In re Powers, Bankruptcy No. 90 B 08822.
| Decision Date | 27 April 1992 |
| Docket Number | Bankruptcy No. 90 B 08822. |
| Citation | 140 BR 476 |
| Parties | In re Janice L. POWERS, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Mark Ryan, Chicago, Ill., for Trustee.
Carleen L. Cignetto, Grochocinski & Grochocinski, Chicago, Ill., for debtor.
FACTS
This matter is before the court on the trustee's motion to amend Janice Powers' ("Debtor") Chapter 13 plan to provide for 100% payment to unsecured creditors.
The facts are not in dispute. The debtor filed for relief under Chapter 13 of the Bankruptcy Code on May 14, 1990. Pursuant to the debtor's plan confirmed on September 7, 1990, the debtor was required to pay the trustee $545 per month for 60 months. Under the plan, her unsecured creditors were to receive 54% of their claims. This was the minimum dividend required to satisfy the "best interests" test, i.e., to assure creditors they would receive payments under the Chapter 13 plan at least equal in present value terms to what they could have expected to receive had the debtor opted for Chapter 7 instead of Chapter 13. See, 11 U.S.C. § 1325(a)(4). The main asset that would have been available to creditors in a Chapter 7 case for this debtor was her 1/3 interest in real property located at 7521 W. 62nd, Summit, Illinois. At the time of the petition, she scheduled the total value of the property at $124,000.
In January of 1992, about fifteen months after her plan was confirmed, the debtor brought a motion to sell her interest in the property to her mother and sister for $41,667, which was one-third of the appraised value. The court approved the motion. The draft order, submitted by debtor's counsel, approved the debtor's motion to sell the property, provided for some of the sale proceeds to be distributed to the creditors via the trustee, and provided that the debtor would be discharged from her debts when the trustee distributed sufficient sale proceeds to those creditors such that each unsecured creditor who had filed a timely proof of claim received 54% of its claim. That draft order was signed on January 13, 1992, and was docketed on January 15, 1992.
On January 29, 1992, the trustee filed a motion seeking to vacate the January 15, 1992 order, on the grounds that the order effectively modified the plan in an impermissible manner by reducing the plan's term to 15 months while providing the unsecured creditors with only 54% of their claims. As the trustee sees it, this violated the "best effort test" found in § 1325(b) of the Bankruptcy Code requiring the debtor to either pay all creditors in full in 36 months or to make all disposable income available for a 36-month period. Because many of the debtor's scheduled unsecured creditors failed to file timely proofs of claim, the trustee contends, and the debtor concedes, that the nonexempt net proceeds produced by the sale of the debtor's interest in the Summit property are more than enough to provide payment in full to those unsecured creditors who did file timely proofs of claim. The debtor and trustee have briefed the issue of whether the trustee may seek to amend the debtor's plan to provide for a 100% distribution to the unsecured creditors. For the reasons stated below, the court grants the trustee's motion to modify the debtor's plan.
This court has jurisdiction over this dispute under 28 U.S.C. § 1334(b) as a matter arising under § 1329 of the Bankruptcy Code. This matter is before the court for determination under Local Rule 2.33 of the United States District Court for the Northern District of Illinois which automatically refers bankruptcy cases and proceedings to this court for hearing and determination. This is a core proceeding under 28 U.S.C. § 157(b)(2)(L) as a matter relating to the confirmation of plans of reorganization.
