IRMA RODRIGUEZ ANDINO

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Case:0

FILED & ENTERED

¥ COURT

. CLERK
Us. BANKRUPT C
SAN JUAN, PUERTO RiCg

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IN THE MATTER OF

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IRMA RODRIGUEZ ANDINO, CASE NO.07-01217 (SEK)

DEBTOR CHAPTER 13

OPINION AND ORDER
At issue is whether we should confirm the Chapter 13 plan
that provides for the vesting of all estate property upon entry

of discharge, rather than upon confirmation of the plan.

Here, this repeat filer’ discloses state she owns her
residence that has considerable equity, other rental, income
producing property and an undivided inherited interest in her

parents’ former residence valued at approximately $6,000 that is

unencumbered. She receives income for the local Family Affairs

Department for the after school care of children, and a pension

as retired worker from the Insular judicial system. She will

begin collecting Social Security retirement benefits on the
thirtieth month of the plan, reflected in the increased pian

payments. Her net income from the mentioned sources is delivered
to the Trustee for distribution to creditors. These will receive

100% plus 63 annum interest for their allowed claims. All claims

‘Debtor file for bankruptcy protection under Chapter 13 in
2004, under case number 04- 07829(SEK). This case was dismissed
on April 18, 2006. She refiled within eleven months from the

dismissal.

AUTHENTICATED /
U.S. GOVERNMENT.
INFORMATION
GPO

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have been allowed.

The plan calls for the payment of mortgage arrears due on
her home loan of approximately $20,000 and full payment to
secured note pledged to Island Finance Corp. of $29,771.12. Post
petition mortgage payments to three secured creditors shall be
paid directiy by the Debtor. The plan lasts for five years and
calls for total contributions of $88,250.

As a repeat filer, Debtor had to request continuance of the
automatic stay beyond thirty days from the date of filing. We
denied her motion for continuance of the stay. This led us to
conclude that the plan’s clause delaying revesting of estate
property until discharge, was designed to circumvent our order
denying continuance of the automatic stay.

The Trustee, U.S. Trustee and the Debtor all seem to agree
that we should allow, rather than strike, the vesting provision
in this plan. We disagree for reasons stated in In re Jemison,
2007 WL 266922 (Bkrtcy. N.D. Ala.), which we adopt as our own and
attach as Exhibit A.

Hence, unless Debtor modifies the vesting provision of the
proposed plan within ten days to conform with the terms and

conditions set forth in Jemison, supra, or we deny confirmation,

as the plan’s current vesting provision does not comply with 11

U.S.C. $§ 362(a) and 1325(a) fil}. The Clerk shall refer any

amended plan to chambers. If an amended plan is not filed, then

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Debtor shall sow cause why the case should not be converted to
Chapter 7 for delay in obtaining confirmation of a plan that
prejudices her creditors. Failure to show cause within the ten
day period stated above, may cause the court to convert the case

without further ado.

So Ordered, in San Juan, Puerto Rico on June 17, 2008.

thin

8 DE US
U.S. Bankruptcy Judge

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Exhibilg

Slip Copy, 2007 WL 2669222 (Bkrtcy.N.D.Ala.)

Only the Westlaw citation is currently available.
United States Bankruptcy Court,
N.D. Alabama,
Eastern Division.
In re Mary JEMISON; Anthony Lee Rounds; Harold E. & Carolyn A. Brown; and Frances L, Bailey,
Debtors.
Nos. 07-40761, 07-40917, 07-40803, 07-40916.
Sept. 6, 2007.

Thomas M. Semmes, Legal Clinic of Semmes and Semmes, Anniston, AL, for Debtors.

MEMORANDUM OPINION ON PLAN CONFIRMATIONS

JAMES J. ROBINSON, United States Bankruptcy Judge.

I, Facts and Jurisdiction

*1 These chapter 13 cases came before the Court for plan confirmation. Each proposed plan
contains a provision purporting to postpone the re-vesting in the debtor of all property of the estate

until the case is dismissed, converted or closed.FN4 at the hearings to consider confirmation of the
pians, the Court, sua sponte, raised the issue of whether confirmation should be denied because
these provisions violate paragraphs (1) and (3) of 11 U.S.C. §§ 1325(a). Confirmation of the
proposed plans was taken under submission, and parties in interest were invited to submit briefs for
the Court's consideration. No briefs were submitted. 3

EN1, The plan provisions at issue state “Property of the estate will vest according to
Section 1306,” or “Revesting property of the estate shall not occur until dismissal or
discharge.” Although the former provision is ambiguous, the Court understands its intent
is to delay vesting of all property of the estate in the debtor until the case is closed,
dismissed or converted.

