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U.S. Supreme Court rules on appeals in bankruptcy decisions

As some Kentucky residents may know, the U.S. Supreme Court decided on whether a debtor may automatically appeal if a payment plan is not accepted by the bankruptcy court. A Massachusetts debtor had petitioned the court to rule because of differences in circuit court opinion on this issue.

The debtor in this case had filed for bankruptcy under Chapter 13 in 2010 and had amended his payment plan several times over that period. The last amended plan resulted in a hybrid plan, one that separated secured from unsecured debt.

The debtor offered to continue paying his $387,000 mortgage but asked to pay only the amount he could on his $101,000 unsecured debt. In the end, the debtor would have paid $5,000 on that amount, and the remainder would have been discharged. The bankruptcy court declined that proposal. The man appealed the court's decision and lost.

The debtor contended that each time a proceeding was accepted or not, it became a final decision and eligible for appeal. The Supreme Court did not accept the latter interpretation and said instead that each change in a payment plan is not a final decision. It allows the automatic stay to remain that bankruptcy imposes on creditor attempts to collect. In addition, the debtor is free to advance other plans that are viable and considered acceptable while the trustee continues to accept payments the debtor makes. Conversely, if the individual payment plan adjustment is seen as a final dismissal, the benefits bankruptcy would provide are lifted.

A debtor may find that an attorney's insight might help when working on the payment plan, so it will be acceptable to creditors. The attorney may review the case and help structure a plan that is acceptable to the bankruptcy court.

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