In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 15‐3237
JOHN GERMERAAD,
Trustee‐Appellant,
v.
MYRICK POWERS AND ELVIE
OWENS‐POWERS,
Debtors‐Appellees.
____________________
Appeal from the United States District Court for the
Central District of Illinois.
No. 14‐CV‐03128 — Sue E. Myerscough, Judge.
____________________
ARGUED APRIL 11, 2016 — DECIDED JUNE 23, 2016
____________________
Before BAUER and WILLIAMS, Circuit Judges, and ADELMAN,
District Judge.*
ADELMAN, District Judge. Myrick Powers and Elvie Owens‐
Powers filed a petition under Chapter 13 of the Bankruptcy
Code. After the bankruptcy court confirmed their plan, the
* Of the Eastern District of Wisconsin, sitting by designation.
2 No. 15‐3237
Chapter 13 trustee filed a motion to modify the plan to in‐
crease the debtors’ payments to the general unsecured credi‐
tors. The trustee’s motion was based on an increase in the
debtors’ income, which, the trustee argued, resulted in their
ability to pay more to their creditors under the plan. The
bankruptcy court denied the motion. The trustee appealed to
the district court, which affirmed. The trustee then filed this
appeal. We vacate the judgment of the district court and re‐
mand for further proceedings.
I.
The debtors filed their Chapter 13 petition on May 24,
2010. The bankruptcy court confirmed their plan on March 1,
2011. Under the plan, the debtors were to pay $660 per month
to the Chapter 13 trustee for seven months, and then $758 per
month for fifty‐three months. The latter payment was later re‐
duced to $670 per month. From these payments, the trustee
would pay the claims of secured creditors and distribute ap‐
proximately $22,000 to the general unsecured creditors.
In 2013, the trustee received the debtors’ income tax return
for 2012. According to the trustee, the return showed that the
debtors’ income had increased by $50,000 since 2011. Based
on this increase in income, the trustee concluded that the
debtors could afford a higher monthly payment for the re‐
maining months of their plan. The trustee filed a motion to
modify the debtors’ plan under 11 U.S.C. § 1329, which per‐
mits postconfirmation modification of a Chapter 13 plan. The
trustee proposed to increase the debtors’ monthly payments
from $670 per month to $1,416 per month for the twenty‐three
months that remained under the plan at the time the motion
was filed. If the debtors made these increased payments, the
No. 15‐3237 3
trustee could (after a reduction for the trustee’s commission)
distribute an additional $15,000 to the unsecured creditors.
The debtors filed an objection to the trustee’s motion to
modify. They argued that the Bankruptcy Code did not per‐
mit modification of a Chapter 13 plan based on a postconfir‐
mation increase in a debtor’s income. They also argued that,
even if the Code did permit modification on this ground, the
facts of the case did not warrant modification because, alt‐
hough their income had increased, so had their expenses. Af‐
ter the debtors filed their objection, the trustee took discovery
relating to the debtors’ finances. Once this discovery was com‐
pleted, the parties stipulated to certain facts.
The bankruptcy court decided the trustee’s motion to
modify based on the parties’ briefs and their stipulation of
facts. See In re Powers, 507 B.R. 262 (Bankr. C.D. Ill. 2014). The
court denied the motion for two independent reasons. First,
the court held that, as a matter of law, the Bankruptcy Code
did not contain a provision that would allow modification of
a Chapter 13 plan for the reasons cited by the trustee. Id. at
267–74. Second, the court found that, even if the court had the
power to modify the plan for the reasons cited by the trustee,
the facts of the case did not support the trustee’s request. Id.
at 274–75.
The trustee appealed the bankruptcy court’s decision to
the district court. The district court exercised jurisdiction over
the appeal under 28 U.S.C. § 158(a)(1). On appeal, the trustee
challenged both of the bankruptcy court’s reasons for denying
the motion to modify. First, the trustee argued that the bank‐
ruptcy court had erred as a matter of law when it concluded
that the Bankruptcy Code did not permit modification based
on a postconfirmation increase in a debtor’s income. Second,
4 No. 15‐3237
the trustee argued that the bankruptcy court’s alternative rea‐
son for denying the motion was based on clearly erroneous
factual findings and also involved an abuse of discretion. The
district court addressed only the first argument. It concluded
that the bankruptcy court did not err as a matter of law when
it found that it lacked authority to grant the trustee’s motion.
Noting that this conclusion was sufficient to resolve the ap‐
peal, the district court declined to consider whether the bank‐
ruptcy court clearly erred or abused its discretion in finding
that the facts of the case did not support the trustee’s motion.
In his appeal to this court, the trustee argues that both the
district court and the bankruptcy court erred in concluding
that the Bankruptcy Code does not permit a trustee to request
modification of a plan based on a postconfirmation increase
in a debtor’s income. The trustee asks that, if we accept his
argument, we remand the case to the district court so that it
may consider his arguments relating to the bankruptcy court’s
alternative ground for denying the motion.
