In a published opinion, the Fourth Circuit affirmed the denial of confirmation of an above-median Chapter 13 debtor’s plan that proposed to pay off three recently purchased vehicles while paying unsecured creditors less than eight cents on the dollar. In Goddard v. Burnett, No. 25-1303 (4th Cir. Apr. 28, 2026), the court held that technical compliance with the disposable-income test under Section 1325(b) does not insulate a plan from the separate good-faith requirement of Section 1325(a)(3). This ruling creates a circuit split on this issue with the case of Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013).
[Read more…] about Fourth Circuit Holds Good-Faith Review May Consider Whether Secured Property Is Necessary for Above-Median Chapter 13 DebtorsNinth Circuit Allows Section 524(i) Discharge-Violation Claim to Proceed Against Mortgage Creditors
In an unpublished memorandum disposition, the Ninth Circuit affirmed a Bankruptcy Appellate Panel decision reviving Chapter 13 debtors’ claim that their mortgage creditors violated the discharge injunction by failing to properly credit payments made under their confirmed plan. In Valdellon v. PHH Mortgage Corp., No. 25-538 (9th Cir. Apr. 20, 2026), the court held that the debtors plausibly stated a claim under Section 524(i) and that emotional distress damages may be available as a civil contempt remedy for violation of the discharge injunction.
Read more: Ninth Circuit Allows Section 524(i) Discharge-Violation Claim to Proceed Against Mortgage CreditorsThe court affirmed the BAP’s order in full. Judge R. Nelson concurred in part and dissented in part, agreeing that the debtors stated a Section 524(i) claim but disagreeing that emotional distress damages are available for discharge-injunction contempt.
This disposition is not precedential except as provided by Ninth Circuit Rule 36-3.
NCBRC and NACBA filed a joint amicus brief, authored by D. Eitan Arom and Daniel J. Bussel of KTBS Law, urging the court to affirm the Bankruptcy Appellate Panel’s (BAP) ruling. The brief highlights the long-standing historical basis for compensatory contempt remedies—including emotional-distress damages—and emphasizes the importance of meaningful enforcement of the Chapter 13 fresh start.
Facts
Melanio and Ellen Valdellon filed a Chapter 13 bankruptcy case. During the case, their mortgage debt was serviced or held by PHH Mortgage Corporation and Wells Fargo Bank, N.A. The Chapter 13 trustee filed a Notice of Completion of Plan Payments and Notice of Final Cure Payment on September 27, 2019. The creditors responded on October 18, 2019, agreeing that the debtors had cured the prepetition arrears in full and were current on their post-petition monthly mortgage payments.
The bankruptcy court entered the debtors’ discharge on June 1, 2020.
The debtors later filed an adversary proceeding alleging that the creditors violated the discharge injunction. They brought their claim under Section 524(i), which treats a creditor’s willful failure to properly credit payments received under a confirmed plan as a violation of the discharge injunction, unless the plan is in default.
The bankruptcy court dismissed the debtors’ second amended complaint for failure to state a claim. The BAP reversed and remanded, holding that the debtors had plausibly alleged a Section 524(i) violation and that emotional distress damages may be available as a contempt remedy. The creditors appealed.
The Ninth Circuit’s Analysis
The Ninth Circuit first held that it had jurisdiction to review the BAP’s decision even though the BAP had remanded the case to the bankruptcy court. The court concluded that the BAP’s order resolved discrete legal issues affecting the parties’ substantive rights: whether the debtors had stated a Section 524(i) claim and whether emotional distress damages could be available. Immediate review, the court explained, would avoid piecemeal litigation and prevent the parties from having to climb the appellate ladder again on the same legal issues.
On the merits, the Ninth Circuit agreed with the BAP that the bankruptcy court erred in dismissing the Section 524(i) claim.
The court explained that creditors may not willfully fail to credit payments received under a bankruptcy plan unless the plan is in default. Doing so violates the discharge injunction. The debtors alleged that they paid the full arrearage amount required under the plan, and that the creditors nevertheless failed to give those payments their curative effect. Those allegations were enough to state a claim.
