331 F.

3d 821

In re: Carmen BATEMAN, Debtor.

Universal American Mortgage Company, Plaintiff-Appellant,
v.
Carmen Bateman, Defendant-Appellee.
No. 02-11221.

United States Court of Appeals, Eleventh Circuit.

May 22, 2003.

William P. McCaughan, Miami, FL, for Plaintiff-Appellant.

Lawrence M. Shoot, Law Offices of Lawrence M. Shoot, Paul A. Avron,
Berger, Singerman, P.A., Miami, FL, for Defendant-Appellee.
Appeal from the United States District Court for the Southern District of
Florida.
Before BIRCH, DUBINA and KRAVITCH, Circuit Judges.
BIRCH, Circuit Judge:

In this bankruptcy appeal, we decide that a secured creditor cannot collaterally

attack a confirmed Chapter 13 plan, even though the plan conflicted with the
mandatory provisions of the bankruptcy code, when the secured creditor failed
to object to the plan's confirmation or appeal the confirmation order. We also
hold that a secured creditor's claim for mortgage arrearage survives the
confirmed plan to the extent it is not satisfied in full by payments under the
plan, or otherwise satisfied under the terms 1325(a)(5), because to permit
otherwise would deny the effect of 11 U.S.C. 1322(b)(2), which, in effect,
prohibits modifications of secured claims for mortgages on a debtor's principal
residence. The bankruptcy court confirmed the plan at issue and, after the
plan's confirmation, granted the debtor's objection to the creditor's allowed
claim, thereby reducing the secured claim for mortgage arrearage to the amount
provided for in the confirmed plan, but denied the creditor's motion to dismiss
the Chapter 13 bankruptcy. The district court affirmed the bankruptcy court.
For the following reasons, we AFFIRM in part and REVERSE in part.

I. BACKGROUND
2

On 26 November 1996, Debtor-Appellee Carmen Bateman filed a Chapter 13

bankruptcy petition and confirmation plan in the United States Bankruptcy
Court for the Southern District of Florida. On 18 December 1996, CreditorAppellant Universal American Mortgage Company ("Universal") timely filed
proof of a secured claim, pursuant to 11 U.S.C. 502, in the amount of
$49,178.80.1 The claim was for arrearage on a first mortgage that was secured
by Bateman's principal residence. Bateman did not file an objection to
Universal's proof of claim. On 5 February 1997, the first creditors' meeting was
held; Universal did not attend. On 13 February 1997, Bateman filed an
amended confirmation plan (the "Plan"). The initial plan and the amended plan
both provided for payment to Universal of $21,600.00. The confirmation
hearing was set for 19 February 1997; Universal did not attend.

On 14 March 1997, the bankruptcy court entered the Confirmation Order,

which contained the $21,600.00 amount to be paid to Universal over the course
of the Chapter 13 plan. Universal did not at any time object to the Plan's
confirmation. Universal did not appeal the Confirmation Order to the district
court, even though the plan erroneously provided for the payment of the
"disputed" amount contrary to its timely filed proof of claim.2

Over a year after the Plan was confirmed, the bankruptcy trustee noted that
Universal's filed proof of claim did not match the Plan amount. The trustee
contacted Bateman and thereafter, on 7 May 1998, Bateman filed an objection
to Universal's proof of claim, to which Universal responded. On 13 July 1998,
Universal filed a motion to dismiss the bankruptcy because the Plan failed to
comply with the bankruptcy code.

The bankruptcy court sustained Bateman's objection and denied Universal's

motion to dismiss, holding in part that "[a]s a matter of substance the Chapter
13 plan provided an objection to the claim which placed a duty on [Universal]
to pursue the matter if the $21,600.00 was not acceptable." R1-2-B20 at 2.
Because Universal did not object to the Plan as confirmed, the bankruptcy court
gave the Plan res judicata effect and found that Universal was bound to the
$21,600.00 amount for its claim. In doing so, the bankruptcy observed that:

"The binding effect on the confirmation order establishes the rights of the
debtor and creditors as those which are provided in the plan. It is therefore
incumbent upon creditors with notice of the Chapter 13 case to review the plan
and object to the plan if they believe it to be improper, they may ignore the

confirmation hearing only at their peril...

7

... A creditor that had the opportunity to object that the plan did not meet the
standards for confirmation, which provide the protections Congress deemed
appropriate for the various types of creditors may not later assert any interest
other than that provided for it by the confirmed plan."

