Supreme Court Says No Immediate Appeal for Many Bankruptcy Issues

June 30, 2015

Most bankruptcy cases are comprised of different debt issues between the debtor and several creditors – all who are competing to get at the debtor’s limited resources. During the course of the case, a party may ask for the bankruptcy court to take action to alter the legal status or relationship of one or more parties.
For instance, a party may ask the court:

  • To confirm a Chapter 13 plan;
  • To lift the automatic stay to foreclose, repossess, or continue a court action; or
  • To dismiss the debtor’s case.

For years there has been disagreement whether the party has a right to immediately appeal if the bankruptcy court denies such a request.

Recently the U.S. Supreme Court ruled in the case of Bullard v. Blue Hills Bank, No. 14-116 (5/4/15). In that case, Mr. Bullard submitted a Chapter 13 plan for court approval that proposed to modify Blue Hills Bank’s loan on his rental property. Mr. Bullard sought to continue to pay his monthly payment which would be applied to the secured portion of the property only. The unsecured portion would be paid at the same rate as other unsecured debts, with the remaining balance to be discharged at the end of the case. The bank objected, the court denied confirmation of the plan, and Mr. Bullard was given the opportunity to submit another plan.

Mr. Bullard appealed the court’s denial of confirmation. However, denial of confirmation isn’t a final order because Mr. Bullard was able to submit a new plan. In other words, the denial did not change his legal status. Consequently, the First Circuit Court of Appeals said the bankruptcy court denial could not be appealed.

The Supreme Court agreed to hear this case, and in a unanimous opinion authored by Chief Justice John Roberts, the court said, “Only plan confirmation, or case dismissal, alters the status quo and fixes the parties’ rights and obligations; denial of confirmation with leave to amend changes little and can hardly be described as final.”

What this means to a debtor in bankruptcy is plain: there is no right to appeal an order denying relief which does not change the status quo. If the case continues and the party is free to continue litigating the matter, the order is not final. This ruling is especially harsh to a Chapter 13 debtor like Mr. Bullard, who may be faced with a Hobson’s choice of submitting a new, less desirable repayment plan, or allowing the case to be dismissed to have the opportunity to challenge the bankruptcy court’s decision.

As a final note, under current bankruptcy rules a party may seek permission to appeal a non-final order, called an “interlocutory appeal.” This type of permissive appeal may or may not be granted and requires the aggrieved party to persuade the over-worked appeals court to hear the case. Interlocutory appeals must be granted at each stage of the appellate process. In the case of Bullard v. Blue Hills Bank, Mr. Bullard was granted an interlocutory appeal from the Bankruptcy Appellate Panel, but denied appeal at the circuit court level.

If you are considering filing for bankruptcy please call the experienced attorneys at Fears | Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to fears@fnlawfirm.com.

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