In re Sundrea Gordon
- William Orrick
- 3:21-cv-00643
- U.S. District Court · Northern District of California
- 15
In In re Sundrea Gordon, Judge Orrick affirmed requiring quarterly payment reports and upheld two bankruptcy-court orders about Gordon’s Chapter 13 plan.
Sundrea Gordon and Chapter 13 debtors in the Northern District of California who make covered payments directly to creditors, as well as the Chapter 13 trustee and bankruptcy court monitoring those payments.
What happened
In In re Sundrea Gordon, Sundrea Gordon appealed two bankruptcy-court orders concerning her Chapter 13 repayment plan. One order denied confirmation because the plan would have automatically ended required reports about direct mortgage payments; the other confirmed a revised plan after she removed that language.
The district court considered whether General Order 34 could require Chapter 13 debtors who pay certain creditors directly, rather than through the trustee, to submit quarterly declarations and proof of payment. Gordon argued that the order added duties not authorized by federal bankruptcy law and that the reporting requirement should end after she paid her mortgage arrears.
Judge William H. Orrick held that General Order 34 is a procedural reporting requirement, not a change to Gordon’s substantive payment obligations, and that it is consistent with federal bankruptcy law. He affirmed both bankruptcy-court orders.
The detailed version
- In re Sundrea Gordon · No. 3:21-cv-00643
- William Orrick
- July 15, 2021
Background
Sundrea Gordon filed for Chapter 13 bankruptcy in the Northern District of California. Her First Amended Chapter 13 Plan proposed that she make mortgage payments directly to a Class 1 creditor instead of having those payments pass through the Chapter 13 trustee. This is called a non-conduit plan.
General Order 34 requires debtors using non-conduit payment provisions to file declarations, signed under penalty of perjury, and documentary proof showing that they made their direct payments. Before confirmation, the filings are due before relevant hearings; after confirmation, the declarations are due quarterly for the duration of the plan. The order allows the bankruptcy court to deny confirmation or dismiss a case when the debtor is not current on the required payments.
Gordon’s First Amended Plan included the reporting language but also stated that the declarations would automatically stop after November 2020, when she expected to finish paying her mortgage arrears. The Chapter 13 trustee objected, arguing that Gordon could not prospectively eliminate the reporting requirement without seeking to modify the plan. The bankruptcy court denied confirmation of the First Amended Plan. Gordon then filed a Second Amended Plan removing the automatic-termination language and requiring reporting for the full duration of the plan. The bankruptcy court confirmed that revised plan.
Gordon appealed both orders. She argued that General Order 34 imposed an additional duty not found in the Bankruptcy Code, conflicted with the statutory requirements for confirming a Chapter 13 plan, and conflicted with the debtor-reporting duties in 11 U.S.C. § 521. She also argued that reporting should not be required after the mortgage arrears were paid.
Court’s Analysis
The district court held that the appeal concerned the validity of a procedural reporting requirement. It rejected Gordon’s reliance on the Ninth Circuit’s decision in In re Sisk, explaining that Sisk addressed a proposed plan term that substantively changed the plan’s duration. General Order 34, by contrast, did not change the amount, frequency, or duration of Gordon’s required payments. It required proof that she was meeting payment obligations already included in her plan.
The court concluded that Federal Rule of Bankruptcy Procedure 9029 and the Rules Enabling Act authorized the bankruptcy court to regulate practice through a general order, so long as the order was consistent with federal law and did not alter substantive rights. General Order 34 helped the trustee and the court monitor direct payments that otherwise would not pass through the trustee’s hands.
The court also rejected Gordon’s argument under 11 U.S.C. § 1325(a). That provision requires a debtor to be able to make all payments under the plan and comply with the plan. The court reasoned that the reporting requirement provided assurance of the plan’s feasibility in a non-conduit case rather than adding an incompatible confirmation condition.
The court further held that 11 U.S.C. § 521 was not the exclusive method for the trustee to obtain information about a debtor’s financial activity. General Order 34 supplied a compatible method for obtaining regular proof of direct payments. The court acknowledged that preparing the declarations could impose costs but agreed with the bankruptcy court that the costs did not invalidate the reporting requirement.
Finally, the court rejected Gordon’s proposed ten-month exemption. It reasoned that continued reporting helped the trustee identify payment problems while the plan could still be modified and helped ensure that debtors using non-conduit plans received treatment comparable to debtors using conduit plans.
Disposition
Judge William H. Orrick affirmed the bankruptcy court’s Order Denying Confirmation of the First Amended Chapter 13 Plan and Order Confirming the Second Amended Chapter 13 Plan. The court therefore upheld General Order 34’s requirement that applicable non-conduit Chapter 13 debtors provide quarterly declarations and proof of their direct payments for the duration of the plan.
Read the full 15-page opinion on CourtListener, the free public archive maintained by the Free Law Project.