IN RE SAVAGE, 07-30873.

Citation426 B.R. 320
Decision Date25 March 2010
Docket NumberNo. 07-30873.,07-30873.
PartiesIn re Michael J. SAVAGE and Amber J. Savage, Debtors.
CourtUnited States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota

Ronald J. Lundquist, Eagan, MN, for Debtors.


GREGORY F. KISHEL, Bankruptcy Judge.

This Chapter 13 case came on before the court for hearing on the Debtors' motion for post-confirmation modification. The Standing Trustee objected to the motion. The Debtors appeared by their attorney, Ronald J. Lundquist. The Standing Trustee appeared by her attorney, Margaret H. Culp. The following decision is based on the record made for the hearing, and the post-hearing briefing.


The context for the dispute at bar is framed by various procedural aspects of this case during its earlier pendency. The content of the Debtors' confirmed plan, and of the proposed modification at bar, is the focus of the controversy.

1. The Debtors filed a voluntary petition under Chapter 13 on March 19, 2007.

2. On May 24, 2007, the court confirmed the Debtors' modified plan. In pertinent part, the plan provided that:

a. After an initial payment of $521.00, the Debtors were to pay the Standing Trustee $574.00 per month for a period of 59 months commencing in May, 2007, for a total of $33,866.00.
b. The "minimum plan length" was to be 60 months, "from the date of the initial plan payment unless all allowed claims were paid in full."
c. After payment of the allowed fees of the Debtors' attorney and the Standing Trustee's compensation, creditors holding allowed unsecured claims were to receive their pro rata share of $30,637.00. The Debtors estimated that the total of unsecured claims was $65,321.00.

3. On April 2, 2009, the Standing Trustee filed a motion for dismissal of this case. The cited cause for dismissal was the Debtors' default in plan payments, in the amount of $1,148.00 as of April 2, 2009.

4. The Debtors' response to the Standing Trustee's motion was the motion at bar.

5. The Debtors stated that they were proposing the modification due to "changes in income and expenses," as well as a reduction in child support payments to be received by Amber Savage. The only proof for the alleged change in income and expenses was specimen copies of amended Schedules I and J, not separately verified. The proof for the alleged reduction in child support received was a conformed copy of an order from the Family Division of the Hennepin County District Court.

6. In pertinent part, the Debtors' second modified plan provided that:

a. The Debtors had already paid the Standing Trustee a total of $13,194.00.
b. After the date of the plan given as April 20, 2009 in its verification, the Debtors were to pay the Standing Trustee $224.00 per month for a period of 18 months commencing in April, 2009, for a total of $4,032.00 in that increment.
c. There was no provision for a "minimum plan length."
d. After payment of the allowed fees of the Debtors' attorney and the Standing Trustee's compensation, creditors holding allowed unsecured claims were to receive their pro rata share of $14,504.00. The stated amount of attorney fees had not changed from that recited in the confirmed plan; neither had the total of unsecured claims.

7. The Standing Trustee then filed an objection to the Debtor's motion for modification.


The effect of the Debtors' proposed modification, if approved, would be two-fold. First, de facto, by reducing the Debtors' aggregate obligation of payment under the plan, it would significantly lessen the composition-distribution to their unsecured creditors. Second, de jure, it would reduce the period of time over which the Debtors were bound to a payment obligation as a condition of discharge— from the total of 60 months for which the confirmed plan provides, to a total of 43 months.

These potential consequences have significance because this case was commenced by "above-median debtors." This phrase is part of the shorthand-jargon that has evolved among consumer bankruptcy attorneys since the effective date of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), Pub.L. No. 109-8. It signifies individual debtors whose "current monthly income," as defined by 11 U.S.C. § 101(10A), is above "the highest median family income of the applicable State," i.e., their state of residence. 11 U.S.C. § 1325(b)(3); In re Frederickson, 545 F.3d 652, 654 (8th Cir.2008); In re Lasowski, 384 B.R. 205, 208 (8th Cir. BAP 2008).

Acknowledging this status, the Debtors took a prophylactic measure against an objection to confirmation of their plan; they structured it to have all of their projected disposable income applied to make payments to unsecured creditors for the statutorily-prescribed "applicable commitment period." 11 U.S.C. § 1325(b)(1)(B). For them, the length of the "applicable commitment period" was "not less than 5 years," in light of their above-median status. 11 U.S.C. § 1325(b)(4)(A)(ii). Once confirmed, this plan established what they had to do by way of payment on creditors' claims, to remain under the protection of the court pending a grant of discharge under Chapter 13.

Now, however, the Debtors propose to reduce the amount of their monthly payment to the Trustee that would be applied to unsecured claims. They also propose to significantly reduce the duration of time for which they would have to make that payment. These changes were embodied in a modification of their plan pursuant to 11 U.S.C. § 1329(a), for which "notice and a hearing" were afforded as required by 11 U.S.C. § 1329(b)(2). The Standing Trustee objected, seeking to have the modification disapproved.

The threshold question posed by the Trustee's objection may be stated as follows: Is it legally open to a Chapter 13 debtor to reduce the duration of a plan below the applicable commitment period prescribed by § 1325(b)(1)(B) at the commencement of the case, by invoking 11 U.S.C. § 1329(a)(2) to propose a modification?

