Randall J. Nelson
Does
FACTUAL BACKGROUND
A. Randall Nelson
Debtor Randall Nelson filed a voluntary petition and Chapter 13 plan on May 6, 2019. Case No. 19-24458, ECF Nos. 1 and 2. The Court confirmed his amended 60-month plan on February 21, 2020. ECF No. 39. The debtor filed a proposed modified plan on January 13, 2021, which the Court confirmed on February 17, 2021. ECF No. 59. The modified plan took advantage of then-existing
On March 28, 2022—25 months after the debtor‘s plan was first confirmed—the Chapter 13 trustee filed a motion to dismiss Mr. Nelson‘s case, based on failure to make plan payments and to supply a copy of his 2020 tax returns. ECF No. 61. The debtor objected and noted his ability to make/catch up on payments due to anticipated receipt of rents. The parties reached a resolution, which included provision for a further modified plan. The Court entered an order on April 25, 2022, denying the trustee‘s motion to dismiss and, among other things, noting that the debtor had to file a modified plan no later than May 31, 2022.1 ECF No. 67.
When the modified plan was not filed by that deadline, the trustee certified default, but later withdrew her certification after the debtor filed a modified plan and budget. See ECF Nos. 69, 72, 73, and 74. The proposed modification sought to change only the payment amount in section 2.1 of the plan, requiring the debtor to make monthly payments to the trustee of $1,838. The modification further provided: “All remaining terms of the Chapter 13 Plan last confirmed on February 17, 2021 are unaffected.” ECF No. 72, at 3. The trustee objected to this proposed modification on the basis that it did not provide for a feasible plan. ECF No. 78. The parties agreed to settle the trustee‘s objection on the condition that the debtor file a modified feasible plan by August 19, 2022, and the trustee submitted a proposed order imposing this requirement for the Court to sign. Thereafter the Court notified the debtor and trustee via docket entry: “Given that [the] text of s. 1329(c) provides that a court may not approve a [plan payment] period that expires after five years beyond the time the first payment was due, the Court will modify the proposed
Both counsel for the debtor and counsel for the Chapter 13 trustee presented their views on the issue identified by the Court. Namely, the parties recognized that Congress did not amend the text of
B. Wilfredo Ramos
Debtor Wilfredo Ramos filed his initial Chapter 13 plan on February 28, 2020. See Case No. 20-21169, ECF No. 9. The Court confirmed the plan, as amended, on March 1, 2021. See ECF Nos. 75 and 80. Shortly thereafter, mortgage lender Deutsche Bank National Trust Company filed a motion for relief from the automatic stay based on the debtor‘s failure to make post-petition mortgage payments. The Court denied the motion in an order dated June 2, 2021. In doing so, the Court imposed a six-month “doomsday” period during which the debtor was required to make timely mortgage payments or risk Deutsche Bank being granted immediate relief from the automatic stay, and also allowed the bank to file a supplemental claim in the amount of $9,605.60. See ECF No. 90. To accommodate the bank‘s supplemental claim without having to increase his monthly plan payment amount, the debtor elected to extend his plan payment period to 76 months pursuant to
Several months later, Deutsche Bank filed an affidavit of default. After a series of hearings on the matter, the parties stipulated to allowing Deutsche Bank to file another supplemental claim for $2,111.52. ECF No. 130. The
ARGUMENTS OF THE PARTIES
These cases present the same question: Does
Debtor Nelson contends that imposing the 60-month limitation of
Debtor Ramos likewise relies on Mercer as authority for allowing him to modify his plan in the manner proposed. See Case No. 20-21169, ECF No. 146. He also directs the Court to In re Carter, 638 B.R. 379 (Bankr. N.D. Ill. 2022), for the proposition that a plan can be modified to run longer than 60 months. See 638 B.R. at 398 (“[Section 1329(c)] is satisfied so long as the modification itself does not expressly alter the plan term to one longer than 60 months, even if the effect of the modification is that a plan may run longer than 60 months.“) (citing Germeraad v. Powers, 826 F.3d 962, 968 (7th Cir. 2016)). See ECF No. 145. Carter, however, does not help the debtor, because Mr. Ramos‘s proposed modification would result in a plan that, by its express terms, provides for a payment period exceeding the 60-month limit of section 1329(c). See 638 B.R. at 398 (“[T]he general proposition taken by the court from [Germeraad] is more broad: Even after the 60th month of a plan, a court may modify a plan—even if the resulting plan will result by definition in a plan longer than 60 months—so long as the court does not extend the plan term itself beyond 60 months.“); see also Germeraad, 826 F.3d at 970–71 (“[Section 1329] contains three general limits on the bankruptcy court‘s power to approve the request. First, modification is allowed only if it will modify the plan in one of the ways specified in
Mr. Ramos points out that his extended plan period already is in place and he does not seek further modification of that period, therefore, he argues, he is not asking the Court to “‘approve a period that expires after five years [after the time that the first payment under the original confirmed plan was due].‘” ECF No. 146, at 2. He asserts that if the Court were to deny a request to modify only his payment amount, that denial would serve as a retroactive
For their part, the trustees argue that restricting debtors with plan period extensions previously approved under
DISCUSSION
Since 1978,
A plan modified under this section may not provide for payments over a period that expires after the applicable commitment period under section 1325(b)(1)(B) after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time.