Id. at 3 (quoting Collier on Bankruptcy, 1327.01[1][a] (15th rev. ed. 1993)).

Noting that Universal

is a successful, organized, mortgage lender and servicer, it elected not to retain

an attorney, filed its claim, ignored the Chapter 13 plan, corrected Chapter 13
plan, failed to attend the creditors meeting, the confirmation hearing, and had
the right to timely proceed after the Order of Confirmation. Creditor[s,]
especially lending institutions like the mortgagee, must follow the
administration of the bankruptcy estate to determine what aspects of the
proceeding that they may want to challenge.

10

Id. at 3-4.
The bankruptcy court held that Universal's

11

lien passes through the bankruptcy proceeding, however the amount of the
arrearage is res judicata. Upon successful completion of the Chapter 13 plan or
upon earlier payment of the arrears in the sum of $21,600.00, the mortgagees
must as a matter of law provide that the mortgagor is current in her mortgage
account. Her principal sum owed on the mortgage, the date the sum of
$21,600.00 has been paid to the mortgagee must be the same as if no
delinquency had ever occurred. The mortgagee may not seek at any future time
to charge back against the debtor or any successor any portion of the difference
between the $21,600.00 and the claimed amount of $49,178.80. The mortgagee
waived its rights to contest the amount of the arrearage and is bound by the
confirmed plan.

12

Id. at 4.

13

Universal filed a motion to reconsider, which the bankruptcy court denied.

Universal appealed to the United States District Court for the Southern District
of Florida, which affirmed the bankruptcy court on the basis that Universal was
precluded from collaterally attacking the Plan, and was bound to the amount

provided for in the Plan on the grounds of res judicata, because it failed to
object previously to the Plan. Universal timely appealed the district court's
order, which is now properly before us.
II. DISCUSSION
14

Universal's appeal before us challenges, first, the bankruptcy court's

sustainment of Bateman's objection and ruling that Universal was bound by the
claim amount provided for in the Plan, despite the fact that Bateman did not file
an objection to counter Universal's proof of claim prior to confirmation.
Second, Universal urges us to find error in the bankruptcy court's denial of
Universal's motion to dismiss the bankruptcy because it did not comply with 11
U.S.C. 1325, which it argues requires that a secured claim must be provided
for in full as a prerequisite to plan confirmation. Thus, Universal seeks both to
avoid the res judicata effect of the Plan's confirmation as to its claim and to
unravel the bankruptcy altogether as invalidly confirmed. Bateman argues that
the Plan is conclusive as to the treatment of Universal's claim and it cannot be
dismissed for such treatment, whether improper or not, at this late stage when
Universal neither objected to nor appealed from the Plan's confirmation. We
deny both of Universal's requests, but nevertheless hold that Universal's secured
claim for the mortgage arrearage remains intact.

15

This appeal pits the procedural requirements and substantive provisions of 11

U.S.C. 502(a), 1322, and 1325 of the bankruptcy code, against the res
judicata effect of a confirmed plan under 11 U.S.C. 1327.3 We now undertake
to harmonize these provisions and decide an issue of first impression in this
circuit.4 "[D]eterminations of law, whether made by the bankruptcy court or by
the district court, [are reviewed] de novo." Equitable Life Assurance Soc'y v.
Sublett (In re Sublett), 895 F.2d 1381, 1383 (11th Cir.1990).

16

The issues before us present questions of statutory interpretation and evaluation

of the interlocking nature of the bankruptcy code. Provisions within a statute
are read to be consistent whenever possible. See Clark v. Uebersee FinanzKorporation, 332 U.S. 480, 488, 68 S.Ct. 174, 178, 92 L.Ed. 88 (1947). If the
two provisions may not be harmonized, then the more specific will control over
the general. Green v. Bock Laundry Mach. Co., 490 U.S. 504, 524, 109 S.Ct.
1981, 1992, 104 L.Ed.2d 557 (1989). With these principles in mind, we
navigate the intricacies of the bankruptcy code and bankruptcy procedure to
decide Universal's appeal and whether Universal's claim survived Bateman's
confirmed Chapter 13 Plan.

