Johnson v. Fink (In re Johnson)

Citation: 
Johnson v. Fink, No. 11-6037 (BAP 8th Cir., November 2, 2011)
Ruling: 
Once a chapter 13 plan is confirmed, it is binding upon the debtor unless the plan is modified and approved by the court under Sec. 1329(a) after a substantial change in circumstances. A plan modification must correlate to the change in the circumstances.
Procedural context: 
The case is an appeal from the bankruptcy court's order overruling both the chapter 13 debtor's and the trustee's plan objections and confirming the debtors' second amended plan, which amendment was limited to a modification to the monthly payment based only on changed circumstances since confirmation of the initial plan.
Facts: 
Husband and wife filed a chatper 13 bankruptcy petition and obtained confirmation of their plan without objection. The plan proposed payments based on the debtor's disposable income, which included Social Security income and other income. The plan was confirmed. Approximately one year after the filing, the husband lost his job. The debtors thereafter amended their schedules and filed a post-confirmation amended plan, which significantly reduced their monthly payments based on the debtor's position that their Social Security income should be excluded in calculating their required plan payments. The bankruptcy court subsequently sustained the trustee's motion to deny confirmation stating that the post-confirmation plan was not proposed in good faith. The debtors subsequently filed a second amended plan containing terms the bankruptcy court indicated it would confirm, and then objected to their own plan. The trustee also objected, asserting that the monthly payment should only be adjusted to reflect the loss of the husband's job. The court rejected the debtors' argument that their entire plan was open to modification based upon the change in circumstances. The court, however, agreed with the trustee that when a confirmed plan is modified to reduce payments under Sec. 1329(a) due to a substantial change in circumstances, the modification must correlate to the change in circumstances. The court observed that the debtors could have litigated whether they were required to include their Social Security income at the time they proposed their original plan, but did not do so. The proposed reduction in their plan payment was not reflective of the debtors' loss of income. The bankruptcy court's confirmation of the second amended plan over the debtors' objection was affirmed.
Judge(s): 
Kressel, Saladino, Nail