Elvie Owens‐Powers, who is the only debtor participating
in this appeal,1 contends that we lack jurisdiction to decide the
appeal. She argues that the bankruptcy court’s order denying
the trustee’s motion to modify the plan is not a final order for
purposes of 28 U.S.C. § 158, and also that the case is moot. On
the merits, she argues that the trustee has mischaracterized
the bankruptcy court’s reasons for denying his motion and
that, under the proper characterization, the court’s order must
be affirmed.
1 Myrick Powers has not filed a brief in this appeal and did not partic‐
ipate in oral argument.
No. 15‐3237 5
II.
We begin by addressing the debtor’s arguments concern‐
ing our jurisdiction.
A.
First, the debtor contends that a bankruptcy court’s order
denying a motion to modify a Chapter 13 plan is not “final”
within the meaning of 28 U.S.C. § 158. Under that statute, we
generally have jurisdiction over a bankruptcy appeal only if
both the bankruptcy courtʹs order and the district courtʹs or‐
der are final. See 28 U.S.C. § 158(d)(1); Schaumburg Bank &
Trust Co., N.A. v. Alsterda, 815 F.3d 306, 312 (7th Cir. 2016). In
the bankruptcy context, “finality” is understood somewhat
differently than it is in the context of ordinary civil litigation.
See, e.g., Bullard v. Blue Hills Bank, __ U.S. __, __, 135 S. Ct. 1686,
1692 (2015). A bankruptcy case involves an aggregation of in‐
dividual controversies, many of which would exist as stand‐
alone lawsuits but for the bankrupt status of the debtor. Id. An
order in a bankruptcy case is considered final when it resolves
one of the individual controversies that might exist as a stand‐
alone suit outside of bankruptcy. See Schaumberg Bank & Trust,
815 F.3d at 312–13. One way of assessing whether this stand‐
ard has been met is to identify whether the order at issue
brought to an end a single “proceeding” that exists within the
larger bankruptcy case. See Bullard, 135 S. Ct. at 1692 (empha‐
sizing that 28 U.S.C. § 158(a) allows appeals as of right from
final orders in “cases and proceedings”).
In the present case, Owens‐Powers argues that a bank‐
ruptcy court’s denial of a trustee’s motion to modify a Chapter
13 plan does not resolve a “proceeding” within the larger
bankruptcy case. She relies on the Supreme Court’s decision
6 No. 15‐3237
in Bullard, in which the Court held that an order denying con‐
firmation of a Chapter 13 plan is not final unless the bank‐
ruptcy court also dismisses the underlying bankruptcy case.
Id. at 1692–93. The Court reasoned that, in the context of the
consideration of Chapter 13 plans, the relevant “proceeding,”
for purposes of § 158(a), is the entire process of considering
plans, which terminates only when a plan is confirmed or—if
the debtor fails to offer any confirmable plan—when the case
is dismissed. Id. at 1692.
Owens‐Powers contends that, in the context of a trustee’s
motion to modify a confirmed plan, the relevant “proceed‐
ing” encompasses more than simply the bankruptcy court’s
denial of the motion. She notes that a ruling on one motion to
modify does not preclude the trustee from filing another mo‐
tion to modify. Thus, argues the debtor, just like an order
denying plan confirmation is not final, an order denying a
trustee’s motion to modify a confirmed plan is not final.
We do not find the debtor’s analogy to Bullard persuasive.
The denial of a trustee’s motion to modify is generally not part
of a larger “proceeding” that will conclude only when some
event other than the denial of the motion occurs. Rather, the
denial of the motion will generally resolve a discrete dispute
within the larger bankruptcy case, i.e., whether the debtor’s
plan may be modified for the reasons the trustee cites. If the
trustee loses the motion on the merits, rather than because the
motion contained a technical defect that could be cured, the
bankruptcy court will not invite the trustee to bring a subse‐
quent motion seeking plan modification on the same grounds.
In contrast, when a bankruptcy court refuses to confirm a plan
but does not also dismiss the case, the debtor is usually given
an opportunity to submit a revised plan. Bullard, 135 S. Ct. at
No. 15‐3237 7
1690. This is why the Court found that the relevant “proceed‐
ing” for purposes of plan confirmation encompasses more
than the denial of any single proposed plan. That proceeding
concludes only when either a plan is confirmed or the bank‐
ruptcy case is dismissed.
Of course, if the bankruptcy court does deny a trustee’s
motion to modify a plan based on a technical defect or on
some other basis that could be cured by an amended motion,
then the bankruptcy court’s order will not be final. In this sit‐
uation, the bankruptcy court’s order will not have resolved a
discrete dispute but will have been merely one step in a larger
proceeding that will conclude when the bankruptcy court de‐
cides the amended motion. However, from the fact that some
orders denying motions to modify plans are not final, it does
not follow that none of them are final. In this regard, an order
denying a motion to modify is analogous to an order granting
a motion to dismiss a complaint under Federal Rule of Civil
Procedure 12(b)(6). If the district court grants the motion but
does so based on a defect in the complaint that cannot be
cured, then the order is final. See Strong v. David, 297 F.3d 646,
648 (7th Cir. 2002). However, if the district court grants the
motion based on a technical defect that the plaintiff could cure
by filing an amended complaint, then the order generally will
not be final. Id. In the present case, the bankruptcy court did
not deny the trustee’s motion to modify based on a technical
defect that the trustee could have cured by filing an amended
motion that sought the same relief. Rather, the bankruptcy
concluded as a matter of law that the Bankruptcy Code did
not allow the requested modification.
