NCBRC REPORT
Modification Based on
Increased Ability to Pay
T
he trustee may modify a chapter
13 plan based on the debtor’s
post-confirmation increase in
ability to pay. Germeraad v. Powers (In
re Powers), No. 15-3237 (7th Cir. June
23, 2016). Elvie Owens-Powers and
Myrick Powers had a confirmed plan
under which they would pay off their
secured creditors and pay $22,000
toward their unsecured debts. Upon
receiving their tax return during the plan,
the trustee noticed a $50,000 increase
in Mr. Powers’ income and sought an
order requiring them to modify their
plan under section 1329 to increase
their monthly plan contributions. The
bankruptcy court denied the motion
to modify on the basis that it was not
supported by any provision of the
Code, and, alternatively, that the facts
did not support modification. In re
Powers, 507 B.R. 262 (Bankr. C.D. Ill.
2014). The district court affirmed on
the basis that the Code did not permit
the modification. It did not address
the alternative factual basis for the
bankruptcy court’s decision. In re
Powers, __ B.R. __, 2015 WL 5725701,
at *2 (C.D. Ill. Sep. 30, 2015).
On appeal the trustee argued that the
lower courts erred in finding that the
Bankruptcy Code does not permit the
trustee to obtain a plan modification
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CONSUMER BANKRUPTCY JOURNAL
based on post-confirmation increase in
income.
The court began by addressing Ms.
Owens-Powers’ (Mr. Powers did not
take part in the appeal) jurisdictional
argument based on Bullard v. Blue
Hills Bank, __ U.S. __, 135 S. Ct.
1686 (2015), that denial of a motion to
modify is not a final, appealable order.
The court observed that in bankruptcy,
unlike other civil proceedings, the
requisite finality need not dispose
of the entire case, but may merely
resolve an individual controversy within
the case. It distinguished denial of
plan confirmation, which is a process
continuing until the case is either
dismissed or a plan is confirmed, and
denial of a motion to modify. Resolution
of the latter motion terminates a
discrete dispute: “whether the debtor’s
plan may be modified for the reasons
the trustee cites.” Denial of a motion
to modify precludes the trustee from
seeking modification on the same
grounds.
Because the bankruptcy court denied
the motion to modify on the basis that
it could not be justified under the Code,
the decision was final and appealable.
The fact that the trustee could still
move to modify the plan on different
Summer 2016
grounds did not change the final nature
of the denial on the grounds he actually
proposed.
Ms. Owens-Powers next argued that
there was no “case or controversy”
over which the court could exercise
jurisdiction because more than five
years had elapsed since the Powers
began making payments into their
plan. Section 1329(c) provides that a
plan may not be modified in such a way
that it would require a debtor to make
payments extending beyond five years
from the date of the first plan payment.
The court disagreed with Ms. OwensPowers’ interpretation of what the
modification would mean if granted.
It found that rather than extending
the payments beyond five years, the
increased payment amounts would be
retrospective, representing the 38th
through the 60th month of the plan.
Moreover, the fact that section 1329
requires that a motion to modify must be
made before the debtor has completed
plan payments, also did not render the
appeal moot as the date of the trustee’s
motion would be the original filing date.
The court acknowledged that because
National Association of Consumer Bankruptcy Attorneys