National Consumer Bankruptcy Rights Center

Protecting The Rights Of Consumer Debtors In Bankruptcy

NCBRC News

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Eleventh Circuit Upholds the Bankruptcy Court’s Discretion to Deny Trustee’s Plan Modification Based on Postpetition PI Proceeds

In Conte v. Hill, No. 24-10264, the U.S. Court of Appeals for the Eleventh Circuit affirmed a bankruptcy court’s order denying a Chapter 13 trustee’s motion to modify two confirmed plans to require turnover of post-confirmation personal injury settlement proceeds. The injuries in both cases occurred post-petition. The Eleventh Circuit affirmed that plan modification remains a discretionary determination for the bankruptcy court.

The Case Below

In each of the consolidated cases, the debtor received modest personal injury settlements—$7,685 in Proffitt and $19,685 in Hill/Boutwell—after their Chapter 13 plans had been confirmed. Chapter 13 Trustee Christopher Conte moved to modify the confirmed plans under 11 U.S.C. § 1329(a), seeking to require the debtors to turn over the settlement proceeds to increase payments to unsecured creditors.

After an evidentiary hearing, the bankruptcy court found that both debtors were contributing all their disposable income to the plan and that the insurance proceeds were needed to meet immediate family needs, including vehicle replacement and medical-related expenses. The court denied the motions to modify, finding that (1) the Bankruptcy Code did not require the court to modify the debtors’ bankruptcy plans to account for the post-petition personal-injury net settlement proceeds, and 2) the settlement proceeds did not increase the debtors’ ability to pay their unsecured creditors’ claims. Thus, the bankruptcy court found “no legitimate reason for the modification requested by the trustee” and denied the motions, invoking its discretionary authority.

The district court affirmed, and the trustee appealed to the Eleventh Circuit.

Appellant Trustee’s Position

Trustee Conte argued that the receipt of post-confirmation personal injury proceeds increased the debtors’ ability to pay and triggered a mandatory obligation to increase payments to unsecured creditors. Among several other arguments, the trustee alleged the following errors.

  • The bankruptcy court erred in concluding that non-exempt settlement proceeds received from post-petition personal injury claims are not “income” within the meaning of “disposable income” under Code § 1325(b).
  • The bankruptcy court erred in concluding that the settlement proceeds were not “new assets” that increased the Debtors’ ability to pay because the Debtors gave “consideration” for the post-petition personal injury settlement proceeds in the form of their injury, pain, and suffering.

Debtors’ Position

The debtors argued that modification is discretionary under § 1329 and that the trustee had not demonstrated a sufficient change in financial condition warranting increased payments. The debtors in these cases were represented by NACBA member Lacy S. Robertson of Padgett & Robertson in Mobile, Alabama.

They emphasized that:

  • Under § 1329 the court is not required to approve a plan modification even where both the disposable income and liquidation tests can only be met by payment of settlement proceeds to the unsecured creditors as an additional payment.
  • The settlement proceeds are not income, but are assets, and therefore § 1325(b) does not apply.
  • The Bankruptcy Code does not mandate that § 1325(b)’s means test or § 1325(a)(4)’s liquidation test be reapplied at modification.
  • The bankruptcy court is not required to allow a modification under § 1329 and may use its discretion.

NCBRC and NACBA Position

In their amici brief, NCBRC and NACBA urged the Eleventh Circuit to affirm the district and bankruptcy courts and to reject the trustee’s attempt to impose mandatory reapplication of confirmation tests at modification. The amicus brief was filed by NCBRC and NACBA and prepared by Thomas Moers Mayer of HSF Kramer LLP. Tom also participated in the oral argument.

The amici argued that:

  • The Chapter 13 plan may be modified based on an increase or decrease in ability to pay as determined in the discretion of the bankruptcy court.
  • Section 1325(a)(4) does not reset the liquidation value at modification.
  • Section 1325(b) does not apply to plan modifications.
  • The bankruptcy court had discretion to deny modification under § 1329.
  • The trustee did not carry his burden of proof in connection with the motions to modify the chapter 13 plans.

Outcome

The Eleventh Circuit affirmed. The court side-stepped the issue of whether § 1329 mandates that either the best interests of creditors test or the means test be reapplied at plan modification. Instead, it found that the bankruptcy court did not abuse its discretion in denying the trustee’s motions because the settlement proceeds did not increase the debtors’ ability to pay their unsecured creditors in a way sufficient to justify approval of the trustee’s proposed modification.

“The trustee disagrees and asserts that the bankruptcy court erred in its judgment because the settlement proceeds increased the debtors’ ability to pay their unsecured creditors. We have explained, however, that while “an unforeseen change in circumstances is a good reason to permit a modification that … satisfies § 1329,” modification is not required: “[n]othing prevents a bankruptcy court from refusing to confirm a modified plan put before it.” Guillen, 972 F.3d at 1229 (emphasis added).”

The decision preserves a flexible, debtor-protective approach to post-confirmation modifications and underscores the discretion of bankruptcy courts to evaluate proposed changes holistically under § 1329.

