In re Maupin, 07-61051-LYN.

• Decision Date: 01 November 2007
• Docket Number: No. 07-61051-LYN.,07-61051-LYN.
• Citation: 384 B.R. 421
• Parties: In re Susan T. MAUPIN, Debtor. Herbert L. Beskin, Chapter 13 Trustee, v. Susan T. Maupin, Debtor.
• Court: U.S. Bankruptcy Court — Western District of Virginia

384 B.R. 421

In re Susan T. MAUPIN, Debtor.

Herbert L. Beskin, Chapter 13 Trustee, v. Susan T. Maupin, Debtor.

No. 07-61051-LYN.

United States Bankruptcy Court, W.D. Virginia, Lynchburg Division.

November 1, 2007.

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Herbert L. Beskin, for Chapter 13 Trustee.

Marshall M. Slayton, Charlottesville, VA, for debtor.

MEMORANDUM

WILLIAM E. ANDERSON, Bankruptcy Judge.

This matter comes before the court on an objection by the chapter 13 trustee to the confirmation of the chapter 13 plan of Susan T. Maupin ("the Debtor"). In addition, the court has, on its own motion, raised other objections to the Debtor's plan.

This Court has jurisdiction over this matter. 28 U.S.C. § 1334(a) & 157(a). This proceeding is a core proceeding. 28 U.S.C. § 157(b)(2)(A) & (L). This Court may enter a final order. This memorandum shall constitute the Court's findings of fact and conclusions of law as required by Fed.R.Civ.P. 52, which is made applicable in this proceeding by Fed. R. Bankr.P. 7052.

Facts

On June 8, 2007, the Debtor filed a petition initiating the above-styled chapter 13 case. On July 24, 2007, the Debtor filed an amended chapter 13 plan of reorganization. Paragraph 11 of the proposed plan contained 18 provisions not previously included in a chapter 13 plan by a debtor in the Lynchburg Division of the Western District of Virginia.

The chapter 13 trustee, in the normal course, filed a motion to dismiss or convert the case. At the hearing on confirmation, the chapter 13 trustee made supplemental objections to some of the provisions in paragraph 11.

Discussion.

The Bankruptcy Courts in the Western District of Virginia have executed an order directing chapter 13 debtors to use a Uniform Plan ("the Uniform Plan"). The Uniform Plan is less than five pages in length. As a preliminary matter, it must be noted that Bankruptcy Courts have the power to require the use of a uniform chapter 13 plan. A Bankruptcy Court's requirement that debtors use a form chapter 13 plan is a valid exercise of the Court's authority to regulate local practice and procedure because such a policy does not affect the substance rights of a chapter 13 debtor and is not inconsistent with the Bankruptcy Code or Bankruptcy Rules. See In re Walat, 89 B.R. 11 (E.D.Va.1988).

There are reasons that the Uniform Plan is required. First, the Uniform Plan provides debtors and debtors' counsel with a template that, if properly employed, will result in a plan that has a high probability of confirmation. Second, and perhaps more importantly, the Uniform Plan allows each creditor to review the plan in a more efficient manner by assuring it that its claim will be treated as provided in a certain section of the plan depending on the nature and character of the claim. Efficiency is a valid purpose of a uniform plan. See Walat, 89 B.R. at 13 (Efficiency is a purpose that is consistent with the letter and spirit of the bankruptcy laws.).

As noted, paragraph 11 of the Debtor's plan contains 18 provisions not present in the Uniform Plan. The first provision, Paragraph 11 A, provides that any secured creditor seeking post-petition fees or costs from the Debtor shall be required to file an application for compensation under Fed. R. Bankr.P. 2016. This paragraph is a paraphrased abstract of Rule 2016, as interpreted by the Debtor. As such it is a statement of the Debtor's interpretation of law which provides two possible effects. First, it increases the cost to creditors of monitoring the plan. Second, it provides for future additional and unnecessary litigation should a creditor's interpretation of Rule 2016 diverge from that of the Debtor. Indeed, a creditor who disagrees with the interpretation or who believes that it may be adversely effected by the Debtor's interpretation of Rule 2016 would be required to litigate the matter at the time of confirmation in order to avoid being bound by what it believes to be an incorrect interpretation of law. In either case, proposed Paragraph 11A unnecessarily increases the expected cost of administration of the plan without providing any benefit. If Rule 2016 is applicable to post-petition attempts to collect fees and costs, then it is applicable. If it is not, then it is not. There is no need to provide the debtor's interpretation of Rule 2016. Paragraph 11A is unnecessary and is likely, if applicable, to increase the costs of administration and litigation.

