LETITIA Z. CLARK, Bankruptcy Judge
The court has held a final hearing on "General Motors Acceptance Corporation's Motion to Lift the Automatic Stay" (Docket No. 46). The court has also held a hearing on the "Motion to Modify Confirmed Chapter 13 Plan" (Docket No. 63). The following are the Findings of Fact and Conclusions of Law of the court. A separate Judgment will be entered, granting the motion for relief from stay in part, and denying without prejudice the motion to modify. To the extent any of the Findings of Fact are considered Conclusions of Law, they are adopted as such. To the extent any of the Conclusions of Law are considered Findings of Fact, they are adopted as such.
Findings of Fact
Rodney Wayne Hatch and Susie Lee Hatch ("Debtors") filed a voluntary petition under Chapter 7 of the Bankruptcy Code on August 3, 1999.
On September 21, 1999, Debtors moved for conversion of the case from Chapter 7 to Chapter 13. On the same date, Debtors filed their initial proposed Chapter 13 plan. (Docket No. 16). The motion "to convert was granted by order entered September 30, 1999. (Docket No. 19)
In their initial plan, Debtors proposed to surrender a 1999 Chevrolet truck to General Motors Acceptance Corporation ("GMAC") in satisfaction of its secured claim. Debtors purchased the truck on March 2, 1999, five months prior to the petition date in the instant case.
In Debtors' initial schedules, which were filed on September 21, 1999, Debtors listed the value of the truck at $25,800.00. (Docket No. 13).
On November 9, 1999, William E. Heitkamp, the Chapter 13 Trustee, filed his "Notice of Creditors Meeting, Deadline for Filing Claims, Deadline for Objecting to Confirmation of Plan, Notice of Confirmation Hearing, and Summary of Chapter 13 Plan." (Docket No. 28) (the "Confirmation Notice"). The Confirmation Notice provided to all listed creditors notice of a confirmation hearing, scheduled for January 27, 2000.
The Trustee's form of Confirmation Notice provides in pertinent part:
If you object to confirmation of the plan, you must file a written objection with the clerk of the court not later than ten days prior to the confirmation hearing and serve a copy of your objection on the Trustee and the Debtor's attorney. Your objection will then be heard at the confirmation hearing. All parties are further notified that at the confirmation hearing the court will determine all issues relative to confirmation of the plan including setting a value on all collateral and the rate of interest and term of payout for secured claims.
(Docket No. 28).
In Debtors' first amended plan, filed on December 17, 1999, Debtors proposed to retain the 1999 Chevrolet truck, and to pay GMAC just $20,000.00 plus interest through the plan on its secured claim. (Docket No. 30).
On January 13, 2000, GMAC filed its proof of claim in the above captioned case. The proof of claim states a claim amount of $30,574.21 plus interest, and states the value of the collateral securing the claim, a 1999 Chevrolet truck, to be $29,303.00. (Claim No. 5). Debtor has filed no objection to GMAC's secured claim.
On January 18, 2000, GMAC filed an objection to the amended plan, on grounds the plan undervalued GMAC's secured claim, and therefore did not pay GMAC the full amount of its secured claim as of the effective date of the plan. (Docket No. 35).
On January 24, 2000, Debtors filed their second amended plan. The second amended plan provided for the claim of GMAC, in the total amount of $29,303.00, with $20,000.00 as a secured claim to be paid at 10.00 percent interest during the 60 month term of the plan. (Docket No. 36). The second amended plan also provides for the payment of $17,455.00 plus interest on the secured claims of creditors holding claims secured by a 1996 Ford Mustang and a boat.
On January 27, 2000, the court held a hearing on confirmation of the second amended plan. Counsel for neither GMAC nor Debtor appeared. The Chapter 13 Trustee appeared, and announced his recommendation that the plan be confirmed.