Briefs and Opinion

Appellant/Trustee’s Brief

Appellee/Debtors Brief

Amici Brief – NCBRC/NACBA

Opinion

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Eighth Circuit Ducks Issue Whether Defensive Appellate Rights Are Estate Property, but Highlights Necessity of Staying an Order Granting Sale

July 31, 2025 — In Humphrey v. Christopher, No. 24-1854, the U.S. Court of Appeals for the Eighth Circuit sidestepped a key question in consumer bankruptcy law: whether a debtor’s defensive appellate rights are part of the bankruptcy estate and may be sold by the trustee. Instead, the court resolved the case on procedural grounds, holding that because the debtor failed to obtain a stay of the bankruptcy court’s sale order, review of that order was statutorily moot under 11 U.S.C. § 363(m). While declining to reach the merits, the decision underscores the critical importance of seeking a stay pending appeal when challenging sales of purported estate assets.

The Case Below

LaDonna Humphrey, a Chapter 7 debtor, was the defendant in a state court civil action in Arkansas in which the trial court struck her answer and dismissed her counterclaims as a sanction for discovery misconduct. The court proceeded to a bench trial and entered a judgment against her for $3.57 million.

While her appeals of the sanctions order and judgment were pending in state court, Humphrey filed for bankruptcy. The Chapter 7 trustee subsequently moved to sell her appellate rights back to her litigation opponents, Anthony Christopher and Absolute Pediatric Therapy. The bankruptcy court approved the sale, finding that the appellate rights were estate property and the sale was in the best interest of the estate.

Humphrey appealed. The district court reversed, holding that appellate rights under Arkansas law are not “personal property” and therefore not estate property under § 541. The district court also found that the sale was not in the best interest of the estate and that Humphrey’s appeal was not barred by § 363(m) because she had timely sought review.

Appellants’ (Creditors’) Position

The creditors argued that all of Humphrey’s appellate rights—defensive or otherwise—were property of the estate under 11 U.S.C. § 541. They contended that the bankruptcy court correctly approved the sale under § 363 and that the sale was in the best interest of the estate.

They further asserted that Humphrey’s appeal was barred by § 363(m) because she failed to obtain a stay of the sale order, and the sale was consummated before the appeal was decided. They cited longstanding Eighth Circuit precedent establishing that failure to secure a stay moots appellate challenges to § 363 sales.

Debtor’s Position

Humphrey argued that her right to challenge the state court judgment—particularly the orders striking her answer and denying her a jury trial—was not “property” that could be sold by the trustee. She maintained that defensive appellate rights are personal to the litigant and are not assignable under Arkansas law. She also argued that selling those rights to her litigation opponents was fundamentally unfair and not in the best interest of the estate.

Humphrey further asserted that § 363(m) did not apply because the state court stayed the proceedings, and that the Court could supply a remedy given that the interests of the parties have been preserved

NCBRC and NACBA Position

NCBRC and NACBA filed an amicus brief warning that allowing trustees to sell a debtor’s defensive appellate rights to litigation adversaries raises grave concerns. The amici argued:

  • Defensive appellate rights are not property of the estate because they are not assignable under Arkansas law and cannot be monetized apart from the debtor’s legal interest.
  • The sale raised serious federal interests by allowing the opposing party in litigation to purchase control over the debtor’s access to appellate review, thus making a bankruptcy a dangerous endeavor for any debtor with an adverse judgment on appeal.
  • Section 363(m) does not bar this appeal because the Supreme Court held that § 363(m) is not a jurisdictional provision that would deprive the court of the ability to take appropriate corrective action in a case like this, citing MOAC Mall Holdings LLC v. Transform Holdco LLC, 598 U.S. 288 (2023).

The amici urged the Eighth Circuit to affirm the district court’s reversal of the sale order and to hold that the debtor’s right to challenge an adverse judgment is not a commodity subject to sale in bankruptcy. The amicus brief was filed by NCBRC and NACBA and prepared by the Hon. Allan Gropper (Ret.).

Outcome

The Eighth Circuit avoided the substantive property-of-the-estate question and instead held that Humphrey’s failure to obtain a stay of the bankruptcy court’s sale order rendered the appeal statutorily moot under § 363(m). The court emphasized that a sale authorized under § 363(b) cannot be undone on appeal unless the order was stayed, and it found no basis to invoke the limited exception recognized in MOAC Mall Holdings, LLC v. Transform Holdco LLC, 598 U.S. 288 (2023).

The ruling leaves unresolved whether a debtor’s defensive appellate rights may be sold in bankruptcy, but it sends a clear message: parties who wish to challenge § 363 sales must act swiftly to obtain a stay or risk forfeiting their appeal.

