In re Gronski
| Decision Date | 16 October 1986 |
| Docket Number | Bankruptcy No. 85-04610K. |
| Citation | 65 BR 932 |
| Parties | In re Ronald J. GRONSKI, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Virginia R. Powel, Asst. U.S. Atty., Philadelphia, Pa., for U.S.
Mitchell W. Miller, Philadelphia, Pa., for debtor.
James J. O'Connell, Philadelphia, Pa., Chapter 13 standing trustee.
This case, in its present posture, requires us to consider whether a debt incurred under the Health Education Assistance Loan Program, 42 U.S.C. § 294f (hereinafter "HEAL") constitutes an additional exception to 11 U.S.C. § 1328(a) and is hence dischargeable only if the conditions set forth in 42 U.S.C. § 294f(g) are met, and whether the Objection of the Government to the Debtor's Plan, on account of the HEAL loan obligation, is timely. We believe that the Objection here must be considered timely, and we agree with the Government that the terms of 42 U.S.C. § 294f(g) must be met to discharge a HEAL loan in any bankruptcy case, including one maintained, as is this case, pursuant to Chapter 13, and hence that the HEAL loan of the Debtor here may not be discharged by its mere inclusion in the Debtor's Chapter 13 Plan, as the Debtor appears to argue. However, we also believe that it is premature to determine whether the HEAL loan of the particular Debtor in this case is in fact dischargeable, as the Government apparently urges us to do. We therefore conclude that the Government's Objection to confirmation, although timely, must, in the light of the foregoing, be denied.
The instant bankruptcy case was commenced under Chapter 13 of title 11, U.S. Code, on October 30, 1985. Prominent among the obligations of the Debtor was a debt which the United States Department of Health and Human Services (HHS) claimed, by declaration of one John F. Haczewski accompanying its Objection to Confirmation, was in the amount of $9,184.00, for a HEAL loan incurred by the Debtor on November 13, 1984.
The original Plan of the Debtor, filed on November 7, 1985, proposed monthly payments of $85.00 for a period of thirty-six (36) months. On June 30, 1986, the Debtor filed a Modified Plan, contemplating payments of $85.00 monthly for sixty (60) months, not accompanied by any certificate, per Local Bankruptcy Rule 3019.1(b).
Prior to the filing of the Modified Plan, HHS, on May 9, 1986, had filed an Objection to Confirmation of the original Plan. The Creditors' Meeting, per 11 U.S.C. § 341, was held on February 5, 1986, and the Confirmation Hearing was originally scheduled on May 15, 1986.
Procedurally, the Debtor has raised the issue of the timeliness of HHS's Objection to Confirmation. Bankruptcy Rule 3020(b)(1) requires that such Objections must be filed "within a time fixed by the court." The Notice sent to all creditors concerning the scheduling of both the § 341 Meeting and the Confirmation Hearing in this case fixed the time for filing by its statement "objections shall be filed with the Clerk, United States Bankruptcy Court, at the address shown below no later than 10 days before the Confirmation Hearing" and be served upon the Debtor and the Debtor' Attorney "no later than 5 days before the date set for the confirmation hearing." Thus, the deadlines for filing and serving Objections would ordinarily have been May 5, 1986, and May 10, 1986, respectively, and the Government clearly did not meet the filing deadline.
However, the combination of two (2) factors present here causes us to consider the Objection of HHS to be timely filed. The first factor is the Debtor's failure to assure that notice was sent to "the United States Attorney for the district in which the case is pending" as well as the agency involved, HHS, as required by Bankruptcy Rule 2002(j). See In re Divco Philadelphia Sales Corp., 60 B.R. 323, 325 (Bankr. E.D.Pa.1986) (per Goldhaber, Ch. B.J.).
The second factor arises from the fact that the Debtor modified the Plan subsequent to the Confirmation hearing without providing the requisite certificate or notice to affected creditors. Since it is now the Modified Plan of which Confirmation is sought, the Court believes that creditors must be notified of the modifications and a new bar date to object to the Plan, as modified. Otherwise, a debtor could amend a plan perfectly acceptable to a creditor in such a way as to render it unacceptable to the creditor subsequent to the Confirmation hearing, and the creditor, ignorant of same, would be deprived of any opportunity to object to a different, more detrimental treatment.
The National Bankruptcy Rules reflect this concern, and state that a modification of an "accepted" plan is not permissible unless the court finds that "the proposed modification does not adversely change the treatment of the claim" or the affected creditor has accepted the modification in writing. Bankruptcy Rule 3019.
Local Rule 3019.1, as is indicated below, is even more specific as to the obligations of the debtor when he modifies his Plan, providing as follows:
In the instant case, the Debtor has not filed the requisite 3019.1(b) certificate. Thus, per 3019.1(c), we cannot confirm the Plan at this time. Further, we are inclined to read the phrase "would receive distribution in an amount less" than the original Plan broadly, and require service of the modified Plan upon all creditors whose interests might be adversely affected. We believe that HHS is such a party, as it appears that the Modified Plan may, apparently unlike its original Plan, contemplate satisfaction of the Debtor's obligations to it.
Finally, we believe that it is implicit in 3019.1(c) that a creditor has a right to serve and file objections to the Modified Plan after receipt of same, whether he filed objections to the original Plan or not, and that the bar date, if any, is at least ten (10) days before the first scheduled Confirmation Hearing at which the Modified Plan is considered, which must be at least twenty (20) days after the filing of the modified plan. The Modified Plan in issue was first scheduled for a confirmation hearing on September 9, 1986. Thus, the Government's Objection, filed in May, should be considered timely filed.
We now turn to the substance of the Government's Objection that the discharge of a HEAL is controlled by the following provisions of the HEAL Act, 42 U.S.C. § 294f(g), enacted by Congress in 1981, rather than by 11 U.S.C. § 1328(a):
The Government asserts that, since the Debtor has not undertaken to establish that he meets the criteria of 42 U.S.C. § 294f(g), his debt to the HHS is non-dischargeable. In its Objections, at paragraph nine (9), the Government thus concludes that the Plan is "not feasible and not proposed in good faith" and that Confirmation should therefore be denied.
The Debtor argues that, as long as the requirements of 11 U.S.C. § 1325(a) are met, the Plan must be confirmed. At one point, the Debtor states that HHS' claim of dischargeability must be resolved later and has no relevance to Confirmation. However, in the same paragraph, the Debtor elsewhere asserts that only the debts enumerated in 11 U.S.C. § 1325(a) are non-dischargeable, and it therefore appears that the Debtor may well be arguing that the HEAL loan is dischargeable and is discharged if the Debtor completes the proposed Modified Plan payments.
At the hearing on September 9, 1986, the Court asked Counsel for the Debtor directly whether he considered a confirmation of the Plan to resolve the issue of the dischargeability of the HEAL loan in the Modified Plan in his favor. The response was affirmative, and the Court therefore indicated that it believed that it must address the issue of potential dischargeability at this juncture, as well as the merits of the Government's Objection to confirmation. The Court invited both parties to submit supplemental Briefs on the issues before it. The Government indicated a desire to do so, and promised a filing by September 12, 1986. The Debtor specifically declined the Court's invitation, wishing to stand on his previously-filed brief Memorandum of Law opposing the Government's Objection.
On September 30, 1986, the Government filed its Brief. It objected to the Debtor's improper treatment of what it referred to as "admittedly non-dischargeable debt" in his Plan. It is, of course, not clear that the Debtor admits non-dischargeability.
Upon reflection, the Court believes that both parties have muddled the issue of the dischargeability of the Debtor's HEAL loan with the issue of whether his Plan ought to be confirmed. This...
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