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In re Mattson
Anyone seen this?
I've been buried with two 11 confo's in the last two weeks 54 and 55, but saw this today.
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Section 1325(b) Requirements Not Applicable to Plan Modification
Posted by NCBRC - April 10, 2012
The Ninth Circuit BAP found that the requirement of section 1325(b)
that all of the debtors projected disposable be paid into the planduring the applicable commitment period, is not incorporated into
section 1329 for plan modification. In re Mattson, No. 11-1478 (B.A.P. 9th Cir. April 5, 2012).
Mattson involved above-median debtors with positive
disposable income. They had a confirmed plan with an applicable
commitment period of five years. When their income increased, debtors
moved to amend their plan to increase the plan payments. They also
sought to decrease the plan period from five years to three. The trustee objected and the bankruptcy court sustained the objection finding that
although the debtors demonstrated a substantial and unanticipated change in circumstances, they did not meet a second requirement that the
proposed modification correlated with the change in circumstance.
Although the court affirmed the bankruptcy courts order, it did sofor reasons not relied upon by the bankruptcy court. Specifically, the
court rejected both requirements set forth by the lower court. Noting
that the requirement that the modification be a result of substantial
and unanticipated change in circumstances arose out of judicial
imposition of res judicata, the court joined the First, Fifth and Seventh Circuits in finding that res judicata does not apply. Therefore, it found that there is no threshold
requirement that the catalyst for plan modification be a substantial and unanticipated change in circumstances. See Barbosa v. Soloman, 235 F.3d 31, 41 (1st Cir. 2000), Meza v. Truman (In re Meza), 467 F.3d 874, 878 (5th Cir. 2006), and In re Witkowski, 16 F.3d 739, 746 (7th Cir. 1994). Contra, Murphy v. ODonnell (In re Murphy), 474 F.3d 143, 149 (4th Cir. 2007). Second, the court rejected the
Bankruptcy Courts imposition of an additional requirement that theproposed modification to the plan correlate with the change in
circumstances.
Instead, the court said that, under its holding in Sunahara v. Burchard (In re Sunahara), 326 B.R. 768 (B.A.P. 9th Cir. 2005), plan modifications must be addressed
in terms of good faith using the framework set forth in Goeb v. Heid (In re Goeb), 675 F.2d 1386 (9th Cir. 1982). Under that test, a change in
circumstances is a consideration to be entered in the analysis. The
court affirmed the Bankruptcy Court on the basis that the facts in the
case, and the bankruptcy courts analysis of those facts, followed a
good faith analysis in which the modified plan was found wanting.
The court suggested that possible justifications for a shortened plan period might be retirement, leaving the employment market, changing
jobs, or anticipated health issues justifying a shorter plan.
Mattson opinion
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