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NCBRC and NACBA Urge Second Circuit to Preserve Bankruptcy Court Jurisdiction Over Tax Dischargeability

July 31, 2025 — The National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed an amicus brief in the Second Circuit in In re Goebel, No. 25-103, in support of a Chapter 7 debtor seeking a determination that over $500,000 in tax debts owed to the Internal Revenue Service (IRS) were discharged in bankruptcy. The amici urge the court to reject the IRS’s efforts to restrict the bankruptcy court’s ability to determine tax dischargeability and to reaffirm the rights of debtors to obtain a timely and final ruling on the scope of their discharge.

The Case Below

Laura Charlene Goebel filed for Chapter 7 relief in the Eastern District of New York. Her petition included over $500,000 in income tax debt owed for tax years 2008 through 2018. The IRS had issued lien and levy notices and entered into installment agreements for portions of the debt. Because the taxes were assessed more than three years before the petition date, and she had filed timely returns, the debts were presumptively dischargeable unless she had “willfully attempted to evade or defeat” the taxes under 11 U.S.C. § 523(a)(1)(C).

Before entry of her general discharge, Ms. Goebel filed an adversary proceeding under Rule 4007(b) seeking a determination that the IRS debts were discharged. The IRS moved to dismiss, arguing lack of ripeness and that the Declaratory Judgment Act bars the Bankruptcy Court from making determinations of dischargeability on federal taxes. The bankruptcy court denied the motion to dismiss and the district court certified the appeal for direct review by the Second Circuit.

IRS Position

The IRS argues that the bankruptcy court lacked jurisdiction to determine dischargeability because the dispute was not “ripe” at the time Ms. Goebel filed her complaint. According to the IRS, dischargeability is not justiciable until two events occur: (1) the debtor receives a discharge and (2) the IRS takes a post-discharge collection action or otherwise disputes dischargeability. The IRS further contends that the Declaratory Judgment Act, 28 U.S.C. § 2201(a), bars declaratory relief “with respect to Federal taxes,” and that this prohibition prevents bankruptcy courts from adjudicating dischargeability of tax debts in advance.

Debtor’s Position

Ms. Goebel argues in her brief that the Bankruptcy Code and Rules expressly authorize her to bring a dischargeability action “at any time,” and that there is no requirement that she wait until after discharge or after a collection effort. She maintains that the IRS’s interpretation would deprive debtors of meaningful access to the courts while they are still protected by the bankruptcy process and represented by counsel. Ms. Goebel also argues that section 106(a) of the Bankruptcy Code abrogates the government’s sovereign immunity and permits the bankruptcy court to issue binding determinations of tax dischargeability. Her supplemental complaint, filed after the IRS initiated its own action in district court, removed any lingering ripeness concerns.

NCBRC and NACBA Position

In their amicus brief, NCBRC and NACBA emphasize that:

  • Bankruptcy courts have core jurisdiction to determine dischargeability under 11 U.S.C. §§ 523 and 157(b)(2)(I), and nothing in the Declaratory Judgment Act or Article III limits that authority.
  • Congress expressly authorized debtors to initiate dischargeability proceedings “at any time” under Rule 4007(b), and courts have long held that such proceedings are justiciable without waiting for the IRS to act.
  • The Declaratory Judgment Act does not apply to dischargeability actions because such proceedings are not declaratory in nature—they are determinations of substantive rights under the Bankruptcy Code and are specifically authorized by statute. Congress further abrogated sovereign immunity in § 106(a), making clear that governmental units, including the IRS, are subject to these determinations.
  • The IRS’s position would undermine the fresh start by postponing litigation over dischargeability until after the bankruptcy case has closed, forcing debtors to defend themselves years later without the protection of the bankruptcy court.

The brief was prepared by Chad Husnick, David Foster, and Leah Davis Patrick of Kirkland & Ellis LLP. NCBRC and NACBA thank them for their hard work and dedication.

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NCBRC and NACBA File Amicus Brief in the Fourth Circuit to Preserve Enforcement of the Automatic Stay in Brown v. Goldman Sachs

On July 24, 2025, the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed an amicus curiae brief in the U.S. Court of Appeals for the Fourth Circuit in Goldman Sachs Bank USA v. Brown, No. 25-1439. The case concerns whether consumer debtors’ claims under 11 U.S.C. § 362(k)—seeking damages for willful violations of the automatic stay—must be resolved through private arbitration, rather than in the bankruptcy courts tasked with enforcing that stay.

The Case Below

The appellees, Rhea Ann Brown and Gregory Kevin Maze, filed Chapter 13 and Chapter 7 bankruptcy cases, respectively. Both allege that Goldman Sachs, issuer of the Apple Card, engaged in willful violations of the automatic stay by continuing to attempt to collect prepetition debts despite receiving actual notice of the bankruptcy filings and multiple cease-and-desist communications.

The bankruptcy court and the district court both denied Goldman’s motion to compel arbitration. The lower courts held that sending § 362(k) claims to arbitration would be inconsistent with the core functions of the bankruptcy system and would undermine the court’s authority to enforce its orders. Goldman appealed.

