Bankruptcy Appeal Of Your Own Victory? Yes, Indeed!

02 Jun Bankruptcy Appeal Of Your Own Victory? Yes, Indeed!

Fireworks_3Taking an appeal in a Chapter 13 bankruptcy case is a bizarre trip for Midwestern folks. In 2008, the Eighth Circuit Court of Appeals allowed a debtor’s objection to her own plan to be heard on appeal. Sometimes judicial enlightenment comes in surprising and unusual developments.

Traditionally, courts of appeal hold that you cannot appeal a decision until it is “final.” But what is final in a Chapter 13? In the Eighth Circuit, for example, we have known for sometime that a court’s refusal to confirm a proposed plan is not a ‘final’ order for appeal. The debtor had to accept the dismissal of the case in order to take an appeal to a higher court. That could mean the loss of court protection for property and income while the appeal proceeded for months or years — a self-defeating choice for most consumers.

A debtor from Kansas City did not like this approach. So she tried something crazy. When the bankruptcy court refused to approve her first Chapter 13 plan, she proposed one the court would approve. And then she objected to what she proposed. The bankruptcy judge rejected the objection and approved the plan. The debtor then appealed the denial of her objection — to her own plan. The Bankruptcy Appellate Panel turned down this appeal, reasoning that the debtor was not a “person aggrieved” by the lower court’s final order denying the objection. On the other hand, two BAP members also suggested the circuit court should re-examine its “final order” standard in order to allow consumers a more meaningful opportunity for appellate review in Chapter 13 scenarios.

The circuit court refused to modify its standards regarding the appealability of final orders. But in an astonishing twist, the court reversed the BAP and found that the debtor was “aggrieved” by the denial of her objection to her own plan. As she was now bound to perform the plan, she was injured. As the panel concluded:

Not to allow a debtor to appeal confirmation of her own plan would require a debtor to comply with a plan that contains provisions the debtor does not believe are required by the Bankruptcy Code, while losing her right to appeal those provisions.

For many consumer advocates who despaired that it was virtually impossible to take an effective Chapter 13 appeal, this is a surprising and delightful sign.

And it is a lesson again to practitioners like myself who were convinced there was no answer to the “final order” conundrum: No matter how crazy the tactic might sound, you’re only wrong if you lose.

Case: In re Zahn

Photo Credit: Bouncey2k

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I have been a bankruptcy attorney since 1989. Our firm represents consumers filing bankruptcy almost exclusively, although I have represented bankruptcy trustees as well as creditors. For 2017-2019 I served on the American Bankruptcy Institute's Commission on Consumer Bankruptcy. Our Report recommended numerous changes to improve bankruptcy law to make it serve everyone in the process more effectively. If you live in Eastern Missouri, visit our website, send an e-mail or give us a call (314) 781-3400. Our website:
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