Creditor Could Not Object to Modification that Did Not Change Treatment of its Loan

Posted by NCBRC - July 8, 2022

A creditor that fails to object to treatment of its loan in the debtor’s proposed chapter 13 plan cannot object to modification of that plan where the modification did not change treatment of its loan. In re Powell, No. 21-3069 (Bankr. D.S.C May 16, 2022).

The debtor filed for chapter 13 bankruptcy listing a $22,214.00 debt to World Omni Financial Corp. secured by her Toyota Camry. The contract interest rate for the loan was 0.0% and her plan proposed to pay the entire secured debt with no interest. The creditor did not object to treatment of its loan in the plan. The trustee, however, objected to the plan for its treatment of a different debt, and the court ordered the debtor to modify and resubmit. In her modified plan, the debtor did not change her treatment of the vehicle loan. Only then did the creditor object. It sought to have the debt repaid with an interest rate at one percent over the prime rate in accordance with Till v. SCS Credit Corp., 541 U.S. 465 (2004).

The court cited the local rules stating that “[a] party in interest objecting to the interest rate proposed in a chapter 13 plan or modified plan must do so before expiration of the deadline for objecting to the plan or modified plan in which the interest rate is first proposed.” The court noted that, under section 1325(a)(5)(A), a creditor’s failure to raise a timely objection to a proposed plan constitutes acceptance of that plan. Further, “[u]nder § 1323(c), any secured creditor that has accepted the plan is deemed to have accepted the plan as modified, unless the modification changed that creditor’s rights from its treatment in the previous plan.”

In this case, the creditor received notice of the original proposed plan in which its loan was treated at 0.0% interest. It failed to raise a timely objection. Having accepted the treatment of its loan in the original plan, the creditor could not then object to the modified plan that did not alter that treatment.

The court confirmed the debtor’s modified plan.

Powell Bankr SC May 2022


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