In re Calloway

Citation:
In re Calloway, ___ B.R. ___ (B.A.P. 6th Cir. 2012)(unpublished)
Tag(s):
Ruling:
The Bankruptcy Appellate Panel of the Sixth Circuit (the “6th Cir. BAP”) affirmed the bankruptcy court’s order denying the Chapter 13 co-debtors’ motion seeking relief from the order confirming their Chapter 13 plan, finding the following: (i) the Debtors’ decision, based upon the advice of counsel, to wait to file their motion to modify their confirmation order until after the proof of claim bar date was not the result of “mistake, inadvertence or surprise,” or “excusable neglect”; and (ii) the bankruptcy court did not abuse its discretion in denying the Debtors’ motion without a hearing.
Procedural context:
Approximately six months after the entry of an order confirming their Chapter 13 plan, the Debtors filed a motion under Rule 60(b) of the Federal Rules of Civil Procedure, made applicable under Rule 9024 of the Federal Rules of Bankruptcy Procedure, seeking primarily to modify their plan to strip the second mortgage holder’s lien and to pay its claim as an unsecured claim. The bankruptcy court denied their motion. The Debtors appealed that denial, contending that their failure, on advice of counsel, to amend their plan prior to confirmation to provide for a lien strip action was “excusable neglect,” because it was based on a creditor’s failure to file a proof of claim.
Facts:
In December 2010, the Debtors filed their Chapter 13 petition and a proposed plan. At that time, their primary residence was encumbered by two mortgages: the first with a $186,189 claim and the second with a $34,950 claim. The Debtors listed the value of the residence at $236,140. Shortly thereafter, the Debtors obtained an appraisal of the residence, valuing it at $180,000. The Debtors did not amend their schedules to reflect this lower amount. The Debtors’ plan provided that the first and second lienholders on their residence would retain their liens and receive mortgage payments. Further, the plan did not list any secured claims that had liens or mortgages to be avoided pursuant to a subsequent motion or adversary proceeding. The plan was uncontested and confirmed by an order entered on February 18, 2011. The confirmation order provided that the value of the residence would be the lesser of the value set forth in the Debtors’ schedules or a secured party’s proof of claim. The deadline for filing proofs of claim was set for April 26, 2011. The first mortgage lien holder did not file a proof of claim. Nearly four months after the claim deadline, the Debtors filed a motion in the bankruptcy court pursuant to Rule 60(b), seeking to modify their plan to, among other things, provide for paying the second mortgage holder as an unsecured creditor and file an adversary proceeding to strip that holder’s lien. Without holding a hearing, the bankruptcy court denied the motion, finding that the Debtors’ failure to amend their plan prior to the confirmation was not excusable neglect. The Debtors appealed.
Judge(s):
Fulton, Harris, and Shea-Stonum, Bankruptcy Appellate Panel Judges

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