conclusion the last six specified in the Order, 30,1997, January why no. entered “binding,” then is are of the sentence arguably finding 3. The of fact that in the same sen- the sum certain stated not supports this conclusion of law is the infer- binding?) also tence finding of fact ence to be drawn no. not contend that it would The debtors do proof claim. But that Great Lakes filed pay Lakes the hardship to Great be a undue this does not establish that the debtor sent unpaid $6,097 accrued on in interest that had merely, copy Lakes a Great filing principal after 3015(d), summary permitted by that Rule Hence, loan debt does the student case. necessarily provi- did include exotic statutory hardship ex- undue qualify for sion. nondischargeability under ception must review the facts Since we 623(a)(8)(B). Accordingly, pre- must we standard, “special scrutiny” we should be merely inconvenient for the sume that it skeptical. repay the loan. debtors to student unambiguously estab- does not record 1327(a) §of notice that The correct construction Lakes had actual lish “binding” with the re- right clause terminate the of Great would discharge presents question striction on on the nondis- Lakes to that was addressed the concurrence chargeable debt. Hobdy Mortgage Corp. Fireman’s Fund b (9th (In Hobdy), B.R. re Cir. majority applying wrong stan- 1991) (Perris, agree I concurring). BAP J. appeal, the correct of review. dard with, adopt, analysis. findings standard of review scrutiny” “sрecial bankruptcy court is one of statutory principles Familiar construc clearly erro- rather than the more deferential give way require general tion that a rule to a applies. ordinarily neous standard specific more rule that is inconsistent with findings of fact conclu Specifically, the general E.g., rule. v. Bock Laun Green (in appear in the order of law that sions Co., 504, 524, dry Mach. 490 U.S. 109 S.Ct. separate order doctrine of violation of the (1989) (“A 1981, 1992, 104 gener L.Ed.2d 9021) prepared by coun were debtor’s Rule usually govern statutory rule does not al signed by the prevailing party and sel as rule”); specific Hob unless there is no more Order, any changes. making court without dy, 130 B.R. at 321-22. 30, 1997, January at 2-5. entered on Here, general rule is Circuit, bankruptcy court’s In the Ninth the debtors and all creditors “binds” merely adopted in full from the findings, if of such credi plan “whether or not claim party, findings prevailing fact whether provided tor is scrutiny.” subject “special Alvernaz to, objected has has not such creditor Farms, Inc. v. Bank of California rejected plan.” accepted, or has Co.), Processing 910 F.2d T.H. Richards 1327(a). specific The first more U.S.C. (9th Cir.1990); Sealy, Easy n. 2 Inc. v. 1328(a)(2), which excludes from dis rule is Inc., n. 3 Living, charge those debts that are Cir.1984). specific The second more 523(a)(8)(B) majority gives requiring because the the demon This matters rule is hardship” court’s conclu- in order to have deference to stration of “undue notice, discharged, actual which demonstra sion that Great Lakes had a student loan adversary by way offending exotic tion must be made Compare proceeding.17 plan, observing in a footnote 7001(6). 523(a)(8)(B), Fed.R.Bankr.P. Appellant re- “bankruptcy court found that discharged. It is dis- prescribed which a student loan Congress has two circumstances in requires cant that principle Another familiar is not in latitude conferred harmonious, chapter giv- nondischargeable to be 11 for in- statutes be construed debts of 1141(d)(2). § dividual ing language effect to of each section. debtors. U.S.C. the 321-22; E.g., Hobdy, In 130 B.R. re Par- provision purporting The (Bankr.D.Idaho ker, 148 B.R. 606-06 to a that is debt 1992) J.). (Hagan, 1328(a)(2) plainly § is inconsistent 1328(a)(2) hence, § and, permitted is not compel principles Both of these the conclu- to be included in the majority sion that is not correct the when it 1327(a) § applies “binding” provision the 523(a)(8)(B) 1328(a)(2) § expunge § to if to regarded Even this were be as a Bankruptcy from the Code. principles collateral attack to which of res b judicata majority apply, the leaves unexa- exceptions a rigid mined number of finali- Moreover, majority’s sweeping the defer- record, ty suggested by that are the 1327(a) § ence to not admit of a limiting does 1327(a) principle. can §If be used to elimi- a 1328(a)(2) § Bankruptcy nate from the Code exceptions There are per- numerous can an excep- be used to add additional judgments mit relief from in various circum- 523(a)(8), any § Bankrupt- tion to then other stances. See Restatement (Second) cy provision similarly Code be could amend- Judgments (1982) (“Restatement”). §§ 64-82 ed. judgment preclude A subsequent does not majority’s logic, fully Under the secured litigation subject if the matter plainly “was so “fully paid” upon claims could be deemed beyond jurisdiction the court’s that its enter- payment full of less than the amount of the taining the action awas manifest abuse of extended, Logically claims. creditors could Judg- authority.” Restatement (Second) imprisoned be or even ordered executed. 12(1) (1982). § regard I this as such ments a principle case. To the extent that Escobedo limiting suggested The correct is could be attack, § construed as a collateral it is this specifies which the terms that exception justifies may permissibly Seventh Circuit’s plans. be in Escobedo, result. F.3d at 34-35. only potential §in authority provi 1322for a y sion that specificall varies the terms of Inadequate party notice to affected can 523(a)(8) § 1322(b)(10), § § is finality. defeat 1. Applying Restatement permits which “appro a to include review, “special scrutiny” standard of priate provision not inconsistent with this apparent is not Lakes had ade- 1322(b)(10). Thus, title.” 11 U.S.C. quate notice that loan the student debt would limiting principle plan may is that discharged postpeti- without contain a is inconsistent with tion interest and without a demonstration of Simmons, Bankruptcy Code. hardship” adversary proceed- “undue Cf. an at 557-59. Indeed, ing. similar defects necessitated Hobdy, reversal the BAP in 130 B.R. 318. conspicuous absence from phrase “except provided otherwise person A about an who knows action but plan” inability vary connotes the terms perceives a jurisdiction given lack of “is contrast, of the discharge. preamu- right ignore proceeding at his own risk phrase, bular phrase standard but to if is suffer no detriment his assessment proves denoting correct.” Code latitude to 65 & cmt. Restatement 1141(d)(1) vary statute, vacating judgment b. The rationale for is is used that: give plan proponent some limited control