This Court has jurisdiction over these matters pursuant to 28 U.S .C. §§ 157 and 1334, and the
General Order of Reference by the District Court. These are core proceedings under 28 U.S.C. § 157

(b)(2)(L}.

II. Legal Analysis

Commencement of a case under any chapter of the Bankruptcy Code (11 U.S.C. § 101 et seg. ,
and herein the “Code”) creates an estate. 11 U.S.C. § 541(a). Section 541 of the Code describes what

property is included in the estate.£¥2 In a chapter 13 case, property of the estate is expanded by.
Section 1306(a) to include not only all of the debtor's pre-petition property specified in Section 541,
but also all of the same type property acquired by the debtor post-petition, plus the debtor's post-
petition earnings. The principal difference between the estate of a chapter 13 case and that of a
chapter 7 case is the inclusion of the debtor's property, including earnings, acquired after the
commencement of the case. The Code does not anticipate all of the debtor's pre- and post-petition
property will remain vested in the estate for the entire term of the chapter 13 plan. Section 1327(b)
provides, “Except as otherwise provided in the plan or the order confirming the plan, the confirmation
of a plan vests all of the property of the estate in the debtor.” Although some courts find “tension”

between Sections 1306 and 1327, this Court finds none.£%3 These two Sections work together, hand

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in glove.
FN2, In this opinion, the term “Section” refers to a section or subsection of the Code.

FN3. Barbosa v. Solomon, 235 F.3d 31 (ist Cir.2000); Telfair v. First Union Mortg. Corp..

216 F.3d 1333 (1ith Cir.2000); In re LaPlana, 363 B.R, 259, n. 4 (Bankr.M.D.Fla.2007):
in re Moore, 312 B.R. 902 (Bankr.N.D.Ala. 2004), ‘

As mentioned above, the commencement of a chapter 13 case creates an estate comprised of the
debtor's pre- and post-petition property, Including post-petition earnings. 11 U.S.C. § § 541, 1306. A
chapter 13 plan must provide for payment of claims through periodic payments made to the trustee.
11 U.S.C. § 1322(a)(1). These payments are made, for the most part, from the debtor's post-petition

wages. EN4 A fey plans will propose that a portion of the payments to trustee will come out of

proceeds from the sale or other disposition of property of the estate.“N2 Thus, when it comes time for
property of the estate to be returned to the debtor at confirmation, the plan and order of confirmation
should provide for the estate to retain a sufficient portion of the debtor's future earnings, and
occasionally other property, to fund the plan. If a partial and measured exception to the vesting of
the estate's property back in the debtor is not made in the plan and confirmation order, the estate will
not have a source from which to make the plan payments, After anaiyzing the creation of a chapter
13 estate and the configuration and funding of a plan in the foregoing context, the process
contemplated by Sections 1306 and 1327 works well and without tension. Am. Gen, Fin., Inc. v.
McKnight (In re McKnight ), 136 B.R. 891, 894 (Bankr.S.D.Ga.1992) (finding a similar interpretation
provides consistency between Sections 1306 and 1327).

FN4, 11 U.S.C, §§ 1322(a)(1), 1325(b){1)(B), (c).

FNS. Occasionally chapter 13 debtors will propose plans that anticipate the sale of real
estate, such as vacation property, or an extra vehicle, The proceeds from such a sale are
disbursed by the trustee as a “one time payment” to creditors. Additionally, it is not
unusual for the trustee to object to confirmation of a plan because the debtor proposes to
retain unnecessary property (usually an extra car, truck, boat or recreational vehicle). As
a condition to plan confirmation, the trustee will require the unnecessary property be sold
to generate cash to pay unsecured claims or if such property is encumbered, surrendered
to satisfy, in whole or part, claims secured by such property, and thereby free-up the
debtor's earnings for plan payments.