The question really does present a conundrum, which is created by the coincidence of two aspects of Chapter 13 in the wake of BAPCPA's enactment.

On the one hand, the text of several pertinent amendments in BAPCPA is a patent display of a more generalized legislative intent, "to require above-median income debtors in Chapter 13 cases to make more funds available to unsecured creditors." In re Lasowski, 384 B.R. at 212. See also In re Frederickson, 545 F.3d at 658; In re Wilson, 383 B.R. 729, 733 (8th Cir. BAP 2008).

But, if Congress's intent was to prescribe that for the full duration of a case after a post-confirmation modification of plan, there is the persisting, undeniable interstice in the statutory requirements for modification, post-BAPCPA. Under § 1329(b)(1), a debtor must conform a proposed modification to several of the statutory requirements for the initial confirmation of a plan, per explicit cross-references to §§ 1322(a), 1322(b), and 1325(a); but there is no reference in § 1329(b)(1) to § 1325(b) and its "best efforts" test. Further complicating the picture is the post-BAPCPA reference in 11 U.S.C. § 1329(c) to the "applicable commitment period." Section 1329(c) caps the duration of a modified plan, and now it prohibits the extension of post-modification payments beyond the end of the applicable commitment period for the case.1

Reasonable minds can differ, as to how to harmonize the seeming conflict in this current, incomplete statutory governance; and they have differed on the trial court level. Compare In re White, 411 B.R. 268, 272-273 (Bankr.W.D.N.C.2008); In re McCully, 398 B.R. 590, 592-594 (Bankr. N.D.Ohio 2008); In re Kidd, 374 B.R. 277, 282 (Bankr.D.Kan.2007); and In re Ewers, 366 B.R. 139, 141-142 (Bankr.D.Nev.2007) (all holding, in substance, that facial absence from § 1329(b)(1) of any reference to § 1325(b) is conclusive as to whether debtor may modify plan to reduce duration of payment obligation below applicable commitment period required for original plan; and all holding that debtor may modify to reduce duration); with In re Heyward, 386 B.R. 919, 924-926 (Bankr. S.D.Ga.2008); In re Slusher, 359 B.R. 290, 301 (Bankr.D.Nev.2007); and In re Baxter, 374 B.R. 292, 296 (Bankr.M.D.Ala.2007) (all holding that BAPCPA's imposition of "applicable commitment period" persists for full duration of case; all holding that debtor may not modify to reduce duration below applicable commitment period fixed at beginning of case). Thus far, there is no significant post-BAPCPA development of the issue on the appellate level, in the Eighth Circuit or elsewhere.2

But, for the case at bar and on the record at bar, one need not go there. There is another threshold issue, at a more immediate level, and its outcome cannot be favorable to the Debtors.

It has long been recognized in this district that the proponent of a modification of a plan in a Chapter 13 case must demonstrate some form of "cause" for the modification, in anticipation of objection from parties that would be adversely affected by the approval and administration of the modification. In re Guernsey, 189 B.R. 477, 481-482 (Bankr.D.Minn.1995). Any modification that would reduce a debtor's payment obligations and creditors' distribution rights must be supported by a material, adverse change in the debtor's financial circumstances, that took place after the confirmation of the original plan. In re Nelson, 189 B.R. 748, 751 (Bankr. D.Minn.1995). See also, in general, In re Debing, 202 B.R. 291, 293 (Bankr.D.Minn. 1996).

Of necessity, the required change in financial circumstances should be directly resonant with the nature of the proposed modification.3 Given the structure of the "best efforts" requirement of § 1325(b), the original confirmed plan is deemed to reflect the outside boundaries of the debtor's most stable and predictable financial means. So, the stated reduction in a debtor's ability to make payment...

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  • In re Scholl, Case No. 13-12810
    • United States
    • United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio
    • August 23, 2019 determining whether a debtor's proposed plan conforms to the good faith requirements of § 1325(a)(3)."); also see In re Savage , 426 B.R. 320, 324 n. 3 (Bankr. D. Minn. 2010). Thus, any modification under § 1329 must satisfy the mandatory requirements of plan confirmation under § 1325(a)......
  • In re Barnes, 11–27724.
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    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Eastern District of Wisconsin
    • March 17, 2014
    ...have determined that a change alone without further evidence is not sufficient to reduce the applicable commitment period. In re Savage, 426 B.R. 320, 325 (Bankr.D.Minn.2010) (finding reduction in child support payments did not warrant modification because debtors did not lose ability to ma......
  • Mattson v. Howe (In re Mattson), BAP No. WW–11–1478–JuHKi.
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    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit
    • April 5, 2012
    ...the proposed modification correlate to Debtors' change in circumstances—necessarily implicates a good faith analysis. See In re Savage, 426 B.R. 320, 324 & n. 3 (Bankr.D.Minn.2010) (in order to comply with the “good faith” requirement of § 1325(a)(3), “the required change in financial circu......
  • In re White, 6:06–bk–71787.
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    • November 6, 2012
    ...could request a modification of his plan at a later date if he could “show a substantial change in [his] ability to pay”); In re Savage, 426 B.R. 320, 324 (Bankr.D.Minn.2010) (recognizing the long-standing principle that a debtor “must demonstrate some form of ‘cause’ for [a] modification”)......
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