over public no purpose matters eases. served protecting 1141(d)(1). signifi- judgment. U.S.C. And it is also By hypothesis pro'eeed- old, charged 523(a)(8)(A), passage if it too U.S.C. and the associated with time this case repaying or if would be loan an "undue estop- is either not is the basis for counted or

hardship.” age exception loan did not pel. filed; apply to the facts case when it of this was error, Code, judi- contrary it was to all by fundamental ing was infected plaintiffs except own cial decisions Wasson. The usually attributable statutory judgment duty participate trustee had or omissions. Since acts confirmation, ju- opining suitability in the significant no investment of by default 1302(b)(2)(B). judg- effort was made. confirmation. dicial And, regardless supported by of whether or the none consider- creditor ment supporting preclusion properly objects, trustee the court had an ations independent duty plans wholly only abortive. to confirm those may be treated as that meet confirmation standards. Ever- Cf. Id. Perez), ett Perez. F.3d Relief from the confirmation would order (9th Cir.1994) (ch. 11—“trustees have re- permitted if from a be confirmation resulted issues, sponsibility certain the to raise by the court. substantial mistake Restate- issues, pass court itself must on those wheth- 68(3) (“If & cmt. c the mistake is ment put they’re specifically dispute.”). er or not in plaintiff, for by the the case relief is induced expect chap- Great Lakes entitled the was stronger, by and so also if the mistake is the jobs. ter 13 trustee and the court their to do itself’)- plan Confirming a con- that Moreover, sup- none of the considerations provision prohibited by the tains a is preclusion porting support confirm- the order by a substantial Code is mistake ing chapter public purpose this No court, induced the debtors. the by protecting portion is served the ‘ b purports order nondis- main on relief affording The limitation chargeable debt. The order infect- itself was confirming plans is the same from orders because, ed error a matter fundamental as analysis generally governs— equitable law, confirmed, regardless of it not be could untimeliness, diligence, inequita- lack of objected. Lakes it is whether Greаt And interest of ble disturbance of reliance others. evident from the manner the court which § 74. Restatement prepare pres- let the findings counsel on key in the issue to overcome context significant in- ent matter that there no plan confirmed the reliance of a judicial vestment effort. A equilibrium legal others. new and new are in reliance relations established on con- Finally, majority incorrectly finds that adversely Disturbing firmation. them often “impliedly accepted” Great Lakes and, hence, impermissible. inequitable will be object it when did not confirmation. can, however, fashion The court limited legitimate long conditional relief so reli- record, “special reviewed under the protected. interests are ance Restatement standard, scrutiny” not adequately does es- 74(3). Lakes about tablish that Great even knew instance, essentially Lakes is know, offending term. If exotic it did Any creditor. reliance' interest of accepted to have could not be found others is remote. stake is wheth- What theory. $6,096. still owe Great Lakes er debtors b (if any) subject creditors Other Acceptance hardly implied can be from the already unaffected have Lakes, took a behavior of Great which never inequitable no been full. vio- position contrary to its entitlement to receive be reliance lence would done to interests of plan payments interest after the injunction. by reversing others understood, completed. were Great Lakes Moreover, Great Lakes satisfies the re- with, good reason based a host of deci- diligence. It has quirement never mani- sions, according- law. It that to be the acted offending fested an to treat intention ly- Assuming provision as it had valid. e every provisiоn, it had notice reason Moreover, acceptance expect implied would is a trouble- that such a be never theory largely that has been given violating effect. In addition some discred- application: formality but ited all one this' distinction for does account chapter above.”). acceptance [statutory] language quoted broad being secured creditor whose claim is not Neither of Ninth Circuit decisions in- statutory treated in accord with standards majority support application voked implied may I ex- from silence. As will implied acceptance theory an unse- plain, acceptance in context formali- cured creditor. ty because the secured creditor can never- implied acceptance theory played no opt disregard theless out of in In re Gregory, role F.2d plan’s treatment of the secured claim. Cir.1983), holding creditor authority implied accep- Judicial unsecured claim for an embezzlement debt theory tance outside the limited context (but dischargeable that is not in formality involving 7) did not to a zero 13 secured claims is tenuous. let order of confirmation begins leading chapter One with