The debtor notes that although the trustee could not have
filed a second motion to modify requesting the same relief,
8 No. 15‐3237
the trustee could have filed “a different motion”—one that
“ask[ed] for a different change in the debtor’s plan or [was]
based on a different financial situation.” Initially, we observe
that the debtor has not identified any grounds on which the
trustee could have filed a different motion to modify the plan
in this case, and thus we cannot agree that in fact the trustee
could have filed such a motion. However, we do not doubt
that in some Chapter 13 cases, a trustee will file more than one
motion to modify a confirmed plan. But this does not mean
that in every case there is some larger “proceeding” relating
to the trustee’s motions to modify that does not come to an
end until it is legally impossible for the trustee to file any fur‐
ther motions. Rather, where an order denying a motion to
modify precludes the trustee from filing a subsequent motion
based on the same grounds (i.e., based on the same facts and
legal principles), that order will be final even though the trus‐
tee could file a subsequent motion to modify based on differ‐
ent grounds, should those grounds materialize. In such a case,
the bankruptcy court’s resolution of the first motion to modify
will have resolved a freestanding dispute within the larger
bankruptcy case and be final for that reason.
Here, we may analogize the denial of a trustee’s motion to
modify to a denial of a Rule 60(b) motion for relief from a
judgment entered in an ordinary civil case. See Fed. R. Civ. P.
60(b). That rule provides several grounds for relieving a party
from the judgment. A court’s denying a party’s motion for re‐
lief on one ground, such as that the judgment was procured
by fraud, see Fed. R. Civ. P. 60(b)(3), will not preclude the party
from later filing a second motion based on a different ground,
such as the discovery of new evidence, see Fed. R. Civ. P.
60(b)(2), should that ground materialize. Yet, even though it
is theoretically possible that more than one Rule 60(b) motion
No. 15‐3237 9
will be filed in a single civil case, a district court’s order deny‐
ing any one motion will be considered final and immediately
appealable. See, e.g., Madej v. Briley, 371 F.3d 898, 899 (7th Cir.
2004). The same result applies to a trustee’s motion to modify
a Chapter 13 plan.
For these reasons, we conclude that the bankruptcy court’s
order denying the trustee’s motion to modify the plan was “fi‐
nal” within the meaning of § 158(a)(1). Because the district
court’s order was also final, we have jurisdiction over this ap‐
peal under § 158(d)(1).
B.
The debtor next contends that this appeal is moot. Article
III of the Constitution limits the federal judicial power to ac‐
tual, ongoing cases or controversies, a limitation understood
to require a live dispute involving a party with “an actual in‐
jury traceable to the defendant and likely to be redressed by a
favorable judicial decision.” Redmond v. Redmond, 724 F.3d
729, 735 (7th Cir. 2013) (quoting Lewis v. Contʹl Bank Corp., 494
U.S. 472, 477 (1990)). The case‐or‐controversy requirement
“subsists through all stages of federal judicial proceedings,
trial and appellate.” Id. (quoting Lewis). If on appeal it be‐
comes “impossible for a court to grant any effectual relief
whatever,” the case becomes moot and jurisdiction no longer
exists. Id. (quoting Knox v. Serv. Emps. Intʹl Union, Local 1000,
__ U.S. __, 132 S. Ct. 2277, 2287 (2012)).
In the present case, Owens‐Powers argues that it is no
longer possible to grant the relief the trustee requests—mod‐
ification of the plan—because five years have elapsed since
the debtors began making payments under their original
plan. This argument is based on 11 U.S.C. § 1329(c), which
10 No. 15‐3237
provides, in relevant part, that a plan may not be modified
such that it “provide[s] for” the debtor to make plan pay‐
ments over a period that expires more than five years from the
date on which the first payment under the original confirmed
plan was due. The first payment under the Powers’ original
confirmed plan was due in June 2010. Thus, Owens‐Powers
argues, it is no longer possible to modify the plan.
The debtor’s argument rests on the assumption that if the
trustee’s request to modify the plan were allowed today, the
result would be a plan that provides for the debtors to make
payments over a period that expires after June 2015. That as‐
sumption is incorrect. If we vacated the bankruptcy court’s
disallowance of the trustee’s proposed modification, then by
operation of 11 U.S.C. § 1329(b)(2), the trustee’s modified plan
would “become[] the plan.” The modified plan would then
“provide” that the debtors must make increased payments to
the trustee each month for the twenty‐three months that re‐
mained under the plan at the time the motion was filed, i.e.,
months 38 through 60. These months were within the permis‐
sible five‐year period specified in § 1329(c). The modified plan
would thus not “provide for” payments beyond five years.
It is true that months 38 through 60 have come and gone
without the debtors making the increased payments. How‐
ever, this does not mean that allowing the modification would
have no effect on the parties’ rights. Rather, if the modification
were allowed, the debtors would be deemed in default be‐
cause they failed to make all payments called for by their
modified plan. If the debtors were in default, then several
things of consequence could occur: the bankruptcy court
could deny the debtors a discharge, dismiss their bankruptcy
case, or convert the case to Chapter 7. See 11 U.S.C.