‘*2 The Eleventh Circuit made clear what the law in this circuit is regarding the vesting of the
estate's property in the debtor at confirmation: “We therefore echo the conclusion of the Seventh
Circuit and ‘read the two sections, 1306(a)(2) and 1327(b), to mean simply that while the filing of the
petition for bankruptcy places all the property of the debtor in the control of the bankruptcy court, the
plan upon confirmation returns so much of that property to the debtor's control as is not necessary to
the fulfillment of the plan.’™ Teffair y. First Union Mortg. Corp., 216 F.3d 1333, 1340 (11th Cir.2000),
quoting Black v. United States Postal Serv. ( In re Heath },115 F.3d 521, 524 (7th Cir.1997), See also
in re McKnight, supra.

The Circuit Court in Te/fair did not discuss to what extent, if any, Sections 1322(b)(9}) and 1327(b)
may alfow a plan to provide for the estate to retain property post-confirmation in excess of what is

needed to sustain the plan.EN6 Each plan now under consideration provides that a// property of the
estate will not vest In the debtor until the case is closed, dismissed or converted. Much of the
property to be retained by the estates in these cases will not be used to fund the debtors' plans or
serve any other legitimate purpose contemplated by the plans or the Code, and in particular chapter
13 of the Code. So why do these debtors want to delay the re-vesting of all the estates’ property In
themselves? The Court believes the answer can be found through an analysis of Section 362,

FN6. This Court is aware some Courts and authorities have concluded it is permissible
under Section 1322(b)(9) for a plan’to postpone the vesting of all the estate's property

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back in the debtor for the life of the chapter 13 case. See e.g. Hampton v. Yam's Choice
Plus Autos, Inc. (In re Hampton ), 319 B.R. 163 (Bankr.£.D.Ark.2005); In re Thomas,
291 B.R. 189 (Bankr.M.D.Ala.2003); 2 Keith M. Lundin, Chapter 13 Bankruptcy (2nd ed.,
Wiley Law Publications 1994), § 6.16 at 6-57, 6-58 (“the Chapter 13 plan should very
specifically continue the estate, to include all postconfirmation wages of the debtor-those
committed to funding the plan and those to be received by the debtor-pending
completion of payments under the plan.” (Footnotes omitted); see a/so In re Durant, 239

B.R. 859 (Bankr.N.D.N.¥.1999): In re Lee, 156 B.R. 628, n. 8 (Bankr.D.Minn.1993); In re
Beasley, 22 B.R. 773 (Bankr.Tenn.1982)) In re Adams, 12 B.R. 540, n. 2 (Bankr.Utah

1981). For the reasons discussed herein, this Court has reached a contrary conclusion.

The debtor's property and the estate’s property are not protected to the same extent by the
automatic stay imposed by Section 362(a). The stay under paragraphs (2), (3) and (4) of Section 362
(a) applies to the estate's property but not the debtor's property. Consequently, for the most part,
the estate's property is protected from both pre- and post-petition creditors, while debtors and their

property are only protected from pre-petition claims.£¥4 This Court is convinced the more extensive
protection given to the estate’s property is the reason these debtors are attempting to retain all their
property, including wages, in the estates for the duration of their cases. If post-petition creditors can
reach only debtors individually, but not property and wages that remain vasted in the estate, then
these creditors have no meaningful remedy while the case is pending unless they first obtain relief
from the stay to pursue property of the estate before commencing state law collection remedies. Such
a two-step process gives debtors, who leave ail their property in the bankruptcy estate, unwarranted
stay protection, and it imposes additional collection expenses and delays on postpetition creditors.
Moreover, relief from the stay is problematic because it will allow the postpetition creditor to reach
estate property earmarked for plan payments, which otherwise would go to creditors holding allowed
pre-petition claims, including home mortgages being paid through the trustee. Debtors may argue
that if stay relief is limited to that portion of the estate not devoted to funding the plan, the result is
no different from what would have been achieved by returning that same portion to the debtor at
confirmation. Such an argument ignores the additional expense and delay incurred by post-petition
creditors in prosecuting lift-stay motions under Section 362(d), and it fails to recognize that such
expense is often substantial enough, when compared to the amount of the post-petition debt, to
persuade creditors to forego collection efforts and write off the debt.

FN7Z. 11 U.S.C. § 362(a). See Matter of Growth Development Corp., 168 B.R. 1009, 1016
(Bankr.N.D.Ga.1994) (“The language of [Section 362(a)(3) ] is devoid of any distinction
between prepetition and postpetition claims. So long as a creditor attempts to obtain
property of the estate, the automatic stay remains in full force and effect.”).

