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In re Banks - 161 B.R. 375 (Bankr. S.D. Miss. 1993)


11 U.S.C.S. § 1329(a)(1) provides that the plan may be modified to increase or reduce the amount of payments on claims of a particular class provided for by the plan. This section does not state that the plan may be modified to increase or reduce the amount of claims. This is of significance in relation to secured claims. Such claims are secured claims to the extent of the value of the collateral in accordance with § 506(a) of the Bankruptcy Code. Valuation of secured claims is adjudicated by the order of confirmation. A debtor's confirmed plan is res judicata as to claims determinations. 11 U.S.C.S. § 1329(a) does not provide for modification upon the request of a secured creditor, but only upon the request of the debtor, the trustee or the holder of an allowed unsecured claim.


Debtor Jacqueline Banks filed a petition for relief under Chapter 13 of Title 11 of the United States Code, scheduling Mercury Finance Company as a creditor secured by a 1985 Ford Escort Station Wagon. The Debtor's Chapter 13 plan was confirmed by the Court on June 1, 1992. The plan provided that Mercury was to receive the value of its collateral, stated in the plan as $1,125.00 plus the contract rate of interest through the debtor's chapter 13 plan payments. Unsecured creditors were to receive 10% under the plan. After confirmation, the engine in the vehicle began to emit excessive smoke through its exhaust system. Thereafter, Debtor filed a motion for modification of her plan proposing that Mercury’s collateral be abandoned. Mercury filed an objection to the proposed modification asserting that it violated 11 U.S.C. § 1127, which provided that the confirmed plan shall bind the creditor and the debtor.


Can the debtor modify her confirmed plan to surrender collateral that had diminished in value to the secured creditor?




The court concluded that the mechanical problems with Debtor's vehicle did not qualify as a justifiable basis upon which the Debtor should be allowed to modify her confirmed plan. Evidence at the hearing revealed that the debtor was currently paying both the payments on her newly acquired car as well as plan payments to the trustee. The court could not conclude that there was sufficient justification found in the Bankruptcy Code for allowing the Debtor to shift the burden of unexpected collateral depreciation to the creditor, after confirmation of the Debtor's plan, particularly when the creditor had already experienced a cramdown of valuation at the time of confirmation. The court thus denied the Debtor's request for modification of her confirmed Chapter 13 plan.

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