Robert Ranta v. Thomas Gorman

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-2017

ROBERT D. MORT RANTA,

Debtor - Appellant,

v.

THOMAS PATRICK GORMAN,

Trustee – Appellee.
------------------------------
NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS,

Amicus Supporting Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Alexandria. Claude M. Hilton, Senior
District Judge. (1:12-cv-00505-CMH-TCB; 11-18842-RGM)

Argued: March 20, 2013 Decided: July 1, 2013

Before GREGORY and AGEE, Circuit Judges, and David A. FABER,
Senior United States District Judge for the Southern District of
West Virginia, sitting by designation.

Vacated and remanded by published opinion. Judge Gregory wrote
the majority opinion, in which Judge Agee joined. Senior Judge
Faber wrote a dissenting opinion.

ARGUED: Daniel Mark Press, CHUNG & PRESS, PC, McLean, Virginia,
for Appellant. Eva Choi, OFFICE OF THE CHAPTER 13 TRUSTEE,
Alexandria, Virginia, for Appellee. ON BRIEF: Tara A. Twomey,
NATIONAL ASSOCIATION OF CONSUMER BANKRUPTCY ATTORNEYS, San Jose,
California, for Amicus Supporting Appellant.

2
GREGORY, Circuit Judge:

Robert D. Mort Ranta filed a voluntary petition for

bankruptcy under Chapter 13 of the Bankruptcy Code, 11 U.S.C.

§§ 1301-1330, seeking to adjust various secured and unsecured

debts. The bankruptcy court denied confirmation of his proposed

Chapter 13 plan on the grounds that it did not accurately

reflect his disposable income and that it was unfeasible if Mort

Ranta’s Social Security income was excluded from his “projected

disposable income,” as Mort Ranta urged. 1 The district court

affirmed. We hold that the plain language of the Bankruptcy

Code excludes Social Security income from the calculation of

“projected disposable income,” but that such income nevertheless

must be considered in the evaluation of a plan’s feasibility.

For these reasons, we vacate and remand to the district court

with instructions to remand the case to the bankruptcy court for

further proceedings consistent with this opinion.

I.

At the time he filed the Chapter 13 petition, Mort Ranta

owed $20,000 in arrears on his home mortgage loan, $12,981 in

individual credit card debt, and $8,295 in joint credit card

1
Although the docket lists the appellant’s surname as
“Ranta,” his correct surname, according to his counsel, is “Mort
Ranta.” We therefore use “Mort Ranta” in the opinion.

3
debt with his wife. On Form B22(C), Mort Ranta reported a

“current monthly income” of $3,097.46, a figure derived from the

couple’s combined average monthly income from employment over

the previous six months.

On Form B6I (“Schedule I”), however, Mort Ranta reported

his “combined average monthly income” as $7,492.10. That figure

reflected the couple’s current monthly take-home pay from

employment, plus an additional $3,319 in combined monthly Social

Security benefits. His monthly expenses were reported on Form

B6J (“Schedule J”) as $6,967.24. Subtracting that figure from

his “combined average monthly income,” his “monthly net income”

per Schedule J was $524.86.

Mort Ranta proposed a plan requiring payments of $525 per

month for five years, for a total of $31,500. From that amount,

the plan would pay off in full his mortgage arrears and joint

credit card debt. However, his individual credit card debt

would be paid off at less than one percent. 2

The Trustee objected to the plan, claiming that it failed

to dedicate Mort Ranta’s full “projected disposable income” to

creditors as required by 11 U.S.C. § 1325(b)(1)(B). 3

2
Specifically, the plan would provide a distribution of
.0042 on the individual credit card debt.
3
As explained below, § 1325(b)(1) applies when the Trustee
or an unsecured creditor objects to a Chapter 13 plan. In that
case, the plan may not be approved unless it (A) fully pays the
(Continued)
4
Specifically, the Trustee contended that the expenses listed on

Schedule J were overstated and that Mort Ranta’s disposable

income therefore was higher than it appeared to be.

In a hearing before the bankruptcy court, Mort Ranta

conceded that some of his expenses were overstated, but argued

that his plan nevertheless complied with § 1325(b)(1)(B) because

Social Security income is excluded from the calculation of

“disposable income.” Thus, even after adjusting his expenses

downward, he argued that his disposable income would be negative

because his expenses would still exceed his non-Social Security

income. As a result, Mort Ranta contended he was not required

to make any payments to unsecured creditors under

§ 1325(b)(1)(B).

In a colloquy with the parties, the bankruptcy court

determined that if Mort Ranta’s monthly payments were increased

to reflect his actual net income, including Social Security,

the total payments under the plan would be approximately

$50,000. That amount would allow for full repayment of all

debts, including the individual credit card debt that would be

paid off at less than one percent under Mort Ranta’s proposed

plan. Thus, the Trustee noted, the holder of that unsecured

unsecured claim or (B) dedicates all the debtor’s “projected
disposable income” during the commitment period to payments to
unsecured creditors. 11 U.S.C. § 1325(b)(1)(B).

5
debt would either “get paid pretty much in full like everybody

else or [under Mort Ranta’s proposed plan] they get nothing.”

The bankruptcy court agreed with the Trustee that Mort

Ranta “[could] afford something greater [than what he proposed

to pay] because there’s . . . income from Social Security.” The

court then found that Mort Ranta’s plan was not feasible,

explaining:

If you don’t want to count Social Security for the
purposes of the income then I think you have to go
back to the rule of law of disposable income. If
you’re not going to add it to income you’re not going
to have feasibility for the plan. It’s not feasible.

At this point, Mort Ranta asked the court to grant an

interlocutory appeal, and the court denied his request. The

court subsequently issued a written order denying confirmation

of the plan and ordering the case dismissed in 21 days unless

Mort Ranta took one of the actions enumerated in Rule 3015-2 of

the Local Bankruptcy Rules for the United States Bankruptcy

Court of the Eastern District of Virginia. 4

Mort Ranta appealed to the United States District Court for

the Eastern District of Virginia. In a motion for leave to

appeal, Mort Ranta noted that “the majority rule is that denial

4
The enumerated actions include filing a new modified
Chapter 13 plan, converting the case to another chapter of the
Bankruptcy Code, filing a motion for reconsideration, or
appealing the denial of confirmation. Bankr. Ct. R. 3015-
2(H)(3).

6
of confirmation is interlocutory,” but preserved his position

that the denial should be considered a final order for purposes

of appeal. The Trustee opposed the motion, arguing that the

appeal did not meet the criteria for interlocutory appeal under

28 U.S.C. § 158(a)(3).

Without addressing the basis for its jurisdiction or the

motion for leave to file, the district court affirmed the

bankruptcy court’s denial of confirmation in a written order.

The court reasoned:

In this case, the Bankruptcy Court appropriately
found that the Debtor could afford to pay an amount
greater than that proposed in his Chapter 13 plan.
Neither the Bankruptcy Code nor the Social Security
Act prohibits a bankruptcy court from determining a
debtor’s ability to repay his or her creditors, and in
this case part of that consideration included Debtor’s
supplemental Social Security retirement benefits.
Because Debtor voluntary[sic] chose not to include
Social Security benefits for purposes of income in
this particular case, the Bankruptcy Court found that
Debtor’s proposed Chapter 13 Plan was not feasible.
. . . [T]hese findings of the Bankruptcy Court are
neither erroneous nor contrary to law . . . .

Ranta v. Gorman, No. 1:12-CV-505 at 2 (E.D.V.A. August 6, 2012).

Mort Ranta timely appealed.

On appeal, Mort Ranta asks us to reverse the district

court’s order affirming the bankruptcy court’s denial of

confirmation, thereby overruling the Trustee’s objection to

confirmation. He argues first that the Bankruptcy Code

expressly excludes Social Security income from the calculation

7
of projected disposable income; and second, that his plan is

feasible based on his Social Security income. Before turning to

the merits of his appeal, first we must satisfy ourselves of our

appellate jurisdiction over the case.

II.

Mort Ranta asserts appellate jurisdiction under 28 U.S.C.

§ 158(d)(1), which grants the courts of appeal jurisdiction over

appeals from “all final decisions, judgments, orders, and

decrees” entered by the district court sitting in review of the

bankruptcy court. 5 Both the district court order and the

bankruptcy court order must be final for our jurisdiction to be

proper under § 158(d)(1). See In re Computer Learning Ctrs.,

Inc., 407 F.3d 656, 660 (4th Cir. 2005).

When a bankruptcy debtor’s proposed plan is confirmed, we

have generally allowed creditors and trustees whose objections

to the plan were overruled to appeal as a matter of right. See,

eg., In re Quigley, 673 F.3d 269, 270 (4th Cir. 2012) (trustee’s

appeal from district court’s affirmance of bankruptcy court

order overruling in part trustee’s objection to proposed plan);

Neufeld v. Freeman, 794 F.2d 149, 150 (4th Cir. 1986)

5
Mort Ranta does not claim to have complied with the
procedure for certifying a direct appeal under § 158(d)(2).

8
(creditor’s appeal from district court’s affirmance of

bankruptcy court’s confirmation of proposed plan).

