Make that two cases the U.S. Supreme Court will decide next year that might affect people filing New York bankruptcy. On December 12, 2014, the Court granted certiorari to petitioner Louis B. Bullard, whose chapter 13 repayment plan was denied confirmation. The other case the Court will hear is Bank of America v. Toledo-Cardona, which concerns a debtor hoping to strip an underwater mortgage lien in chapter 7.
In Bullard v. Hyde Park Savings Bank, et al., the petitioner owned a property that he mortgaged to the respondent bank, and over time the real estate’s value fell below that of the mortgage. He filed bankruptcy in Massachusetts, and in January 2012, he filed a repayment plan that separated the mortgage into a secured part that was worth the current purchase price of the property and an unsecured part equivalent to the underwater portion of the mortgage. Over the course of the five-year plan, the petitioner would make regular payments on the secured mortgage while paying down some of the underwater portion, which would then be discharged after the plan concluded. Effectively, he was proposing a mortgage cram down.
In July 2012, the bankruptcy court rejected the plan. A bankruptcy appellate panel (BAP) also rejected the plan, although similar plans had been approved in other parts of the country. The BAP did, however, grant Bullard’s motion for leave to appeal based on 28 U.S.C. §158(a)(3), the bankruptcy appeals statute that you can read about here.
As with many Supreme Court appeals, the issue isn’t the substance of what the parties want but of how they can go about getting it. Although the First Circuit Court of Appeals noted that the issue of whether a hybrid plan such as Bullard’s was valid hadn’t been decided in that jurisdiction, it held that the denial of the confirmation was not a “final order” necessary to give him a right of appeal. Instead, he was left with two options that even the First Circuit characterized as “unappealing”: Either he could propose a new plan that was accepted by the bankruptcy court and then appeal it, or he could dismiss his case and then appeal the dismissal, both of which are “final orders.”
Thus, Bullard is taking his case to the Supreme Court, which will decide whether the denial of confirmation is a final order. The obvious benefit of a ruling in favor of the petitioner to New York bankruptcy debtors is that they would be able to appeal the denial of a confirmation of a chapter 13 repayment plan based on its legality rather than jump through more procedural hoops. The respondents will undoubtedly argue that debtors would routinely appeal denials of plan confirmations for frivolous reasons.
Information on Bullard can be found here. It will be decided the day before Toledo-Cardona in mid-May 2015.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.