17

Before we reach the issue whether the bankruptcy court properly granted

Bateman's objection to Universal's proof of claim, we will review the

confirmation and claims process to give the issue context in the bankruptcy law
and procedure. In general terms, when a debtor initiates a Chapter 13
bankruptcy, he or she files a petition and, in many instances simultaneously, a
proposed plan. The plan contains the treatment to be afforded each creditor,
including whether and how much each is to receive during the course of the
plan's term. During the petition's pendency, before a Chapter 13 plan is
confirmed, debtor and creditor alike have an opportunity to file claims and
litigate any dispute regarding the validity and the amount of such claims. See
generally 11 U.S.C. 501. This is facilitated through filings and scheduled
conferences and hearings. Upon satisfaction of the plan and completion of the
plan's term, the debtor is discharged of his or her debts and, in theory, faces a
future of solvency. See 11 U.S.C. 1328. The general bankruptcy statutory
provisions, 11 U.S.C. 1 to 560, and the specifics of Chapter 13 (Debts of
Individuals), 11 U.S.C. 1301 to 1330, define the rights and duties of debtors
and creditors, whereas the Federal Rules of Bankruptcy Procedure dictate how
to navigate the process. Within this framework, the issue here requires us to
harmonize these interrelated provisions.
18

A. The Bankruptcy Court's Sustainment of Debtor's (Constructive) Objection

19

Title 11, United States Code 1322 sets forth the mandatory contents of a
Chapter 13 plan. Generally, the holder of a secured claim is entitled to
protection under the bankruptcy code to the extent of the collateral's value
securing the claim. 11 U.S.C. 506(a). However, 1322(b)(2) specially
prohibits any modification of a homestead mortgagee's rights in the Chapter 13
plan. Because of the protection afforded to mortgagees by 1322(b)(2), the
protected security interest is not compromised even if the interest is
undersecured by the value of the property. Nobelman v. Am. Savs. Bank, 508
U.S. 324, 329, 113 S.Ct. 2106, 2110, 124 L.Ed.2d 228 (1993). Thus, even if the
residential mortgage is undersecured, the plan is prohibited from reducing the
mortgagee's secured claim.5 "At first blush it seems somewhat strange that the
Bankruptcy Code should provide less protection to an individual's interest in
retaining possession of his or her home than of other assets. The anomaly is,
however, explained by the legislative history indicating that favorable treatment
of residential mortgagees was intended to encourage the flow of capital into the
home lending market." Id. at 332, 113 S.Ct. at 2111-12 (Stevens, J.,
concurring). "This is not to say, of course, that the contractual rights of a home
mortgage lender are unaffected by the mortgagor's Chapter 13 bankruptcy. The
lender's power to enforce its rights and, in particular, its right to foreclose on
the property in the event of default is checked by the Bankruptcy Code's
automatic stay provision." Id. at 330, 113 S.Ct. at 2110 (citing 11 U.S.C.

362); see also 11 U.S.C. 1301.

20

Inclusion of creditors for disbursements under a Chapter 13 plan is not an

automatic process. If the debtor wants to be discharged of certain liabilities,
then the debtor must list the claim amounts and their proposed treatment under
the plan. Correspondingly, if a creditor wants to ensure it will be provided for
in the confirmed plan, it will file a proof of claim. 11 U.S.C. 502. "Although
the filing of a proof of claim may be a prerequisite to the allowance of certain
claims, no creditor is required to file a proof of claim ... [but one] should be
filed only when some purpose would be served." Simmons v. Savell, 765 F.2d
547, 551 (5th Cir.1985) (citations omitted). An unsecured creditor is required to
file a proof claim for its claim to be allowed, but filing is not mandatory for a
secured creditor. See Fed.R.Bankr.P. 3002(a). In fact, a secured creditor need
not do anything during the course of the bankruptcy proceeding because it will
always be able to look to the underlying collateral to satisfy its lien. In re
Folendore, 862 F.2d 1537, 1539 (11th Cir.1989) ("Because an unchallenged
lien survives the discharge of the debtor in bankruptcy, a lienholder need not
file a proof of claim under section 501."); see also Long v. Bullard, 117 U.S.
617, 620-21, 6 S.Ct. 917, 918, 29 L.Ed. 1004 (1886) (holding that a secured
creditor can ignore a bankruptcy proceeding because it can always look to the
lien to satisfy its claim).