the 11 final, adversary become and then filed case, implied acceptance re In Ruti-Sweet proceeding for a the declaration that embez- Inc., (10th water, 836 1266 Cir. F.2d discharged debt not zlement had been be- 1988), which has never achieved follow “provided by it cause was not for” a zero ing squarely rejected by and has been payment plan questioned and notice and Bankruptcy Appellate the Ninth Circuit Pan good rejected faith. The Ninth Circuit the frequently-cited el in re decision. M. In appeal straightforward finality on crеditor’s Arabians, Long 103 B.R. 211 BAP Cir. grounds there quar- with which can be little 1989). up: The Collier sums it treatise “The rel. To the it extent was a direct belated Ruti-Sweetwater, Inc., holding case of re confirmation, on attack the creditor had re- by non-voting single inaction class adequate of ceived notice the the class, acceptance by creditor constituted the hearing plainly confirmation flunked the correctly spe was not decided and has been requirement of diligence. rejected cifically recent decisions.” 7 law, aAs matter of unsecured creditors King P. eds., et al. Lawrence Collier on right “accept” no plan. have to 13 ¶ see Wm. (1997); 1126.04 L. 1325(a)(4); § § 122:2 Norton Jr., Norton, Ed., Norton Bankr.Law & Prac (“Acceptance rejection Chapter of a (“While (1997) (“Norton”) § 2d 91:21 tice only is relevant to confirmation with courts in have several eases held that the respect to the holder an allowed secured of accept class is deemed to the only purposes claim and for satisfying of the vote, growing failure to courts in a number of confirmation standard set forth Code more recent cases have held to the con 1325(a)(5)(A).”). Hence, acceptance ir- trary.”). We should be faithful to our own judicial relevant and accep- comments about precedent Long in M. Arabians. tance unsecured creditors mere are dicta. majority’s on reliance Cir- Third The more recent decision of Andrews (3d decision, Szostek, cuit In re 886 F.2d 1405 Loheit, (9th Cir.1995), posed F.3d Cir.1989), amounts to reliance on Ruti- question whether a 13 trustee has Sweetwater, premised because Szostek was standing object to plan. confirmation upon Moreover, Ruti-Sweetwater. by object- The trustee blocked confirmation rejected Ninth squarely Circuit has Szostek’s (a)(5). ing §§ 1411-14) under (Szostek, holding other F.2d at Circuit, rejecting Ninth appeal, the debtors’ present requirements value 1325(a)(ii) held that the trustee does standing have mandatory and, not are in hold- 1302(b) object trustee ing present has the requirements that the value are statutory duty “appear mandatory, viability has cast be heard” doubt implied acceptance. hearing question Barnes v. Barnes (9th Cir.1994) (“It whether, Barnes), 1325(a)(1), required possible “plan complies provisions to distinguish In re with the Szostek on the this ground that the creditor in that ease did not ^[13] and with the other applicable timely object impliedly provisions title accepted] [i.e. [11]”. U.S.C. 1302(b) plan, 1325(a)(1). whereas the Creditors here did. But ap- & anticipated the Bankruptcy Appellate had debtors’ ambush and noted peals standing found under of the .stay had trustee- elected to out line of fire not Panel 1325(a)(5), ruling expressed it about which filing proof claim. acceptance implied theo- light doubt claim, proof of Lakes Without a and said: ry “[be- as to secured creditors pay- would have been to receive entitled problematic to confer stand- we find cause plan. ments For most unsecured 1325(a)(5), we ing in this instance under creditors, that situation would be a disaster Chapter 13 trust- on the basis that affirm are because the claims nevertheless dis- standing has ee charged. loan But Great Lakes’ student 1325(a)(1).” Andrews, 49 F.3d at 1409: discharged claim cannot be acceptance implied comments about Its Hence, owed, loan the student would still pure dicta. through accrued the ultimate with interest unse The difference between secured and payment. date final A status makes all the difference. cured Great Lakes would had to content have provide chapter 13 that does property paying payments during itself no surrendering the secured through claim full value of the secured life of have been but would imply remain silent. ant cured creditors plans plan can be “has acceptance when accepted” Courts have confirmed impaired Implied and confirm acceptance secured creditors only if been 13, however, such willing by se U.S.C. claim was owed to Great that more than I respectfully one or two ‡ dissent from the affirmance months in Lakes. percent light ^[*] of the fact injunction. total debt ‡ plans largely formality because really against secured enforceable option to have the retain creditors — security and a claim. Bisch v. their not file Bisch), 159 B.R. 546 United States 1993). words, BAP In other Cir. dba, In re Arizona Darlene SANNER ‍‌​​‌​​​‌‌​‌‌‌‌​​‌​​​​​‌​​​​​‌​‌‌​​‌‌‌​​‌​​​‌‌‌​​‍of such a from the stand confirmation Quality Granite, Debtor creditors, deprive

