NCBRC REPORT those months had come and gone , the impact of a ruling permitting the modification would have the practical effect of putting the debtors in default for which they could be denied discharge , have their case dismissed , or be converted to chapter 7 . Or the bankruptcy could permit the Powers to remedy the default by paying the amount owed as payments under the plan rendered to cure a default . The court found , however , that any perceived inequity in the result would not affect the matter of whether the issue was moot .
Turning to the merits , the court looked to whether a bankruptcy court may grant a trustee ’ s motion to modify based on a post-confirmation increase in income . The court found the trustee ’ s modification satisfied the three requirements set forth in section 1329 in that it would : 1 ) increase the plan payments , 2 ) comport with section 1322 ( a ) – ( c ) and section 1325 ( a ), and 3 ) not provide for payments beyond five years .
In so holding , the court rejected the bankruptcy court ’ s finding that a modification could not be equitably based , but must be supported by one of the provisions listed in section 1329 ( b )( 1 ). The court found that a post-confirmation change in a debtor ’ s ability to pay is adequate justification for modification and , in fact , harmonizes with the dual purpose of chapter 13 of giving the debtor an opportunity for a fresh start while maximizing payments to creditors . It noted that it had previously rejected the notion that an increase in post-confirmation income could only support a modification if it was substantial and unanticipated .
The court found the bankruptcy court ’ s decision was based on a misinterpretation of its decision in Witkowski , 16 F . 3d 739 ( 7th Cir . 1994 ), under which the ability to modify was limited by a requirement that the modification be consistent with sections 1322 ( a ), 1322 ( b ), and 1323 ( c ) and the requirements of section 1325 ( a ). While a modification must not conflict with those provisions , they do not establish requirements upon which modification must be based . Rather , the court found that the question of whether to grant a motion to modify was one of discretion and a balance of equities .
Finally , the court rejected the debtor ’ s argument that while a plan may be modified upon a change in the debtor ’ s financial circumstances , section 1325 ( a ) ( 3 ) imposes a requirement that the modification be granted only if “ good faith . . . required the increase .” Section 1325 ( a ) ( 3 ) requires that the proposed modification not be made in bad faith but the good faith requirement applies to the debtor when he proposes a plan and is inapplicable to a trustee-proposed modification . The court disagreed with Ms . Owens- Powers that the bankruptcy court
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The court turned to the bankruptcy court ’ s alternate reason for denial : that the Powers ’ actual financial circumstances did not support the modification . Because the district court did not address this factual claim the court remanded for review .
Powers 7th Cir opinion June 2016
National Association of Consumer Bankruptcy Attorneys Summer 2016 CONSUMER BANKRUPTCY JOURNAL 31