21

If the secured creditor wants to receive payments under the confirmed plan, it
must file the proof of claim in a timely manner. See In re Baldridge, 232 B.R.
394, 395-96 (Bankr.N.D.Ind.1999). The debtor also has an interest in ensuring
that a proof of claim is filed, if the secured creditor neglects to do so, because
the debtor is the party seeking the protection of the bankruptcy court and the
ultimate benefit of the discharge of his or her liabilities. Under 502(a), "[a]
claim or interest, proof of which is filed under section 501 of [Title 11], is
deemed allowed, unless a party in interest ... objects." A proof of claim filed
pursuant to Federal Rule of Bankruptcy Procedure 3001 "shall constitute prima
facie evidence of the validity and amount of the claim." Fed.R.Bankr.P.
3001(f).

22

The prima facie evidence of a proof claim can be rebutted if the debtor files an
objection pursuant to Federal Rule of Bankruptcy Procedure 3007. If an
objection is made as to the amount or validity of the claim, the bankruptcy
court will conduct a hearing to determine such, and, if appropriate, will
disallow the claim. 11 U.S.C. 502(b). Although 502(a) does not provide for
a time limit to file an objection, it must be filed prior to plan confirmation. In re
Justice Oaks II, Ltd., 898 F.2d 1544, 1553 (11th Cir.1990); In re Starling, 251
B.R. 908, 909-10 (Bankr. S.D.Fla.2000).

23

Universal timely filed a proof of claim before the Plan's confirmation.

Accordingly, unless Bateman, or any other party in interest, objected to the
proof of claim, it is "deemed allowed" and is "prima facie evidence of the
validity and amount" of the mortgage arrearage. 502(a); Fed. R. Bankr.P.
3001(f). It is undisputed that Bateman did not file an objection to Universal's
proof of claim prior to confirmation of the Plan. Instead, it was not until the
trustee notified Bateman of the discrepancy between the Plan and Universal's
proof of claim over one year after the Plan's confirmation that she filed an
objection to Universal's proof of claim.6

24

The bankruptcy court decided ex post facto, however, that "[a]s a matter of
substance the Chapter 13 plan provided an objection to the claim which placed
a duty on the mortgagee to pursue the matter if the $21,600.00 was not
acceptable." R1-2-B20 at 2. We disagree. See In re White, 908 F.2d 691, 694-95
(11th Cir.1990) (per curiam) (refusing to permit a bankruptcy court to
determine the validity of a lien in connection with fixing valuation for purposes
of confirmation when it did not follow procedure pursuant to Rule 3007).

25

Universal properly filed its proof of claim. In fact, because Universal has a
secured claim, that act was not even necessary or required. Indeed, Universal
decided that it would pursue treatment under the plan for its secured claim for
arrearage, therefore, it filed the proof of claim. Universal was not the only party
with an interest in ensuring that a proof of claim was filed and provided for in
the Plan. Bateman had every incentive to provide for the secured mortgage
claim in her Chapter 13 plan; otherwise, the claim would have survived beyond
the confirmed plan and the debtor would no longer have enjoyed the protection
afforded by the automatic stay and periodic payments, and could possibly face
foreclosure on her property. If Bateman disagreed with the amount of the claim,
Rule 3007 provided the procedures by which she could resolve the dispute.

26

Bateman failed to file a timely objection and the amount in Universal's proof of
claim was "deemed allowed" under 502. Instead, she listed a lower amount as
"disputed" on her proposed plan, without more, and the Plan passed through the
confirmation process uncorrected. Given the "deemed allowed" language of
502, the explicit procedures set forth in Rule 3007 to effect a proper
disallowance, the existence of a secured home mortgage claim, and the failure
by the debtor here, not the creditor, to follow the proper procedures, we refuse
to permit an inconsistent plan provision to constitute a constructive objection by
reason of the Plan's notation of dispute alone, especially where a bankruptcy
court does not consider an objection until over a year after the Plan's
confirmation. See In re Starling, 251 B.R. at 910 ("To allow the Debtor to
object, months after the plan has been confirmed, would contradict the `finality'

objective of the confirmation process and would overlook the express language
of section 1327(a) of the Bankruptcy Code."). That the Plan states an amount in
conflict with the proof of claim demands a resolution of the inconsistency, but a
debtor's post-confirmation objection is not the appropriate vehicle by which to
do so. Because the bankruptcy court granted this objection and held that
Universal was bound to the amount provided in the Plan and, in addition, that
Universal would not be permitted to recoup the balance of the mortgage
arrearage, the district court's affirmance of its ruling in this regard is
REVERSED.
27

