New ruling from Supreme Court about Chapter 13 bankruptcy

New York residents may have read that the U.S. Supreme Court recently issued a ruling regarding the ability to appeal a denial of proposed repayment plans in Chapter 13 bankruptcy cases. Previously, the lower courts had split, with some allowing people to appeal denials and others prohibiting them.

According to the unanimous decision, people do not have the ability to appeal a denial of their proposed repayment plans when they are given leave to amend them. The court reasoned that a denial is not a final ruling in a case, such as a dismissal would be, and thus may not be appealed.

The case involved a man that had filed a Chapter 13 petition in December 2010. After amending it three times, he proposed a repayment plan that would have divided his real estate which secured his $387,000 mortgage from his unsecured debts of $101,000. He proposed paying his mortgage payments in full each month while only contributing a small amount towards the unsecured debt balance. Over the life of his proposed five-year plan, he would have only paid about $5,000 towards the unsecured debt portion. The ruling by the Supreme Court effectively ends the split in the circuit courts.

People who are filing for Chapter 13 have to submit proposed repayment plans to the bankruptcy court. There is no guarantee that a proposed plan will be accepted, and people often seek the help of a bankruptcy attorney in preparing one. Chapter 13 bankruptcy petitions are more complicated than are those filed under Chapter 7. An attorney may be able to help clients determine an appropriate repayment plan that is also likely to be accepted by the bankruptcy court.