No. 15‐3237 11
§§ 1307(c)(6), 1328.2 Or, the bankruptcy court might allow the
debtors to cure their default by paying the difference between
the payments called for by the modified plan for months 38 to
60 and what they actually paid during those months. Alt‐
hough these payments would be made outside of the five‐
year period specified in § 1329(c), they would not be pay‐
ments “provide[d] for” by the modified plan; rather, they
would be payments made to cure a default under the modi‐
fied plan, i.e., payments made because the debtors did not
make the payments “provide[d] for” by the plan in the first
place. See 1 Hon. W. Homer Drake, Jr., et al., Chapter 13 Practice
and Procedure, § 11:15 at 1131 (2d ed. 2015) (“[W]hen a debtor
is close to completing her plan payments and needs a reason‐
able additional time to do so, courts have permitted the
debtor to cure the defaults and consummate the plan. The rea‐
soning is that the five‐year restriction applies to the schedul‐
ing of the payments in the confirmed plan and does not pro‐
hibit cure of those payments outside the scheduled
time … .”). In any event, even if the bankruptcy court could
not allow the debtors to cure their default because of the five‐
year restriction, this appeal would still present a live dispute
because the bankruptcy court has the power to deem the debt‐
ors in default, deny them a discharge, and dismiss or convert
their Chapter 13 case.
The debtors might argue that it would be inequitable for
the bankruptcy court to modify the plan or deny them a dis‐
charge after they have already made the payments provided
2 At oral argument, the parties informed us that the bankruptcy court
has not granted the debtors a discharge. We express no view on whether
this appeal would be moot if the debtors had received a discharge.
12 No. 15‐3237
for by the original plan. However, whether it would be ineq‐
uitable to do any of these things is not a question that is rele‐
vant to mootness. As we have previously held, so long as a
court retains the “raw ability” to take some action that will
have a concrete effect on the parties’ rights, the case is not
moot even if the court would be reluctant to take that action.
In re UNR Indus., Inc., 20 F.3d 766, 768–69 (7th Cir. 1994); accord
United States v. Buchman, 646 F.3d 409, 410–11 (7th Cir. 2011).
Next, the debtor contends that even if the five‐year re‐
striction does not result in mootness, the case is still moot be‐
cause § 1329(a) states that a plan “may be modified,” upon the
request of the trustee (or the debtor or the holder of an al‐
lowed unsecured claim) only “before the completion of pay‐
ments” under the original plan. The debtors note that they
have completed making payments under their original plan.
Therefore, they contend, the bankruptcy court no longer has
the power to approve a modified plan.
However, § 1329(a) does not place any temporal limits on
the bankruptcy court’s power to approve a requested modifi‐
cation. Rather, the temporal limit applies to the party request‐
ing modification, i.e., to the debtor, the trustee, or an unse‐
cured creditor. Although § 1329(a) states that the plan “may
be modified” only within the prescribed time, when this lan‐
guage is read in the context of § 1329 as a whole, it is clear that
it is referring to the time when the modification may be re‐
quested, not to the time within which the bankruptcy court
may approve the modification. Specifically, § 1329(b)(2) states
that “[t]he plan as modified becomes the plan unless, after no‐
tice and a hearing, such modification is disapproved.” This
provision means that the modification is effective, i.e., that the
plan is modified, on the date the party requests modification
No. 15‐3237 13
of the plan, unless the court later disapproves it. See 2 Drake
et al., supra, § 21:7 at 642. So, for example, if the debtors had
completed making payments under their original plan be‐
tween the date on which the trustee filed the modified plan
and the date the bankruptcy court considered whether to ap‐
prove the modification, the bankruptcy court would still have
had the power to approve the modification, since by the time
the debtors completed making the payments required by the
original plan, the plan would have been modified to require
increased payments. Cf. In re Meza, 467 F.3d 874, 879–80 (5th
Cir. 2006) (holding that a bankruptcy court may consider a
trustee’s motion to modify a plan, if that motion was filed be‐
fore the debtor completed payments under the original plan,
even if the debtor completes making payments under the
original plan before the bankruptcy court considers whether
to approve the modification). Of course, in this case, the bank‐
ruptcy court disapproved the trustee’s modification. Under
§ 1392(b)(2), the effect of the disapproval was to void the mod‐
ification and reinstate the original plan. But this does not
mean that the debtors’ having completed payments under the
original plan prevents reinstatement of the trustee’s modified
plan. Rather, if we were to vacate the bankruptcy court’s order
disapproving the modification, then by operation of
§ 1329(b)(2), the modified plan would be reinstated and
deemed effective as of the date it was filed. It would be as if
the bankruptcy court had never disapproved the modification
in the first place. The modification thus would have occurred
within the time period specified in § 1329(a).
For these reasons, we conclude that this appeal is not
moot.
14 No. 15‐3237
III.