Crediting payments under the plan requires more than merely accepting payments from the trustee; creditors must apply the payments to the debt in the manner directed by the plan. When a plan provides for a cure of prepetition arrears and maintenance of ongoing mortgage payments, the creditor must reinstate the loan and treat prepetition arrears as satisfied upon completion of plan payments. Section 524(i) serves to ensure that creditors abide by the terms of the plan and allow debtors to exit bankruptcy current on their mortgage, owing no past due amounts.
Conditioning relief under § 524(i) on a debtor’s ability to show a specific misapplication of cure payments would obviate the statute’s purpose in cases where the creditor refuses reinstate a loan and effectuate a cure of prepetition arrears. Thus, even if PHH applied every cure payment to the outstanding loan balance, it could still willfully fail to “credit” those payments if it intentionally did not give them the curative effect required by the plan.
The creditors argued that the debtors were in default because some payments were made outside the sixty-month plan term. The Ninth Circuit rejected that argument. The court distinguished In re Kinney, where the bankruptcy case had been dismissed without a discharge after the debtors failed to make required payments. Here, by contrast, the debtors completed the payments required under the plan, the creditors did not object to the trustee’s notice of final cure, and the bankruptcy court entered a discharge. That discharge was final.
Because the bankruptcy court had entered a discharge, the Ninth Circuit reasoned, the plan could not be treated as still in default for purposes of barring Section 524(i) relief. The court held that the debtors plausibly alleged that the creditors failed to treat the arrears as satisfied and failed to reinstate the loan after completion of the plan.
Emotional Distress Damages
The Ninth Circuit also affirmed the BAP’s holding that emotional distress damages may be available as a civil contempt remedy for violation of the discharge injunction.
The creditors argued that Taggart limited contempt remedies to traditional civil contempt remedies and that emotional distress damages were not available. The majority disagreed. It read Taggart as addressing when civil contempt is appropriate, not as limiting the range of compensatory remedies available once contempt is established.
The court relied in part on the BAP’s decision in In re Marino and on traditional equity principles, recognizing that civil contempt remedies are designed to compensate the injured party. The majority concluded that full and equitable relief in the discharge-injunction context may include damages for emotional distress, especially in light of the fresh-start purpose of bankruptcy discharge.
The court stressed that it was not deciding whether emotional distress damages should actually be awarded in this case, or in what amount. It held only that such damages are not categorically unavailable.
Result
The Ninth Circuit affirmed the BAP’s order in full. The debtors’ Section 524(i) discharge-violation claim may proceed, and emotional distress damages remain available as a potential civil contempt remedy if the debtors prove a violation of the discharge injunction.
The opinion was issued on April 20, 2026.
Opinion and Briefs
Fourth Circuit Rejects Equitable Mootness in Chapter 13 Plan Confirmation Appeal
In a published opinion, the Fourth Circuit held that a district court erred in dismissing a Chapter 13 debtor’s appeal as equitably moot merely because a later plan had been confirmed and payments had begun. In Cook v. Chapter 13 Trustee, No. 25-1048 (4th Cir. Apr. 13, 2026), the court emphasized that equitable mootness is a narrow, pragmatic doctrine reserved for cases where effective relief is no longer practical or would be inequitable. The court concluded that the doctrine did not apply in a straightforward individual Chapter 13 case involving limited creditors, limited assets, and only prospective relief.
[Read more…] about Fourth Circuit Rejects Equitable Mootness in Chapter 13 Plan Confirmation AppealFourth Circuit Affirms Denial of Arbitration in Automatic Stay Action Against Goldman Sachs
In a 2-1 opinion, the Fourth Circuit held that a bankruptcy court may refuse to compel arbitration of a debtor’s claim for willful violation of the automatic stay under Section 362(k) where arbitration would conflict with the purposes of the Bankruptcy Code. In Goldman Sachs Bank USA v Brown, the court concluded that sending the debtors’ stay-violation claims to arbitration would interfere with the bankruptcy court’s authority to enforce the stay, undermine the centralized resolution of bankruptcy disputes, and dilute one of the Code’s core protections for debtors.
[Read more…] about Fourth Circuit Affirms Denial of Arbitration in Automatic Stay Action Against Goldman SachsNCBRC Releases 2025 Year in Review
The National Consumer Bankruptcy Rights Center is pleased to announce the publication of its 2025 Year in Review, highlighting a year of sustained appellate advocacy, national collaboration, and meaningful impact on consumer bankruptcy jurisprudence. The full report is available here: NCBRC 2025 Year in Review.
