In Re: Pecoraro

Background

Charles A. Pecoraro filed a Chapter 13 bankruptcy petition in 2017. His confirmed plan required 60 monthly payments and included payment of a $5,581.02 priority tax claim and approved attorney’s fees of $11,983.61.

After confirmation, Pecoraro’s counsel received an additional award of $4,138.50 in fees and $121.96 in expenses. The bankruptcy court advised Pecoraro that the plan would need to be modified because the additional fees made it financially infeasible. Pecoraro did not move to amend the plan before it expired in January 2022.

The Chapter 13 trustee later moved to dismiss the case for cause under 11 U.S.C. § 1307(c), arguing that the plan was financially infeasible. Pecoraro offered to pay $3,641.09 to cover the shortfall. The bankruptcy court dismissed the case on April 14, 2022, and later denied Pecoraro’s motion to reconsider.

Arguments on Appeal

Pecoraro argued that the bankruptcy court dismissed his case improperly and failed to recognize his right to cure the shortfall under the plan’s “Funding Shortfall” provision. That provision stated that the debtor would cure any funding shortfall before the plan was deemed completed. Pecoraro also asked the district court to restore the case so that the shortfall could be paid and he could receive a discharge.

The trustee argued that Pecoraro had failed to amend the plan during the 60-month statutory period, even though he and his counsel had known for more than a year that the additional fees made the plan infeasible. The trustee also argued that allowing payment without a formal plan amendment could permit additional obligations not included in the confirmed plan to be paid without required safeguards.

Ruling

Judge Roman agreed with the trustee. The court held that a bankruptcy court may dismiss a Chapter 13 case for cause when a debtor unjustifiably fails to amend a plan that has become financially infeasible. Because Pecoraro did not amend the plan after being told that the additional fees made it infeasible, and did not act until three months after the plan expired, the bankruptcy court did not abuse its discretion by dismissing the case.

The court also rejected Pecoraro’s reliance on a Third Circuit decision concerning a shortfall involving obligations contemplated by the confirmed plan. Here, the additional post-confirmation attorney’s fees were not contemplated by the plan, so the bankruptcy court appropriately required a plan amendment under 11 U.S.C. § 1329.

The court’s discussion states that it “DISMISSES” Pecoraro’s bankruptcy appeal, while the conclusion states that the bankruptcy court’s decision is “AFFIRMED” and directs the clerk to close the case. The opinion therefore both describes dismissal of the appeal and expressly affirms the underlying bankruptcy-court decision.