IN RE FRANKLIN

WESLEY STEEN, Bankruptcy Judge

The Debtor filed this case under Chapter 13 of the Bankruptcy Code on December 17, 2003. On July 13, 2004, when the case was called for hearing (i) on confirmation of the Debtor's Chapter 13 plan, and (ii) on the Chapter 13 trustee's motion to dismiss, the Court dismissed the case for reasons stated on the record on facts that were not disputed at the hearing. The Court has reviewed the digital recording of the hearing, and the reasons stated on the record are adopted here under FRBP 7052.

The Debtor has filed a motion to "reinstate" the Chapter 13 case. Although many courts "reinstate" cases, the Court knows of no authority to do so, and the Court is not willing to fabricate that relief. Because reinstatement is not expressly contemplated by the Bankruptcy Code, an order reinstating a case raises a number of issues that have no easy solution. For example, it is not clear whether the § 362 stay continues in force. The Bankruptcy Code provides that the stay comes into effect when the case is filed, and terminates when the case is dismissed. There is no provision for "reinstatement" of the stay. There are other issues which the Court will not address in detail, but has addressed in other published decisions.

Nevertheless, in Chapter 13 bankruptcy practice there continues to be a large number of motions to "reinstate." Most admit that the Debtor was delinquent in payments to the Chapter 13 trustee at the time of the hearing on plan confirmation, or that the case had not otherwise been adequately prosecuted to make it ready for plan confirmation on the date that the plan confirmation hearing was held. The essence of these motions is that the court should reverse its decision to dismiss a case for delay prejudicial to creditors, and that the court should do so to allow the debtor more time to get ready for the confirmation hearing.

The Court believes that the time to be prepared for adjudication of an issue is the date and time that the matter is set for trial. Unless a continuance is granted, the Court will rule at that hearing and will grant or deny relief based on whether the party with the burden of proof on an issue has carried that burden. The Court also believes that the Chapter 13 debtor has the burden of proof on the requirements for Chapter 13 plan confirmation. If there is some reason that the Debtor or Debtor's counsel cannot, despite reasonable diligence, be prepared for the plan confirmation hearing, then counsel should seek a continuance prior to, or at, the confirmation hearing. The Court will grant a continuance or not, depending on the Court's assessment of the reason articulated for the continuance and on whether the Debtor and counsel have demonstrated reasonable diligence to prosecute the case and to prepare it in time for the hearing.

If the Chapter 13 trustee has filed and has noticed for hearing, concurrently with the confirmation hearing, a motion to dismiss for unreasonable delay prejudicial to creditors, and if the Debtor is not prepared to sustain the burden of proof for plan confirmation at the confirmation hearing, and if the Court does not grant a continuance, then the Court will dismiss the case. Once those adjudications are concluded, a motion for "reinstatement" essentially admitting the case was not ready for confirmation but that the debtor could adequately prosecute the case in the future is, in this Court's view, not an appropriate basis for relief from the order dismissing the case.

That is not to say that an order dismissing a case cannot be reconsidered or modified. Rules 59 and 60 of the Federal Rules of Civil Procedure, adopted in Bankruptcy by Rules 9023 and 9024 of the Federal Rules of Bankruptcy Procedure, provide the bases for doing so. Therefore, the Court will amend or will vacate an order of dismissal only for the specific grounds set forth in Rules 59 and 60, which do not include failure to be prepared for the plan confirmation hearing absent a good reason as to why the Debtor was not prepared in time.

REVIEW OF SPECIFICS OF THIS CASE

Delinquent Plan Payments

The Debtor filed this case in December, 2003. The Chapter 13 plan (formulated by the Debtor) proposed a schedule of payments to the Chapter 13 trustee. The Bankruptcy Code requires the Debtor to commence making those payments to the Chapter 13 trustee within thirty days after the plan is filed (§ 1326). The Debtor is the person who is responsible for formulating the plan in a Chapter 13 case, and the Debtor should not propose payments that are greater than those the Debtor is able to make. Nevertheless, it is not uncommon for a Chapter 13 debtor to be delinquent on plan payments immediately after the case is filed and to continue in that delinquency through the date of the plan confirmation hearing.

In an attempt to address that problem in this case, the Court issued an Initial Order for plan prosecution. The Initial Order (doc. #2) reminded the Debtor of the statutory requirements concerning payments to the trustee, and provided certain suggestions and specifics. In particular, to acknowledge the higher success rates of Chapter 13 cases in which a debtor agrees to an order for the debtor's employer to withhold funds from the debtor's paycheck and pay the money directly to the trustee, the Initial Order suggested that the Debtor enter into such a "wage order." To provide further incentive for this salutary practice, the Initial Order recognizes a debtor's consent to a wage order as prima facie evidence of the Debtor's good faith and attempt to make payments as required by the statute. In this case, the Debtor did not avail herself of that benefit.

The Chapter 13 trustee moved to dismiss the case, and at the hearing on July 13, the Chapter 13 trustee reported that the Debtor was $1,690 delinquent on plan payments. Debtor's counsel asserted that the Debtor had made a payment in June (which the trustee did not acknowledge), and further asserted that the Debtor was able to make a $400 payment at the hearing. But the sum of the payments alleged by the Debtor was still about $700 less than the amount that was due, even assuming all the allegations to be true. (If the allegations about the July payment were not correct, which according to the trustee's report they were not, then the deficiency was far greater.)