B. The Bankruptcy Court's Denial of Universal's Motion to Dismiss

28

Section 1325(a) requires the bankruptcy judge to confirm a plan if it meets

certain requirements, one of which is that the proposed plan conforms with the
requirements of Chapter 13 and the applicable provisions of Title 11. 1325(a)
(1). According to the plain statutory language, 1322 is a mandatory provision
contemplated by 1325(a)(1) and the confirmed plan should comply with it.
Section 1325(a)(5), in turn, references secured creditors and mandates plan
confirmation if (1) the secured creditor accepts the plan; (2) the plan provides
that the secured creditor retain its lien and be paid the full amount of the
allowed claim; or (3) the debtor surrenders the property securing the claim to
the creditor. Thus, there are three options to the treatment of a secured
creditor's claim that compel confirmation of a plan, none of which were present
in the facts here. First, Universal, by filing a proof of claim contrary to the
amount indicated in Bateman's first plan, did not indicate its acceptance of the
plan to the detriment of its lien by declining to further participate in the
confirmation proceedings. Confirmation would have been proper under
1325(a) if Universal conceded to the treatment of its claim under the Plan.
Universal did not accept the Plan, however; rather, after receiving the first plan,
it filed a proof of claim with a different, higher amount. Because there was no
objection to the proof of claim, Universal did not need to act further and the
claim was "deemed allowed." We will not permit Universal's reliance on the
terms of the bankruptcy code, and Universal's subsequent silence on the matter,
to act as an acceptance under 1325(a). There is no indication that Universal
accepted the Plan and we will not treat its actions as comprising such. It is also
undisputed that neither Universal was provided for in full pursuant to its
allowed claim and 1325(a)(5)(B), nor was the property surrendered to it.
Accordingly, Bateman cannot claim that the Plan's confirmation was proper at
the outset or was entitled to confirmation because it did not meet the mandatory
provisions of 1322 and Universal did not accept, nor was it alternatively
sufficiently provided for, under 1325(a)(5).7

29

Universal argues that because the Plan did not meet the requisites of 1325,
which it maintains are mandatory for confirmation, the Plan cannot be afforded
res judicata effect under 1327. Title 11, U.S.C. 1327(a) provides that "[t]he
provisions of a confirmed plan bind the debtor and each creditor, whether or
not the claim of such creditor is provided for by the plan, and whether or not
such creditor has objected to, has accepted, or has rejected the plan." Thus,
1327 gives res judicata effect to a confirmed Chapter 13 plan. A leading
treatise makes clear that the binding effect ... extends to any issue actually
litigated by the parties and any issue necessarily determined by the
confirmation order, including whether the plan complies with sections 1322
and 1325 of the Bankruptcy Code. For example, a creditor may not after
confirmation assert that the plan ... is otherwise inconsistent with the Code in
violation of section 1322(b)(10) or section 1325(a)(1).

30

8 Collier on Bankruptcy, 1327.02[1][c] at 1327-5 (15th rev. ed. 2003)

(footnotes omitted).

31

We set forth in In re Justice Oaks II, Ltd., and reiterate here, that res judicata
refers to "claim preclusion" in the sense Bateman seeks to apply the doctrine,
meaning, "[i]f the later litigation arises from the same cause of action, then the
judgment bars litigation not only of `every matter which was actually offered
and received to sustain the demand, but also [of] every [claim] which might
have been presented.'" 898 F.2d 1544, 1549 n. 3 (11th Cir.1990) (quoting
Baltimore S.S. Co. v. Phillips, 274 U.S. 316, 319, 47 S.Ct. 600, 602, 71 L.Ed.
1069 (1927)). "Preclusion under 1327 is somewhat harsher than common law
issue preclusion, however. At common law the litigation of an issue is
precluded only if that issue was actually litigated and decided and if the
determination of that issue was necessary to the judgment in a previous action
between the parties." In re Starling, 251 B.R. at 910 n. 2 (quoting In re
Sanders, 243 B.R. 326, 328 (Bankr.N.D.Ohio 2000)). Confirmation of a
Chapter 13 plan by a bankruptcy court of competent jurisdiction, in accordance
with the procedural requirements of notice and hearing of confirmation, "is
given the same effect as any district court's final judgment on the merits." In re
Justice Oaks II, Ltd., 898 F.2d at 1550 (citing Stoll v. Gottlieb, 305 U.S. 165,
170-71, 59 S.Ct. 134, 137, 83 L.Ed. 104 (1938)).8 Universal's proof of claim
and the Plan's listed distribution amount, however improper, was within the
definition of claim preclusion because it very well might have been and, as we
have articulated should have been, presented before the bankruptcy judge prior
to the Plan confirmation. See In re Starling, 251 B.R. at 910. The Plan was
improperly confirmed because it conflicted with 1322's mandatory
provisions. Had Universal objected to or appealed from the Plan's confirmation,
it would have prevailed without question, given the facts presented to us.