point of secured does security. value them of the of their BIRDSELL, Plaintiff, David majority cites no case which a acceptance was es- secured creditor whose SAND AND GRAVEL FORT McDOWELL involuntarily has been sential (an enterprise of the McDowell Fort implied accep- deprived security on an Community), Mohave-Apache Indian Indeed, theory. ascribing much tance too Company, implied a Novak acceptance strays into Madison Granite muscle to an Kirk, unconstitutionality liability family company, the frontier John 1325(a)(5)(B) payment requirements of Kirk, Novak, Rose Jane Doe Stan Susan constitutionally-imposed limitation of are “a and Law Firms 1-10 John Novak plan modify power 1-10., Does Defen 1-10 and Jane Roes rights of a secured claim holder.” dants. NORTON, § 122:8. Bankruptcy No. B-91-07694-PHX-CGC. implied acceptance To the extent that the Adversary No. 97-184. theory any vitality, it has unwarranted , United States Court majority apply it to extension for D. Arizona. nondischargeable claims of unsecured credi- tors. Feb. D n none irony is that of this ultimate if

controversy Great Lakes would have arisen

Case Details

Case Name: Great Lakes Higher Education Corp. v. Pardee (In Re Pardee)

Court Name: United States Bankruptcy Appellate Panel for the Ninth Circuit

Date Published: Mar 31, 1998

Citation: 218 B.R. 916

Docket Number: BAP No. AZ-97-1038-RYKJ, Bankruptcy No. 92-02586-TUC-LO, Adversary No. 96-00186

Court Abbreviation: 9th Cir. BAP