By the same token, we have a long history of allowing

appeals from debtors whose proposed plans are denied

confirmation, without questioning the finality of the underlying

order. See, eg., In re Coleman, 426 F.3d 719, 722, 727 (4th

Cir. 2005) (appeal from bankruptcy court order, affirmed by

district court, withdrawing confirmation of debtor’s plan and

granting debtor 30 days to file an amended plan); In re Witt,

113 F.3d 508, 509, 513 (4th Cir. 1997) (appeal from district

court order reversing bankruptcy court’s confirmation of plan

and remanding to allow debtor to propose amended plan); In re

Solomon, 67 F.3d 1128, 1130-31 (4th Cir. 1995) (appeal from

bankruptcy court order, affirmed by district court, denying

confirmation of plan); Caswell v. Lang, 757 F.2d 608, 608 (4th

Cir. 1985) (same); Deans v. O’Donnell, 692 F.2d 968, 968 (4th

Cir. 1982) (same). 6

However, as described below, the finality of an order

denying confirmation of a proposed plan but not dismissing the

6
In tension with this practice, in an unpublished decision
we once dismissed an appeal similar to the one at bar for lack
of appellate jurisdiction. See In re Massey, 21 F. App’x 113,
114 (4th Cir. 2001) (per curiam) (unpublished). This decision
has minimal persuasive value, however, as it relied entirely on
out-of-circuit authority without providing any independent
reasoning. See id.

9
underlying bankruptcy petition is an issue that has divided

other circuits. On one side, four circuits have held that such

orders are strictly interlocutory, while two other circuits have

held that they can be final for purposes of appeal. See infra

pp. 11-15. Given this circuit split, and the fact that we have

not squarely addressed this issue before, we asked the parties

to file supplemental briefs addressing the basis for our

appellate jurisdiction. After considering the principles of

finality unique to bankruptcy cases and the decisions of other

circuits, we conclude that the bankruptcy court’s denial of Mort

Ranta’s proposed plan and the district court’s affirmance are

final orders for purposes of appeal, and that our appellate

jurisdiction is proper.

As we have recognized on many occasions, the concept of

finality in bankruptcy traditionally has been applied in a “more

pragmatic and less technical way” than in other situations.

McDow v. Dudley, 662 F.3d 284, 287 (4th Cir. 2011) (quoting

Computer Learning Ctrs., 407 F.3d at 660). The reason for this

“relaxed rule of appealability” is that bankruptcy proceedings

are often protracted, involving multiple parties, claims, and

procedures, and postponing review of discrete portions of the

action until after a plan of reorganization is approved could

result in the waste of valuable time and scarce resources.

McDow, 662 F.3d at 287 (quoting A.H. Robins Co. v. Piccinin, 788

10
F.2d 994, 1009 (4th Cir. 1986)). Thus, in bankruptcy cases, we

allow immediate appellate review of orders that “finally dispose

of discrete disputes within the larger case.” Id. at 287

(quoting Computer Learning Ctrs., 407 F.3d at 660). 7

Applying these principles, we have held final and

appealable a variety of orders that resolve a specific dispute

within the larger case without dismissing the entire action or

resolving all other issues. See, eg., McDow, 662 F.3d at 286-90

(denial of trustee’s motion to dismiss bankruptcy case as

abusive); Comm. of Dalkon Shield Claimants v. A.H. Robins Co.,

Inc., 828 F.2d 239, 241 (4th Cir. 1987) (denial of request by

claimants for appointment of trustee); Piccinin, 788 F.2d at

1009 (order fixing venue).

By contrast, we have held interlocutory bankruptcy court

orders that are provisional in nature and subject to revision,

and district court orders that remand the case to bankruptcy

court without consideration of the merits of the appeal. See,

eg., Computer Learning Ctrs., 407 F.3d at 661 (interim fee award

subject to reevaluation by bankruptcy court); In re Wallace &

7
We have applied the same relaxed and pragmatic approach to
finality whether the appeal is brought under 28 U.S.C. §§ 158 or
1291. Compare McDow v. Dudley, 662 F.3d 284, 286-87 (4th Cir.
2011) (applying the more pragmatic and less technical approach
in an appeal brought under § 158), with Comm. of Dalkon Shield
Claimants v. A.H. Robins Co., Inc., 828 F.2d 239, 241 (4th Cir.
1987) (using the same approach in an appeal brought under
§ 1291).

11
Gale Co., 72 F.3d 21, 23-24 (4th Cir. 1995) (district court

order remanding case to bankruptcy court with instructions to

certify an interlocutory appeal); In re Looney, 823 F.2d 788,

790-91 (4th Cir. 1987) (bankruptcy court order continuing

automatic stay until hearing on the merits of creditor’s motion

for relief from stay).

In contrast to the interlocutory orders in those cases,

here the bankruptcy court order clearly resolved a discrete

issue, indeed, the only issue, in Mort Ranta’s bankruptcy case—

that is, whether his proposed Chapter 13 plan merits

confirmation. The bankruptcy court order denied confirmation of

the proposed plan and directed the case dismissed unless Mort

Ranta took further action, and the district court’s order simply

affirmed. Nothing in either of the orders indicates that any

issues concerning the proposed plan remained for the bankruptcy

court’s consideration.

The argument against treating a denial of confirmation

final for purposes of appeal rests primarily on the fact that

the debtor may propose an amended plan before the case is

dismissed. The Second Circuit first articulated this reasoning

in Maiorino v. Branford Sav. Bank, 691 F.2d 89 (2d Cir. 1982),

which held that the denial of a Chapter 13 plan is

12
interlocutory. 8 As the Maiorino court explained, “[s]o long as

the petition is not dismissed, it is open to the debtor to

propose another plan, and . . . such a plan might well be

acceptable to the parties or bankruptcy judge concerned.” 691

F.2d at 91 (citation omitted). Following the Second Circuit,

three other circuits have held that a decision denying

confirmation of a proposed plan but not dismissing the

underlying bankruptcy petition is an interlocutory order. See

In re Lievsay, 118 F.3d 661, 662 (9th Cir. 1997) (per curiam);

Lewis v. United States, Farmers Home Admin., 992 F.2d 767, 773

(8th Cir. 1993); In re Simons, 908 F.2d 643, 645 (10th Cir.

1990) (per curiam). According to the Tenth Circuit, “[t]his

approach is entirely consistent” with two general principles

regarding finality: (1) that an order is not final unless it

“ends the litigation on the merits, leaving nothing for the

court to do but execute the judgment”; and (2) that a district

court order is not final if it “contemplates significant further

proceedings in the bankruptcy court.” Simons, 908 F.2d at 644-

45.

8
The jurisdictional statute at issue in that case was
former 28 U.S.C. § 1293(b), which was replaced by 28 U.S.C.
§ 158(d) when Congress enacted the Bankruptcy Amendments and
Federal Judgeship Act of 1984, Pub. L. No. 98-353, 98 Stat. 333.
“Because both statutes contain the finality requirement, courts
have applied the cases brought under section 1293(b) to section
158(d) cases.” In re Brown, 803 F.2d 120, 122 n.3 (3d Cir.
1986).

13
 We are not persuaded that a denial of confirmation should

be considered an interlocutory order simply because the debtor

could propose an amended plan. That conclusion appears to be

grounded upon standard finality principles, as demonstrated by

the Tenth Circuit’s observations in Simons, rather than the more

flexible approach to finality traditionally applied in

bankruptcy proceedings. Indeed, Maiorino, the seminal decision

upon which nearly all other courts have relied, made no mention

of a flexible approach, and instead opined that “[f]rom a policy

point of view . . . there is something to be said in a day of

burgeoning appellate dockets for taking care not to construe

jurisdictional statutes . . . with great liberality.” 691 F.2d

at 91. Although some courts have paid lip service to the

flexible approach even as they have held denials of confirmation

interlocutory, see, eg., In re Flor, 79 F.3d 281, 283 (2d Cir.

1996) (per curiam); Lewis, 992 F.2d at 772, they have generally

used the same reasoning as Maiorino--that such orders are

interlocutory because additional proceedings are available--

which is consonant with a more rigid approach, see In re Bartee,

212 F.3d 277, 282 n.6 (5th Cir. 2000) (observing that the Second

and Tenth Circuits have “favor[ed] a rigid rule of finality” in

holding that denials of confirmation are interlocutory).

Moreover, we find questionable the logic that denials of

confirmation are interlocutory simply because the debtor may

14
propose an amended plan, for the same can be said of a

confirmation order. Even after a plan is confirmed, the debtor

is always free to propose a modification to the plan, which

could substantially modify the terms of repayment and the rights

of creditors. See 11 U.S.C. § 1329(a). (Indeed, even the

Trustee and the creditors may propose a modification. Id.)