*3 If the plans now before the Court are confirmed without change, that portion of the estates’
property otherwise vesting in the debtors at confirmation pursuant to Section 1327({b) will remain
vested in the estates. Consequently, paragraphs (3} and (4) of Section 362(a) will stay post-petition
creditors from reaching this property, inciuding surplus property not needed to fund the plans. The
automatic stay as to the estates’ property may remain in effect until such property is no jonger
property of the estates, which may be up to five years. 11 U.S.C. §§ 362(c)}(1), 1325(b)(4). Other
than garnering extended automatic stay protection, from the debtors' perspective, there can be no
other reason for the plans now under consideration to propose a delay in vesting all the estates’
excess property in the debtors. If there are other reasons, none was evident from the plans or
otherwise offered by these debtors. Thus, herein lies the essence of the issue to be resolved: Does a
pian provision, which surreptitiously extends the automatic stay to post-petition creditors by retaining
all the debtor's property in the estate until a chapter 13 case is closed, dismissed or converted,

violate paragraphs (1) and (3) of Section 1325(a), or is such a provision permitted under Sections
1322{b}{9} and 1327(b)?

Paragraphs (1) and (3) of Section 1325(a) state, “the court shall confirm a plan if ... the plan

complies with the provisions of this chapter and with the other applicable provisions of this title ...
[and] has been proposed in good faith and not by any means forbidden by jaw....” As previously
discussed, Section 1327(b) provides property of the estate will vest in the debtor at confirmation, “fe]

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xcept as otherwise provided in the plan or the order confirming the plan.” In addition, Section
1322(b)(9) provides that a plan may “provide for the vesting of property of the estate, on

confirmation of the plan or at a later time, in the debtor or in any other entity.” 88 This Court does
not interpret Sections 1322(b)(9) and 1327(b) as permitting an arbitrary delay in the vesting of the
estate's property in the debtor in excess of the portion reasonably anticipated as needed to fund the
plan within the confines of the Code. More specifically, only that portion of the estate's property
reasonably calculated to provide for the payment of the pian over the applicable commitment period
should be retained by the estate, and the remainder must be returned to the debtor. The estate is not
a safe harbor in which debtors may moor their property, including earnings, for protection from post-
petition creditors.

FN8. An example of a permitted application of Section 1322(b)(9) is a plan that proposes
property securing a claim will vest at confirmation in the holder of such claim in full or

partial satisfaction of the claim.

The primary purpose of chapter 13 is to allow a financially distressed consumer-debtor to
reorganize and adjust his or her pre-petition debts through a wage-funded payment plan structured
within the parameters of chapter 13 of the Code, and after making all plan payments the debtor may
receive a discharge of any remaining unsecured consumer debts. Through this same process, debtors
may cure defaults in secured debts and save homes and automobiles from foreclosure and
repossession, extend payment of priority and non-dischargeable claims (e.g. taxes, domestic support
obligations, student loans) over the plan's commitment period, and continue to pay ongoing

maintenance installments due on long term debts such as home mortgages. FNS During the life of a
chapter 13 case, the debtor is expected to stay on the financial straight-and-narrow, pay plan
payments as they become due, and ultimately receive a discharge and fresh start under Section
1328. Incurring additional debts post-petition, except for necessities needed to perform under the

plan, should be avoided. Otherwise, the debtor steps back onto the debt merry-go-round with little

chance of ever getting off.£N42

FNS, 11 U.S.C. § 1322(a),(b). Ongoing maintenance payments on long-term secured
debts, such as home mortgages, may be paid through the chapter 13 trustee or directly
to the creditor. When a debtor's plan pays ongoing maintenance payments through the
trustee, the debtor can legitimately allow the estate to retain that portion of the debtor's
future wages needed to pay such payments. If the debtor elects to pay these payments
‘outside the plan” and directly to the creditor, then the wages needed for these payments
never go through the trustee and are not retained by the estate after confirmation. See
JIU S.C. § 1322(b)(8} (permitting payment of a claim from the estate's or the debtor's

property).