Goldman Sachs’ Argument

In its opening brief, Goldman argues that the Federal Arbitration Act (FAA) requires enforcement of the arbitration clauses in the cardholder agreements. Goldman acknowledges that the claims arise under § 362(k) but contends that arbitration of those claims would not create an “inherent conflict” with the Bankruptcy Code. Relying heavily on Moses v. CashCall, Inc., 781 F.3d 63 (4th Cir. 2015), Goldman asserts that because neither debtor’s reorganization efforts are jeopardized by arbitration, the FAA should control.

Appellees’ Response

In their response brief, Appellees Brown and Maze underscore the importance of the automatic stay and § 362(k) as tools for ensuring debtors’ protection and court authority. They detail Goldman’s systemic and repeated stay violations, noting that this is not an isolated incident—similar suits have been filed against Goldman across the country.

Appellees argue that § 362(k) claims are statutorily and constitutionally core to bankruptcy jurisdiction. They emphasize that arbitration of such claims would improperly divest the bankruptcy court of its power to interpret and enforce its orders, a result contrary to Fourth Circuit precedent and congressional intent.

Appellees are represented by NACBA members Thad Bartholow of Kellett & Bartholow, PLCC in Dallas, Texas, and Malissa L. Giles of Giles & Lambert P.C. in Roanoke, Virginia.

NCBRC and NACBA’s Amicus Brief

The joint amicus brief filed by NCBRC and NACBA supports affirmance. The brief frames the automatic stay as a foundational protection in bankruptcy—a safeguard for both debtors and the integrity of the bankruptcy process. It emphasizes that § 362(k) is not simply a private damages remedy but a congressionally crafted enforcement mechanism for a federal injunction.

As the brief explains:

“This case involves the power of a Federal court to enforce its own order, a right—and indeed an obligation—that should not, under the circumstances of this case, be turned over to an arbitrator even in part.”

The amici argue that compelling arbitration would strip bankruptcy courts of their ability to address and sanction violations of their orders, a result that conflicts with the structure, purpose, and constitutional underpinnings of the Bankruptcy Code. The brief also notes that Congress expanded the automatic stay protections in 1984 by enacting § 362(h) (now § 362(k)) specifically to provide meaningful remedies for individual debtors—remedies that should remain within the purview of the court issuing the stay.

Hon. Allan L. Gropper (ret..) drafted the brief on behalf of NCBRC and NACBA.

Why It Matters

This appeal is part of a broader trend of creditors attempting to use arbitration agreements to avoid judicial oversight in bankruptcy. A ruling in Goldman’s favor would allow large institutional creditors to shift stay enforcement away from Article III courts and into private arbitration forums, potentially undermining the uniformity and authority of the bankruptcy system nationwide.

NCBRC is committed to protecting the statutory and constitutional rights of consumer debtors. We will continue to oppose efforts to erode the authority of bankruptcy courts to enforce their orders and safeguard the relief Congress intended when it enacted the automatic stay.

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Fourth Circuit Appeal in Goddard v. Burnett Examines the Role of Good Faith in Paying Secured Debts in Chapter 13 Plans

On July 16, 2025, the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA) filed a joint amicus brief in the U.S. Court of Appeals for the Fourth Circuit in support of the debtor-appellant in Goddard v. Burnett, Case No. 25-1303. The case presents a critical question about the interaction between the statutory “means test” and the judicially interpreted “good faith” standard in Chapter 13 bankruptcy cases.

The Issue on Appeal

At the heart of the appeal is whether a bankruptcy court may deny confirmation of a Chapter 13 plan under § 1325(a)(3) (good faith) when the debtor’s proposed plan complies with the “means test” formula under § 1325(b), including deductions for secured debts.

The debtor, Bobby Goddard, proposed a plan retaining and paying for three financed vehicles—a Chevrolet Corvette, a GMC Sierra pickup, and a Genesis G70 sedan. The trustee objected to confirmation on the grounds that retaining all three vehicles was unnecessary and indicative of bad faith. Although the debtor’s plan satisfied the disposable income requirements of § 1325(b), the bankruptcy court sustained the trustee’s objection under § 1325(a)(3), and both the district court and bankruptcy court rejected the argument that BAPCPA’s statutory means test preempts the necessity determination under the good faith inquiry.

The Argument from Appellant

Goddard’s appellate brief contends that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) fundamentally changed how “reasonably necessary” expenses are determined. For debtors above median income like Goddard, that determination is governed by the mechanical formula in § 707(b)(2), incorporated into § 1325(b)(3). The Appellant is represented by NACBA member Travis P. Sasser of the Sasser Law Firm in Cary, North Carolina. The brief argues:

  • BAPCPA supplanted case-by-case judicial discretion with a standardized means test.
  • The deduction for secured debt payments under § 707(b)(2)(A)(iii)(I) does not allow courts to exclude expenses based on their perceived necessity.
  • Allowing courts to override allowable deductions through the good faith standard would nullify Congress’s reforms and reintroduce pre-BAPCPA judicial discretion through the back door.