We therefore agree with the more pragmatic approach of

those circuits that have held that a denial of confirmation can

be a final order for purposes of appeal even if the case has not

yet been dismissed, recognizing that this conclusion “is all but

compelled by considerations of practicality.” Bartee, 212 F.3d

at 283; see also In re Armstrong World Indus., Inc., 432 F.3d

507, 511 (3d Cir. 2005) (holding that a denial of confirmation

was a final order for purposes of appeal, in part, due to

“practical considerations in the interests of judicial

economy”). 9

As the Fifth Circuit explained in Bartee, a contrary rule

could leave some debtors “without any real options in

formulating [their] plan.” 212 F.3d at 283. Assuming an

9
While we find the decisions of these circuits persuasive,
contrary to the dissent’s assertions, we do not adopt any of the
methodology they use to evaluate finality in bankruptcy (such as
multi-factor tests), which the dissent considers too
“indeterminate.” See infra pp. 42 n.6, 43-44, 51-52. Rather,
our decision is based on the principles of finality
traditionally applied by our Circuit in bankruptcy cases. See
supra pp. 9-10.

15
interlocutory appeal is unavailable, the debtor who prefers the

proposed plan and seeks to appeal the denial would be forced to

“choose between filing an unwanted or involuntary plan and then

appealing his own plan, or dismissing his case and then

appealing his own dismissal.” Id. Forced to suffer dismissal,

the debtor could lose the automatic stay on foreclosure and

collection actions that takes effect upon the filing of the

Chapter 13 petition, see 11 U.S.C. § 362, and could be precluded

from filing another bankruptcy petition for six months, see id.

§ 109(g). Forced to propose an unwanted plan, the debtor would

waste “valuable time and scarce resources,” McDow, 662 F.3d at

287, on a plan proposed only for the purpose of obtaining

appellate review of the earlier order. 10 Thus, as a practical

matter, it makes little sense to deny debtors immediate

10
In addition, the procedural oddity of allowing a debtor
to appeal the confirmation of his or her own proposed plan
raises questions regarding standing. To have standing to appeal
a bankruptcy order, the appellant must be a “person aggrieved”
by the order, that is, a person “directly and adversely affected
pecuniarily.” In re Urban Broad. Corp., 401 F.3d 236, 243-44
(4th Cir. 2005). Although the Eighth Circuit has held that a
debtor forced to propose an amended plan has standing to appeal
as a “person aggrieved” by the confirmation order, see In re
Zahn, 526 F.3d 1140, 1142 (8th Cir. 2008) (reversing the
contrary ruling of the Bankruptcy Appellate Panel), we have not
yet addressed this issue.

16
appellate review simply because the case has not yet been

dismissed and the debtor could propose an amended plan. 11

In arguing that the denial of confirmation should be

considered interlocutory, the dissent contends that a “discrete

dispute” should be limited, for purposes of evaluating the

finality of a bankruptcy order, to “situations where one

creditor’s rights become fixed while other issues in the

bankruptcy case remain unresolved.” Infra p. 40. However, our

Circuit has never articulated such a strict rule. Instead, as

described above, we have held final a variety of orders that

resolved a discrete dispute without fixing the rights of any one

creditor. See infra p. 10 (collecting cases).

The dissent also contends that our decision “needlessly

expands appellate jurisdiction” in bankruptcy, encouraging

“start-and-stop” appeals from debtors whose plans are denied

confirmation, discouraging negotiation and mediation in

reorganization cases, and hampering the very aim of judicial

economy guiding our decision. Infra p. 54. We disagree.

First, as described above, our Court has a long history of

11
The dissent argues that our reasoning “assumes too much
of the debtor’s intent.” Infra p. 53. However, it is reason,
not assumption, which leads us to conclude that the initial plan
proposed by the debtor is the debtor’s preferred plan--
especially given that the Bankruptcy Code requires Chapter 13
debtors to propose their plans in good faith, see 11 U.S.C.
§ 1325(a)(3)--and therefore that some debtors will disagree with
the denial of confirmation and want to appeal the decision.

17
allowing appeals from debtors whose proposed plans are denied

confirmation. Infra p. 8. Our holding today does not extend

our appellate jurisdiction but instead justifies its existing

parameters. 12

Moreover, we see no reason to assume that debtors faced

with a denial of confirmation will waste their resources on a

gratuitous appeal simply because the option to appeal is

available, when an amended plan would provide all the relief

needed. Thus, to the extent the dissent suggests that our

decision will encourage an onslaught of senseless “start-and-

stop appeals,” undermining judicial economy, see infra p. 54, we

disagree. Indeed, the alternative adopted by the courts upon

which the dissent relies, that is, allowing debtors to appeal

the denial of confirmation after an amended plan is confirmed,

see, eg., In re Zahn, 526 F.3d 1140, 1143-44 (8th Cir. 2008), is

hardly less economical, for it simply delays the inevitable in

cases where the amended plan is unacceptable to the debtor.

Finally, we do not think it necessary to treat denials of

confirmation as interlocutory in order to encourage negotiation

and mediation in reorganization cases. As noted by the dissent

12
We do not rely, as the dissent suggests, infra pp. 45-46,
on any sub silentio holdings in the cases cited infra page 8.
Rather, we cite these cases to show that our Circuit has a
history of hearing appeals from denials of confirmation, even if
we have not yet squarely addressed the basis for our
jurisdiction.

18
in Maiorino, the effect of such a rule is that “when creditors

lose and a plan is confirmed, creditors may appeal immediately

as of right,” but “when debtors lose and a plan is rejected,

they may appeal only by leave of the [reviewing] court,” 691

F.2d at 95 (Lumbard, J., dissenting). Given that “Congress

enacted Chapter 13 to aid consumer debtors,” id., whatever the

value of negotiation and mediation in Chapter 13 cases, that

value is best fostered by an even playing field that affords

debtors the same access to relief on appeal as creditors when a

decision regarding the proposed plan is adverse to their

interests. 13

In sum, because it is evident from the face of the

underlying orders that confirmation of Mort Ranta’s proposed

plan was finally denied, it would make little sense to force

Mort Ranta to suffer dismissal or to waste resources on an

amended plan before obtaining appellate review. Such a rule

would be inconsistent with the pragmatic, less technical

approach to finality we apply in bankruptcy proceedings. We

13
The dissent also argues that our decision “effectively
reads out” the avenues for interlocutory relief afforded by the
certification provisions of 28 U.S.C. §§ 158(d)(2) and 1291(b).
Infra p. 54. This is not so. Those provisions remain available
to authorize direct appeals from any number of bankruptcy court
rulings on novel or disputed legal issues, or other issues of
importance, without regard to the finality of the underlying
order. We simply hold, regardless of whether this case presents
such an issue, that the denial of confirmation is appealable as
a final order.

19
therefore conclude that the bankruptcy court’s denial of

confirmation and the district court’s affirmance are final

orders for purposes of appeal under § 158(d)(1), and our

appellate jurisdiction is proper. 14

III.

Turning to the merits of the appeal, Mort Ranta argues that

the bankruptcy court erred in denying confirmation of his plan

because the Bankruptcy Code excludes Social Security income from

the calculation of “projected disposable income,” and because

his plan is feasible based on consideration of that income.

When reviewing a decision by a district court sitting in its

capacity as a bankruptcy appellate court, we review the factual

findings of the bankruptcy court for clear error and the legal

conclusions de novo. In re Kirkland, 600 F.3d 310, 314 (4th

Cir. 2010). Because this appeal presents only questions of

statutory interpretation and the facts are undisputed, our

review is de novo. In re White, 487 F.3d 199, 204 (4th Cir.

2007).

14
During the pendency of this appeal, the bankruptcy court
conditionally confirmed Mort Ranta’s proposed plan pending the
outcome of his appeal to allow the Trustee to disburse to
creditors funds Mort Ranta had paid to the Trustee. Mort Ranta
argues that the conditional confirmation order cures any defect
in the finality of the denial of confirmation. Because we hold
that the denial of confirmation is final and appealable, we do
not reach this argument.

20
 A.

Chapter 13 of the Bankruptcy Code allows debtors with

regular income to repay or discharge certain debts after making

payments to creditors for a specified commitment period,

generally three to five years. See 11 U.S.C. §§ 1301-1330. To

obtain relief, the debtor must propose a debt adjustment plan

that meets all the requirements for confirmation set forth in

the Code. See id. §§ 1322, 1325. Relevant here, if the Trustee

or an unsecured creditor objects to confirmation of the plan,

the plan must either fully pay the unsecured claim or provide

that all the debtor’s “projected disposable income” to be

received during the applicable commitment period will be applied

to make payments to unsecured creditors. Id. § 1325(b)(1).

Prior to 2005, the Code defined disposable income as “income

which is received by the debtor” less amounts reasonably

necessary for the maintenance or support of the debtor, certain

charitable contributions, and certain business expenses. 11

U.S.C. § 1325(b)(2) (2000). Based on this definition, “courts

typically included Social Security benefits in the calculation

of disposable income.” Baud v. Carroll, 634 F.3d 327, 347 (6th

Cir. 2011) (collecting cases).