On the merits, the parties’ principal disagreement con‐
cerns the legal standard that governs a bankruptcy court’s ex‐
ercise of its discretion in deciding a trustee’s motion to modify
a confirmed plan based on a postconfirmation increase in the
debtor’s income. The trustee contends that a bankruptcy court
has discretion to grant the motion where the trustee shows
that, because of an increase in income, the debtor can afford
to pay more to the unsecured creditors than the original plan
requires. Owens‐Powers contends that a modification based
on increased income is allowed only if the trustee shows that
“good faith,” as that term is used in 11 U.S.C. § 1325(a)(3), re‐
quires the increase. In addition, the parties disagree about
how to characterize the bankruptcy court’s decision in this
case. The trustee contends that the bankruptcy court held as a
matter of law that it lacked authority to grant a motion to
modify based on a postconfirmation increase in the debtor’s
income. Owens‐Powers, who concedes that the bankruptcy
court had authority to grant a motion to modify based on a
postconfirmation increase in income, contends that what the
bankruptcy court actually held was that the trustee had failed
to prove that good faith required the increase. For the reasons
explained below, we side with the trustee on both issues.
Section 1329 provides that:
(a) At any time after confirmation of the plan but be‐
fore 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–
No. 15‐3237 15
(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;
(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; or
(4) reduce amounts to be paid under the plan by the
actual amount expended by the debtor to purchase
health insurance for the debtor … .
(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 disap‐
proved.
(c) A plan modified under this section may not provide
for payments over a period that expires after the appli‐
cable commitment period under section 1325(b)(1)(B)
after the time that the first payment under the original
confirmed plan was due, unless the court, for cause,
approves a longer period, but the court may not ap‐
prove a period that expires after five years after such
time.
16 No. 15‐3237
In short, § 1329 states that modification may be requested by
either the debtor, the trustee, or the holder of an allowed un‐
secured claim.3 It contains three general limits on the bank‐
ruptcy court’s power to approve the request. First, modifica‐
tion is allowed only if it will modify the plan in one of the
ways specified in § 1329(a)(1)–(4). Second, a modification
must comport with the provisions of the Code listed in
§ 1329(b)(1). Finally, as we have already discussed in the con‐
text of mootness, a modification may not result in a plan
providing for payments over a term that is longer than the
period specified in § 1329(c), which in this case is five years.
In the present case, the trustee’s proposed modification
satisfies these basic requirements. The purpose of the modifi‐
cation is to increase payments to the unsecured creditors, and
thus it is of a type specified in subsection (a)(1). The modifi‐
cation would not result in a plan that violates any of the pro‐
visions identified in subsection (b)(1). And, as we have al‐
ready held, the modification would not result in a plan that
provides for payments over a period that is longer than five
years.
3 Section 1329 was added to the Bankruptcy Code as part of the Bank‐
ruptcy Reform Act of 1978, Pub. L. No. 95‐598, 92 Stat. 2549 (1980). As
originally enacted, § 1329 did not identify the parties who could request
modification, and it was interpreted as allowing only the debtor to do so.
See 92 Stat. at 2651; In re Fitak, 92 B.R. 243, 248 (Bankr. S.D. Ohio 1988).
However, the 1984 amendments to the Code added language stating that
modification could be requested by the debtor, the trustee, or the holder
of an allowed unsecured claim. See Bankruptcy Amendments and Federal
Judgeship Act of 1984, Pub. L. No. 98‐353, § 319, 98 Stat. 333, 357 (1986).
No. 15‐3237 17
Although § 1329 contains these three general limits on
modification, it does not contain an explicit standard for de‐
termining when a modification that is within those limits
should be approved. See In re Witkowski, 16 F.3d 739, 746 (7th
Cir. 1994); Barbosa v. Solomon, 235 F.3d 31, 38 (1st Cir. 2000); In
re Arnold, 869 F.2d 240, 241 (4th Cir. 1989); 1 Drake et al., supra,
§ 11:4 at 1083 (noting that “§ 1329 provides no standards to
guide the court in the exercise of its discretion”). However,
courts routinely deem modification appropriate when there
has been a postconfirmation change in the debtor’s financial
circumstances that affects his or her ability to make plan pay‐
ments. See, e.g., Barbosa, 235 F.3d at 40 (“Congress saw fit to
allow the trustee and holders of unsecured claims to seek an
amendment to the confirmed plan in order to carry the ability‐
to‐pay standard forward in time, allowing upward or down‐
ward adjustment of plan payments in response to changes in
the debtor’s financial circumstances which affect his/her abil‐
ity to make payments”); Arnold, 869 F.2d at 241 (“Although §
1329(a) does not explicitly state what justifies such a modifi‐
cation, it is well‐settled that a substantial change in the
debtor’s financial condition after confirmation may warrant a
change in the level of payments.”); In re Powers, 202 B.R. 618,
622 (B.A.P. 9th Cir. 1996) (noting that a “debtor’s changed fi‐
nancial situation” is grounds for modifying a plan); 1 Drake
et al., supra, § 11:12 at 1100–01 (collecting numerous cases sup‐
porting the proposition that “[c]ourts generally permit debt‐
ors to modify plans to reduce payments based on reduced in‐
come” and “generally require[] debtors whose income in‐
creases significantly after confirmation to pay more”). So, for
example, if the debtor loses her job and can no longer afford
the payments required under the original plan, then she may
request modification to have the plan payments reduced.
