X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Debtors filed a voluntary petition for Chapter 13 bankruptcy in April 2001. Truman, the standing Chapter 13 trustee for the Northern District of Texas, was appointed trustee. On Jan. 17 2002, debtors filed their bankruptcy plan. The plan, confirmed on April 2, 2002, required debtors to pay $350 per month for 50 months for a total of $17,500. Debtors’ unsecured creditors, owed a total of $23,181.59, were to receive nothing for their claims. Nearly two years later, on Feb. 26, 2004, trustee received debtors’ 2003 federal income-tax refund, in the amount of $3,029. Under the plan, the trustee was authorized to receive, endorse and apply to any delinquent payments under the plan, any income tax refund payable to the debtors during the pendency of this case. Debtors, however, were not delinquent in their payments. Nevertheless, the trustee wanted the non-exempt portion of this refund, $1,545 in disposable income, applied to amounts due under the plan. Accordingly, on March 23, the trustee filed a motion to modify debtors’ plan; the requested modification would increase the distribution to debtors’ unsecured creditors from zero percent under the confirmed plan to approximately 8.40 percent. This would increase debtors’ total payment from $17,500 to $19,045. Trustee provided debtors 20 days notice, as required by Federal Rule of Bankruptcy Procedure 3015(g), and set the motion for pre-trial conference before the bankruptcy court on May 7, 2004. On April 7, however, approximately a month before the scheduled hearing, the debtors paid the trustee $5,600, which paid in full the balance of their confirmed plan. To do so, debtors refinanced their home, which was exempt property under the plan. On May 3, the debtors filed an objection to trustee’s proposed modification, asserting it was untimely. Because they had already completed payments under the plan, debtors claimed they were entitled to a discharge from bankruptcy. Following a hearing on July 7, 2004, the bankruptcy court ruled the modification request was untimely: “By the time the Modification was presented to the Court, the Debtors had completed all payments required by the terms of the plan. Thus, in accordance with the unambiguous language of 11 U.S.C. �1329(a), the Modification is disapproved as untimely.” HOLDING:Vacated and remanded. In concluding, the court stated, that the debtors were permitted to complete plan payments after trustee had filed his proposed modification, but before a hearing on it was held, the bankruptcy court relied in part on a scholarly treatise. But, the court stated, when �1329 is read in its entirety, within the context of Chapter 13, it is improbable this is the correct or intended result. Section 1329(a), the court stated, provides a plan may be modified “upon request” and “before the completion of payments”; but, �1329(b)(2) provides that the modified plan “becomes the plan unless, after notice and a hearing, such modification is disapproved.” Read together, both subsections show that, when a modification request is timely filed, the completion of the plan and eventual discharge of the debtor is stayed until the bankruptcy court is allowed to consider the modification on its merits, the court stated. Therefore, rather than disapproving it as untimely, the bankruptcy court should have considered the trustee’s proposed modification on its merits, the court concluded. OPINION:Barksdale, J.; Jones, C.J., and Barksdale and Benavides, J.J.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.