Read more: NCBRC Releases 2025 Year in ReviewIn 2025, NCBRC’s advocacy reached seven federal circuits and the United States Supreme Court. Through amicus participation, moot courts, case monitoring, and direct collaboration with debtors’ counsel, NCBRC engaged in cases addressing exemptions, Chapter 13 plan feasibility and modification, discharge enforcement, arbitration, and the scope of bankruptcy court authority. Over the course of the year, the organization published more than 28 substantive case-law and advocacy updates and strengthened its Board of Directors with the addition of two distinguished attorneys.
The Year in Review details NCBRC’s work in significant matters such as Warfield v. Nance, Bronitsky v. Saldana, Conte v. Hill, Mission Hen, LLC v. Lee, and Valdellon v. Wells Fargo, among many others. It also outlines the organization’s continued efforts to preserve the integrity of the fresh start, protect exemptions, defend Chapter 13 as a viable reorganization tool, and resist efforts to privatize core bankruptcy remedies through arbitration.
As NCBRC looks ahead to 2026, several major appellate matters are already underway. With the continued support of debtors’ counsel nationwide, board members, and contributors, NCBRC remains committed to shaping bankruptcy law in ways that protect consumer debtors and promote fairness and uniformity in the federal appellate courts.
We invite practitioners, supporters, and members of the bankruptcy community to read the full 2025 Year in Review and join us in advancing the rights of consumer debtors nationwide.
NCBRC Files Amicus in Seventh Circuit to Protect Payment of Debtor’s Counsel in Chapter 13
The National Consumer Bankruptcy Rights Center (NCBRC), joined by the National Association of Consumer Bankruptcy Attorneys (NACBA) and two standing Chapter 13 trustees (Tracy L. Updike, Chapter 13 Trustee for the Northern District of Indiana and Thomas H. Hooper, Chapter 13 Trustee for the Northern District of Illinois), has filed an amicus brief in the Seventh Circuit in In re City of Chicago, (Falkner & Alayah), Nos. 25-2878 & 25-2879. The brief urges affirmance of confirmation orders that permitted payment of debtor’s counsel before distributions to unsecured creditors. At issue is a sweeping and unprecedented argument by the City of Chicago that, if accepted, would fundamentally alter Chapter 13 practice across the country — and effectively make Chapter 13 relief unavailable to many consumer debtors. The brief was drafted by NCBRC Board Member Thomas Moers Mayer of Herbert Smith Freehills Kramer (US) LLP.
Read more: NCBRC Files Amicus in Seventh Circuit to Protect Payment of Debtor’s Counsel in Chapter 13The Issue
The City argues that in below-median Chapter 13 cases, administrative expenses — including court-approved debtor’s attorney fees — cannot be paid until unsecured creditors first receive three years of “disposable income.” In other words, Chicago contends that debtor’s counsel must wait behind general unsecured creditors for payment. The Bankruptcy Court rejected that argument and confirmed the plans. The City appealed.
Why This Matters
This is not a narrow dispute about plan drafting. The City’s theory would:
- Subordinate administrative expenses to general unsecured claims — something Congress has never done in modern bankruptcy law.
- Conflict directly with §§ 1322(a)(2) and 1326(b), which require payment of administrative expenses and trustee fees.
- Make it economically impossible for many debtors to obtain Chapter 13 counsel unless they could pay all fees up front.
- Threaten the viability of Chapter 13 practice in the Seventh Circuit.
As the amicus brief explains, more than half of Chapter 13 debtors are below-median income. If counsel cannot be paid through the plan in the ordinary course, Chapter 13 relief becomes unattainable for tens of thousands of families seeking to save homes and vehicles.
The Absurd Consequences of Chicago’s Position
Perhaps most strikingly, the City’s theory would also:
- Prevent payment of secured prepetition domestic support obligations during the commitment period.
- Elevate municipal parking fines above support obligations and administrative expenses.
- Allow charitable contributions while prohibiting payment of court-approved attorney fees.
Such results are incompatible with the structure of Chapter 13 and Congress’s clear priority scheme.
Why NCBRC Filed An Amicus Brief
NCBRC regularly files amicus briefs in cases that threaten the structural integrity of consumer bankruptcy practice. This appeal presents exactly that risk.