In 2005, however, Congress amended the definition of

“disposable income” with the enactment of the Bankruptcy Abuse

Prevention and Consumer Protection Act of 2005 (BAPCPA), Pub.L.

21
No. 109–8, 119 Stat. 23 (2005). The Code now defines “disposable

income” as “current monthly income received by the debtor” less

“amounts reasonably necessary to be expended” for the

maintenance or support of the debtor, certain charitable

contributions, and certain business expenses. 11 U.S.C.

§ 1325(b)(2). “[C]urrent monthly income” means the debtor’s

average monthly income from all sources during the previous six

months, excluding, among other things, “benefits received under

the Social Security Act.” Id. § 101(10A). Thus, Social

Security income is now excluded from the definition of

“disposable income.” In addition, the Code now requires above-

median income debtors to use the “means test”--a statutory

formula for determining whether a presumption of abuse arises in

Chapter 7 cases--when calculating the “amounts reasonably

necessary to be expended” for the debtor’s maintenance or

support. See id. §§ 1325(b)(3), 707(b)(2). As a result, only

certain specified expenses are included in the above-median

income debtor’s “amounts reasonably necessary” for maintenance

or support. Id. For below-median income debtors, however, the

full amount reasonably necessary for maintenance and support is

included. See § 1325(b)(2)(A)(i).

Although the Bankruptcy Code defines the term “disposable

income,” it does not specifically define “projected disposable

income.” However, in Hamilton v. Lanning, the Supreme Court

22
explained that “projected disposable income” should be

calculated based on “disposable income,” using a “forward-

looking approach.” 130 S. Ct. 2464, 2469 (2010). First, the

debtor’s “disposable income” should be multiplied by the number

of months in the debtor’s plan, and in most cases the result

will be determinative. Lanning, 130 S. Ct. at 2471. However,

“in exceptional cases, where significant changes in a debtor’s

financial circumstances are known or virtually certain, the

bankruptcy court has discretion to make an appropriate

adjustment.” Id.; see also In re Quigley, 673 F.3d 269, 273-74

(4th Cir. 2012) (noting that under Lanning, bankruptcy courts

may account for foreseeable changes in both income and

expenses).

Following Lanning, a debtor’s “projected disposable income”

is based on the debtor’s “disposable income,” give or take any

adjustments necessary to account for foreseeable changes in that

income. Because the Code expressly excludes Social Security

income from “current monthly income,” and thus, “disposable

income,” it follows that Social Security income must also be

excluded from “projected disposable income.” Indeed, every

other circuit to address this issue has arrived at the same

conclusion. See In re Welsh, 711 F.3d 1120, 1127 n.28, 1130-31

(9th Cir. 2013) (noting that the statute clearly excludes Social

Security income); In re Ragos, 700 F.3d 220, 223 (5th Cir. 2012)

23
(same); In re Cranmer, 697 F.3d 1314, 1317-18 (10th Cir. 2012)

(same); Baud, 634 F.3d at 345 (same).

The Trustee’s arguments to the contrary are neither

persuasive nor consistent with the plain language of the Code.

The Trustee first claims that the revised definition of

“disposable income” applies only to above-median income debtors,

not to below-median income debtors, like Mort Ranta. But the

Code provides a single definition of “disposable income,” and

that definition uses “current monthly income” as a starting

point without differentiating between debtors of different

income levels. 11 U.S.C. § 1325(b)(2). Although the Code goes

on to distinguish between above-median income and below-median

income debtors for purposes of calculating the “amounts

reasonably necessary” for the debtor’s maintenance or support,

id. § 1325(b)(3), there is no distinction on the income side.

Next, the Trustee argues that the Supreme Court’s decision

in Lanning allows Social Security income to be included in

“projected disposable income” even if it is excluded from

“disposable income.” In Lanning, however, the Court held only

that foreseeable changes in the debtor’s financial circumstances

may be taken into account when calculating “projected disposable

income,” not that the basic formula for “disposable income” may

be ignored. See Cranmer, 697 F.3d at 1318 (“[N]othing in

Lanning suggests a court may disregard the Code’s definition of

24
disposable income in calculating projected disposable income.”);

Baud, 634 F.3d at 345 (“[T]he discretion Lanning affords . . .

does not permit the court to alter the items to be included in

and excluded from income.”). We do not consider Lanning to

authorize the bankruptcy court to read out of the Code the

BAPCPA’s revisions to the definition of “disposable income.”

“If Congress excluded social security income from current

monthly income and disposable income, it makes little sense to

circumvent that prohibition by allowing social security income

to be included in projected disposable income.” Ragos, 700 F.3d

at 223.

The Trustee also argues that Social Security income must be

included in the calculation of a below-median income debtor’s

“disposable income” because Schedule I contains a line for its

inclusion. The Trustee contends that Schedule I is used with

Schedule J to calculate the disposable income of below-median

income debtors. The language of the forms, however, does not

support the Trustee’s contention. Schedule I states that it

calculates “average monthly income,” not “current monthly

income.” And Schedule J, which references Schedule I,

calculates “monthly net income,” not “disposable income.” The

bankruptcy court may not “disregard the Code’s definition of

disposable income . . . simply because there is a disparity

between the amount calculated using that definition and the

25
debtor’s actual available income as set forth on Schedule I.”

Baud, 634 F.3d at 345.

Given the Trustee’s confusion over this issue, we emphasize

that, for all debtors, the starting point for calculating

projected disposable income is the debtor’s “current monthly

income,” which is provided by Form B22(C). For above-median

income debtors, Parts IV and V of Form B22(C) allow the debtor

to calculate “disposable income” by deducting the limited

expenses allowed under the means test from the debtor’s “current

monthly income.” For below-median income debtors, however,

“disposable income” should be calculated by subtracting the full

amount “reasonably necessary to be expended” for the debtor’s

support or maintenance, based on information provided in

Schedule J, from the “current monthly income” figure. Using the

“disposable income” figure, “projected disposable income” should

then be calculated consistent with the Supreme Court’s

instructions in Lanning.

Finally, the Trustee argues that failing to require below-

median income debtors to include Social Security income in their

“projected disposable income” would contravene Congress’ intent

to eradicate bankruptcy abuse when it enacted the BAPCPA. See

Ransom v. FIA Card Servs., N.A., 131 S. Ct. 716, 721 (2011)

(“Congress enacted the [BAPCPA] to correct perceived abuses of

the bankruptcy system. In particular, Congress adopted the

26
means test . . . to help ensure that debtors who can pay

creditors do pay them.”) (internal quotation marks and citations

omitted). For instance, the Trustee argues that if Social

Security income is not included, then debtors will have total

discretion to dictate the amount of income they want to

contribute to the plan. But this is not necessarily so. It is

true that a Chapter 13 debtor with zero or negative “projected

disposable income” is not required to apply any income to

payments to unsecured creditors under § 1325(b)(1)(B). The

debtor’s plan, however, still must satisfy every other

requirement for confirmation set forth in the Code. Among other

requirements, the plan must meet the “best interests of the

creditors” test, i.e., unsecured creditors must not receive less

than they would in a Chapter 7 liquidation of the estate, 11

U.S.C. § 1325(a)(4), and the plan must have been proposed in

good faith, id. § 1325(a)(3). 15

15
We note, however, that the exclusion of Social Security
income from disposable income, as required by statute, by
itself, does not constitute bad faith. See In re Ragos, 700
F.3d 220, 227 (5th Cir. 2012) (“[R]etention of exempt social
security benefits alone is legally insufficient to support a
finding of bad faith under the Bankruptcy Code); In re Cranmer,
697 F.3d 1314, 1319 (10th Cir. 2012) (“When a Chapter 13 debtor
calculates his repayment plan payments exactly as the Bankruptcy
Code and the Social Security Act allow him to, and thereby
excludes SSI, that exclusion cannot constitute a lack of good
faith.”).

27
 More fundamentally, the concerns over abuse raised by the

Trustee are best addressed to Congress, not to this Court. The

function of the judiciary is to apply the law, not to rewrite it

to conform with the policy positions of litigants. When the

statutory language is clear, as it is in this case, our inquiry

must end. See In re Sunterra Corp., 361 F.3d 257, 265 (4th Cir.

2004) (“As a settled principle, unless there is some ambiguity

in the language of a statute, a court’s analysis must end with

the statute’s plain language.” (internal quotation marks,

citations, and alteration omitted)). 16

In sum, we hold that, for both above-median income and

below-median income debtors, Social Security income is excluded

from the calculation of “projected disposable income” under

§ 1325(b)(2).

B.

