Chapter 13 bankruptcy allows a debtor with a regular income avoid a portion of his debts by making a monthly payment to a Chapter 13 Trustee for a period of years. The debtor will file a chapter 13 plan that proposes how he will pay back his creditors and how those creditors will be treated during the plan. In most cases, the debtor makes monthly payments based on his income level and the creditors are paid back in a prorated fashion with secured creditors receiving more than unsecured creditors. Once the plan is filed, creditors and the Chapter 13 Trustee have an opportunity to object to the plan and its contents if they do not conform to the bankruptcy code.  If the Judge denies confirmation based on one of these objections, then the debtor is required to file another chapter 13 plan with a different proposal.

The question becomes, if the debtor’s plan is denied, can he then appeal the judge’s decision to deny confirmation of the plan? It is well settled that a confirmed plan is appealable. In other words, if the Judge approves the proposed plan, then the creditors can appeal his decision. The U. S. Supreme Court ruled in Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015) that denial of confirmation is not an appealable order.

This decision effectively gives creditors an unfair advantage in bankruptcy because they can appeal if the debtor wins and his plan is confirmed; but if the creditor wins, and the plan is denied, then the debtor can not appeal. In Chapter 13 bankruptcy, it is always the debtor proposing the plan, which he can never appeal when confirmation is denied. The High Court argues that a confirmed plan is final because it is a court order that resolves all issues between all creditors and the debtor; whereas a denied plan is not final because the debtor can go back and file a new plan. I disagree with the Supreme Court’s ruling in this case.

Where it is true the debtor can file an amended plan, there may not be an amended plan that could actually be feasible. Furthermore, if the debtor believes the only feasible plan he could propose is the one that got denied, and he has a duty to file a plan in “good faith” then he may not be able to file a second plan at all because any second plan would not be filed in “good faith.” In other words, if the plan filed by the debtor is the only plan he could file and the court denies it, then that courts denial was in effect a final decision – from which he can’t appeal because of this Supreme Court decision.

The Supreme Court goes on to justify stripping the debtor of his right to appeal his plan being denied by saying that the debtor has several other remedies. The court points out that in this case, the appellate court heard his appeal even though they believed that the lower courts decision was not a final decision and thus not appealable. The Supreme Court reasoned that appellate courts would use discretion and hear cases involving denied plans where the circumstances warranted the appeal. The problem with that reasoning is that in the past there was not a Supreme Court decision on point clarifying that denied plans were not appealable.

I understand the Supreme Courts desire to stream line the bankruptcy process, and if debtors could appeal every denied plan it could add unnecessary layers of complexity and work load to the process. While the Court is correct in its assessment that most denied plans do not create a final order because the debtor can file and amended plan – there are denied plans where the debtor can not in “good faith” file an amended plan. For these unfortunate debtors, the Supreme Court left very few options.