NACBA and NCBRC’s Amicus Position

In their amicus brief, NACBA and NCBRC echo these statutory concerns and add a broader policy perspective. They urge the Fourth Circuit to hold that bankruptcy courts may not second-guess secured debt deductions when calculating projected disposable income—so long as the debtor’s calculation follows the Code.

Key points from the amicus brief include:

  • The Lower Court Opinions punish debtors for following the Bankruptcy Code and Official Forms.
  • Textual Clarity: Congress clearly permitted debtors to deduct “amounts scheduled as contractually due” on secured debts without an additional necessity overlay.
  • Affirming the Lower Court Opinions Creates a Circuit Split: Affirmation of the lower courts would create a circuit split with Ninth Circuit in Drummond v. Welsh (In re Welsh), 711 F.3d 1120 (9th Cir. 2013). The applicable holding of Welsh is: “We conclude that Congress’s adoption of the BAPCPA forecloses a court’s consideration of a debtor’s … payments to secured creditors as part of the inquiry into good faith under 11 U.S.C. § 1325(a).” Id. at 1135.
  • Secured Creditors Will Be Harmed by Affirmance: BAPCPA included protections for secured creditors. Affirming the lower court opinions could disrupt the flow of capital into the vehicle lending market.

The amici argue that if the plan complies with the Code’s requirements—particularly § 1325(b)’s means test—then the good faith provision of § 1325(a)(3) should not be used to impose an additional, undefined necessity requirement. This brief was written by NACBA member Richard Cook of Richard P. Cook PLLC, Inc. in Wilmington, North Carolina.

Why This Case Matters

This appeal has national implications for Chapter 13 practice. A ruling affirming the lower courts could give trustees and judges wide discretion to deny plans based on subjective views of consumer choices, even when debtors fully comply with statutory requirements. A reversal would help ensure that BAPCPA’s objective standards govern plan confirmation and protect debtors’ right to propose plans based on a clear, predictable formula.

NACBA and NCBRC’s Commitment

As leading advocates for consumer debtors, NACBA and NCBRC are committed to ensuring that courts apply the Bankruptcy Code as written and that debtors are not penalized for retaining necessary or even modestly aspirational property. Their participation in Goddard reflects ongoing efforts to preserve the integrity of the means test and defend debtors from judicially imposed limitations not found in the statute.

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Supreme Court Declines to Hear Trustee’s Appeal in Saldana—Victory for Chapter 13 Debtors and Retirement Security

On June 23, 2025, the U.S. Supreme Court denied the Chapter 13 trustee’s petition for certiorari in Bronitsky v. Saldana, leaving intact a significant Ninth Circuit decision that protects the ability of debtors to continue contributing to retirement accounts while repaying unsecured creditors through a Chapter 13 plan.

The Court’s denial is a quiet but consequential win for consumer debtors—and a reaffirmation that long-term financial stability, including retirement savings, has a place within bankruptcy’s rehabilitative structure.

Background: Retirement Contributions and Disposable Income

The case centered on a key question: Can Chapter 13 debtors continue making voluntary retirement contributions during their repayment plan, or must every available dollar go to unsecured creditors?

The Ninth Circuit answered in the debtor’s favor, holding that under 11 U.S.C. § 541(b)(7), such contributions are excluded from “disposable income”—the income debtors are typically required to devote to creditors under a confirmed Chapter 13 plan. The court recognized Congress’s intent to safeguard retirement savings, even for debtors actively contributing post-petition.

The trustee disagreed sharply, warning in the petition that the decision would allow debtors to “shield” income and disrupt uniformity in Chapter 13 administration.

The Arguments: A Disputed Split and Legislative Intent

In opposing certiorari, the debtor emphasized that Saldana created no true circuit split. Every appellate court to address the issue—including the Sixth Circuit—has upheld the right to continue contributions when debtors had done so pre-petition. The Ninth merely affirmed that principle.

Nor did the trustee dispute the debtor’s consistent history of contributions. The case, then, was not about the facts—it was about how to interpret § 541(b)(7) in light of Congress’s policy judgment.

Why the Denial Matters

The Supreme Court’s refusal to hear the case leaves the Ninth Circuit’s debtor-friendly interpretation in place, reinforcing a growing consensus: retirement contributions made in good faith should not be sacrificed in the name of modest creditor recovery.

Had the Court granted review and ruled for the trustee, the result could have reverberated nationwide, effectively banning voluntary retirement savings for more than 180,000 Chapter 13 debtors annually. That burden would have fallen hardest on older workers and financially vulnerable families trying to avoid future poverty.

NCBRC’s Role: A Strategic Advocate

NCBRC played an active role in shaping the outcome. In the Ninth Circuit, NCBRC filed an amicus curiae brief in support of the debtor. At the certiorari stage, NCBRC worked closely with the debtor’s counsel and the Stanford Law School Supreme Court Litigation Clinic to help craft the brief opposing the trustee’s petition. That collaboration helped frame the case in a way that underscored its policy and doctrinal coherence, and ultimately contributed to the Court’s decision to deny review.

