July 1, 2013 4th circuit published opinion

Mort Ranta v Gorman

Mort Ranta field for Chapter 13 bankruptcy protection. The bankruptcy court denied his proposed plan as not feasible as it did not include social security benefits and including them would allow all creditors to be paid. The district court on appeal affirmed. The panel, 2-1, vacated and remanded. The majority first held there was jurisdiction over the case as bankruptcy finality has always been treated pragmatically in the 4th Circuit and it makes the most sense to allow discrete resolved disputes to be appealed din order to prevent waste and time consuming later review. The majority noted that he 4th Circuit has traditionally reviewed orders rejecting plans without ruling on jurisdiction and this practice is most consistent with realities of bankruptcy cases which are long and have multiple discrete disputes embodied within them. Also, it is unfair to allow creditors and trustees to appeal plan approval while denying that right to debtor when the plan is denied. As to the merits, the majority held that 11 USC 1325(b)(2) excludes Social Security benefits from income and thus from the projected income used to determine plan confirmation. It reasoned that there is no exception for below median income debtors, the statute controlled over forms used in the bankruptcy court and any abuse in the system is a problem for congress not the courts. The panel finally held that under 11 USC 1325(a)(6), Social Security benefits must be considered in determining feasibility as those benefits are not excluded in (a)(6), have been approved in the past as means of paying a Chapter 13 plan and there is no indication that Congress intended to prohibit debtors who rely on those benefits form getting pans approved. The dissent argued that even with the flexible finality doctrine in bankruptcy cases, the appeal here is interlocutory as the plan can be amended as provided in the Bankruptcy Code. The dissent also argued that 28 USC 158(d) provide for interlocutory appeals in chapter 13 cases and that Mort Ranta attempted to use these, but, his case was not found to meet the criteria by the lower courts. The dissent lamented that based on this decision, jurisdiction over bankruptcy cases will inevitably expand at the appellate level which will retard the progress of cases in the bankruptcy court. The dissent argued that 4th Circuit authority was confused and that the majority position of circuit courts requiring a true final order was more persuasive as it more consistent with the policy of encouraging negotiation and mediation to get to an approved plan.

This entry was posted in Uncategorized and tagged , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s