A plan modified under paragraph (1) may not provide for payments over a period that expires more than 7 years after the time that the first payment under the original confirmed plan was due.
With the sunset of
One bankruptcy court decision offers mild support for the debtors’ view that they may modify their plans as proposed. In In re Mercer, a Colorado court allowed debtors who had previously modified their plan to provide for payments over a period of seven years under section 1329(d) to further modify their plan to adjust the payment amount to creditors, while keeping the plan duration at seven years despite the sunset of
In In re Bohinski, 638 B.R. 870 (Bankr. E.D. Mich. 2022), the debtor filed a proposed post-confirmation plan modification several days before March 27, 2022. The proposed modification would have changed the Chapter 13 plan period from 64 to 67 months. In mid-April, after the time for objection had passed, the court denied confirmation. It concluded that because
A. Section 1329(c) is not ambiguous as applied to the debtors.
While apparently acknowledging that the text of
One problem with this ambiguity/conflict argument, which necessarily compares now-stricken
The converse situation does occur—courts may attempt to interpret current Code provisions by considering prior bankruptcy statutes. See, e.g., Goodrich, 587 B.R. at 840 n.11 (“In efforts to decipher the meaning of newly added provisions, three of the four BAPCPA decisions considered pre-BAPCPA bankruptcy statutes and practice.“) (citing Milavetz, Gallop & Milavetz, P.A. v. United States, 559 U.S. 229, 244 (2010); Hamilton v. Lanning, 560 U.S. 505, 515–17 (2010); Hall v. United States, 566 U.S. 506, 513–14 (2012)). But the lineage is not direct here;
Assuming
Mr. NADLER. Madam Speaker, H.R. 1651, the COVID-19 Bankruptcy Relief extension Act of 2021, is bipartisan legislation to temporarily extend, until March 27, 2022, the COVID-19 bankruptcy relief provisions enacted as part of the CARES Act in the December 2020 omnibus appropriations bill.
Since the bankruptcy provisions of the CARES Act will expire next week, it is urgent for Congress to ensure that families and small businesses do not lose access to these economic lifelines.
These provisions were enacted last year to provide critical relief to families and small businesses forced into bankruptcy because of the ongoing pandemic. For example, they . . . protect individuals and creditors alike from the effects of the pandemic derailing the court-ordered repayment plans that promise a way out of chapter 13 bankruptcy.
. . .
Extending these necessary protections until March of next year will provide much-needed certainty that the bankruptcy system will remain responsive to debtors and creditors alike during this extraordinarily disruptive crisis.
. . .
Mr. ISSA. . . . Madam Speaker, this pandemic, everyone knows, has uprooted lives and caused untold destruction to families, to workers, and to small businesses. And many see the partisan behavior as destructive during this time, and they often do not see the bipartisan behavior.
Today‘s extension, H.R. 1651, is an example of bipartisan behavior on behalf of the American people. Repeated and lengthy government shutdowns in response to the pandemic have devastated the ability of millions to work, pay bills, and support their families, and keep their small businesses afloat.
. . .