While we were prepared to engage directly had the Court granted certiorari, the outcome affirms the strong legal footing of the Ninth Circuit’s ruling—and protects Chapter 13 debtors’ ability to prioritize long-term financial dignity alongside their repayment obligations.

The fight over disposable income may not be over, but for now, retirement savings remain secure.

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Supreme Court Asked to Decide Whether Chapter 13 Debtors Can Prioritize Retirement Contributions Over Unsecured Creditors—NCBRC Monitoring Case Closely

The consumer bankruptcy world is watching closely as a critical issue heads to the U.S. Supreme Court in Bronitsky v. Saldana. The case, now pending in a petition for certiorari, asks whether Chapter 13 debtors may continue contributing to retirement accounts at the expense of unsecured creditors. The Ninth Circuit said yes. The petitioning Chapter 13 trustee says absolutely not. And the National Consumer Bankruptcy Rights Center (NCBRC) is paying close attention.

If the Court grants certiorari, NCBRC stands ready to join the fight directly.

The Legal Issue: Retirement Savings vs. Creditor Recovery

At the heart of the case is whether Chapter 13 debtors can exclude voluntary retirement contributions from their “disposable income”—the income they would otherwise use to pay unsecured creditors under their repayment plans.

The Ninth Circuit’s decision in favor of debtor Jorden Saldana held that under 11 U.S.C. § 541(b)(7), such retirement contributions are not disposable income. This aligns with a growing body of appellate decisions recognizing Congress’s intent to shield retirement savings—even for debtors still actively contributing post-petition.

However, the trustee argues this interpretation enables debtors to prioritize future savings over present obligations, potentially leaving creditors with nothing. According to the trustee’s cert. petition, the ruling “creates a stark conflict” with other circuits and “throws the Chapter 13 system into chaos.”

Saldana – Trustee’s Petition for Cert

Saldana – Trustee’s Reply Brief

The Debtor’s Response: No Circuit Split, No Cert Needed

Saldana’s legal team pushed back forcefully, noting that every circuit to reach the question—including the Sixth—allows continued contributions when the debtor had contributed pre-petition. The Ninth Circuit merely affirmed that right. The debtor argues there is no true circuit split, especially not one warranting Supreme Court intervention.

The debtor also points out that the trustee never disputed Saldana’s history of contributions, nor contested her evidence. The core disagreement, then, isn’t about facts—it’s about how § 541(b)(7) should be read.

Debtor’s Brief in Opposition to Pet for Cert

Why This Case Matters

If the Supreme Court takes the case, the outcome could reverberate across every Chapter 13 court in the country. The petition’s logic would effectively ban all voluntary retirement contributions during a plan, drastically reducing flexibility for low- and middle-income debtors trying to maintain long-term financial stability.

More than 180,000 Chapter 13 cases are filed annually. A decision restricting retirement contributions could disproportionately harm older workers and financially precarious families who rely on steady retirement savings to avoid future insolvency.

NCBRC’s Role: Ready to Engage

NCBRC is currently monitoring the petition and has assisted the debtor’s legal team in shaping the response. If the Court grants certiorari, NCBRC will step in directly, likely through a joint amicus effort alongside key consumer advocacy organizations. The goal: ensure that the debtor’s fresh start includes the ability to save for retirement and avoid punishing choices between dignity in old age and minimal creditor returns today.

Stay tuned. This case could redefine the balance between creditor recovery and debtor rehabilitation—and NCBRC is prepared to make sure the scales remain fair.

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Ninth Circuit Confirms Right to Cramdown Short-Term Mortgages in Major Win for Chapter 13 Debtors

In a resounding victory for Chapter 13 consumer debtors, the U.S. Court of Appeals for the Ninth Circuit affirmed that a debtor may bifurcate and “cram down” a junior mortgage claim—even when the loan is secured solely by the debtor’s principal residence—so long as the loan matures during the plan term. The opinion in Mission Hen, LLC v. Lee reinforces the flexibility and protective power of Chapter 13 and clarifies an important exception to the Bankruptcy Code’s anti-modification provision.

This favorable ruling follows a strong showing of advocacy by the National Consumer Bankruptcy Rights Center (NCBRC) and the National Association of Consumer Bankruptcy Attorneys (NACBA), who filed an amicus brief supporting the debtors, Jason Lee and Janice Chen.

The Legal Dispute: Can Short-Term Mortgages on Principal Residences Be Crammed Down?

The debtors proposed a Chapter 13 plan that bifurcated a junior mortgage held by Mission Hen, treating the unsecured portion separately. Mission Hen objected, arguing the plan violated the anti-modification rule under § 1322(b)(2), which bars modification of claims secured only by a debtor’s principal residence. The creditor also claimed the debtors were ineligible for Chapter 13 and that the plan was not feasible.

All three objections were rejected.