18 No. 15‐3237
Conversely, if the debtor’s income increases such that she can
afford to pay more to her creditors than required under the
original plan, then the trustee or an unsecured creditor may
request that plan payments be increased. Courts have rea‐
soned that authority to allow such modifications is implied by
the purposes of Chapter 13, which are to allow the debtor a
fresh start where it is possible to do so without liquidating the
debtor’s assets (as in a Chapter 7 bankruptcy case), while at
the same time ensuring that the debtor devotes all of her dis‐
posable income during the life of the plan to repaying credi‐
tors. 1 Drake, et al., supra, § 11:4 (quoting In re Forte, 341 B.R.
859, 869–70 (Bankr. N.D. Ill. 2005)). In addition, courts have
noted that the legislative history relating to the 1984 amend‐
ments to the Bankruptcy Code—which amended § 1329(a) to
permit trustees and unsecured creditors (and not just debtors)
to request plan modification—supports the conclusion that
plan modification is permitted when a change in the debtor’s
income makes increased payments affordable. Barbosa, 235
F.3d at 40–41 (citing Personal Bankruptcy: Oversight Hearings
Before the Subcomm. on Monopolies and Commercial Law of the H.
Comm. on the Judiciary, 97th Cong. 22–23 (1981–82)); Arnold,
869 F.2d at 241–42 (same).4
4 While courts generally agree that a postconfirmation change in the
debtor’s ability to make plan payments is grounds for modifying a plan to
either increase or decrease the debtor’s payments, they have disagreed on
whether there must be some threshold showing relating to the amount of
change that has occurred since confirmation and whether that change was
unanticipated at the time of confirmation. Specifically, some courts have
held that modification is permitted only if there have been “unanticipated,
substantial changes” in the debtor’s financial circumstances since the time
of confirmation. See, e.g., Arnold, 869 F.2d at 243. However, in Witkowski,
No. 15‐3237 19
In the present case, the trustee requested modification of
the debtors’ plan after he determined that the debtors’ income
had increased substantially since confirmation and, for that
reason, they could afford to make higher plan payments. In
his motion, the trustee cited various cases recognizing that the
bankruptcy court has discretion to allow modification for this
reason. The bankruptcy court, however, found that no “statu‐
tory authority” or “Code provision” supported the trustee’s
request. Powers, 507 B.R. at 270–71, 273–74. The court initially
characterized the trustee’s modification as a request “to recal‐
culate disposable income” under the method specified in 11
U.S.C. § 1325(b). That subsection of the Code generally pro‐
vides that a court may not confirm a plan, over the objection
of the trustee or an unsecured creditor, unless under the plan
the debtor will, during the applicable plan period, pay all of
her projected disposable income—as calculated under the
methods specified in that subsection—to the unsecured cred‐
itors. However, because § 1325(b) is not mentioned in
§ 1329(b)(1) as a section of the Code that “appl[ies]” to modi‐
fication, many courts have concluded that the projected‐dis‐
posable‐income test of § 1325(b) does not apply to a proposed
modification. See, e.g., In re Sunahara, 326 B.R. 768, 781–82
(B.A.P. 9th Cir. 2005). Other courts have held that the test does
apply. See, e.g., In re Cormier, 478 B.R. 88, 94–97 (Bankr. D.
Mass. 2012). The bankruptcy judge in the present case is in the
former camp, and that is why she held that § 1325(b) does not
provide authority to allow the trustee’s modification. But the
trustee has not at any stage of this case suggested that the
modification was based on the disposable‐income test of
we held that a substantial, unanticipated change in circumstances is not a
prerequisite to modification. 16 F.3d at 742–46.
20 No. 15‐3237
§ 1325(b). Instead, as noted, the trustee argues that the modi‐
fication is supported by the cases holding that a plan may be
modified where an increase in income means that the debtor
can afford to make higher payments. Thus, in this appeal, we
do not need to decide whether the bankruptcy court was cor‐
rect in holding that § 1325(b) does not apply to modifications
under § 1329.
After concluding that § 1325(b) was not a source of author‐
ity for the trustee’s modification, the bankruptcy court found
that no other Code provision supported the modification.
Powers, 507 B.R. at 270–74. In this part of its opinion, the bank‐
ruptcy court characterized the trustee’s modification request
as being based “solely on the equities of the situation.” Id. at
270. The court then rejected the idea that a modification could
be based on equitable grounds rather than on an express pro‐
vision of the Bankruptcy Code. Id. at 271 (stating that court
could not “exercise its discretion to modify a confirmed Chap‐
ter 13 plan other than for the reasons or under the circum‐
stances expressly provided for by statute”). Instead, the court
reasoned, a motion to modify “must comply with and be sup‐
ported by the Code provisions made applicable to modifica‐
tions by § 1329(b)(1).” Id. at 274.