In 2020, Congress passed five bipartisan COVID relief packages. The CARES Act allowed a variety of temporary relief measures for families and small business. When it was passed, we believed that, in fact, once the vaccine was available, that we would be able to put this behind us. But today, when over 10 percent of Americans have received a vaccine, we now know that the road to full recovery is longer ahead of us even after we begin going to work.
So allowing . . . debtors to file chapter 13 to modify their payment plans are only some of the critical items that the CARES Act did. Today we are making sure these will continue until March of 2022. This bill also extends through 2022 bankruptcy relief provisions included in the December 2020 COVID relief package. This extension will provide individuals and businesses with certainty and simplicity as they look at an economic recovery that, although it is underway, may be long.
167 Cong. Rec. H1389–90 (daily ed. March 16, 2021) (emphasis added).
These statements reflect an intent that the accommodation of
Moreover, there is no dispute that Congress took some action after the passage of the CARES Act, and even after the sunset of
[Section 1329(d)], however, did not adequately address the situation where a debtor had complied with all requirements of the plan and was ready for a discharge but could not keep up with mortgage payments due to COVID-19 related financial setbacks. . . . Section 1328(i) allows debtors who have suffered COVID-19 related financial distress to still obtain a discharge even
though they have obtained a forbearance agreement or loan modification for their residential mortgage.
626 B.R. at 41. See also Bankruptcy Threshold Adjustments and Technical Corrections Act, Pub. L. 117-151, 136 Stat 1298 (June 21, 2022) (amending
Well before the COVID crisis arose, courts agreed that
The legislative history of the Bankruptcy Code indicates that Congress was unhappy with practices that had developed in certain parts of the country under Chapter 13‘s predecessor that had resulted in debtors remaining under court-supervised repayment plans for seven to ten years, which Congress characterized as being close to indentured servitude.
In re Black, 292 B.R. 693, 700 (B.A.P. 10th Cir. 2003) (citing Congressional Report). Congress temporarily altered that policy choice for a 24-month period, when the country‘s debtors and creditors were abruptly affected by the COVID-19 outbreak.
Even if the parties’ argument strikes one as a practical solution, numerous courts have cautioned against judicial curing of a seeming congressional inadvertence. For example, in Stearns v. Pratola (In re Pratola), 589 B.R. 779 (N.D. Ill. 2018), the district court described the arguments
After noting that ineligibility under
§ 109(e) is usually cause for dismissal or conversion of a Chapter 13 case but is not an absolute bar, the Bankruptcy Court concluded that it was without clear direction from either the Bankruptcy Code or case law as to whether cause for dismissal under§ 1307(c) exists in this situation. Id. at 7. Based on this perceived ambiguity, the Bankruptcy Court turned to legislative history and policy considerations regarding educational debt to determine whether Debtor‘s case should be dismissed. The Bankruptcy Court concluded that based on the history surrounding the debt limits’ enactment, Congress could not have intended to exclude someone like Debtor, an otherwise eligible individual exceeding§ 109(e) ‘s unsecured debt limit solely because of educational debt, from Chapter 13 relief. . . .Based on these considerations, the Bankruptcy Court held that there was no cause for dismissal of Debtor‘s Chapter 13 case under
§ 1307(c) . The Bankruptcy Court specifically noted that “[d]ismissing [Debtor‘s] case would not advance the Congressional intent behind the debt limits, and doing so would hinder the principal purpose of the Bankruptcy Code—to grant a ‘fresh start’ to the honest but unfortunate debtor.” Id. at 12 (citation omitted). . . .. . .
The Court is not unsympathetic to the policy concerns raised by the Bankruptcy Court and highlighted by Debtor . . . regarding individuals with large amounts of educational debt, but the power to create such an exception to
§ 109(e) lies with Congress rather than the courts. . . . . Courts must enforce statutes as written; they cannot “rewrite the statute that Congress has enacted.” Puerto Rico, 136 S. Ct. at 1949 (quoting Dodd v. United States, 545 U.S. 353, 359, 125 S. Ct. 2478, 162 L.Ed.2d 343 (2005)). Creating an exception to Chapter 13‘s eligibility requirements effectively rewrites the statute, substituting a discretionary substantive standard for the bright-line rule established by Congress.. . .
