Sorry, Can’t Confirm Plan If You’re Dead

Posted by NCBRC - August 23, 2022

A debtor who has shuffled off this mortal coil cannot confirm a chapter 13 plan where he has no ability to fund it with future income and no need for the fresh start offered by bankruptcy discharge. In re Carrasco, No. 21-51420 (Bankr. W.D. Tex. July 19, 2022).

In this case, the debtor died after the meeting of the creditors, but before his proposed chapter 13 plan had been confirmed. The debtor’s counsel lobbied to substitute the debtor’s son to confirm the plan notwithstanding the fact that the debtor himself had ridden the carriage into immortality. The trustee objected to confirmation.

Rule 1016 provides that upon the death of the debtor “if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death . . .  had not occurred.” The court found that administration of a chapter 13 case requires a confirmed plan. With this in mind, the court looked to the elements necessary for confirmation as outlined in section 1325(a), including that the debtor will be able to fund and comply with the plan. In chapter 13, plans are funded by ongoing income and, as the court pointed out in In re Shepherd, 490 B.R. 338, 340 (Bankr. N.D. Ind. 2013), once a debtor has translated his life into death, he no longer has the earning power to fund a plan.

Moreover, the benefits of a chapter 13 discharge are personal to the debtor and there is no bankruptcy provision for substituting another entity in the event the debtor passes that short sleep into eternity. Given that the debtor here lost the ability to fund a plan out of future income, the court found the elements of section 1325(a) for confirmation could not be met.

In short, though the debtor may rage, rage against the dying of the light, once that battle is lost, so goes his right to confirm a chapter 13 plan.

The court sustained the trustee’s objection to confirmation and dismissed the case.

Carrasco Bankr WD Tex July 2022


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