In re Ilyev, 17-12987-KHK

CourtUnited States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia
Writing for the CourtBrian F. Kenney United States Bankruptcy Judge
PartiesIn re: Stanislav Ougrinov Ilyev, Debtor.
Docket Number17-12987-KHK
Decision Date26 July 2022

In re: Stanislav Ougrinov Ilyev, Debtor.

No. 17-12987-KHK

United States Bankruptcy Court, E.D. Virginia, Alexandria Division

July 26, 2022

Chapter 13


Brian F. Kenney United States Bankruptcy Judge

This matter initially came before the Court on the Debtor's Motion to Approve a Proposed COVID-19 Payment Deferral. Docket No. 178. The Chapter 13 Trustee filed a Response and a Motion to Modify the Debtor's confirmed Chapter 13 Plan under Bankruptcy Code Section 1329. Docket No. 180. The Debtor filed a Response to the Trustee's Motion. Docket No. 181. Both parties filed briefs in support of their respective positions. Docket Nos. 191, 194. The Court heard the evidence and the parties' arguments on July 14, 2022, during which the Debtor withdrew his Motion.

For the reasons stated below, the Court will grant the Trustee's Motion.

Findings of Fact

The Court, having heard the evidence, makes the following findings of fact.

A. The Debtor's Confirmed Chapter 13 Plan.

1. The Debtor, Stanislav O. Ilyev, filed a Voluntary Petition under Chapter 13 with this Court on September 1, 2017. Docket No. 1. He is a Systems Administrator with a law firm in Falls Church, Virginia. Docket No. 133, Schedule I.


2. The Debtor is a below-median debtor. Docket No. 18-1, Form 122-C1.[1]

3. The case was contentious. After the Debtor filed five Chapter 13 Plans (Docket Nos. 20, 41, 82, 95, 133), all of which drew objections from his creditors and the Chapter 13 Trustee, the Court confirmed the Debtor's Amended Chapter 13 Plan in April 2019. Docket No. 142.

4. The confirmed Amended Plan called for the Debtor to pay $6,950.00 to the Trustee (which he had already paid by the time the Plan was confirmed), plus $420 per month for the remaining 43 months of the Plan. Docket No. 133, ¶ 2. The Amended Plan proposed a 4% return to the Debtor's unsecured creditors. Id., ¶ 5.[2]

5. The Amended Plan called for the Debtor to retain his property at 45476 Baggett Terrace, Sterling, Virginia 20166 ("the Property") and to continue to make the monthly mortgage payments. Id., ¶ 6(A).

6. On Schedule J attached to the confirmed Amended Plan, the Debtor took a deduction in the amount of $1,625.00 per month for the payment of his mortgage. Id., Schedule J, Line 4.

B. The Debtor Receives a Covid-19 Forbearance.

7. On April 26, 2022, the Debtor filed a Motion to Approve Proposed Covid-19 Payment Deferral. Docket No. 178.


8. In his Motion, the Debtor stated: "During the Covid-19 pandemic, the debtor accepted a forbearance from his mortgage company and did not pay his mortgage for a period of 18 months." Id., ¶ 1.

9. According to the Notice from Wells Fargo, the Debtor was to resume making regular monthly mortgage payments as of February 1, 2022. Id., Ex. 1. This meant that the Debtor was not making mortgage payments from September 2020 to February 2022.

10. The Trustee filed an Opposition and Motion to Modify the Debtor's Plan pursuant to Bankruptcy Code Section 1329. Docket No. 180.

11. In his Response to the Trustee's Motion, the Debtor argued that he will have to repay the deferred mortgage payments at some point, and that that the Trustee had no authority to seek a retroactive modification of the confirmed Plan. Docket No. 181.

12. The Trustee requested expedited discovery from the Debtor, which the Court granted. Docket No. 184.

13. The Trustee served the Debtor with discovery requests, seeking to determine what the Debtor did, if anything, with the deferred mortgage payments. Docket No. 185.

