Eastern District Bankruptcy Judge Rules Chapter 13 Payment Time Can be Reduced in Light of Attorney Error.

In a recent case for the United States Bankruptcy Court, in the Eastern District of Michigan sitting in Detroit, Judge Mark Randon, addressed the issue of what happens when a Debtor is put into a Chapter 13 Plan that turned out to be longer than that required by statute because his attorney did not do adequate work. In In re Gregory Luman, Case No.: 15-54207, the Debtor, who would have qualified for a 36-month Chapter 13 Plan, was put into a 60-month Plan because of his attorney’s “inadvertence or mistake”. The issue before the Court was whether or not the attorney’s mistake was fixable, there being a general rule that a confirmed reorganization plan constitutes a new contract between the Debtor and their creditors and is only modifiable under certain circumstances.

As it turns out, Mr. Luman, whose income was below the “median”, should have been in a 36-month Plan all along. The Court allowed modification, noting the Debtor’s age and poor health. Moreover, the Court felt that even though the dividend to unsecured creditors was going to be diminished substantially, it was appropriate, in fact, fair and just, that the modification be allowed. The Court also found that the general Federal Rules regarding “mistake, inadvertence, surprise or excusable neglect” might also apply to give the Debtor appropriate relief.

Judge Randon, although new to the Bench, has written several opinions that are short, to the point, and are, in this writer’s opinion, correct. Chapter 13 should provide Debtors with a flexible repayment plan that meets their income, their needs, their health and their age.

Categories: Reorganization

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