The second amended plan was confirmed by order entered January 31, 2000. The Confirmation Order provides in pertinent part:
This order may be entered prior to the expiration of the time within which claims may be filed. This order shall establish conclusive findings as to the value of a creditor's interest in the estate's interest in property securing a creditor's claim and shall be reviewable on such issue only upon a showing that the party seeking review had no reasonable notice of the valuation or the confirmation hearing. Except where limited by a determination of the value of the creditor's interest in the estate's interest in the collateral securing a claim, contained in this order, or a subsequent court order, the amount of a secured claim shall be determined pursuant to
11 U.S.C. § 502.
(Docket No. 38)
On May 7, 2000, Rodney Wayne Hatch died. Prior to Mr. Hatch's death, Debtors made all the payments due under the Chapter 13 plan. The last such payment was made on April 7, 2000. Following the death of Mr. Hatch, Mrs. Hatch made no plan payments until August 10, 2000, the date on which she proposed the instant plan modification.
At the hearing on the instant motion to modify (Docket No. 63), the parties expressed confusion as to which modification is presently before the court. On August 11, 2000, Mrs. Hatch filed a motion to modify (Docket No. 52), with a proposed modified plan, dated August 10, 2000, attached. The first motion to modify was denied without prejudice because Mrs. Hatch failed to appear at a hearing set for September 7, 2000 on the motion. Mrs. Hatch filed the instant motion to modify on September 14, 2000, and again attached the modified plan dated August 10, 2000. Debtor subsequently filed and withdrew a different modified plan summary.
In the instant motion to modify, Mrs. Hatch seeks to reduce the monthly payment on her Chapter 13 plan from $1,075.00 per month to $760.00 per month. She also proposes to surrender the 1996 Ford Mustang and the boat, and to retain the 1999 Chevrolet truck. Mrs. Hatch testified that her purpose both in amending the plan during December, 1999 to provide for retaining the truck and for modifying the plan in August, 2000 was to retain as much property as she could.
Debtors' schedules indicate that, at the time the Chapter 13 plan was confirmed, Mr. Hatch received a disability benefit from Social Security of $1,727.00 per month. Mrs. Hatch testified that she now receives a survivor's benefit from Social Security of $1,936.00 per month. Her pay at her job has also increased from $8.00 per hour to $11.50 per hour.
On July 11, 2000, GMAC filed the instant motion for relief from stay. In the instant motion for relief from stay, GMAC seeks entry of an order lifting the automatic stay for cause, on grounds Debtor's plan fails to provide adequate protection of its secured claim, and on grounds of failure of adequate protection because Debtors are delinquent in making the payments pursuant to their confirmed Chapter 13 plan.
Conclusions of Law
Section 362(d)(1) of the Bankruptcy Code provides that the court shall grant relief from the stay, such as by terminating, annulling, modifying or conditioning the stay, for cause, including the lack of adequate protection.
11 U.S.C. § 362(d)(1)
In a hearing on a motion for relief from the stay, the party seeking relief has the burden of proof on the issue of debtor's equity in the property. The party opposing relief has the burden of proof on all other issues. 11 U.S.C. § 362(g).
Modification of a Chapter 13 plan after confirmation is governed by Section 1329 of the Bankruptcy Code. That section provides in pertinent part:
(a) At any time after confirmation of the plan but before the completion of payments under such plan, the plan may be modified, upon request of the debtor, the trustee, or the holder of an allowed unsecured claim, to —
(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;
(2) extend or reduce the time for such payments; or
(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan.
(b)(1) Sections 1322(a), 1322(b), and 1323(c) of this title and the requirements of section 1325(a) of this title apply to any modification under subsection(a) of this section.
(2) The plan as modified becomes the plan unless, after notice and a hearing, such modification is disapproved.
11 U.S.C. § 1329.
Section 1323(a)(3) requires that the plan be "proposed in good faith."
Mrs. Hatch takes the position that good faith requires nothing more than that she treat GMAC no worse than GMAC was treated under the confirmed plan. She also takes the position that her surrender of the 1996 Ford and the boat weighs in favor of a finding of good faith.