If administrative expenses cannot be paid in the ordinary course:
- Debtors will be unable to obtain counsel.
- Chapter 13 filings will decline.
- Home-saving reorganizations will become rare.
That is not what Congress enacted, and it is not how Chapter 13 has functioned for decades.
What’s Next
The case is now before the Seventh Circuit. A decision will have significant implications for Chapter 13 practice not only in Illinois, Indiana, and Wisconsin, but potentially nationwide.
NCBRC will continue to monitor developments and provide updates.
Briefs
Amicus Brief of NCBRC, NACBA, Trustee Updike & Trustee Hooper
Appellant City of Chicago’s Brief
Appellees/Debtors Brief written by Michael S. Miller of The Semrad Law Firm LLC
NCBRC Urges Supreme Court to Decide Bad Faith Narrowly in Keathley—Without Expanding Disclosure Duties
The National Consumer Bankruptcy Rights Center (NCBRC), joined by the National Consumer Law Center (NCLC) and the National Association of Consumer Bankruptcy Attorneys (NACBA), has filed an amicus curiae brief in Keathley v. Buddy Ayers Construction, Inc., a case now before the United States Supreme Court that could significantly reshape how judicial estoppel is applied in consumer bankruptcy cases. The Court is being asked to decide whether debtors may be barred from pursuing otherwise valid claims based on rigid, punitive presumptions of bad faith—rather than an equitable, fact-specific inquiry—when a claim was not disclosed during a Chapter 13 case.
For debtor’s counsel, the stakes are high: the Court’s decision may determine whether honest mistakes or unsettled disclosure rules can be transformed into case-ending sanctions that benefit civil defendants at the expense of both debtors and creditors.
[Read more…] about NCBRC Urges Supreme Court to Decide Bad Faith Narrowly in Keathley—Without Expanding Disclosure DutiesNinth Circuit to Address Scope of § 524(i) and Discharge Remedies in Valdellon v. Wells Fargo
The Ninth Circuit is poised to address a set of important issues at the intersection of Chapter 13 practice and discharge enforcement in Valdellon v. Wells Fargo. The appeal challenges how § 524(i) applies when a mortgage servicer fails to honor the cure-and-maintain structure of a confirmed Chapter 13 plan and asks whether emotional-distress damages remain available as a contempt remedy after Taggart v. Lorenzen. The outcome will directly affect the reliability of Notices of Final Cure, the finality of the discharge order, and the remedies available to protect debtors from unlawful post-discharge collection efforts.
[Read more…] about Ninth Circuit to Address Scope of § 524(i) and Discharge Remedies in Valdellon v. Wells FargoMichigan Court of Appeals Orders Presentation of Passed Bills, Including Critical Bankruptcy-Exemption Modernization Measure
In a significant constitutional and consumer-protection decision, the Michigan Court of Appeals held that nine bills duly enacted by both chambers of the Legislature—including HB 4901, the long-awaited modernization of Michigan’s bankruptcy exemptions—must be presented to the Governor for consideration. The opinion, released October 27, 2025, reverses the Court of Claims and directs issuance of a writ of mandamus compelling presentment.
[Read more…] about Michigan Court of Appeals Orders Presentation of Passed Bills, Including Critical Bankruptcy-Exemption Modernization Measure5th Circuit Holds That The 30-Day Window To Object to Exemptions in Rule 4003(b)(1) Can Be Waived
In Langston v. Dallas Commodity Company, No. 24-10883 (5th Cir. Nov. 17, 2025), the U.S. Court of Appeals for the Fifth Circuit addressed a recurring challenge in consumer bankruptcy practice: what happens when a trustee fails to properly continue a Section 341 meeting of creditors under Federal Rule of Bankruptcy Procedure 2003(e)? While the court affirmed that such procedural failures do not automatically trigger a bright-line rule concluding the meeting, it established important precedent distinguishing between cases where another meeting is actually held versus cases where no further meeting occurs. Most significantly for practitioners, the decision underscores how easily debtors can waive the protections of the 30-day deadline to object to exemptions under Rule 4003(b)(1)—and provides a roadmap for avoiding such waivers.
[Read more…] about 5th Circuit Holds That The 30-Day Window To Object to Exemptions in Rule 4003(b)(1) Can Be Waived