April 11, 2016
from the United States District Court for the Central
District of Illinois. No. 14-CV-03128 - Sue E. Myerscough,
Bauer and Williams, Circuit Judges, and Adelman, District
Adelman, District Judge.
Powers and Elvie OwensPowers filed a petition under Chapter
13 of the Bankruptcy Code. After the bankruptcy court
confirmed their plan, the Chapter 13 trustee filed a motion
to modify the plan to increase the debtors' payments to
the general unsecured creditors. The trustee's motion was
based on an increase in the debtors' income, which, the
trustee argued, resulted in their ability to pay more to
their creditors under the plan. The bankruptcy court denied
the motion. The trustee appealed to the district court, which
affirmed. The trustee then filed this appeal. We vacate the
judgment of the district court and remand for further
debtors filed their Chapter 13 petition on May 24, 2010.The
bankruptcy court confirmed their plan on March 1, 2011.Under
the plan, the debtors were to pay $660 per month to the
Chapter 13 trustee for seven months, and then $758 per month
for fifty-three months. The latter payment was later reduced
to $670 per month. From these payments, the trustee would pay
the claims of secured creditors and distribute approximately
$22, 000 to the general unsecured creditors.
2013, the trustee received the debtors' income tax return
for 2012. According to the trustee, the return showed that
the debtors' income had increased by $50, 000 since 2011.
Based on this increase in income, the trustee concluded that
the debtors could afford a higher monthly payment for the
remaining months of their plan. The trustee filed a motion to
modify the debtors' plan under 11 U.S.C. § 1329,
which permits postconfirmation modification of a Chapter 13
plan. The trustee proposed to increase the debtors'
monthly payments from $670 per month to $1, 416 per month for
the twenty-three months that remained under the plan at the
time the motion was filed. If the debtors made these
increased payments, the trustee could (after a reduction for
the trustee's commission) distribute an additional $15,
000 to the unsecured creditors.
debtors filed an objection to the trustee's motion to
modify. They argued that the Bankruptcy Code did not permit
modification of a Chapter 13 plan based on a postconfirmation
increase in a debtor's income. They also argued that,
even if the Code did permit modification on this ground, the
facts of the case did not warrant modification because,
although their income had increased, so had their expenses.
After the debtors filed their objection, the trustee took
discovery relating to the debtors' finances. Once this
discovery was completed, the parties stipulated to certain
bankruptcy court decided the trustee's motion to modify
based on the parties' briefs and their stipulation of
facts. See In re Powers, 507 B.R. 262 (Bankr. C.D.
Ill. 2014). The court denied the motion for two independent
reasons. First, the court held that, as a matter of law, the
Bankruptcy Code did not contain a provision that would allow
modification of a Chapter 13 plan for the reasons cited by
the trustee. Id. at 267–74. Second, the court
found that, even if the court had the power to modify the
plan for the reasons cited by the trustee, the facts of the
case did not support the trustee's request. Id.
trustee appealed the bankruptcy court's decision to the
district court. The district court exercised jurisdiction
over the appeal under 28 U.S.C. § 158(a)(1). On appeal,
the trustee challenged both of the bankruptcy court's
reasons for denying the motion to modify. First, the trustee
argued that the bankruptcy court had erred as a matter of law
when it concluded that the Bankruptcy Code did not permit
modification based on a postconfirmation increase in a
debtor's income. Second, the trustee argued that the
bankruptcy court's alternative reason for denying the
motion was based on clearly erroneous factual findings and
also involved an abuse of discretion. The district court
addressed only the first argument. It concluded that the
bankruptcy court did not err as a matter of law when it found
that it lacked authority to grant the trustee's motion.
Noting that this conclusion was sufficient to resolve the
appeal, the district court declined to consider whether the
bankruptcy court clearly erred or abused its discretion in
finding that the facts of the case did not support the
appeal to this court, the trustee argues that both the
district court and the bankruptcy court erred in concluding
that the Bankruptcy Code does not permit a trustee to request
modification of a plan based on a postconfirmation increase
in a debtor's income. The trustee asks that, if we accept
his argument, we remand the case to the district court so
that it may consider his arguments relating to the bankruptcy
court's alternative ground for denying the motion.
Owens-Powers, who is the only debtor participating in this
appeal,  contends that we lack jurisdiction to
decide the appeal. She argues that the bankruptcy court's
order denying the trustee's motion to modify the plan is
not a final order for purposes of 28 U.S.C. § 158, and
also that the case is moot. On the merits, she argues that
the trustee has mischaracterized the bankruptcy court's
reasons for denying his motion and that, under the proper
characterization, the court's order must be affirmed.
begin by addressing the debtor's arguments concerning our
the debtor contends that a bankruptcy court's order
denying a motion to modify a Chapter 13 plan is not
"final" within the meaning of 28 U.S.C. § 158.
