A trustee can object to the allowance of unsecured claims after confirmation of a chapter 13 plan, according to an opinion by Chief Bankruptcy Judge Terrence L. Michael, coming down on one side of an issue that divides the lower courts.
The creditor submitted an unsecured claim one month after the debtor filed his chapter 13 petition. The bankruptcy court confirmed the plan more than one month before the claims bar date. The so-called pot plan told creditors explicitly that their recoveries would depend on the amount of claims that were “actually filed and allowed.”
The trustee objected to the claim six months after confirmation. The creditor conceded that the claim was barred by the statute of limitations but argued that confirmation of the plan was res judicata on the allowance of the claim.
Judge Michael, of Tulsa, Okla., disagreed with the creditor in his June 21 opinion, noting that the case before him demonstrated how a chapter 13 plan can be confirmed before the bar date. Indeed, he said, the first confirmation hearing is always held before the bar date.
It is therefore “illogical,” Judge Michael said, to argue that confirmation can be a final order allowing claims that are not yet filed. He also noted that the Bankruptcy Rules contain no deadline for the filing of claim objections in chapter 13.
On the res judicata issue, Judge Michael found nothing in the plan or in the confirmation order that “operates as a final order allowing all unsecured claims.” He suggested that res judicata cannot apply because claim allowance was not part of the confirmation process.
Judge Michael approvingly cited the Sixth Circuit Bankruptcy Appellate Panel’s 2003 opinion in In re Morton, which reached the same conclusion.