The Debtor offered to enter into a wage order at the hearing, but gave no reason why the Debtor had not done so from the beginning. By failing to enter into a wage order at the start of the case, and only agreeing to do so after serious default, the Debtor forfeited the prima facie benefit that the order could have probably provided. In the Court's view it is too late, in the courtroom, at the confirmation hearing, to be negotiating as to how to bring the Debtor's payments current.

It is the Debtor's burden to satisfy and to prove the facts necessary for plan confirmation. "The debtor has the burden of proving his plan complies with section 1325 of the Code, which requires that the plan comply with all applicable provisions of the Code." In re Day, 292 B.R. 133, 137 (Bankr. N.D. Tex. 2003). Because of the huge volume of cases, the Court frequently accepts the trustee's analysis and recommendation, but custom does not change the fact that it is the Debtor that is seeking relief under the Bankruptcy Code, and therefore the Debtor has the burden of proof. One of the requirements of plan confirmation is that the Court must conclude that the "debtor will be able to make all payments under the plan." 11 U.S.C. 1325(a)(6). If a Debtor is in default on her plan payments at the time of the hearing, then it is a very difficult burden of proof because the Debtor has demonstrated an inability to make the payments. Moreover, if the Debtor failed to enter into a wage order at the beginning of the case, the Debtor has forfeited the favorable argument that the Debtor did everything she could do to comply. The Debtor has, for reasons known only to her, forfeited the very tool that research has shown as being the single most effective element of successful Chapter 13 cases.

The Court dismissed this case on July 13 because, assuming all the Debtor's allegations to be true, the Debtor was unable to make plan payments and was $700 delinquent at the confirmation hearing. The Court concluded that the Debtor could not meet her burden of proving that the plan met the requirements of § 1325(a)(6).

In the motion to reinstate, the Debtor alleges that she will be able to bring payments current if the case is reinstated. That allegation is insufficient to grant relief under Rule 59 or 60. It is essentially a confession that the Debtor could not meet the requirements of the Bankruptcy Code on the date of the hearing and that the Debtor was not ready to carry her burden of proof for confirmation at the confirmation hearing. No sufficient cause for a continuance was shown at the hearing, or was even alleged in the motion to reinstate. The time to be ready for plan confirmation is the date and time scheduled for the confirmation hearing, not afterwards. Failure to have the case ready for confirmation at the confirmation hearing is an unreasonable delay prejudicial to creditors, grounds for case dismissal under Bankruptcy Code § 1307(c)(1).

Other Delay Prejudicial to Creditors

The Debtor was also unable to show at confirmation that the requirements of Bankruptcy Code § 1325(a)(5) were met. GMAC Mortgage had filed a proof of claim in January, 2004, and in February, filed an objection to plan confirmation for failure to meet the requirements of § 1325(a)(5). The Debtor's counsel stated that the Debtor had been negotiating with GMAC but had not filed an objection to the GMAC proof of claim or a response to the objection to confirmation. The Debtor's counsel alleged that he thought that the issue could be resolved, given additional time.

The docket sheet in the case shows that notice was given on March 5, 2004, that a hearing would be held on confirmation of the Chapter 13 plan on April 13, 2004. Debtor did not file any pleading to resolve the GMAC objection to confirmation. The plan was not confirmed on April 13. The minute entry from that hearing states that the trustee would file a motion to dismiss. As indicated below, from that date until the case was dismissed., the Debtor did not file any significant pleadings to resolve the GMAC objection to confirmation or to object to the GMAC proof of claim.

On June 22, the Chapter 13 trustee filed a motion to dismiss the case. On June 23, the Debtor filed a response that states "Respondent has attempted to contact both the Trustee and GM AC to rectify any problems that has (sic) been alleged to be wrong in the Respondent's Chapter 13 Plan Summary . . .". But the Debtor had filed no pleadings to adjudicate the GMAC claim or any other issue prior to the July 13 hearing on dismissal of the case, other than an amended schedule J, the Debtor's budget. Two weeks after dismissal of the case, the Debtor filed an objection to the GMAC claim, and at about the same time, moved to reinstate the case, alleging that the problems could be resolved if allowed additional time.

The time to be ready for plan confirmation is the confirmation hearing. Two confirmation hearings have been set in this case, one in April and one in July. The Debtor was not ready for either. The Debtor did not file pleadings to resolve the issues until two weeks after the dismissal of the case. The Court sees no grounds under Rules 59 or 60 to vacate the order of dismissal.

CLERICAL ERROR

Having listened to the recording of the dismissal hearing, however, the Court notes a clerical error. The Court issued that the case was dismissed with prejudice for failure to appear in proper prosecution of the case. That is incorrect. The Court did not make that finding, and in that part of the order is a clerical error.

Therefore, the provisions of the order that dismiss the case with prejudice and that prohibit the Debtor from filing another bankruptcy case are struck. The case is dismissed without prejudice. This is not a ruling that the Debtor may file another case. It is simply a removal of the prohibition that the Court issued in error.