Christopher Ryan

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
CENTRAL DIVISION
____________________________________
)
In re: 	) 	Chapter 13
) 	Case No. 08-40601-MSH
CHRISTOPHER RYAN, 	)
)
Debtor. 	)
____________________________________)
MEMORANDUM OF DECISION
ON CHAPTER 13 TRUSTEE’S MOTION FOR RECONSIDERATION
The Chapter 13 trustee, Denise M. Pappalardo, has filed a Motion for Reconsideration or
in the Alternative for Clarification [# 39] of my order of May 28, 2010 [# 35] on the trustee’s
motion to dismiss [# 26]. The debtor opposes the trustee’s motion for reconsideration.
The background facts as well as the rationale for the May 28th order are set forth in a
memorandum of decision accompanying that order [# 34]. The trustee’s motion relates to the
portion of that memorandum of decision dealing with the treatment of the pre-petition arrearage
claims of two secured creditors, IXIS Real Estate Capital Trust 2004-HE-4 (“IXIS”) and
Wilshire Credit Corp. (“Wilshire”). For the sake of simplicity and ease of reference I quote the
relevant portion of the memorandum here:
With respect to the Trustee’s complaint that the plan fails to provide payment in
full of the IXIS and Wilshire secured arrearage claims as filed, the Trustee ignores
the res judicata effect of a confirmed plan. Although a proof of claim is prima
facie evidence of the validity and amount of a claim, Fed. R. Bankr. P. 3001(f), a
timely filed proof of claim will not establish the amount of the claim to be paid
through a confirmed plan if the confirmed plan states otherwise and the creditor
received notice and an opportunity to be heard but failed to object to the treatment
of its claim under the plan. Factors Funding Co. v. Fili (In re Fili), 257 B.R. 370,
372 (1st Cir. B.A.P. 2001). Even a confirmation order that was erroneously
entered is not presumptively void. Espinosa, 130 S.Ct. at 1380. Consequently,
both mortgagees, who received notice of the plan but never objected to it, are
bound by the payment terms set forth in the plan. Each will receive the lion’s
share of its mortgage arrearage through the plan and each will retain its claim for
 	1
Case 08-40601 Doc 61 Filed 07/21/10 Entered 07/21/10 09:49:31 Desc Main
Document Page 1 of 3

the balance of the prepetition arrearage to be collected after completion of the
plan. Cf. In re MacKenzie, 314 B.R. 277, 279-80 (Bankr. D.N.H. 2004).
(Memorandum of Decision on Chapter 13 Trustee’s Motion to Dismiss 4 [# 35]).
The trustee frames her motion for reconsideration in terms of a struggle for primacy
between the res judicata effect of a chapter 13 plan confirmation order under §1327(a) of the
Bankruptcy Code (11 U.S.C. § 101 et seq.) and the prima facie validity of a proof of claim under
§502 of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 3001. The trustee
interprets my May 28th order as a ruling that §1327 trumps §502 and, citing Judge Feeney’s
decision in In re Greene-Jackson, Case No. 00-14423-JNF, Slip Op. (Bankr. D. Mass. Mar.
30,2001) [# 23], asks me to reverse that result.
The trustee has misconstrued my prior ruling. I do not view the interplay between
§§1327 and 502 as an all-or-nothing struggle for supremacy. These two statutory provisions with
their important procedural and substantive impact on Chapter 13 cases can and should co-exist.
The order confirming the Chapter 13 plan in this case was res judicata as to the treatment
of the IXIS and Wilshire pre-petition arrearage claims. The determination of the allowed
amounts of those claims occurred outside the plan as part of the claims process and since each
creditor timely filed a proof of claim to which the debtor interposed no objection, each creditor’s
allowed claim was in the amount set forth in its proof of claim. To the extent the plan treatment
of those allowed claims will not result in full payment of those claims during the life of the plan,
the unpaid balance will have to be paid outside the plan. This is the reasoning in my May 28th
order.
Greene-Jackson implicitly supports this reasoning by acknowledging the important
distinction between the treatment of a claim in a Chapter 13 plan and a plan’s attempt to fix the
 	2
Case 08-40601 Doc 61 Filed 07/21/10 Entered 07/21/10 09:49:31 Desc Main
Document Page 2 of 3

dollar amount of that claim. It is the latter situation (not present in this case) to which the holding
in Greene-Jackson applies.
The trustee suggests that my May 28 ruling is antithetical to the fresh start policy
underlying the Bankruptcy Code because it creates the possibility that a debtor will be saddled
with residual debt after discharge. In this case, however, the difference between the allowed
amounts of the arrearage claims and the amounts to be paid the holders of those claims under the
plan is not substantial. Further, the affected creditors have themselves not objected to the
treatment accorded them in the plan. Finally, the trustee waited nineteen months from the claims
bar date and seventeen months from plan confirmation to raise her objection to the plan.
Nothing in my May 28 order will prevent the trustee or an aggrieved creditor in the appropriate
case from objecting to confirmation of a plan or seeking plan modification upon a pleading filed
within a reasonable time, asserting that the amount of the untreated payment due a secured
creditor outside the plan renders the plan not feasible, not in good faith or violative of some other
provision of the Bankruptcy Code such as §1322(b)(5) which requires curing defaults within a
reasonable time.
Based on the foregoing, I decline to alter my May 28 order but hopefully have provided
to the trustee some clarification as to the effect of that order. A separate order on the trustee’s
motion for reconsideration shall enter.
Dated at Worcester in said District this 21st day of July, 2010.
By the Court,
________________________________
Melvin S. Hoffman
U.S. Bankruptcy Judge
 	3
Case 08-40601 Doc 61 Filed 07/21/10 Entered 07/21/10 09:49:31 Desc Main
Document Page 3 of 3