SW Legal studies in Business

Objections to Bankruptcy Plan Must Fall Within Statutory Specifications
Description Appeals court held that a bankruptcy court must follow the specific steps set for construction of a bankruptcy plan and could not craft requirements for a debtor that are not provided by the statute. The law allows objections to a plan on specific bases; the bankruptcy court must use those bases for evaluating objections.
Topic Bankruptcy
Key Words Objections; Disposable Income; Good Faith
C A S E   S U M M A R Y
Facts The Petros filed for Chapter 13 bankruptcy. The plan approved was to make a series of payments to their creditors through the Chapter 13 bankruptcy trustee. When the bankruptcy court reviewed the plan, the trustee filed an objection for the court's consideration that "was not filed pursuant to any statutory provision contained in the Bankruptcy Code." Rather, the trustee filed his own form of objection, which demanded that every six months the Petros must send the trustee a statement listing all income over that time. The trustee made this request because he believed that the Petros may well earn more income than they asserted they would in the bankruptcy plan. The Petros objected to this requirement, but it was approved by the bankruptcy court and the district court. The Pertos appealed.
Decision

Reversed. In the Bankruptcy Code there is a list of six affirmative requirements necessary for confirmation of a proposed Chapter 13 plan. Congress intended to exclude other requirements from being added to the statutory list. Absent exceptional circumstances, a bankruptcy court may not use undefined equitable powers to add to the six requirements established by Congress. The trustee failed to object to the Petros' plan on "good faith" or "disposable income" grounds as permitted by the Code. Since the Petros met the six statutory requirements, the court should have confirmed the plan as filed.

Citation Petro v. Mishler, 276 F.3d 375 (7th Cir., 2002)

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