FN1O. What this Court séés time and time again are chapter 13 debtors who default on
their plan payments because they become burdened with additional debts incurred post-
petition. While some of the new debts may be unavoidable (e.g. medical bills, car
repairs), often they are for high interest charge card balances, payday loans and credit
purchases that, with some discipline, could have been avoided. The ease of obtaining
credit for many debtors, even though they are in an active chapter 13 case, is apparently
too tempting to resist, even though the consequences often lead to the dismissal of their
case,

*4 Statisticaily, at least in the Eastern Division of the Northern District of Alabama, the majority of
chapter 13 plans never are completed.-N41 many chapter 13 debtors who default under their plans
have incurred post-petition debt without court or trustee approval -N!2 They are unable to make both
their plan payment and payments due on their unapproved post-petition debts. This Court has little
sympathy for post-petition creditors wha extend credit to chapter 13 debtors for nonessential
purposes, especially now that it is easy to determine whether a prospective borrawer is a debtor In an
outstanding bankruptcy case through accessing PACER over the Internet. Nonetheless, the debtor has
the primary responsibility of avoiding post-petition debt.

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FNii. Although not the majority, many chapter 13 cases are successful, and debtors pay
all installments called for under their plans and are granted a discharge. Moreover, it is
not uncommon for debtors’ financial or personal circumstances to improve during the
course of their plans, and they are able to achieve an early exit from chapter 13 by
prepaying their pians.

FNI2. See, 117. U.S.C. § 1305.

There are no restrictions in the Code prohibiting a chapter 13 debtor from incurring ordinary
consumer debt after the commencement of the case and before the debtor is granted a

discharge.fN43 If a post-petition consumer debt Is incurred for necessities, Congress crafted a
procedure allowing the debt to be placed under the plan and discharged like pre-petition debts. This
procedure has three conditions which must be satisfied: First, the debt must be incurred “for property
or services necessary for the debtor's performance of the plan.” Section 1305(a)(2). Second, if
obtaining the trustee's approval was practicable before the obligation was incurred, such approval
must be obtained if the creditor knew or should have known such approval was required. Sections

1305(c), 1328(d). Third, a proof of claim for the debt must be filed in the case."4 Section 1305(a)
(2). After the claim is filed, the debt will be an allowed claim, assuming no objection is filed (Section
502(a)) and become a debt “provided for by the plan,” which will be discharged when the debtor
completes all plan payments. Section 1328(a). Admittedly, the procedure for discharging a post-

petition debt under Section 2365 is cumbersome. However, it demonstrates Congress's intent to

discourage post-petition debt unless it is absolutely necessary.FX12

FN13. Without court approval, ordinary consumer debt incurred post-petition cannot be
allowed as an administrative expense or be secured by property of the estate. 11 U.S.C.
§ 364(b), (c), However, unless the court orders otherwise, a self-employed chapter 13
debtor may incur debt in the ordinary course of business, and such debt will be allowed
as an administrative expense. 11 U.S.C. §§ 364(a), 1304. The Code does not prohibit a
chapter 13 debtor from securing post-petition debt with the debtor's property, as
opposed te the estate's property.

FN14, Most authorities hold the debtor or trustee may not file a preof of claim on the
creditor's behalf and force the creditor to participate in the case. E.g., In re Perkins, 304
B.R, 477 (Bankr.N.D, Ala 2004); In re Sims, 288 B.R. 264 (Bankr.M.D,Ala.2003}. Section
501(c) and Fed. R. Bankr.P, 3004 permit the debtor and trustee to file a proof of claim
for a debt if the holder of the claim fails to timely do so. Although a strong equitable
argument can be made as to why a post-petition creditor should not be forced into
participating in a debtor’s chapter 13 case, there is nothing in the Code or Federal Rules
of Bankruptcy Procedure limiting the debtor's and trustee's option of filing a proof of
claim on behalf of a creditor for a post-petition debt. The authors of at least one
bankruptcy treatise do not believe there is such a limitation: “Technically, the creditor
with a postpetition claim can avoid the Chapter 13 discharge even when prior trustee
approval was not practicable by holding a claim that is not provided for under the

. debtor's plan. This may occur when the holder does not file a proof of claim. Thus,
counsel for the [post-petition creditor] may elect not to file a proof of claim when the
anticipated distribution under the debtor's plan will be de minimis.... [Tjhe effort of
counsel for the [post-petition creditor] will be of no avail if counsel for the Chapter 13
debtor becomes aware of the debt and causes a proof of claim to be filed on behalf of the
creditor. (footnotes omitted). A. Cohen & M. Miller, Consumer Bankruptcy Manual § 5:26
(2d ed.2006},

FN15, For a concise summary of the Code's treatment of post-petition consumer debt in a
chapter 13 case, see A. Cohen, Consumer Bankruptcy Manual, supra note 14, Section
5:26 of this manual contains a sample letter that debtors’ counsel may want to consider
sending to their clients immediately following plan confirmation. The letter alerts debtors

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to the requirement that new credit transactions must be pre-approved by the trustee,
and failure to do so will jeopardize the debtor's “complete discharge that has been your
goal.”