The good faith inquiry under § 1325(a)(3) requires a careful examination of the totality of the circumstances. Matter of Chaffin, 836 F.2d 215 (5th Cir. 1988). Good faith does not necessarily require substantial repayment of the unsecured claims. Public Finance Corp. v. Freeman, 712 F.2d 219 (5th Cir. 1983).
In the instant case, after the death of Mr. Hatch, who was suffering from disability, Mrs. Hatch has greater income than Debtors had together at the time the Chapter 13 plan was confirmed. In addition, by surrendering the 1996 Ford and the boat, Mrs. Hatch has reduced her monthly expenses. Section 1329 does not require that a debtor seeking modification meet the disposable income test of Section 1322(b). However, Debtor is attempting to use a post-confirmation modification to accomplish a result which could not have been achieved on the date the plan was confirmed. Debtor wishes to escape the effects of failing to make payments pursuant to the confirmed plan, while retaining her additional disposable income, and without making additional provision for the payment of creditors. The court concludes that the instant modification is not "proposed in good faith."
Turning then to the question of whether the stay should be lifted for cause, Mrs. Hatch argues that the Confirmation Order entered on January 31, 2000 is res judicata of the amount of GMAC's secured claim, and thus that the plan provides adequate protection of GMAC's interest.
Resolution of the question of whether the Confirmation Order is res judicata of the amount of GMAC's secured claim requires that the court consider the effectiveness of the forms of Confirmation Notice and Confirmation Order used by Trustee, in light of the Fifth Circuit's opinion in In re Howard, 972 F.2d 639 (5th Cir. 1992).
A secured creditor with a loan secured by a lien on the assets of a debtor who becomes bankrupt before the loan is repaid may ignore the bankruptcy proceeding and look to the lien for satisfaction of the debt. In re Howard, 972 F.2d 639 (5th Cir. 1992); In re Simmons, 765 F.2d 547 (5th Cir. 1985)
In Howard, the debtors' plan provided that the $4,590.47 secured mortgage claim of a creditor was to be satisfied by payment of $500.00 through the Chapter 13 plan. The creditor received notice of the confirmation hearing, but did not object to confirmation or otherwise participate in the confirmation hearing. The bankruptcy court confirmed the plan. The debtors did not object to the creditor's proof of claim. The creditor then filed a motion for relief from the automatic stay, seeking to foreclose on the mortgage. The debtors asserted that the plan was res judicata of the secured claim. The bankruptcy court agreed with the debtors' interpretation.
The Fifth Circuit reversed, following its earlier holding, in Simmons, that "a secured creditor is not bound by a plan which purports to reduce its claim where no objection has been filed." Howard, 972 F.2d, at 641. The Fifth Circuit held that the burden of requiring debtors to file an written objection to claim is not onerous, stating that "Once a debtor has objected to a claim, the creditor is on notice that full participation in the confirmation proceedings is required or its lien will be at risk." Howard, 972 F.2d, at 642.
The language that GMAC challenges has highlighted an issue that is currently under considerable discussion among the Southern District of Texas Chapter 13 bar and Trustees. It is an issue on which there are some differences among the courts, both inside and outside the Fifth Circuit. The Trustee's Confirmation Notice, and the form of Confirmation Order routinely used by the Chapter 13 Trustee, and signed by this court, do, in the instant case, result in a conflict with the Fifth Circuit's opinion in Howard. I believe Howard is controlling, and that a creditor is entitled to rely upon its holding that the filing of an objection to claim is necessary in order to provide sufficient notice of a challenge to the amount of a secured claim. The court concludes that the Confirmation Order is not res judicata as to GMAC's secured claim.
Because the plan does not provide for the secured claim of GMAC in the amount set forth in its proof of claim, and because, following denial of the instant motion to modify, Mrs. Hatch has not made the payments required under the originally confirmed plan, the court concludes that the automatic stay in the instant case should be conditioned on prompt modification of the plan, in accordance with this opinion, which does not withhold adequate protection from GMAC.
Based on the foregoing, a separate conforming Judgment will be entered.