Michael Brown

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
MICHAEL BROWN,
Debtor.
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Case No. 07-00148
(Chapter 11)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION AND ORDER REGARDING
DEBTOR’S PROPOSED AMENDED PLAN OF REORGANIZATION
At today’s disclosure statement hearing, I discussed the
impact of 11 U.S.C. § 1141(d)(5) on the debtor’s discharge
rights. 	Two points deserve further comment.
I
A reopening fee would be necessary if the case were closed
and the debtor then sought to reopen the case to obtain his
discharge. 	Item 11 of the Bankruptcy Court Miscellaneous Fee
Schedule (found as an appendix to 28 U.S.C. § 1930) now expressly
provides that the reopening fee “should be charged when a case is
closed without a discharge being entered.”
II
Section 1141(d)(5)(A) provides that “unless after notice and
a hearing the court orders otherwise for cause, confirmation of
The document below is hereby signed. Dated: October 29, 2008.
______________________
S. Martin Teel, Jr.
U.S. Bankruptcy Judge
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the plan does not discharge any debt provided for in the plan
until the court grants a discharge on completion of all payments
under the plan.” 	Here, if the debtor’s plan is confirmed,
unsecured claims would be paid shortly after the Effective Date.
But the plan provides for monthly mortgage payments to continue
on the debtor’s various mortgage debts. 	Those payments might
last for many years, and for the reasons explored below, I do not
believe that the statutory provision was written with those types
of payments to mortgagees in mind.
Section 1141(d)(5)(B) makes clear that the concern in
delaying a discharge until plan payments are completed is that
unsecured creditors might be adversely affected if their claims
were discharged and replaced with a reduced claim under the plan
that was not being paid in accordance with the terms of the plan,
and they did not receive that which they would have received in a
liquidation on the effective date of the plan. 	Presumably
Congress intended that in those circumstances, the case should be
dismissed or closed without the unsecured claims being
discharged. 	No automatic stay would be in place upon dismissal
or closing of the case, and without a discharge being in place,
creditors would no longer be barred by any statutory injunction
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1 	Implicitly, the terms of the plan would no longer be
binding on creditors, and the property dealt with by the plan
would not be free and clear of their claims: although the plan
might provide for the creditors to receive payments less than the
full amount of their original claims, without any injunction in
place the original claims would be enforceable. 	Lamentably, the
statute is not explicit on that point as it is in carving out
nondischargeable debts from the effects of § 1141(a) and
§ 1141(c) (dealing with the binding effect of the plan and with
the property dealt with by the plan being free and clear of all
claims of creditors). 	This is likely a drafting mistake by
Congress in its adding § 1141(d)(5) to the Code in 2005. 	A
similar drafting error appears to have occurred in adding
§ 1141(d)(6) to the Bankruptcy Code in 2005 to make certain debts
of a corporation nondischargeable: it too is not mentioned in
either § 1141(a) or § 1141(c).
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from pursuing collection of their claims. 1 See 11 U.S.C.
§ 362(c)(2).
Significantly, section 1141(d)(5) roughly mirrors chapter 13
provisions delaying discharge until completion of payments to the
chapter 13 trustee. 	The chapter 13 provisions, however, are
never construed as delaying discharge until completion of
payments that the debtor was to continue to make directly to
mortgagees (payments “outside” of the plan), the significant
difference being that in the case of a chapter 11 plan, all
payments are under the plan. 	But, as in the case of regular
monthly mortgage payments being paid outside the plan in a
chapter 13 case, Congress likely did not intend for § 1141(d)(5)
to delay entry of a chapter 11 debtor’s discharge pending the
debtor’s completion of all remaining regular monthly mortgage
payments that the debtor obligates herself to pay under a
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confirmed chapter 11 plan. 	This suggests that cause exists for
ordering that the debtor may obtain a discharge notwithstanding
not having completed all future regular monthly mortgage
payments.
The statute provides that “unless after notice and a hearing
the court orders otherwise for cause, confirmation of the plan
does not discharge any debt provided for in the plan until the
court grants a discharge on completion of all payments under the
plan.” 11 U.S.C. § 1141(d)(5). 	The statute does not expressly
address whether such “notice and a hearing” can be accomplished
by including a provision in the plan that would alter the usual
statutory rule, and treating the order of confirmation as the
“order otherwise.” 	By providing that the confirmation of the
plan does not alter the statutory rule, it is implicit that any
attempt to alter the usual statutory rule ought to be
accomplished via a procedural mechanism separate and apart from
including a provision altering the usual statutory rule within
the plan itself. 	Accordingly, if the debtor wishes to alter the
usual statutory rule that would delay entry of a discharge until
all payments under the plan have been completed, the debtor
should file a motion seeking to alter the usual statutory rule,
with notice to creditors of the opportunity to oppose the motion.
Because the issue would be academic if no plan is confirmed, the
debtor’s notice should indicate that the motion will be heard at
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5	O:\TEEL\Judge Temp Docs\Brown (Michael) Mem Decsn re Disclosure Statement and Plan_v2.wpd
the confirmation hearing. 	To minimize postage expense, the
separate notice of the motion may be served with the proposed
plan and disclosure statement.
In accordance with the foregoing, it is
ORDERED that any request for an order to provide for a
discharge prior to completing regular monthly mortgage payments
under a confirmed plan shall be pursued by a separate motion set
for hearing on the same date as the confirmation hearing, to be
heard after the court has decided whether to confirm the debtor’s
plan. 	Any granting of that motion should be included as part of
the proposed order confirming the plan in order to minimize
postage expense.
[Signed and dated above.]
Copies to: Debtor; Debtor’s attorney; Office of United States
Trustee.
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