The Code contains no procedure for the discharge of post-petition debts incurred for property or
services not necessary for the debtor's performance of the plan. The miake-shift remedy employed by
most debtors who incur substantiai post-petition debt is the dismissal of their case, either voluntarily
or more often by defaulting on plan payments, and then they immediately file another case in which
they schedule the unpaid debts left over from the dismissed case along with their new debts that
were incurred post-petition during the dismissed case. However, dismissal and refiling raises
additional issues that may result in the new case being dismissed, the debtor's plan being denied

confirmation, or the debtor being dented automatic stay protection.FNLS

FN16, Paragraphs (3) and (4) of Section 362(c), added by BAPCPA, provide that debtors
who have had prior cases dismissed within one year are presumed to have filed their new
cases in bad faith, and unless they can demonstrate by clear and convincing evidence to
the contrary, they lose automatic stay protection after 30 days if they had one prior case
dismissed within the past year, or never receive such protection if they had two or more
cases dismissed within the past year. Where substantial post-petition consumer debt was
incurred for non-necessities, the Court may find the new case was filed in bad faith
(Section 1325(a)(7)); or if the debtor's plan proposes to pay the new creditors little or
nothing, the Court may find the plan was proposed in bad faith. Section 1325(a)(3).

Too much debt is the common malady shared by all chapter 13 debtors, and additional debt
incurred post-petition should be avoided except when absolutely necessary. An unbridled
interpretation of Sections 1322(b)(9) and 1327(b), which allows the estate to retain all the debtor's
property throughout the case, facilitates the incurring of unnecessary post-petition debt by keeping
post-petition creditors at bay. It also encourages debtors to ignore the limitations placed on the
allowance and discharge of post-petition debt under Sections 1305(a) and 1328{d). Manipulating the
content of the estate's property and expanding automatic stay protection beyond what Congress
intended should not become substitutes for adhering to the restrictions and discipline provided under
the Code for incurring and discharging post-petition debt.

*5 It is equally important to mention that the retention of all property in the estate during the life
of a case is not practical, and a literal and unqualified interpretation of Sections 1322{b)(9} and 1327

(b) leads to an absurd result.““4 In Heath, supra, the Seventh Circuit stated, “[i]t would presumably
be an abuse of discretion for the bankruptcy judge to confirm a plan that retained more property in

the hands of the trustee than was reasonably necessary to fulfill the plan ....° £818 otherwise would
create a jurisdictional nightmare for bankruptcy courts because any disputes arising during the plan
term, which were arguably related to property of the estate, would confer jurisdiction on the
bankruptcy court and entangle it in even the pettiest of controversies and immerse the court in the
day-to-day lives of debtors. See Id. For example, do the debtors in these cases intend for the Court’
to hear a dispute with the neighborhood grocer if the debtor is overcharged for an apple? Id. Do these
debtors intend for the Court to monitor their use of future earnings throughout the entire life of their
plans? Do the debtors contemplate submitting periodic household budgets for the Court's approval,

which will authorize the use of property of the estate for ordinary household expenditures? N12
Would debtors seek Court approval to hold a garage sale for property of the estate having a value of
$50? The answer to these rhetorical questions is obviously no. Congress did not intend for bankruptcy
courts to serve as continuous overseers of the financial lives of chapter 13 debtors, nor do bankruptcy
courts have the time to serve in such a capacity. Between confirmation of a chapter 13 plan and
discharge, the Code anticipates a debtor will make the payments called for under the plan, and If
there is no payment default or material change in the debtor's circumstances justifying a modification
in the plan, the debtor should have little or no contact with the bankruptcy court. Accordingly, except
for that portion of the estate needed to fund the confirmed plan, the remainder of the estate should
vest back in the debtor at confirmation, to be used at the debtor's discretion so the debtor can get on
with his or her financial life.

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FN17. The Supreme Court has instructed !ower courts to apply the clear and
unambiguous language of a statute unless doing so will lead to an absurd result. Barnhart
v. Sigmon Coal Co., Inc., 534 U.S. 438 (2002); Pub. Citizen v. U.S. Dep't of Justice, 491
U.S. 440 (1989); Heydenfeldt v. Daney Gold & Silver Mining Co., 93 U.S. 634 (1876). To
avoid such an absurd and unworkable result, a reasonable interpretation of Sections 1322
(b)(9) and 1327(b) is to limit the amount of property and earnings that Is to remain
vested in the estate post-confirmation to that reasonably needed to fund the debtor's
chapter 13 plan.