We next address whether the district court erred when it

disregarded Mort Ranta’s Social Security income for purposes of

evaluating whether his plan was feasible. The “feasibility”

requirement is expressed in § 1325(a)(6), which states that the

16
Because we hold that the Bankruptcy Code expressly
excludes Social Security income from the calculation of
“projected disposable income,” we do not reach Mort Ranta’s
alternative argument that the Social Security Act protects
Social Security income from the operation of Chapter 13
proceedings. See 42 U.S.C. § 407.

28
plan shall be confirmed if “the debtor will be able to make all

payments under the plan and to comply with the plan.”

The bankruptcy court reasoned that if Social Security

income is excluded from “disposable income,” then it must also

be excluded when evaluating whether the plan is feasible. But

nothing in the Code supports this conclusion.

Section 1325(a)(6) simply states that a debtor must be able to

make the payments required by the plan; it does not state that

only “disposable income” may be used to make payments. Further,

it has long been established that Social Security income may be

used to fund a Chapter 13 plan. See 11 U.S.C. § 109(e)

(allowing individuals with “regular income” to be debtors under

Chapter 13); United States v. Devall, 704 F.2d 1513, 1516 (11th

Cir. 1983) (explaining that originally only “wage earners” could

file under Chapter 13, and that in 1978 Congress amended the

Code to extend relief to individuals with “regular income,” in

part, to benefit Social Security recipients) (citing S.R. No.

95–989, at 13 (1978), 1978 U.S.C.C.A.N. 5799; H.R. No. 95–595,

(1977), 1978 U.S.C.C.A.N. 5963, 6080); see also Hon. W. Homer

Drake, Hon. Paul W. Bonapfel & Adam M. Goodman, Chapter 13

Practice and Procedure § 3:7 (2012) (noting that “permissible

sources of regular income include . . . social security

benefits”). According to the bankruptcy court’s interpretation

of the Code, however, it is unlikely that a debtor whose primary

29
source of income is Social Security could ever propose a

confirmable plan, for the debtor would be unable to prove

feasibility. There is no indication Congress intended to throw

this kind of obstacle to relief in the way of Social Security

recipients when it revised the definition of “projected

disposable income” with the BAPCPA.

We therefore hold, in agreement with the Sixth Circuit,

that “a debtor with zero or negative projected disposable income

may propose a confirmable plan by making available income that

falls outside of the definition of disposable income—such as

. . . benefits under the Social Security Act—to make payments

under the plan.” Baud, 634 F.3d at 352 n.19; see also In re

Kibbe, 361 B.R. 302, 314 n.11 (B.A.P. 1st Cir. 2007) (per

curiam) (noting that the revised definition of projected

disposable income “does not preclude a debtor’s use of available

monies excluded from the definition . . . to support the

feasibility of the debtor’s plan). Thus, in evaluating whether

a debtor will be able to make all payments under the plan and

comply with the plan, the bankruptcy court must take into

account any Social Security income the debtor proposes to rely

upon, and may not limit its feasibility analysis by considering

only the debtor’s “disposable income.” If the debtor’s actual

net income, including Social Security income, is sufficient to

cover all the required payments, the plan is feasible.

30
 In arguing otherwise, the Trustee cites a single bankruptcy

court case from another circuit, which we do not find

persuasive. See In re Schanuth, 342 B.R. 601, 605 (Bankr. W.D.

Mo. 2006) (holding that a debtor’s plan was not feasible because

the monthly payments exceeded “disposable income”). The

Schanuth court relied exclusively on bankruptcy cases predating

the BAPCPA, without taking into account how the BAPCPA’s revised

definition of “disposable income” affects the feasibility

analysis. See id. n.11 (collecting cases). Although before the

BAPCPA, it would make sense to find a plan unfeasible when

“disposable income” exceeded the payments required by the plan,

that is no longer the case.

For these reasons, we hold that when a Chapter 13 debtor

proposes to use Social Security income to fund a plan, the

bankruptcy court must consider that income in evaluating the

plan’s feasibility under § 1325(a)(6).

IV.

Given that circumstances may have changed during the

pendency of this appeal, we do not decide whether Mort Ranta’s

plan should be confirmed, but instead remand the case to allow

the bankruptcy court to reconsider the plan in light of our

holdings. Accordingly, we vacate the order of the district court

and remand the case to the district court with instructions to

31
remand to the bankruptcy court for further proceedings

consistent with this opinion.

VACATED AND REMANDED

32
FABER, Senior District Judge, dissenting:

I respectfully dissent from the majority's conclusion that

the bankruptcy court's denial of confirmation of the debtor's

Chapter 13 plan was a final order and, accordingly, believe that

appellate jurisdiction is not proper in this case. The nature

of appellate jurisdiction in bankruptcy, the effects of

“flexible finality” on the same, and the weight of precedent

from other circuit courts of appeals all compel my dissenting

opinion.

I.

While federal district courts have original jurisdiction

over all cases under the Bankruptcy Code, see 28 U.S.C. §

1334(a)-(b), they also have appellate jurisdiction over, among

other matters, bankruptcy court orders, whether final or

interlocutory. See 28 U.S.C. § 158(a)(1), (3). Circuit courts

of appeals also have appellate jurisdiction over final

bankruptcy court orders as an additional layer of appellate

review beyond the district court’s own appellate review. See 28

U.S.C. § 158(d)(1)(stating that circuit courts of appeals have

appellate jurisdiction over all final orders of a district court
where that district court heard bankruptcy appeals pursuant to

28 U.S.C. § 158(a)). 1

Separately, circuit courts of appeals have direct appellate

jurisdiction in bankruptcy, conditioned upon certification by

the lower court involved in the bankruptcy proceeding. See 28

U.S.C. § 158(d)(2)(A). This type of direct appeal in bankruptcy

requires certification from a lower court that the bankruptcy

order being appealed involves (1) a legal question where no

circuit court of appeals or Supreme Court decision controls, (2)

a matter of public importance, (3) a legal question requiring

resolution of conflicting decisions, or (4) a situation where an

interlocutory appeal might "materially advance the progress of"

the bankruptcy case or proceeding below. 2 See id. Notably, an

1
In Connecticut National Bank v. Germain, the Supreme Court
noted that 28 U.S.C. §§ 158(d)(1) and 1291 “do not pose an
either-or proposition” regarding the courts of appeals’
appellate jurisdiction over final orders in bankruptcy. See
Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253 (1992).
Accordingly, the statutes overlap to an extent, granting
appellate jurisdiction over final orders in bankruptcy to
circuit courts of appeals through two points of authority.
2
28 U.S.C. § 158(d)(2) essentially grants appellate
jurisdiction over interlocutory orders in bankruptcy to circuit
courts of appeals. The Supreme Court has specifically held,
however, that 28 U.S.C. § 158(d)(2) does not, by negative
implication, limit circuit courts of appeals' appellate
jurisdiction over interlocutory appeals pursuant to 28 U.S.C. §
1292(b). Connecticut Nat. Bank v. Germain, 503 U.S. at 253.
Accordingly, these statutes overlap in a manner similar to 28
U.S.C. §§ 158(d)(1) and 1291. Additionally, while 28 U.S.C. §§
158(d)(2) and 1292(b) differ in ways largely irrelevant here,
(Continued)
34
appeal under 28 U.S.C. § 158(d)(2), as opposed to an appeal

under 28 U.S.C. § 158(d)(1), does not stay any proceeding in the

lower court from which the appeal is taken. See 28 U.S.C. §

158(d)(2)(D). Instead, a lower court may, though it need not,

affirmatively issue a stay when a circuit court of appeals

receives an appeal under Section 158(d)(2). See id.

As the majority rightly notes, the debtor in this case

"does not claim to have complied with the procedure for

certifying a direct appeal" under 28 U.S.C. 158(d)(2). Supra p.

7 n.5. However, the record clearly shows that the debtor

attempted to comply with one or another procedure for obtaining

interlocutory review, but either failed to comply fully or was

denied such review. For example, at the confirmation hearing,

the debtor asked the bankruptcy court to grant an interlocutory

appeal. The bankruptcy court denied the debtor's request. The

record also shows that the debtor, in his motion for leave to

appeal to the district court, acknowledged that more circuit

courts of appeals than not have held that a denial of

confirmation of a Chapter 13 plan is interlocutory. On the one

hand, the district judge below, in his written order affirming

the bankruptcy court’s denial of confirmation, chose not to

the two statutes are significantly similar in one regard—both
contain procedural requisites for taking an interlocutory
appeal.

35
address the basis for the district court's appellate

jurisdiction. By the same token, the district judge did not

opine that any issue in the debtor’s appeal merited

interlocutory review. Just as the opportunity to pursue

interlocutory review by the district court under 28 U.S.C. §

158(a)(3) was quashed at the bankruptcy court level, the

opportunity to pursue interlocutory review by this Court was

lost at both the bankruptcy and district court levels, although

not for the debtor’s lack of attempting to pursue interlocutory

review.

As an alternative, the debtor now seeks to re-cast an

interlocutory appeal as an appeal from a final order. The

majority complied, citing the “flexible finality” concept unique

to bankruptcy while simultaneously ignoring the significance of

procedural requirements for taking an interlocutory appeal in

bankruptcy.

