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The Bankruptcy Protector

January 2, 2019

Local Bankruptcy Rules Cannot Add Additional Chapter 13 Confirmation Requirements

By Graham Mitchell

Bankruptcy Judges cannot impose additional local chapter 13 confirmation requirements beyond those created by Congress, according to the Southern District of Illinois (the “District Court”). 

In Roseberry v. U.S. Trustee (In re Roseberry), 18-01039 (S.D. Ill. Dec. 18, 2018), the Debtors/Appellants appealed certain form language (the “Confirmation Language”) contained in their April 19, 2018 chapter 13 confirmation order (“Confirmation Order”).[1]  The Confirmation Language was created by a Southern District of Illinois Bankruptcy Court (“Bankruptcy Court”) local rule, and was required to be included in all confirmation orders for chapter 13 cases filed on or after January 1, 2018.  Appellants argued that the Bankruptcy Court erred in creating the required Confirmation Language because bankruptcy courts do not have the authority to add additional confirmation requirements not created by statute.

The District Court agreed, holding that a bankruptcy court cannot impose local chapter 13 confirmation requirements that are not contained in 11 U.S.C. § 1325 (the statute that lays out the requirements for chapter 13 confirmation).   The District Court reasoned that the Confirmation Language’s requirements that a debtor amend the schedules every time she/he acquires any property of more than nominal value, and either pay that property to the trustee in cash or pay it into the plan, were more than “menial tasks of reporting.”   The District Court also noted that the Confirmation Language would potentially cause further court intervention if there was a dispute regarding the property at issue.

The District Court reversed the Confirmation Order and remanded the case to the Bankruptcy Court for further proceedings.

[1] The Confirmation Language stated as follows:

Interests in property acquired or received after the commencement of the case: Should the debtor(s) acquire or receive any interest in property of more than nominal value, even if such value is unknown/undetermined/unliquidated (for example, lawsuit settlement, class action settlement, worker’s compensation claim, inheritance, life insurance proceeds, etc.), debtor(s) shall immediately file the appropriate amended schedule(s) to disclose the acquisition or receipt of the same. Absent further Order of this Court, such property, whether or not disclosed on amended schedules or otherwise, shall constitute disposable income, the value of which must be paid into the debtor(s)’ plan as a payment under the plan for the benefit of allowed general unsecured claims.

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