FN18. Heath at 524. The above sentence quoted from the Heath opinion, immediately
follows the sentence adopted by the Eleventh Circuit in Te/fair when it “echo[ed] the
conclusion of the Seventh Circuit.” Te/fair at 1340.

FN19. An argument may be made that confirmation of a plan based on a debtor's
schedules I and J (income and expenses) implies court approval of post-petition
expenditures within the budget represented by these schedules. However, over the
course of a chapter 13 case with a commitment period of up to five years, incomes and
household expenses vary from year to year, or even month to month. What amount of
change would terminate the court's implied approval of the debtor's use of property of
the estate? Section 1306(b) provides, “Except as provided in a confirmed plan or order
confirming a plan, the debtor shall remain in possession of all property of the estate.”
However, possession does not imply authority to dispose of property.

At the risk of being redundant, it is instructive to conclude by again referring to the Seventh
Circuit's opinion in Heath:

It is true that the Bankruptcy Code says that all the earnings of a Chapter 13 debtor are property
of the estate. 11 U.S.C. § 1306(a)(2). But it also says that “confirmation of a plan vests aif the
property of the estate in the debtor ” unless the plan provides otherwise, § 1327(b) ..., which we

. think scotches any inference that Congress intended to render a/f Chapter 13 debtors legally
incompetent to manage any of their property. We read the two sections, 1306(a)(2) and 1327(b}, to
mean simply that while the filing of the petition for bankruptcy places all the property of the debtor in
the control of the bankruptcy court, the plan upon confirmation returns so much of that property to
the debtor's control as is not necessary to the fulfillment of the plan. It would presumably be an
abuse of discretion for the bankruptcy judge to confirm a plan that retained more of the property in
the hands of the trustee than was reasonable necessary to fulfill the plan, though we need not decide

that in this case.

*6 Heath at 524.

Unlike the Court of Appeals in Heath, this Court must decide whether to confirm the plans in these
cases that propose to retain more property in the estates than is reasonable necessary to fulfill the
plans. This Court agrees with the Seventh Circuit's presumption, and finds it would be an abuse of
discretion to confirm the plans proposed in these cases without first striking the provisions that
purport to allow the estates to retain excess property and earnings.

Ii], Conclusions of Law

For the reasons discussed above, the Court concludes that the provisions in the proposed plans E
. purporting to delay vesting of all of the estates’ property in the debtors beyond plan confirmation and
until the case is closed, dismissed or converted, do not comply with chapter 13 of the Code and
Section 362(a). Thus the plans violate Section 1325(a)(1). Moreover, because of the inclusion of
these provisions, the Court finds the plans were not proposed in good faith and violate Section 1325
{a}(3). Accordingly, the Court hereby DENIES confirmation of these plans as now proposed.

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Except for the offending provisions discussed herein, the plans otherwise comply with Section
1325 and are due to be confirmed. Rather than reschedule these cases for plan confirmation, the
Court will enter orders confirming the proposed plans; however each order will contain the following

provision:

Property of the Estate-“[T]he plan upon confirmation returns so much of that property to the
debtor's control as is not necessary to the fulfillment of the plan.” Telfair v. First Union Mortgage

Corp., 216 F.3d 1333, 1340 (11th Cir.2000) (quoting Black v. United States Postal Serv. ( In re
Heath ), 115 F.3d 521, 524 (7th Cir.1997). Any provision in the plan, and in any future amendment

or modification thereof, purporting to cause the estate to retain more property than necessary for the
fulfillment of the plan is hereby STRICKEN and DISALLOWED.

To the extent the proposed plans conflict with this Court's confirmation order, including any
conflict with the above provision quoting Te/fair, the confirmation order shall control. The plan
confirmation orders conforming with this opinion will constitute judgments entered pursuant to Rule

9021 of the Federal Rules of Bankruptcy Procedure.

Bkrtcy.N.D.Ala.,2007.
In re Jemison
Slip Copy, 2007 WL 2669222 (Bkrtcy.N.D.Ala.)

END OF DOCUMENT

{C}) 2008 Thomson Reuters/West. No Claim to Orig. US Gov. Works.

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