II.

A.

Nearly all circuit courts of appeals agree that "the

concept of 'finality' is more flexible in the bankruptcy context

than in ordinary civil litigation." In re Flor, 79 F.3d 281,

283 (2d Cir. 1996)(holding a denial of confirmation of a Chapter

11 plan is interlocutory and reasoning that the Second Circuit's

36
holding in Maiorino v. Bradford Savings Bank, a Chapter 13 case,

"applies with comparable force" in the Chapter 11

context)(citing Maiorino v. Branford Sav. Bank, 691 F.2d 89, 91

(2d Cir. 1982)); see also In re Rudler, 576 F.3d 37, 43 (1st

Cir. 2009)(noting that finality is given a more flexible

interpretation in bankruptcy relative to other contexts).

However, the Tenth Circuit Court of Appeals has specifically

held that it does not apply a flexible finality standard in

bankruptcy. In re Simons, 908 F.2d 643, 644 (10th Cir.

1990)(noting that finality for purposes of 28 U.S.C. § 158 is

interpreted in traditional, not flexible, terms). Nevertheless,

flexible finality is not a novel concept in bankruptcy, and the

purposes underlying its application persist over time.

The First Circuit Court of Appeals distilled the “flexible

finality” concept in In re Saco Development Corporation after

recognizing that application of traditional finality principles

in bankruptcy would lead to “nearly insuperable obstacles to a

finding of finality.” 3 16 Charles Alan Wright, Arthur R. Miller

3
The majority apparently contends that Maiorino, because it
did not distill flexible finality as Saco did only one year
later, was blind to the need for such a concept in bankruptcy.
In other words, the majority implies that Maiorino’s holding—
denial of confirmation of a Chapter 13 plan is interlocutory—was
derived purely from traditional finality principles. See supra
p. 13. Saco’s tracing of the history of finality in bankruptcy
refutes this as does the Second Circuit Court of Appeals’
(Continued)
37
& Edward H. Cooper, Federal Practice and Procedure § 3926.2, at

326 (3d ed. 2012); see In re Saco Local Dev. Corp., 711 F.2d 441

(1st Cir. 1983)(Breyer, J.). In Saco, the bankruptcy court had

ruled that an insurance company creditor in Chapter 7

liquidation was “entitled to priority payment of Saco’s employee

group life, health and disability insurance premiums.” Id. at

442. While the maximum dollar amount of unpaid premiums for

which the insurance company could receive priority treatment was

$106,000, the actual amount was uncertain because the insurance

company’s priority was subject to a reduction provided for wage

priorities that other creditors might enjoy. Id. In this

context, namely where one creditor’s rights are fixed vis-à-vis

the bankruptcy estate generally but subject to alteration vis-à-

vis other creditors’ rights, the First Circuit Court of Appeals

applied a “flexible finality” standard, holding that “an order

that conclusively determines a separable dispute over a

creditor’s claim or priority” is a final order, even when other

creditors’ unfixed rights could ultimately alter the separable

dispute’s outcome at a later stage in the bankruptcy case. Id.

at 445-46; see id. at 443 (acknowledging that “[w]ere this not a

bankruptcy case, we doubt that the kind of order before us would

confirmation of Maiorino’s holding in In re Flor. See generally
Saco, 711 F.2d at 444-46; In re Flor, 79 F.3d at 283.

38
be considered ‘final.’”); cf. In re Bartee, 212 F.3d at 283

(noting that the bankruptcy court’s order, among other things,

“conclusively determined the substantive rights at issue and

ended the dispute.”).

The same rationale from Saco applies, for example, when

lower courts make debt dischargeability determinations, which

are generally considered final orders under the “flexible

finality” standard. See In re Gagne, 394 B.R. 219, 224-25

(B.A.P. 1st Cir. 2008); In re Barrett, 337 B.R. 896, 898 (B.A.P.

6th Cir. 2006) (aff’d 487 F.3d 353). Specifically, once a

bankruptcy court determines whether a specific debt is

dischargeable, all that remains is to enter judgment as to that

specific debt. However, several other matters usually remain

for the bankruptcy court’s determination. Nevertheless, the

discharge of one debt can affect the status and rights of one or

more creditors. Thus, although such a determination likely

would not be final outside bankruptcy, see Saco, 711 F.2d at

443, it is final inside bankruptcy precisely because “flexible

finality” allows courts with appellate jurisdiction in

bankruptcy to pluck sufficiently discrete disputes out of the

larger, usually ongoing, bankruptcy case. In other words,

“flexible finality” allows circuit courts of appeals to

immediately review discrete disputes in bankruptcy cases where

traditional finality standards would not. However, “flexible

39
finality” does not, and should not, blend a circuit court of

appeals' appellate jurisdiction over final orders as provided

under 28 U.S.C. § 158(d)(1) with a circuit court of appeals'

direct appellate jurisdiction over interlocutory matters as

provided under 28 U.S.C. 158(d)(2) and 1292(b). Otherwise, to

extend the concept of flexible finality too far would render

useless the procedures for taking direct appeals in bankruptcy

and would render as "mere surplusage" the statutory language

outlining those procedures in 28 U.S.C. §§ 158(d)(2) and

1292(b). See Freeman v. Quicken Loans, Inc., 132 S. Ct. 2034,

2043 (2012)(stating that the canon against surplusage favors

statutory interpretation that avoids rendering statutory text

superfluous); In re Total Realty Management, LLC, 706 F.3d 245,

251 (4th Cir. 2013)("Principles of statutory construction

require a court to construe all parts to have meaning and,

accordingly, avoid constructions that would reduce some terms to

mere surplussage [sic].")(internal quotations omitted). 4

Given the core purpose of the flexible finality standard in

bankruptcy, denial of confirmation of a proposed reorganization

4
The majority obliquely responds to this argument by
stating that, despite its holding today, avenues for
interlocutory relief remain open. Supra p. 18 n.13. I do not
dispute such avenues remain open. Rather, I contend such
avenues become useless the more willing a court remains to
stretch the concept of “flexible finality” in bankruptcy.

40
plan cannot convincingly be a “discrete dispute” appealable as a

final order under any standard of finality. Indeed, Saco and

others imply that a discrete dispute for purposes of “flexible

finality” most properly refers to situations where one

creditor’s rights become fixed while other issues in the

bankruptcy case remain unresolved. 5 Cf. Matter of Lybrook, 951

F.2d 136, 137 (7th Cir. 1991)(orders in ongoing bankruptcy cases

can be final when they “resolve[] a free-standing dispute of the

sort that, outside of bankruptcy, would be an independent

lawsuit.”)(Posner, J.). That is not this case. Essentially

everything remains unresolved in the Chapter 13 bankruptcy

below. The majority erroneously argues the opposite.

Specifically, because “[t]he bankruptcy court’s order denied

confirmation of [the debtor’s] plan and directed the case

dismissed unless he took further action,” the majority concludes

5
A wholly reasonable exception to the standard discrete
dispute justification for applying flexible finality is found in
this Court’s holding in McDow v. Dudley, 662 F.3d 284 (2011).
In McDow, this Court held that denying a motion to dismiss a
Chapter 7 case as abusive, under 11 U.S.C. § 707(b), is a final
order under “flexible finality.” Id. at 290. After a thorough
examination of the nature of a § 707(b) motion, including the
Congressional policy behind that provision, this Court
concluded, in part, that allowing immediate appeal promoted the
statutory purposes of the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005. See id. Unlike in McDow,
however, applying flexible finality to denial of confirmation of
a reorganization plan serves no special Congressional purpose,
contrary to the majority’s broad appeal to debtor sympathy.
Supra p. 18.

41
that nothing remains for the bankruptcy court to do except enter

dismissal, “unless [the debtor takes] further action.” Supra p.

11. The majority’s diminution of the twenty-one day window

within which the debtor may, among other things, file an amended

plan and resume progress toward settling at least some

expectations among the parties to the reorganization underscores

the weakness of the position that “flexible finality” counsels a

finding of finality when confirmation of a reorganization plan

is denied. Indeed, an order cannot sensibly be final when it

not only fails to dismiss the underlying case but additionally

advises that a party may revise its own court filings.

B.

Without squarely addressing the merits, one can readily

glean the debtor's aim from the record below—he seeks immediate

resolution of what he asserts is a novel legal issue. Assuming

the debtor is correct, his case’s legal novelty makes it a prime

candidate for interlocutory review under 28 U.S.C. 158(d)(2) or

28 U.S.C. 1292(b). However, any novelty of this case’s merits,

and any eagerness to have this Court reach them, should not bend

the judicially-crafted “flexible finality” concept such that it

renders the multiple avenues for interlocutory appeals

unnecessary.

