In a unanimous opinion, the U.S. Supreme Court ruled that the denial of a plan confirmation in a Chapter 13 bankruptcy is not a final decision, and therefore not appealable.
The case involved an underwater homeowner who wanted to use a hybrid plan, but the bankruptcy court refused to confirm the plan. When he attempted to appeal the denial of confirmation, the courts rejected the appeal, finding the denial of the confirmation of a plan was not sufficiently final to permit an appeal.
The Court leaves the debtor with a choice of either submitting another plan for confirmation, or dismissing the bankruptcy and starting all over again. Neither is particularly appealing, as in this case, the plan type that they proposed was necessary, as it was the only type that financially worked for the debtor. Dismissal is problematic, as it lifts the automatic stay that prevents creditors from repossessing assets, foreclosing on property or other collection methods.
Part of the difficulty is a bankruptcy proceeding is different from other civil cases, because decisions such as those involving a Chapter 13 plan, while occurring early in the duration of the proceeding, have consequence to a debtor as significant as a final decision in other types of litigation.
The plan details of the debtor’s payment obligations for the three to five years it is in place, and not allowing an appeal from a denial of confirmation presents an unpleasant Hobson’s choice.
The Court noted that interlocutory appeals, where a bankruptcy court certifies a specific question for an appellate court to review, are available; however, bankruptcy courts have been very reticent in allowing such questions and it is unclear why it was not permitted in this case.
The Court appeared to be more concerned with wasting judicial resources on “unnecessary” appeals than with the actual problems real debtors may face during a Chapter 13.
SCOTUSblog.com, “Opinion analysis: Justices slam the door on appeals of bankruptcy plan denials,” Ronald Mann, May 5, 2015