In rejecting the trustee’s argument that the court had au‐
thority to allow a modification that was based “solely on the
equities of the situation,” the bankruptcy court seems to have
rejected the cases, cited above, in which courts have recog‐
nized that modification under § 1329 is allowed when there
has been a postconfirmation change in the debtor’s financial
circumstances that affects his or her ability to make plan pay‐
ments. Indeed, the phrase “entirely on the equities of the sit‐
uation” appears in one of those cases, In re Than, 215 B.R. 430,
No. 15‐3237 21
438 (B.A.P. 9th Cir. 1997). In that case, the court stated that
“Congress contemplated in enacting § 1329 a motion to mod‐
ify the plan if the debtor’s income increased so the court could
consider all of the circumstances of a particular debtor to de‐
termine whether higher payments should be required.” Id.
The court then held: “When § 1325(b) [i.e., the projected‐dis‐
posable‐income test] is inapplicable, the § 1329 analysis is
based entirely on the equities of the situation.” Id. In rejecting
this line of authority, the bankruptcy court concluded that a
modification is allowed only if it is “supported by” one of the
Code provisions listed in § 1329(b)(1). Powers, 507 B.R. at 274.
On appeal, the district court held that, as a matter of law,
the bankruptcy court was correct in concluding that the pro‐
jected‐disposable‐income test of § 1325(b) did not apply to
modification under § 1329. In re Powers, __ B.R. __, __, 2015
WL 5725701, at *2 (C.D. Ill. Sep. 30, 2015). However, as we
have noted, the trustee did not argue that § 1325(b) applies to
modification under § 1329. Instead, the trustee argued that
even though § 1325(b) may not apply to modification, the
bankruptcy court had the authority to modify the plan to in‐
crease the debtor’s payments if a change in the debtor’s finan‐
cial circumstances enabled the debtor to pay more to her cred‐
itors. The district court acknowledged that the trustee had
cited “several cases from outside of the Seventh Circuit in
which courts have held that a confirmed Chapter 13 plan may
be modified when the debtor experiences an increase in in‐
come.” Id. at *3. But the court deemed those cases inconsistent
with our opinion in Witkowski, which the court interpreted as
meaning that modification is available only if it is based on
one of the Code provisions listed in § 1329(b)(1). The court
therefore concluded that the bankruptcy court lacked author‐
ity to allow the trustee’s modification.
22 No. 15‐3237
We conclude that both the district court and the bank‐
ruptcy court erred in concluding that the Code does not au‐
thorize the trustee’s modification. First, Witkowski does not
hold that modification under § 1329 is allowed only if the
modification is supported by one of the Code provisions
listed in § 1329(b)(1). The sentence in Witkowski that the dis‐
trict court cited to support its contrary conclusion is this: “A
modified plan is also only available if
§§ 1322(a), 1322(b), 1325(a) and 1323(c) of the bankruptcy
code are met.” Witkowski, 16 F.3d 739, 745 (7th Cir. 1994) (cit‐
ing 11 U.S.C. § 1329(b)(1)). However, context makes clear that
this sentence means only that § 1329(b)(1) places certain limits
on plan modification. The sentence appears in our discussion
of the debtor’s argument that the common‐law doctrine of res
judicata prevents modification of a confirmed plan unless the
movant demonstrates a change of circumstances. See id. at
744–46. The debtor had argued that, unless res judicata ap‐
plied in the modification context, bankruptcy courts would be
inundated with motions to modify. Id. at 745. In rejecting this
argument, we observed that “modifications under § 1329 are
not limitless.” Id. It was then that we pointed out that some of
the limits on modification are found in the Code provisions
listed in § 1329(b)(1). Id. Importantly, we did not say that a
court could modify a plan only if the modification was based
on—rather than merely consistent with—one of those provi‐
sions. Rather, after summarizing the limits on modification,
we recognized that § 1329 does not explicitly identify the cir‐
cumstances under which modification is appropriate. Id. at
746 (citing Arnold, 869 F.2d at 241). We then held that “modi‐
fication under § 1329 is discretionary,” and concluded that the
bankruptcy court in that case did not abuse its discretion in
modifying a plan at the request of the trustee to increase the
No. 15‐3237 23
payments made to the unsecured creditors. Id. We allowed
this modification even though it was not based on any provi‐
sion listed in § 1329(b)(1). Thus, Witkowski does not support
the result reached by the district court and the bankruptcy
court in this case.
Although it is true, as the bankruptcy court pointed out,
that no provision of the Code expressly permits modification
when a change in the debtor’s financial circumstances makes
an increase in payments affordable, it does not follow that
modification for this reason is forbidden. Indeed, the Code
does not contain any provision that expressly identifies the
grounds on which a trustee or an unsecured creditor may
modify a plan. See 1 Drake et al., supra, § 11:1 at 1072 (noting
that “the standards for postconfirmation modification in
Code § 1329 provide no guidance for determining what a
trustee or unsecured creditor can require a debtor to do”). Be‐
cause Congress did not provide express standards to govern
modifications by trustees and unsecured creditors, it neces‐
sarily left the development of those standards to the courts.
