In a unanimous decision on May 4, 2015, the U.S. Supreme Court ruled against a homeowner seeking to appeal a bankruptcy court’s denial of his bankruptcy plan, saying that such a denial is not a final order that merits appeal.
In Bullard v. Blue Hills Bank, Massachusetts homeowner Louis Bullard filed voluntary Chapter 13 bankruptcy in 2010. His mortgage lender, Hyde Park Savings Bank (now Blue Hills Bank), filed a proof of claim for the mortgage balance owed of approximately $346,000. Bullard proposed a plan that would split his debt between a secured claim with the home as collateral and an unsecured claim for the balance.
This plan was rejected by the U.S. Bankruptcy Court for the District of Massachusetts, and later by the First Circuit Bankruptcy Court Appellate Panel, which found that an order denying confirmation is not final as long as the debtor is free to propose another plan.
It its May 4 opinion, the Supreme Court affirmed the lower courts’ findings, stating that, “only plan confirmation—or case dismissal—alters the status quo and fixes the rights and obligations of the parties…Denial of confirmation with leave to amend, by contrast, changes little. The automatic stay persists. The parties’ rights and obligations remain unsettled. The trustee continues to collect funds from the debtor in anticipation of a different plan’s eventual confirmation. The possibility of discharge lives on. ‘Final’ does not describe this state of affairs.”
The high court also expressed concern that bankruptcy plan denial appeals would create inefficiencies in the bankruptcy process, observing that the appellate process could take a year or longer and each denial could generate another appeal.
Writing for the court, Chief Justice Roberts noted, “As Bullard’s case shows, each climb up the appellate ladder and slide down the chute can take more than a year. Avoiding such delays and inefficiencies is precisely the reason for a rule of finality.”
This decision could have a further reaching effect into governing Chapter 11 cases as well, since 11 U.S.C. § 158 grants the right to appeal decisions made in cases being decided under either chapter of the Bankruptcy Code.
The attorneys at Glass & Goldberg in California provide high quality, cost-effective legal services and advice for clients in all aspects of commercial compliance, business litigation and transactional law. Call us at (818) 888-2220, send an email inquiry to info@glassgoldberg.com or visit us online at glassgoldberg.com to learn more about the firm and to sign up for future newsletters.
