11th CIRCUIT RESOLVES CONFLICT | Key Points

1. The US Court of Appeals for the 11th Circuit accepted jurisdiction to resolve a conflict between multiple bankruptcy courts over whether a “threshold showing” of a change in circumstances was necessary before a bankruptcy court could modify a confirmed Chapter 13 bankruptcy plan under 11 U.S.C. § 1329. In Re Guillen, 17-13899, 2020 WL 5015287 (11th Cir. Aug. 25, 2020). The 11th Circuit agreed with the 1st, 5th and 7th federal appellate circuits each of which concluded the plain language of § 1329 did not require a change in circumstances showing.

2. The 11th Circuit disagreed with the 4th Circuit which previously concluded that res judicata and reasons of judicial economy justified imposing a “circumstantial requirement” into § 1329. The 11th Circuit explained that § 1329 carved out “a limited exception” to the general rule of finality of Chapter 13 plans and that if Congress intended to add circumstantial requirements to § 1329 it would have done so.

3. In March of this year, President Trump enacted a law which amended § 1329 “to permit debtors to request modification of confirmed plains if ‘the debtor is experiencing or has experienced a material financial hardship due…to the coronavirus disease 2019 (COVID-19) pandemic.’” With the recent economic disruption caused from COVID-19 we anticipate this decision will impact multiple debtors and encourage many to seek plan modifications at least until the COVID-19 amendment to § 1329 sunsets in March 2021.

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