In Re: Perry

Background

Bruce D. Perry filed a Chapter 13 bankruptcy petition on July 29, 2019. His amended repayment plan proposed payments of $575 per month for 60 months, totaling $34,500. In calculating his monthly expenses, Perry listed a $2,000 monthly payment for an RV. The record appeared to show secured claims totaling $429,657.80 and unsecured claims totaling $427,103.70.

The Standing Chapter 13 Trustee, Krista Preuss, objected at the plan-confirmation hearing. She argued that Perry’s unsecured debts exceeded the statutory debt limit for Chapter 13 cases and that the RV payment was an improper luxury expense. The Bankruptcy Court did not consider the substance of those objections because the Trustee had not timely submitted them in writing. It confirmed the plan and later denied the Trustee’s motion to reargue. The Trustee appealed to the District Court.

Issues and arguments

The appeal concerned whether the Bankruptcy Court erred by dismissing the Trustee’s objections and confirming the plan without considering them. Perry argued that the $245,403.91 claim held by LVNV Funding, LLC should not count toward the Chapter 13 debt limit because he considered it disputed and unliquidated.

Court’s analysis

The District Court explained that the Bankruptcy Code requires a bankruptcy court to confirm a Chapter 13 plan only if it complies with applicable provisions of the Code. Under the Supreme Court’s decision in Espinosa, a bankruptcy court has an independent obligation to identify and correct defects in a proposed plan, even when no party raises the issue.

The District Court held that the absence of a timely written objection did not establish that Perry’s plan satisfied the statutory requirement that his noncontingent, liquidated, unsecured debt be below the Chapter 13 limit. The Bankruptcy Court had not decided on the merits whether the LVNV claim counted toward that limit; it had declined to consider the issue because of the timing of the Trustee’s objection.

The District Court also rejected Perry’s reliance on Bankruptcy Rule 3015(f). That rule may allow a court to determine that a plan was proposed in good faith without receiving evidence when no timely objection is filed, but it did not eliminate the Bankruptcy Court’s duty to ensure that the plan facially complied with the Bankruptcy Code. The District Court further noted that the Bankruptcy Code requires a Chapter 13 trustee to appear and be heard at hearings concerning plan confirmation. Although the Trustee’s delay in raising her concerns was criticized, that delay did not relieve the Bankruptcy Court of its independent duty to evaluate the plan.

The District Court left the merits of the debt-limit issue and the Trustee’s other arguments for the Bankruptcy Court to consider in the first instance. It did not itself decide whether the LVNV claim was liquidated, whether it should be counted, or whether the RV expense was allowable.

Disposition

Judge Cathy Seibel reversed the Bankruptcy Court’s decision and remanded the case to the Bankruptcy Court for further proceedings consistent with the District Court’s opinion. The District Court also denied Perry’s request for oral argument and directed the Clerk to close the District Court case.