Debtor Loses the Battle but Wins the War

Posted by NCBRC - April 23, 2021

A confirmed plan binds the county tax creditor even though the plan did not provide for the interest claimed in its post-confirmation proof of claim where the county had notice of the plan and failed to object to confirmation. In re Bird, 624 B.R. 841 (Bankr. N.D. Ill., Feb. 2, 2021) (case no. 1:17-bk-2072).

The debtor filed for chapter 13 bankruptcy and submitted a plan proposing to pay overdue county taxes of $56,059.79 at 0% interest. Though the county had notice of the proposed treatment of its debt, it did not object, and the plan was confirmed. Nearly a month later, the county submitted a proof of claim for $35,448.86 plus interest at 18%. The debtor completed her plan payments according to the confirmed plan. But the county website showed that she still owed $13,069.01, representing the amount of interest that would have accrued under the county’s proof of claim. The debtor moved for an extension of time to file a modified claim for the county which would allow her to extend her plan to pay this amount.

The bankruptcy court denied the debtor’s motion based on section 1327(a) which provides that “[t]he provisions of a confirmed plan bind the debtor and each creditor whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, accepted, or has rejected the plan.” So long as the creditor received adequate notice of the proposed treatment of its claim prior to confirmation, section 1327(a) has a res judicata effect, binding the creditor to the terms of the plan. This principle was reinforced in United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260, 130 S.Ct. 1367, 176 L.Ed.2d 158 (2010).

The court found that the county received due process and neither the creditor nor the debtor had the right to modify the plan to include the increased tax debt claimed by the county. It denied the debtor’s motion for extension of time, stating “the amounts listed on the County’s website for the tax years in question are discharged as Cook County has received payment in full under the confirmed plan.”

Bird Bankr ND Ill


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