And, as we have explained, the courts have long recognized
that a trustee or an unsecured creditor may seek modification
when the debtor’s financial circumstances change after confir‐
mation and result in the debtor’s having the ability to pay
more. See, e.g., Barbosa, 235 F.3d at 40; Arnold, 869 F.2d at 241;
Powers, 202 B.R. at 622; 1 Drake et al., supra, § 11:12 at 1101
(collecting cases). Allowing the bankruptcy court, in its dis‐
cretion, to approve modification for this reason is consistent
with Chapter 13’s policy of requiring debtors to repay credi‐
tors to the extent they are able, and it is also supported by the
legislative history of the 1984 amendments to Chapter 13. Bar‐
bosa, 235 F.3d at 40–41; Arnold, 869 F.2d at 241–42. Thus, we
24 No. 15‐3237
hold that a bankruptcy court may allow modification to in‐
crease the debtor’s payments if, in its discretion, it concludes
that a change in the debtor’s financial circumstances makes an
increase in payments affordable.
In this court, Owens‐Powers concedes that a bankruptcy
court has discretion to allow modification at the request of the
trustee or an unsecured creditor when the debtor experiences
an increase in income. However, the debtor contends that the
court may allow the modification only if the trustee shows
that “good faith … required the increase.” This is a reference
to 11 U.S.C. § 1325(a)(3), which requires a plan to be “pro‐
posed in good faith.” The debtor further contends that the
bankruptcy court actually denied the trustee’s motion on the
ground that he had not shown that good faith required the
increase. We do not find these contentions persuasive.
First, the debtor develops no legal argument in support of
her contention that a plan may be modified based on an in‐
crease in income only when the modification is required by
good faith. Rather, the debtor merely asserts in her brief that
“increased income supports increased plan payments only in
the context of good faith.” The debtor cites no cases that sup‐
port this assertion, and she does not offer an interpretation of
the Code that supports it. Nor do we see how the Code could
be interpreted to allow modification based on an increase in
income only when good faith “requires” the modification. It
is true that the good‐faith standard is incorporated into § 1329
because it is one of the “requirements of section 1325(a)” that
applies to any modification. See 11 U.S.C. § 1329(b)(1). But all
this means is that a party may not propose a plan in bad faith,
such as by “manipulation of code provisions.” Witkowski, 16
F.3d at 746. Section 1325(a)(3) does not provide a standard for
No. 15‐3237 25
determining when a modified plan that has been proposed in
good faith should be approved.
Perhaps the debtor means to argue that a plan may be
modified to increase payments only when modification is
necessary to bring the debtor into compliance with the good‐
faith requirement. But § 1325(a)(3), by its terms, applies only
to the proponent of a plan, which obviously will not be the
debtor when the modification is requested by the trustee or
an unsecured creditor. Although the debtor’s good faith will
have been at issue when the debtor proposed the original
plan, and will be at issue when it is the debtor who requests
modification under § 1329, the debtor’s good faith is not at is‐
sue when the modification is proposed by the trustee or an
unsecured creditor.
We also reject Owens‐Powers’s suggestion that the bank‐
ruptcy court actually denied the trustee’s modification be‐
cause he had failed to show that good faith required the in‐
crease in plan payments. Although the bankruptcy court ref‐
erenced the good‐faith standard three times in its opinion,
two references were merely observations that the standard
applies to modification under § 1329(b)(1). See Powers, 507
B.R. at 273, 274. In the third reference, the bankruptcy court
stated that “[m]odification requests, whether made by a trus‐
tee or a debtor, must be proposed in good faith, and moving
to modify to circumvent the original confirmation require‐
ments may suggest bad faith.” Id. at 272. Here, the court did
not find that the trustee had, in fact, proposed the modified
plan in bad faith. Rather, the court made this statement dur‐
ing the course of a larger discussion in which the court re‐
jected the trustee’s suggestion that modification could be
based on equitable grounds rather than on an express Code
26 No. 15‐3237
provision. See id. at 270–73. At no point did the court suggest
that it would have approved the modification if the trustee
had shown that good faith “required the increase,” as the
debtor suggests.
Finally, we discuss the bankruptcy court’s alternative
holding, which was that it would not allow the trustee’s mod‐
ification even if it had authority to consider whether equitable
considerations required an increase in payments. Powers, 507
B.R. at 274–75, 276. In this part of its opinion, the bankruptcy
court determined that the trustee had failed to show that the
debtors’ financial circumstances had changed such that it was
now equitable to require higher payments. Id. On appeal to
the district court, the trustee argued that this alternative hold‐
ing was based on clearly erroneous factual findings, including
mathematical errors, that caused the court to misunderstand
the debtors’ then‐current financial circumstances. The trustee
also argued that the bankruptcy court had abused its discre‐
tion by failing to consider all of the evidence in the record per‐
taining to this issue. However, the district court declined to
review the bankruptcy court’s alternative holding, reasoning
that it was unnecessary to do so in light of its conclusion that
the bankruptcy court’s primary holding was correct.
Owens‐Powers has not asked us to affirm the district court
on the basis of the bankruptcy court’s alternative holding. Nor
has the trustee asked us to review that holding. Instead, the
trustee asks that we remand the case to the district court so
that it may review the holding in the first instance. Accord‐
ingly, we will not address the alternative holding but will re‐
mand the case to the district court.
No. 15‐3237 27
IV.
For the reasons stated, we vacate the judgment of the dis‐
trict court and remand for further proceedings consistent with
this opinion.