Case Type:
Case Status:
No. 21-2783 (7th Circuit, Aug 18,2022) Published
11 U.S.C. § 1327(a), as applied in the Seventh Circuit under Holstein v. Brill, 987 F.2d 1268 (7th Cir. 1993), and In re Chappell, 984 F.2d 775, 782 (7th Cir. 1993), does not bar creditors from amending their proofs of claim after a Chapter 13 plan is confirmed if compelling circumstances exist. Compelling circumstances may exist when the debtor and its attorney know of the claim before plan confirmation and the amended claim is promptly filed. In addition, a court properly allows a creditor's attorney's fees for services rendered in preparing responses to a debtor's filings.
Procedural context:
The debtor appealed the district court's decision affirming the bankruptcy court's order that allowed a creditor to amend its proof of claim, after the debtor's Chapter 13 plan was confirmed, to include the creditor's attorney's fees.
Ryan L. Laney, the debtor, purchased a very used car from Second Chance Auto, Inc. The transaction was evidenced by a Retail Installment Contract and Security Agreement, The Agreement provided that Laney would pay Second Chance's attorney's fees if Laney defaulted. Four months later, Laney filed a Chapter 13 petition. For four months, the parties submitted various filings about how the Chapter 13 plan should treat Second Chance. Second Chance timely filed a proof of claim (Claim 3). Laney objected to the claim. The bankruptcy court ordered Laney to amend his Chapter 13 plan within seven days to treat Second Chance's claim as a "910 claim" to be paid in full. Laney amended his plan, but the amendment did not require Laney to pay Second Chance in full. Second Chance objected and requested that it recover its attorney's fees for having to file the same objection twice. Following another hearing, the bankruptcy court ordered Laney to amend his Chapter 13 plan, within three days, to pay Second Chance in full. The bankruptcy court also allowed Second Chance to file an attorney's fees affidavit. Instead of complying with the bankruptcy court's order, Laney filed a motion seeking clarification from the bankruptcy court. Laney then filed a second amended Chapter 13 plan, which provided for the payment in full of Second Chance except for Second Chance's attorney's fees. The bankruptcy court confirmed the second amended Chapter 13 plan. The bankruptcy court also conducted additional hearings on Second Chance's request for attorney's fees. Following these hearings, the bankruptcy court ordered Second Chance to amend its proof of claim to include the allowed attorney's fees. Second Chance filed an amended claim that included attorney's fees. This claim was mistakenly designated Claim 9. Laney objected to Claim 9 as untimely. The bankruptcy court ruled against Laney and held that Claim 9 would be treated as an amendment to Claim 3. Laney filed another objection to Claim 9, arguing that Claim violated 11 U.S.C. § 1327(a) and that a majority of the attorney's fees were unnecessary. The bankruptcy court denied Laney's second objection to Claim 9. The bankruptcy court ruled that the amendment of Second Chance's claim was appropriate because compelling circumstances existed, including the parties' pre-petition agreement and Laney's counsel knew of the attorney's fees before the Chapter 13 plan was confirmed.

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