The Ninth Circuit confirmed that § 1322(c)(2)—a little-lit but critical carveout—permits modification of claims when the final payment on a mortgage is due before the Chapter 13 plan ends. Citing the statute’s plain language and a growing consensus among other circuits, the court concluded this provision allows not just for payment schedule tweaks, but for bifurcation of the claim itself. As the court noted, this reading is especially appropriate where the mortgage matures during the plan, placing it squarely within § 1322(c)(2)’s intended scope.

Amicus Advocacy: Clearing the Fog Around § 1322(c)(2)

NCBRC and NACBA’s joint amicus brief was instrumental in reframing the law. The brief:

  • Emphasized that Congress created § 1322(c)(2) to provide flexibility for short-term, high-cost mortgages that often burden working-class families.
  • Underscored the absurdity of allowing only payment-term modification but not bifurcation—especially when the latter is necessary to make a plan feasible.
  • Showed how other circuits, including the Fourth and Eleventh, have correctly interpreted § 1322(c)(2) to permit cramdowns.

Their advocacy helped the Ninth Circuit align with this broader, more debtor-friendly reading—ensuring Chapter 13 remains a viable path for families trying to keep their homes.

Why It Matters for Debtors and Practitioners

This decision carries wide-ranging implications:

  • Validates the use of cramdowns for maturing home loans—a critical tool for affordable plan structuring.
  • Strengthens judicial recognition of § 1322(c)(2) as a real exception, not a paper tiger.
  • Reaffirms the importance of court-determined valuations in assessing eligibility and plan feasibility.
  • Bolsters debtor protections in circuits that had yet to weigh in on this statutory provision.

The Big Picture

The Lee decision is another powerful reminder of how strategic litigation and amicus advocacy protect consumer rights. NCBRC and NACBA continue to ensure that bankruptcy courts do not become blind enforcers of creditor preferences, but remain venues for meaningful financial rehabilitation.

As the housing and debt landscapes evolve, rulings like this one are crucial for preserving Chapter 13’s mission: giving debtors a fair shot at stability and a future.

9th Circuit Court of Appeals Opinion – Mission Hen v Lee

Amici Brief – Mission Hen v Lee

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Fourth Circuit Affirms Post-Discharge Protections: Koontz Decision Preserves FDCPA Rights for Bankruptcy Debtors

In a major victory for consumer bankruptcy debtors and their advocates, the U.S. Court of Appeals for the Fourth Circuit reversed a troubling lower court decision in Koontz v. SN Servicing Corporation, holding that a mortgage servicer’s post-discharge collection efforts could still be subject to the Fair Debt Collection Practices Act (FDCPA), even where the debtor’s personal liability had been extinguished. This opinion affirms that a debtor’s in rem obligations after discharge are still “debts” under the FDCPA—and that debtors remain “consumers” protected by its provisions.

This result is due in no small part to the strong advocacy of the National Association of Consumer Bankruptcy Attorneys (NACBA), the National Consumer Bankruptcy Rights Center (NCBRC), and the National Consumer Law Center (NCLC), who filed a powerful joint amicus brief in support of the debtor, John Koontz.

The Legal Issue: Can a Discharged Debtor Still Owe a “Debt”?

After Koontz received a Chapter 7 discharge, SN Servicing Corporation (SNSC) sent him two letters asserting late fees and refusing to apply a payment—despite the discharge. The district court dismissed Koontz’s FDCPA and West Virginia Consumer Credit and Protection Act (WVCCPA) claims, reasoning that post-discharge, Koontz no longer had a “debt” and therefore no statutory protection.

The Fourth Circuit firmly rejected that view.

Citing Johnson v. Home State Bank, the court held that a discharged mortgage debt remains an enforceable obligation, albeit only through in rem remedies like foreclosure. Thus, Koontz was still a “consumer” obligated to pay a “debt” under 15 U.S.C. § 1692a(3)-(5), and SNSC’s letters constituted “collection activity.”

Amici’s Role: Correcting the Record and Reframing the Law

The joint amicus brief filed by NACBA, NCBRC, and NCLC was pivotal. The brief:

  1. Clarified the effect of a bankruptcy discharge:
    Drawing heavily from Johnson, the amici explained that discharge eliminates personal liability but not the obligation itself. The mortgage lender retains rights against the property, and the borrower retains an obligation to pay to avoid foreclosure.
  2. Refuted the “no personal liability, no debt” fallacy:
    The lower court had erroneously concluded that without personal liability, there is no “debt.” The brief dissected this error, showing how such logic would gut consumer protection statutes, including the FDCPA, Truth in Lending Act, and Fair Credit Reporting Act.
  3. Highlighted § 524(j) of the Bankruptcy Code:
    Congress explicitly preserved a creditor’s ability to collect post-discharge payments “in lieu of pursuit of in rem relief.” But, as amici argued, nothing in § 524(j) authorizes deceptive or unfair conduct—FDCPA standards still apply.
  4. Emphasized real-world impact:
    Many debtors like Koontz attempt to keep their homes post-bankruptcy. The lower court’s decision would have undermined that goal by stripping them of protections when they try to pay—essentially penalizing them for compliance.
  5. Explained broad statutory context:
    The amici reviewed other statutes and jurisprudence, showing a consensus that non-recourse or in rem debts are still subject to consumer protection laws. They warned that allowing the district court’s reasoning to stand would sow confusion and injustice across consumer finance law.