. . . Under the plain terms of
§ 109(e) , Debtor exceeds the statutory debt limit and so is ineligible to proceed as a Chapter 13; the nature of his debt is irrelevant. By taking its nature into account and considering potential policy reasons why Congress would not want toinclude such debt in § 109(e) ‘s debt limits, the Bankruptcy Court interpreted the statute in a way that contravened its plain text.
Another bankruptcy court adhered to Seventh Circuit guidance when plain statutory text conflicts with a practitioner‘s or trial court‘s sense of expediency: “The Seventh Circuit has dispatched a clear message . . . that courts must not engage in judicial legislation, holding that a court of equity does not have ‘free floating discretion to redistribute rights in accordance with its personal views of justice and fairness.‘” In re Nieves, 246 B.R. 866, 872–73 (Bankr. E.D. Wis. 2000) (quoting Matter of Chicago, Milwaukee, St. Paul & Pacific Railroad, 791 F.2d 524 (7th Cir. 1986)).
Moreover, application of the construction canon to “avoid absurd results” has been narrowed. See In re University of Wisconsin Oshkosh Foundation, Inc., 586 B.R. 458, 463 (Bankr. E.D. Wis. 2018), citing Jaskolski v. Daniels, 427 F.3d 456, 462 (7th Cir. 2005). The Jaskolski court explained:
What Daniels labels “absurd” results are nothing but the rough cuts inevitable with decision by rule. . . . Today the anti-absurdity canon is linguistic rather than substantive. It deals with texts that don‘t scan as written and thus need repair work, rather than with statutes that seem poor fits for the task at hand. In other words, the modern decisions draw a line between poor exposition and benighted substantive choice; the latter is left alone, because what judges deem a “correction” or “fix” is from another perspective a deliberate interference with the legislative power to choose what makes for a good rule. Admit the propriety of “fixing mistakes” and you allow a general power to identify “mistakes,” which means a privilege to make the real substantive decision.
427 F.3d at 462 (emphasis in original).
Here, the debtors and trustees ask the Court to “fix the mistake” of Congress and conclude that Congress, when it enacted
In sum, the Court does not find the language of section 1329(c) ambiguous, either on its own or applied to debtors Nelson and Ramos. Because the statutory text is plain, the Court is bound to enforce it as written, and it cannot confirm Mr. Ramos‘s proposed modification, nor require Mr. Nelson to file a modified plan that would expressly require a payment period exceeding 60 months.
B. Subsection 1329(a), on its own, does not require confirmation of a modified plan.
As a separate but related argument, the Chapter 13 trustees assert that failing to allow debtors like Mr. Nelson and Mr. Ramos to modify the payment amount in their extended-period plans would run afoul of
A plan modified under this section may not provide for payments over a period that expires after the applicable commitment period under section 1325(b)(1)(B) after the time that the first payment under the original confirmed plan was due, unless the court, for cause, approves a longer period, but the court may not approve a period that expires after five years after such time.
C. Applying § 1329(c) to CARES Act plans does not result in a manifest injustice.
Finally, the Chapter 13 trustees contend that interpreting
This argument is undeveloped. The concept of “manifest injustice” discussed in Gentry concerned revisiting a prior decision that was clearly erroneous and where failure to correct it would result in a manifest injustice. The Chapter 13 trustees are not seeking reconsideration of a prior order, nor do they argue that any prior orders of the Court were clearly erroneous. Consequently, this argument is unavailing. See Tyler v. Runyon, 70 F.3d 458, 464 (7th Cir. 1995) (“[A] litigant who fails to press a point by supporting it with pertinent authority, or by showing why it is sound despite a lack of supporting authority, forfeits the point.“) (internal quotation marks omitted).
CONCLUSION AND ORDER
While the Court recognizes the frustration of these CARES Act debtors who seek further modifications after the temporary window of
Accordingly,
IT IS THEREFORE ORDERED that the Chapter 13 trustee‘s objection to confirmation of debtor Randall Nelson‘s June 13, 2022 request to modify his confirmed plan is sustained, with the requirement that the debtor file a modified feasible plan that complies with
IT IS FURTHER ORDERED that debtor Wilfredo Ramos‘s July 11, 2022 request to modify his confirmed Chapter 13 plan is DENIED.
Dated: October 11, 2022
By the Court:
Beth E. Hanan
United States Bankruptcy Judge