Further, if Paragraph 11A is an inaccurate statement of law, then it violates the implied statutory prohibition against including a provision in the plan that is not consistent with the Bankruptcy Code. See 11 U.S.C. § 1322(b)(11) (The plan may include "any other appropriate provision not inconsistent with this title."). As such it must be deleted from the plan before it may be confirmed.

The second provision, Paragraph 11B, provides that "[c]onfirmation of this plan does not bar a party in interest from objecting to a claim which is not filed in accordance with Federal Bankruptcy Rules 3001 or 3002." This is also a statement of law. If neither the plan nor the order confirming the plan provide to the contrary, the rules concerning when a party may object to a claim are provided in the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules, and opinions thereon, the Debtor's statement notwithstanding. Paragraph 11B is unnecessary and is likely, if applicable, to increase the costs of administration and litigation. As such it must be deleted from the plan before it may be confirmed.

Further, if Paragraph 11B is an inaccurate statement of law, then it violates the implied statutory prohibition against including any provision that is not consistent with the Bankruptcy Code. See 11 U.S.C. § 1322(b)(11) (The plan may include "any other appropriate provision not inconsistent with this title."). As such it must be deleted from the plan before it may be confirmed.

The third provision, Paragraph 11C, provides that if a secured creditor's collateral is removed from the protection of the automatic stay, the creditor shall have 120 days after the modification of the stay to file an unsecured proof of claim based on any deficiency. Paragraph 4C of the Uniform Plan provides that creditors shall be allowed an unsecured claim for any deficiency if the claim is "timely filed". The Bankruptcy Judges of, the Western District of Virginia have previously concluded that this language is sufficient to protect the interests of both debtors and creditors. If the Debtor believes that such a provision should be included in any order granting relief from the stay, the court will consider requiring it at the hearing on the motion for relief from the stay.

Paragraph 11C also provides that any party, other than the moving creditor, who may claim an interest in, or a lien on, the property on which relief is granted, must be given notice by a party seeking relief from the stay on that property. Any party receiving relief from the stay will be required to pay all senior lienors and notice all junior lienors before foreclosing on the property that is the subject of motion for relief. If a non-moving party has an interest in, or a lien on, the collateral, then that party will necessarily receive notice of any act or attempt to foreclose on, or otherwise repossess, the collateral. Junior lienholders who are not paid from the proceeds of any sale will be required under the Uniform Plan to "timely file" a deficiency claim at that time.

Paragraph 11D paraphrases Section 1306 which defines the property that is included as property of the chapter 13 estate. It is a statement of the law found in Section 1306 of the Bankruptcy Code. As such, Paragraph 11D does not enhance the efficiency of the administration of the case or the rights of either debtors or creditors. Furthermore, even if it were a precise paraphrase of Section 1306, it does not address the effect of Section 1327(b), which provides that property of the estate revests in the debtor upon confirmation. Paragraph 11D is misleading and unnecessary. As such it must be deleted from the plan before it may be confirmed.

Further, if Paragraph 11D is an inaccurate statement of law, then it violates the implied statutory prohibition against including any provision that is not consistent with the Bankruptcy Code. See 11 U.S.C. § 1322(b)(11) (The plan may include "any other appropriate provision not inconsistent with this title."). As such it must be deleted from the plan before it may be confirmed.

Paragraph 11E imposes a duty on creditors whose claims are secured by real property (1) to apply payments from the trustee based on pre-petition arrearages toward those pre-petition arrearages only; (2) to apply "direct mortgage payments, if any, paid by the trustee or by the debtor" to the month in which they were made under the plan; (3) to notify the trustee, the Debtor and her counsel of any changes in the interest rate; (4) to notify the trustee, the debtor and her counsel of any changes in the tax and insurance portion of the monthly payment; and (5) to comply with Section 524(i).

The first requirement in Paragraph 11E requires secured creditors to apply payments made by the trustee based on prepetition arrearages toward those arrearages. Paragraph 5 of the Uniform Plan provides for the payment of debts that extend beyond the term of the plan and claims secured by the debtor's residence. Paragraph 5A of the Uniform Plan provides for payments to be made by the debtor; Paragraph 5B of the Uniform Plan provides for payments to be made by the chapter 13 trustee based on arrearages.

Every chapter 13 case will end in one of three ways. A debtor may complete his or her required obligations under the plan, an event that will normally result in the entry of a discharge order. The debtor will then necessarily be current on all debts that extend beyond the...