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Post-Confirmation Appreciation of Property in Sub-Chapter V Cases

Published October 16, 2024 by Philip Sasser
Post-Confirmation Appreciation of Property in Sub-Chapter V Cases

A common dilemma in Chapter 13 cases arises when the debtor’s property increases while the case is pending. If creditors are slated to receive $10,000 over the five-year Chapter 13 plan because the debtor owns property worth $45,000, then who benefits if the debtor sells the property for $65,000 in year four of the plan? The creditors or the debtor? In Chapter 13, post-confirmation plan modifications may be submitted by the debtor, the trustee, or the holder of an unsecured claim. In the Fourth Circuit, the change must be based on a substantial and unanticipated change of financial circumstances.

In a traditional Chapter 11 case where the debtor is an individual, the language regarding post-confirmation modifications is the same. The language regarding modifications is different, however, in chapter 11, sub-chapter V, cases. In a Sub-V case, 11 USC 1193(c) states that “the debtor may modify the plan.” The absence of a “trustee or the holder of an allowed unsecured claim” is important. In other words, only the debtor may modify a plan in a Sub-V case. While debtors must be truthful in how they value their property at the time of plan confirmation, this prohibition against later modification by a trustee or creditor offers the Sub-V debtor protection in the event that property appreciates in value while the case is pending and the debtor wishes to sell it.

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