The issue to be resolved is whether the trustee may modify the debtor's plan under § 1329 of the Bankruptcy Code.1 Section 1329 provides, in pertinent part:
The language of the Code is clear and unmistakable; the trustee has standing to seek a modification of payments under the plan and of the duration of the plan at any time between confirmation of the plan and completion of the plan payments. More specifically, the statute allows the trustee to do exactly what the trustee seeks to do here, i.e., propose a modification of the debtor's plan to seek an increase in the dividend payable to unsecured creditors under the debtor's confirmed Chapter 13 plan. It is hard to imagine a clearer case for the application of Justice Scalia's constant admonition that when the plain language of the Code is clear, there is no need to look to the legislative history or other extraneous sources for guidance. See, e.g., Dewsnup v. Timm, ___ U.S. ___, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992) (Scalia, J., dissenting.); Union Bank v. Wolas, ___ U.S. ___, 112 S.Ct. 527, 116 L.Ed.2d 514 (1992) (Scalia, J., concurring.); U.S. v. Nordic Village, ___ U.S. ___, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1991). The statute unmistakably says the trustee can do what the trustee seeks to do. This court agrees with Justice Scalia's approach and believes the Trustee's motion should be granted. With all due deference to Lewis Caroll's Humpty Dumpty, words do not mean what I say they mean. They mean what they mean in common parlance. See, Carroll, Lewis, Through the Looking Glass (C.L. Dodgson, ed.) 205 (1934).2
Despite the clear language of the statute, some courts add a precondition to § 1329 relief that nowhere appears in the statute by requiring the party seeking a plan modification to show that the debtor has experienced a substantial and unexpected change in financial circumstances. See, e.g., In re Euerle, 70 B.R. 72 (Bankr. D.N.H.1987); In re Fitak, 92 B.R. 243 (Bankr.S.D.Ohio 1988). The source of this requirement is less than clear. There certainly is no such requirement in the language of § 1329. "The statutory language clearly expresses Congressional intent, and, in the absence of any ambiguity, a court may not read another meaning into the statute." Matter of Cotton, 102 B.R. 891 (Bankr.M.D.Ga.1989). By its terms, § 1329 does not require the movant to demonstrate a substantial, unanticipated change in the debtor's financial circumstances. See, In re Perkins, 111 B.R. 671 (Bankr.M.D.Tenn.1990) ; In re Larson, 122 B.R. 417 (Bankr.D.Idaho 1991) ().
While Chapter 13 in general contemplates that the plan is the debtor's plan, see 11 U.S.C. § 1321, § 1329 of the Bankruptcy Code clearly limits that approach. Congress specifically addressed the question of who could and, by implication who could not, seek to modify a debtor's Chapter 13 plan. Holders of fully secured claims cannot seek to modify a Chapter 13 plan. 11 U.S.C. § 1329(a). Debtors, trustees, and holders of unsecured claims can seek to modify a Chapter 13 plan. See, 11 U.S.C. § 506(a). When Congress dealt with § 1329 of the Bankruptcy Code in 1984, it could have imposed preconditions to modification by a trustee, holder of an unsecured claim and/or a Chapter 13 debtor. It did not choose to do so, and this court will not step in where Congress declined to tread.3
Since there is nothing in § 1329 express or implied in the plain language of § 1329 suggesting the application of a change of circumstances test as a prerequisite to a trustee plan amendment under § 1329, this court is reluctant to create such a test out of whole cloth. Therefore, the trustee need not show that Ms. Powers experienced a substantial, unanticipated change in circumstances in order to seek a modification of the plan, but must only demonstrate compliance with the requirements of § 1329 of the Code.4
Thus, the question becomes whether either the debtor's proposed amendment or the trustee's proposed amendment can be approved under the statutory requirements of § 1329. Under § 1329 of the Bankruptcy Code, the confirmed plan, as modified, becomes the plan. See, In re Rincon, 133 B.R. 594, 596 (Bankr.N.D.Tex.1991); In re Stafford, 123 B.R. 415 (Bankr.N.D.Ala. 1991). Therefore, the modified plan must conform to the statutory requirements for confirmation. In re Louquet, 125 B.R. 267 (9th Cir. BAP 1991).
In the proposed sale order of January 15, 1992, the debtor's plan is effectively modified to a 15-month plan providing for unsecured creditors to receive 54% of their claims. The debtor's amended plan does not meet the statutory requirements for plan confirmation, and therefore the debtor's confirmed plan may not be modified in such a fashion. This plan would violate the disposable income or best efforts test set out in § 1325(b) of the Bankruptcy Code. Section 1325(b) requires the debtor's plan to either apply all of the debtor's disposable income for at least 3 years to the plan, or, to pay 100% of the claims filed within 3 years...
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