Why This Matters for Debtors and Their Counsel

The Fourth Circuit’s decision is more than just a statutory interpretation victory—it’s a win for real people trying to rebuild after bankruptcy:

  • Preserves essential consumer protections post-discharge.
  • Recognizes ongoing obligations and vulnerability of debtors seeking to retain homes.
  • Ensures mortgage servicers must comply with the FDCPA, even if they’re only pursuing in rem remedies.
  • Empowers consumer attorneys to challenge improper fees, misapplied payments, or coercive letters.

In a time when mortgage servicers increasingly push the envelope in post-discharge collections, Koontz provides a much-needed check—and clear precedent that the FDCPA still applies.

The Advocacy Behind the Win

This case once again demonstrates the indispensable role of systemic advocacy. By joining forces, NACBA, NCBRC, and NCLC ensured that the Fourth Circuit understood the broader legal, policy, and practical implications. As their brief argued:

“The implications of the lower court’s error are severe for consumer bankruptcy debtors… The ruling effectively strips discharged debtors of important statutory protections against debt collection abuses… This error of law should be reversed.”

Their voices made a difference—not just for John Koontz, but for thousands of future debtors navigating life after bankruptcy.

Looking Ahead

With the case remanded, Koontz can pursue his FDCPA § 1692f and state law claims. But the bigger picture is already clear: debtors remain consumers, and their rights do not vanish with a discharge.

This decision, and the amicus advocacy behind it, will resonate in courts across the country as consumer advocates continue to push back against unfair post-bankruptcy collection practices.

In re Koontz opinion

Amici brief of NCBRC, NACBA and NCLC

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Does Equitable Mootness Prevent Debtors from Appealing Confirmed Chapter 13 Plans?

The Fourth Circuit is set to decide a significant issue in Cook v. Gorman, a case that could determine whether the doctrine of equitable mootness prevents debtors from appealing the confirmation of a Chapter 13 repayment plan. At the heart of the case is whether equitable mootness—commonly used to dismiss appeals in complex Chapter 11 reorganizations—should apply to a straightforward Chapter 13 consumer bankruptcy case.

Background

Christopher M. Cook, a Chapter 13 debtor, appealed the confirmation of an amended repayment plan that he objected to, arguing that his originally proposed plan complied with bankruptcy law and should have been confirmed instead. However, rather than addressing the merits of Cook’s appeal, the district court dismissed the case on the grounds of equitable mootness, a controversial doctrine that allows courts to decline hearing bankruptcy appeals when the relief sought is deemed impractical due to changes in circumstances.

Cook, represented by bankruptcy counsel, argued that equitable mootness is not applicable to consumer Chapter 13 cases, as these cases lack the complexity of Chapter 11 corporate restructurings. He has now taken his appeal to the Fourth Circuit.

The Issues at Stake

The Fourth Circuit must decide whether equitable mootness should be extended to Chapter 13 cases or if the district court improperly avoided ruling on the appeal’s merits. Cook and his supporters argue that:

  • Equitable mootness was designed for complex Chapter 11 reorganizations where unraveling transactions could harm third-party investors and creditors. It should not apply to a simple Chapter 13 case with only four unsecured creditors.
  • The district court’s ruling denies consumer debtors their statutory right to appellate review by effectively insulating Chapter 13 confirmation orders from challenge.
  • The concept of a “fresh start” in bankruptcy is undermined if debtors are prevented from appealing adverse rulings on procedural grounds rather than legal merit.

NACBA and NCBRC’s Role

Recognizing the broad implications of this case, the National Association of Consumer Bankruptcy Attorneys (NACBA) and the National Consumer Bankruptcy Rights Center (NCBRC) filed an amicus brief in support of Cook. The amicus brief was authored by Richard Cook of Richard P. Cook, PLLC, who provided a thorough analysis of the dangers of extending equitable mootness to Chapter 13 cases. The brief emphasizes that consumer bankruptcy cases involve different considerations from corporate reorganizations and that courts should not use equitable mootness as a tool to sidestep legitimate legal questions.

Potential Impact

If the Fourth Circuit rules in Cook’s favor, it could set an important precedent ensuring that Chapter 13 debtors maintain their right to appeal confirmation orders. A decision restricting the use of equitable mootness in consumer bankruptcy cases would reinforce the fundamental protections of the Bankruptcy Code and uphold the principle that debtors should have access to meaningful judicial review.

This case will be closely watched by consumer bankruptcy attorneys and debtors’ advocates, as its outcome could shape appellate rights in Chapter 13 cases nationwide.

Stay tuned for updates as the Fourth Circuit deliberates on this crucial issue.

NCBRC/NACBA Amici Brief