United States Supreme Court Holds that Order Denying Plan Confirmation Is Not Immediately Appealable

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On May 4, 2015, the Supreme Court for the United States unanimously held that an order denying confirmation of a plan is not a “final” order subject to immediate appeal as a matter of right. Although the Bullard decision involved a plan proposed under chapter 13 to title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), the holding is equally applicable to bankruptcy cases filed under chapter 11 of the Bankruptcy Code. The Supreme Court’s decision divests plan proponents of the ability to immediately appeal denial of plan confirmation gives additional leverage to creditors in the plan process as plan proponents are more likely to settle contested plan issues rather than risk denial of the plan.

Case Background -

Louis Bullard filed a petition under chapter 13 of the Bankruptcy Code. Bankruptcy Code chapter 13 generally allows individuals with regular income to develop a plan to repay all or a portion of their debts while retaining their property. Unless the bankruptcy court grants an extension, the debtor must file a plan for repayment within 14 days of when the bankruptcy petition is filed. In Bullard’s case, his primary debt was the $346,000 he owed to Blue Hills Bank (the “Bank”), which held a mortgage on a multifamily house Bullard owed. Bullard’s proposed repayment plan was to split the debt to the Bank into a secured claim totaling the house’s current value (estimated at $245,000) and an unsecured claim for the remainder ($101,000). Under the proposed plan, Bullard would continue making regular mortgage payments towards the secured portion of the claim, and the unsecured portion would be treated the same as his other unsecured debt (estimated recovery to the Bank on the unsecured portion of its claim was approximately $5,000).

Originally published in Bankruptcy Briefs, a publication of the Bankruptcy Section of the Federal Bar Association - May 2015.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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