However, I do not write separately to fault the debtor for

not obtaining interlocutory review or failing to march in lock-

42
step with its attendant procedural formalities. Instead, I

write separately, in part, to show how the statutory procedures

for an interlocutory appeal in this case could have avoided the

waste of judicial resources that has already occurred. 6 Recall,

pursuing an interlocutory appeal under either 28 U.S.C. §

158(d)(2) or § 1292(b) does not automatically stay the

proceedings below. See 28 U.S.C. §§ 158(d)(2)(D) and 1292(b).

In other words, had the debtor pursued or been granted

interlocutory review, the bankruptcy case could have proceeded

below without pause. Creditor disbursements could have been

made without stop-gap measures described below. The debtor

could have filed an amended plan or converted his Chapter 13

reorganization to Chapter 7 liquidation. Instead, the

bankruptcy case below has been stayed pending this appeal.

Indeed, to achieve the same end of making disbursements to

creditors pending appeal of this case, the bankruptcy court

6
As explained more fully below, while encouraging judicial
economy is a laudable goal and should be pursued where possible,
enshrining that goal in a rule requiring application of a multi-
factor test for finality, as some circuit courts of appeals have
done, results in a particularly indeterminate rule since
“judicial economy” can be framed so many different ways. This
is particularly troublesome when the rule bears so heavily on
whether a court has jurisdiction, an issue that generally should
not be fact-intensive or merits-based. See Matter of Lopez, 116
F.3d 1191, 1194 (7th Cir. 1997)(“Jurisdictional rules ought to
be simple and precise so that judges and lawyers are spared
having to litigate over not the merits of a legal dispute but
where and when those merits shall be litigated.”)(Posner, J.).

43
entered a conditional order confirming the debtor's plan. The

bankruptcy court likely did not enter the conditional order

because it suddenly changed its mind about the debtor's plan.

Rather, the bankruptcy court likely entered the conditional

order to address practical difficulties the Chapter 13 Trustee

would face in administering a bankruptcy estate while an appeal

of a purportedly final order to this Court was pending. 7 The

conditional order’s text makes this point clear.

I also write separately to show that, with today’s ruling,

this Court strays from the goal of “flexible finality,”

reviewing discrete disputes within an ongoing bankruptcy case,

instead choosing to join those circuit courts of appeals that

have effectively made the test for “flexible finality”

indeterminate. Consequently, along with the adoption of an

7
The debtor's argument that the bankruptcy court's
conditional order confirming the debtor's plan cures any
jurisdictional defect is meritless. First, as a definitional
matter, the fact that the order is "conditional" eliminates the
possibility that it is "final," unless conditions are satisfied.
Here, the condition to be satisfied is this Court's decision on
appeal. Second, the Chapter 13 Trustee, and not the debtor,
moved for the conditional order in this case. The Trustee did
so in order to ensure continuous and orderly administration of
the bankruptcy estate, because an appeal like the one in this
case disrupts bankruptcy estate administration. Lastly, the
debtor cites Equipment Finance Group, Inc. v. Traverse Computer
Brokers, 973 F.2d 345 (4th Cir. 1992) to support his argument
that the conditional order cures any jurisdictional defect.
That case does not apply here, where the order at issue is not a
final judgment but instead is, patently, a conditional order.

44
indeterminate test for finality in bankruptcy arises the specter

of jurisdiction creep. 8 Bit by bit, the majority’s version of

“flexible finality” will allow bankruptcy events less

significant than denial of confirmation to be final for purposes

of appeal, 9 so long as the lower court “intended” finality or so

long as judicial economy purportedly bends in just the right

direction. In other words, the majority’s stated appeal to

pragmatism equates to acquiescence to indeterminacy, a

regrettable move endorsed by some circuit courts of appeals that

have held that denial of confirmation of a reorganization plan

can be a final order.

III.

A.

Regarding this Court’s precedent, the majority cites

several cases that purportedly demonstrate a “long history of

allowing appeals from debtors whose proposed plans are denied

8
See Thomas C. Marks, Jr., Jurisdiction Creep and the
Florida Supreme Court, 69 Alb. L. Rev. 543 n.* (2006)(citing two
related versions of the military term “mission creep” and
drawing the strongest parallel with the latter, for purposes of
the term “jurisdiction creep”).
9
Thankfully, the majority has drawn a line where it will
consider some bankruptcy matters interlocutory. Regrettably,
however, the examples cited demonstrate the line’s inadequacy
and, moreover, merely list types of decisions that are
interlocutory by any measure—granting interim fee awards and
continuing an automatic stay until a motion hearing is held, for
example. See supra pp. 10-11.

45
confirmation, without questioning the finality of the underlying

order.” Supra p. 8. The majority then relegates another of

this Court’s cases to a footnote, assigning it “minimal

persuasive authority” because it relied entirely on out-of-

circuit authority without any independent reasoning.” Supra p.

8 n.6.; see In re Massey, 21 F. App’x 113 (4th Cir. 2001).

However, while citing opinions that do not squarely address

finality in bankruptcy and, by proxy, jurisdiction, the majority

ignores this Court’s general distaste for relying on sub

silentio holdings. See United States v. Horton, 693 F.3d 463,

479 n.16 (4th Cir. 2012)(Agee, J.)(citing several Supreme Court

and Fourth Circuit cases for the proposition that a sub silentio

holding is not binding precedent or, in other words, that this

Court is “bound by holdings, not unwritten

assumptions.”)(quoting Fernandez v. Keisler, 502 F.3d 337, 343

n.2 (4th Cir. 2007)).

I find it a curious supposition that the persuasive value

of a string of cases ignoring an issue ought to outweigh the

persuasive value of a case that squarely addresses that same

issue. See In re Massey, 21 F. App’x at 114 (4th Cir.

2001)(holding that “[a]n order denying confirmation of a

proposed Chapter 13 plan, without also dismissing the underlying

petition or proceeding, is not final for purposes of appeal.”).

Nevertheless, this is what the majority posits through its

46
argument by analogy and reliance on sub silentio holdings. See

supra pp. 7-8. Otherwise, the majority’s assertion that its

“holding today does not extend [this Court’s] appellate

jurisdiction but instead justifies its existing parameters” goes

unsupported since jurisdiction in this case depends on the

finality of a denial of confirmation. See supra p. 17.

I recognize this Court’s general disposition with regard to

its own unpublished opinions. See, e.g., Loc. R. 32.1

(disfavoring citation to this Court’s unpublished opinions of a

certain age). Nevertheless, I simply cannot find that reliance

on sub silentio holdings or other assumptions is preferable.

Accordingly, I believe this Court’s precedent is, at the very

least, confused regarding whether a denial of confirmation of a

reorganization plan is a final order and, as a result, I

similarly believe that examining authority from other circuit

courts of appeals as persuasive is appropriate in this case.

B.

More circuit courts of appeals than not have concluded that

a denial of confirmation of a reorganization plan is not a final

order in bankruptcy. See In re Flor, 79 F.3d 281, 283 (2d Cir.

1996)(holding a denial of confirmation of a Chapter 11

reorganization plan was non-final, but noting that its holding

derived from an earlier case, which held that a denial of

confirmation of a Chapter 13 reorganization plan was non-

47
final)(citing Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d

Cir. 1982)); In re Zahn, 526 F.3d 1140, 1143-44 (8th Cir.

2008)(holding a denial of confirmation of a Chapter 13

reorganization plan was non-final); In re Lievsay, 118 F.3d 661,

662 (9th Cir. 1997)(holding a denial of confirmation of a

Chapter 11 reorganization plan was non-final); In re Simons, 908

F.2d 643, 645 (10th Cir. 1990)(holding a denial of confirmation

of a Chapter 13 reorganization plan was non-final). Other

circuit courts of appeals, while not having squarely answered

whether a denial of confirmation of a reorganization plan is a

final order in bankruptcy, indicate they lean toward the

conclusion that a denial of confirmation is interlocutory. See

In re Watson, 403 F.3d 1, 5 (1st Cir. 2005)(holding that “even

if [an earlier] order denying confirmation of the [Chapter 13]

plan was not final at the time it was issued,” the order was

later final after the debtor’s opportunity to file an amended

plan or take other action had passed); In re Coffin, 435 B.R.

780, 784 (B.A.P. 1st Cir. 2010)(noting, in general, that orders

denying confirmation of a Chapter 13 reorganization plan are

interlocutory, but holding that the order in that case satisfied

the requirements in 28 U.S.C. § 158(a)(3) for taking an

interlocutory appeal from the Bankruptcy Court to the First

Circuit’s Bankruptcy Appellate Panel); cf. In re UAL Corp., 411

F.3d 818, 821 (7th Cir. 2005)(Posner, J.)(noting that a “Chapter

48
11 bankruptcy is not final until a plan of reorganization is

confirmed.”). Two circuit courts of appeals have held that

denial of confirmation of a reorganization plan can be final. 10

See In re Armstrong World Indus., Inc., 432 F.3d 507, 511 (3d

Cir. 2005); In re Bartee, 212 F.3d 277, 283-84 (5th Cir.

