In re Debing, Bankruptcy No. 91-34353.

• Decision Date: 12 November 1996
• Docket Number: Bankruptcy No. 91-34353.
• Citation: 202 BR 291
• Parties: In re Darcy L. DEBING and Roxann L. Debing, Debtors.
• Court: U.S. Bankruptcy Court — District of Minnesota

202 B.R. 291 (1996)

In re Darcy L. DEBING and Roxann L. Debing, Debtors.

Bankruptcy No. 91-34353.

United States Bankruptcy Court, D. Minnesota, Third Division.

November 12, 1996.

Stephen J. Creasey, Minneapolis, MN, for Trustee.

Darrel A. Baska, Eagan, MN, for Debtors.

ORDER DENYING DEBTORS' MOTION FOR POST-CONFIRMATION MODIFICATION

GREGORY F. KISHEL, Bankruptcy Judge.

This Chapter 13 case came on before the Court on November 5, 1996, for continued hearing on the Trustee's motion for dismissal and on the Debtors' motion for post-confirmation modification. The standing trustee appeared by his attorney, Stephen J. Creasey. The Debtors appeared personally and by their attorney, Darrel A. Baska. Upon the moving documents and the arguments of counsel, the Court makes the following order.

The Debtors filed a voluntary petition under Chapter 13 on July 31, 1991. In their plan of debt adjustment, they proposed to pay $225.00 per month to the Trustee over a period of 60 months. These funds were to be applied to pay priority and general unsecured debts in a total amount that they estimated at $13,233.00. This was to result in payment in full of all allowed claims. The plan was confirmed without objection on October 24, 1991.

Over the ensuing five years, the Trustee moved for dismissal of this case pursuant to 11 U.S.C. § 1307(c)(6)¹ on five different occasions. The first four motions were resolved when the Debtors and the Trustee agreed to structured cures of their defaults in payment. In the fifth, filed on September 20, 1996², the Trustee again alleged that the Debtors were in default, this time to the extent of $1,124.17. This was the amount required to complete payments under their plan.

In response, the Debtors brought on the present motion for post-confirmation modification. Through it, they propose to obtain confirmation of a "pot plan" in the form currently prescribed by LOC.R.BANKR.P. (D.MINN.) 602, as opposed to the confirmed "percentage plan" that governed this case and its estate over the 60 months of its term.³ Under the proposal, the amount the Debtors have actually paid to the Trustee to date, which has been distributed to creditors already, would be all that those creditors are to receive from the estate.⁴ The Debtors would be deemed current in payment, and entitled to receive a discharge immediately. The effect of the modification would be to retroactively conform the plan's binding provisions to the Debtors' actual, but incomplete, performance under their original plan.

11 U.S.C. § 1329(a)⁵ allows debtors in Chapter 13 to obtain modification of their confirmed plans. The proponent of any modification under this provision must demonstrate some form of "cause" to overcome the objection of parties that would be adversely affected. In re Guernsey, 189 B.R. 477, 481-482 (Bankr.D.Minn.1995). As a threshold matter, a debtor seeking a modification that reduces his payment obligations and creditors' distribution rights from those under a prior plan must show that his financial circumstances underwent an adverse change after confirmation of the original plan. In re Nelson, 189 B.R. 748, 751 (Bankr.D.Minn. 1995). The Bankruptcy Court has "considerable discretion whether to approve proposed modifications." In re Guernsey, 189 B.R. at 482. Because 11 U.S.C. § 1329(b) requires it, the Court may apply the generalized "good faith" element of 11 U.S.C. § 1325(a)(3) to a proposal for modification. In re Guernsey, 189 B.R. at 483 (citing In re Witkowski, 16 F.3d 739, 746 (7th Cir.1994)). Where a motion for modification is brought at the very end of a plan and has the sole goal of forgiving a debtor's repeated or protracted default so as to pave the way for an immediate grant of discharge, this inquiry is particularly pointed; the debtor would have to make an extremely strong showing of an adverse change in circumstances, and should probably be relegated to the more limited remedy of "hardship discharge" under 11 U.S.C. § 1328(b).⁶ In re Guernsey, 189 B.R. at 483.

Here, counsel elected not to present evidence, relying on an offer of proof: if called to testify, the Debtors could attribute the last two months of their current default to unanticipated automobile repair expenses. Even if established, this would not explain the previous several months' defaults. Nor, really, does it go to their inability to muster the relatively modest amount required to fully cure, or their repeated past defaults.⁷ It certainly would not constitute the cause for modification required by § 1329. The Debtors' motion, then must be denied.

On his own motion for dismissal, the Trustee notes that the Debtors are several months beyond the longest period under which they could make payments under any modification proposal.⁸ The Debtors' options for obtaining a discharge in the context of this case, then, are quite narrow. The Trustee has no objection to giving them a little more time to consider and exercise those options. It is appropriate to grant that.

IT IS THEREFORE ORDERED:

1. The Debtors\' motion for post-confirmation modification is denied.

2. No later than November 27, 1996, the Debtors shall either:

a. pay the Trustee the sum of $1,124.17, or

b. serve and file a motion for hardship discharge under 11 U.S.C. § 1328(b).

If the Debtors elect the former, the Trustee's counsel shall immediately advise the Court by letter and shall perform the ministerial actions preliminary to a grant of discharge to the Debtors. If the Debtors fail to timely perform one or the...