Under that statute, we generally have jurisdiction over a
bankruptcy appeal only if both the bankruptcy court's
order and the district court's order are final.
See 28 U.S.C. § 158(d)(1); Schaumburg Bank
& Trust Co., N.A. v. Alsterda, 815 F.3d 306, 312
(7th Cir. 2016). In the bankruptcy context,
"finality" is understood somewhat differently than
it is in the context of ordinary civil litigation. See,
e.g., Bullard v. Blue Hills Bank__, U.S. __,
__, 135 S.Ct. 1686, 1692 (2015). A bankruptcy case involves
an aggregation of individual controversies, many of which
would exist as standalone lawsuits but for the bankrupt
status of the debtor. Id. An order in a bankruptcy
case is considered final when it resolves one of the
individual controversies that might exist as a standalone
suit outside of bankruptcy. See Schaumberg Bank & Tru
st , 815 F.3d at 312–13. One way of assessing
whether this standard has been met is to identify whether the
order at issue brought to an end a single
"proceeding" that exists within the larger
bankruptcy case. See Bullard, 135 S.Ct. at 1692
(emphasizing that 28 U.S.C. § 158(a) allows appeals as
of right from final orders in "cases and
present case, Owens-Powers argues that a bankruptcy
court's denial of a trustee's motion to modify a
Chapter 13 plan does not resolve a "proceeding"
within the larger bankruptcy case. She relies on the Supreme
Court's decision in Bullard, in which the Court
held that an order denying confirmation of a Chapter 13 plan
is not final unless the bankruptcy court also dismisses the
underlying bankruptcy case. Id. at 1692–93.
The Court reasoned that, in the context of the consideration
of Chapter 13 plans, the relevant "proceeding, "
for purposes of § 158(a), is the entire process of
considering plans, which terminates only when a plan is
confirmed or-if the debtor fails to offer any confirmable
plan-when the case is dismissed. Id. at 1692.
contends that, in the context of a trustee's motion to
modify a confirmed plan, the relevant "proceeding"
encompasses more than simply the bankruptcy court's
denial of the motion. She notes that a ruling on one motion
to modify does not preclude the trustee from filing another
motion to modify. Thus, argues the debtor, just like an order
denying plan confirmation is not final, an order denying a
trustee's motion to modify a confirmed plan is not final.
not find the debtor's analogy to Bullard
persuasive. The denial of a trustee's motion to modify is
generally not part of a larger "proceeding" that
will conclude only when some event other than the denial of
the motion occurs. Rather, the denial of the motion will
generally resolve a discrete dispute within the larger
bankruptcy case, i.e., whether the debtor's plan
may be modified for the reasons the trustee cites. If the
trustee loses the motion on the merits, rather than because
the motion contained a technical defect that could be cured,
the bankruptcy court will not invite the trustee to bring a
subsequent motion seeking plan modification on the same
grounds. In contrast, when a bankruptcy court refuses to
confirm a plan but does not also dismiss the case, the debtor
is usually given an opportunity to submit a revised plan.
Bullard, 135 S.Ct. at 1690. This is why the Court
found that the relevant "proceeding" for purposes
of plan confirmation encompasses more than the denial of any
single proposed plan. That proceeding concludes only when
either a plan is confirmed or the bankruptcy case is
course, if the bankruptcy court does deny a trustee's
motion to modify a plan based on a technical defect or on
some other basis that could be cured by an amended motion,
then the bankruptcy court's order will not be final. In
this situation, the bankruptcy court's order will not
have resolved a discrete dispute but will have been merely
one step in a larger proceeding that will conclude when the
bankruptcy court decides the amended motion. However, from
the fact that some orders denying motions to modify plans are
not final, it does not follow that none of them are final. In
this regard, an order denying a motion to modify is analogous
to an order granting a motion to dismiss a complaint under
Federal Rule of Civil Procedure 12(b)(6). If the district
court grants the motion but does so based on a defect in the
complaint that cannot be cured, then the order is final.
See Strong v. David, 297 F.3d 646, 648 (7th Cir.
2002). However, if the district court grants the motion based
on a technical defect that the plaintiff could cure by filing
an amended complaint, then the order generally will not be
final. Id. In the present case, the ...