2000)(noting that, even under its intent-based inquiry, the

Fifth Circuit Court of Appeals could find that denial of

confirmation of a reorganization plan is interlocutory “if the

order addressed an issue that left the debtor able to file an

amended plan (basically to try again)”).

The majority argues that circuit courts of appeals that

conclude denial of confirmation of a Chapter 13 plan is

interlocutory apparently ground their decision “upon standard

finality principles.” Supra p. 13. I do not believe this to be

the case. Indeed, by so arguing, the majority projects the

Tenth Circuit Court of Appeals’ reasoning in In re Simons onto

the circuit courts of appeals that happen to agree with the

Tenth Circuit Court of Appeals’ conclusion on this issue,

despite their differing views on how finality is evaluated in

bankruptcy. Recall, In re Simons explicitly grounded its

conclusion upon standard finality principles. See In re Simons,

10
I can find no circuit court of appeals that has held a
denial of confirmation of a reorganization plan is per se a
final order.

49
908 F.2d at 644. However, other circuit courts of appeals that

conclude a denial of confirmation of a reorganization plan is

interlocutory arrive at that conclusion despite the flexible

concept of finality in bankruptcy proceedings. See In re Flor,

79 F.3d at 283; In re Zahn, 526 F.3d at 1143. In other words,

even keeping the flexible finality concept in mind, reasonable

jurists conclude that a denial of confirmation of a

reorganization plan is, nevertheless, interlocutory. This

conclusion is not without reason.

For example, before deciding In re Flor, the Second Circuit

Court of Appeals addressed the finality of a denial of plan

confirmation in the context of Chapter 13 reorganization plans

in Maiorino v. Branford Savings Bank, 691 F.2d 89 (2d Cir.

1982). There, the Second Circuit Court of Appeals held that a

denial of confirmation of a Chapter 13 plan is not a final

order, even when an order confirming a plan is final. The

Maiorino Court explained in more detail:

Nor do we find it strange as a matter of policy that
an order confirming a plan which would, we agree, be
final, is appealable by an objecting creditor while an
order rejecting a proposed plan is not final and not
appealable by the Chapter 13 debtor [except as an
interlocutory appeal]. So long as the [Chapter 13
bankruptcy] petition is not dismissed [. . .] it is
open to the debtor to propose another plan, and for
all that an appellate court would know in any given
case such a plan might well be acceptable to the
parties or bankruptcy judge concerned.

50
Maiorino, 691 F.2d at 91 (emphasis added). In In re Zahn, the

Eighth Circuit Court of Appeals used similar reasoning to draw

the distinction between the finality of confirmation of a

reorganization plan and the interlocutory character of denial of

confirmation of a reorganization plan. There, the Eighth

Circuit Court of Appeals noted that orders denying confirmation

of a reorganization plan “leave the way open for negotiations”

among the debtor and various creditors laying claim to the

bankruptcy estate. In re Zahn, 526 F.3d at 1143 (8th Cir.

2008). Nevertheless, the majority apparently sees no reasoned

basis for distinguishing between the finality of confirmation of

a reorganization plan and the denial of confirmation of a

reorganization plan, relying, in part, on the supposedly more

pragmatic approach to “flexible finality” espoused by the Third

and Fifth Circuit Courts of Appeals.

However, even In re Bartee provides some support for

distinguishing between the finality of confirmation of a

reorganization plan and denial of confirmation of a

reorganization plan. There, the bankruptcy court’s order

denying confirmation of the reorganization plan also classified

a creditor’s claim as secured over the debtor’s objection;

instead, the debtor wanted the secured creditor’s claim to be

treated as unsecured and subject to the Bankruptcy Code’s

cramdown provision. In re Bartee, 212 F.3d at 281. At that

51
point, the secured creditor’s rights were fixed and no amount of

amended Chapter 13 plans could change the secured creditor’s

status. In other words, even though the bankruptcy court denied

confirmation of the reorganization plan, it also fixed one

party’s rights such that a “discrete dispute” existed within the

larger bankruptcy case. Accordingly, the bankruptcy court order

in In re Bartee both denied confirmation of the reorganization

plan and fixed the secured party’s rights. On the latter basis

alone, the bankruptcy court order in In re Bartee could perhaps

be considered final under the “flexible finality” standard

without needing to consider the question of a denial of

confirmation’s finality.

Notwithstanding the unique factual issue in In re Bartee,

the majority insists that a more “pragmatic” rule, like those

adopted by the Third and Fifth Circuit Courts of Appeals, best

suits denials of confirmation. However, as noted above, I

believe these rules are too indeterminate to keep the “flexible

finality” concept from effectively erasing the line between

final and interlocutory orders in bankruptcy, a result

inconsistent with flexible finality’s goal of immediately

reviewing discrete disputes within an ongoing bankruptcy case.

One set of commentators stated it well

the Third Circuit—with a close parallel in the Ninth
Circuit—has taken flexibility at least as far as any,
announcing an approach that could justify intensely

52
 case-specific analysis that would find finality
whenever immediate appeal seems desirable. It seeks to
effectuate a practical termination of the matter,
considering the impact upon the assets of the bankrupt
estate, the necessity for further fact-finding on
remand, the preclusive effect of our decision on the
merits on further litigation, and whether the interest
of judicial economy would be furthered. These factors
could lead almost anywhere. . .The interest of
judicial economy can embrace the entire calculus of
appealability. Decisions taking this approach all have
reached results that seem sensible enough, but have
not suggested any apparent limits

16 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper,

Federal Practice and Procedure § 3926.2, at 339-342 (3d ed.

2012). For these reasons, examining factors such as the lower

court’s “intent” with regard to finality or enshrining judicial

economy as part of a jurisdictional rule crafts not a rule but a

set of exceptions.

Separately, the majority highlights the Fifth Circuit Court

of Appeals’ disfavor of a situation where a debtor “must choose

between filing an unwanted or involuntary plan and then

appealing his own plan, or dismissing his case and then

appealing his own dismissal.” 11 Id. I believe that this

11
On this point, the majority’s concerns regarding standing
are unwarranted. See supra p. 15 n.10. When appealing one’s
own plan, no matter how odd a procedure it might seem, a party
can nonetheless be a “person aggrieved,” even if a second,
third, or eighth amended plan is finally confirmed. This is so
because each previous denial of confirmation—which I contend
would be interlocutory—merges with the plan’s final
confirmation. See In re Giesbrecht, 429 B.R. 682, 688 (B.A.P.
9th Cir. 2010); In re Pearson, 390 B.R. 706, 710 (B.A.P. 10th
(Continued)
53
rationale, which contrasts starkly with that used by the Second

and Eighth Circuit Courts of Appeals as explained above, assumes

too much of the debtor’s intent and, from a policy point of

view, “there is something to be said in a day of burgeoning

appellate dockets for taking care not to construe jurisdictional

statutes—particularly those conferring power on the parties to

agree to a direct appeal to the court of appeals—with great

liberality.” Maiorino, 691 F.2d at 91. Moreover, the chance

that a bankruptcy court might ultimately confirm a plan with

which the debtor strongly disagrees should not override the

value of negotiation in the plan formulation process.

IV.

Considering all of the jurisdictional statutes relevant

here, the debtor's quest to shape Fourth Circuit law on the

merits of his case might more properly have followed the routes

Cir. 2008)(vacated as moot). This merger concept is not unique
to bankruptcy. See, e.g., Shannon v. General Electric Co., 186
F.3d 192 (2d Cir. 1999)(Sotomayor, J.)(“When a district court
enters a final judgment in a case, interlocutory orders rendered
in the case typically merge with the judgment for purposes of
appellate review . . . By making interlocutory orders
unappealable until a final judgment has been entered, these
rules advance the historic federal policy against piecemeal
appeals.”)(citations and internal quotation marks omitted); cf.
Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 430
(1985)(“Congress has expressed a preference that some erroneous
trial court rulings go uncorrected until the appeal of a final
judgment.”).

54
provided under either 28 U.S.C. §§ 158(d)(2) or 1292(b)—routes

provided for interlocutory appeals. Nevertheless, the debtor's

case wended its way here under the pretense of an appeal

pursuant to 28 U.S.C. § 158(d)(1), an appeal of a purportedly

final order, which it should not be, even under the flexible

standard of finality applied in bankruptcy.

However, by flexing “flexible finality” in this way, the

majority effectively reads out the avenues for interlocutory

relief afforded by bankruptcy’s jurisdictional statutes.

Moreover, the majority’s rule in this case discourages

negotiation and mediation in reorganization cases where,

frankly, those processes are needed. At the same time, the

majority’s decision encourages start-and-stop appeals, thus

hampering the aim of judicial economy the majority purports to

achieve with its ruling. Finally, the majority needlessly

expands appellate jurisdiction in an area where it has been

carefully circumscribed. I find no reasonable basis for this

jurisdictional overreach.

For all these reasons, I dissent, with respect, from the

decision of the majority.

55