14. The Debtor did not respond to the Trustee's discovery requests. Rather, he sent an e-mail to his counsel, which his counsel forwarded to the Trustee. Tr. Ex. 1. In his e-mail, the Debtor stated that he spent $17,000.00 on various expenditures, including IT training for his wife, child care for his daughter and acting classes for his step-daughter. Id. He claimed, with respect to the remaining $11,000.00 or so, that he has outstanding medical bills of $10,000.00. He did not, however, provide any supporting documentation to the Trustee, nor did he present any evidence of such expenses at the hearing on July 14, 2022.


15. In fact, the Debtor did not present any evidence at the hearing that he was adversely affected by Covid at all. He is still employed by the law firm and does not appear to have suffered any decrease in income as a result of Covid (it is not clear to the Court why the Debtor applied for Covid relief in the first place).

16. The Debtor withdrew his Motion to Approve Proposed Covid-19 Payment Deferral in open court on July 14th.

Conclusions of Law

This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Order of Reference entered by the U.S. District Court for this District on August 15, 1984. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) (confirmation of plans).

I. Property of the Estate and Plan Modifications.

When a bankruptcy case is filed, an estate is created. 11 U.S.C. § 541(a). The estate consists of all non-exempt property owned by the debtor on the petition date. Id. ("all the following property, wherever located and by whomever held"). There are exceptions. For example, property in which the debtor holds bare legal title, and the beneficial ownership rests with another person, is not property of the estate. 11 U.S.C. § 541(d). Further, property that the debtor acquires within 180 days of the bankruptcy petition by devise, bequest or inheritance, through a property settlement agreement or a divorce decree, or as the proceeds of life insurance policies or death benefit plans, is property of the bankruptcy estate. 11 U.S.C. § 541(a)(5).

Chapter 13 has an important, additional requirement. All non-exempt property that the debtor acquires after the commencement of the case becomes property of the bankruptcy estate. 11 U.S.C. § 1306(a). The Fourth Circuit has held that property acquired after the commencement of a Chapter 13 case becomes property of the estate whether or not it was acquired within the


180-day limit of Section 541(a)(5). Carroll v. Logan, 735 F.3d 147, 152 (4th Cir. 2013). In other words, Section 1306(a) is broader than Section 541(a)(5), and includes all non-exempt, post-petition property acquired by the debtor during the course of the case. Id.

Prior to Carroll v. Logan, the Fourth Circuit held that Chapter 13 debtors have standing to maintain non-bankruptcy causes of action in their own name, without joining the Chapter 13 trustee as a party. Wilson v. Dollar General Stores, Inc., 717 F.3d 337, 343 (4th Cir. 2013).

With respect to plan modifications, a modification is justified under Bankruptcy Code Section 1329 when the debtor experiences a "substantial and unanticipated" change in financial circumstances. Murphy v. O'Donnell (In re Murphy), 474 F.3d 143, 148 (4th Cir. 2007). Whether a change in financial condition is significant enough to be considered substantial depends on the facts and circumstances of each case. See, e.g., Martinez v. Gorman (In re Martinez), 2022 WL 2165994 (E.D. Va. 2022) (holding that debtor's mortgage refinance was unanticipated, but holding that $300 in monthly mortgage savings was not substantial: "A monthly savings of $300 a month amounts to less than a three percent increase in Debtor's monthly income; this is a modest increase, not a substantial change"); Goodman v. Gorman (In re Goodman), 534 B.R. 656 (E.D. Va. 2015) (debtor's inheritance of $36,000 was substantial and unanticipated).

II. The Duty of Disclosure in Chapter 13.

When a debtor files a bankruptcy case, he or she is required to file accurate and complete Schedules, listing all of the debtor's assets and liabilities. 11 U.S.C. 521; Bankruptcy Rule 1007. Bankruptcy Rule 1007(h) requires debtors to file Amended Schedules disclosing the kind of property described in Section 541(a)(5) (which applies in both Chapter 7 and Chapter 13 cases), "within 14 days after the information comes to the debtor's knowledge." The Rule is limited,


however, to Section 541(a)(5) property, and does not cover the broader Section 1306(a) type of property (which, as noted, applies at any time in the case and is not limited as to time).

Debtors also have a duty of...

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