Universal, however, did not do so and 1327 binds creditors to the provisions
of the Plan. The Plan provided that Universal be paid monthly a certain amount
to fulfill the "disputed" claim. Universal cannot now, years later, urge us to
dismiss the Chapter 13 petition and unravel the Plan's execution when it
otherwise retains its lien in full.
32

We are persuaded by the reasoning in Simmons that a secured creditor's lien

survives a contrary plan confirmation. 765 F.2d at 559. In Simmons, the
creditor secured by a statutory construction lien filed a proof of claim with the
bankruptcy court. During the course of the confirmation proceedings, neither
the debtor nor the trustee objected to the proof of claim prior to confirmation.
Nevertheless, the Chapter 13 plan listed the creditor's claim as unsecured but
disputed. The Fifth Circuit held that the notation in the confirmation plan
"cannot be deemed to constitute... an objection." Id. at 552 ("The purpose of
filing an objection is to join issue in a contested matter, thereby placing the
parties on notice that litigation is required to resolve an actual dispute between
the parties."). The court stated that the plan was erroneously confirmed by the
bankruptcy court because, not only did it not appropriately provide for the
creditor's proof of claim, the plan did not meet any of the prerequisites under
1325(a)(5) in that the secured creditor did not accept the plan, the plan made no
provision that it retained its lien, and the plan did not propose the surrender of
the property.9 Id. at 554.

33

The debtor argued that the effect of the confirmation was to lift the
construction lien from the homestead and vest the interest of the property in the
debtor "free and clear of any `claim or interest' of any creditor." Id. at 555. The
Fifth Circuit declined that invitation:

34

After delineating the parameters of the dispute over the meaning of the terms
"claim or interest," and having observed that the legislative history of section
1327(c) offers no insight regarding this issue, a leading commentator writes that
"[m]atters are further confused by the fact that there appears to be no sound
reason for lifting liens by operation of law at confirmation under chapter 13." 5
Collier on Bankruptcy 1327.01[3], at 1327-5. Nor are we able to discern any
reason for such an effect. Therefore, we agree with the In re Honaker[, 4 B.R.
415 (Bankr.E.D.Mich.1980),] court's conclusion that "[t]he reading of Section
1327 urged by [the debtor] would have the Debtor materially improve his
financial position, by unencumbering [secured] assets, through the simple
expedient of passing his property through the estate. This result has little to
recommend it." [Id.] at 417 ... It would be anomalous indeed were we to permit
[the debtor] a windfall for his mischaracterization of [the creditor's] claim in
the plan. ...

35

Id. at 555-56 (emphasis added). Furthermore, the creditor's

36

failure to interpose an objection to the plan or to appeal the confirmation order

should not now be permitted to justify avoidance of a lien securing a claim that
was originally deemed an allowed secured claim as a result of [the debtor's]
failure to object to [the creditor's] timely filed proof of secured claim.

37

Id. at 556. Rejecting the debtor's argument that 1327 bound the creditor to the
treatment of his claim as provided for in the confirmation plan, the Fifth Circuit
held that the creditor's statutory lien on the debtor's homestead "remained
unimpaired by the order of confirmation." Id. at 559. Thus, while the validity of
the confirmation order itself was not before the court on appeal, the court held
that the effect of confirmation under 1327 did not invalidate the creditor's
lien.

38

For these reasons, if a lien on a mortgage survives the 1327 res judicata effect
of a confirmed plan, then so must any corresponding arrearage claim, such as
one Universal asserts here. See In re Hobdy, 130 B.R. 318, 322 (9th Cir.BAP
1991) (holding, in an identical fact situation, that the general terms of 1327(a)
could not override the specific 502(a) claims provision, therefore, the
confirmed plan was "fatally defective" and could not reduce the arrearage
claim). In re Hobdy is especially instructive to the statutory conflict we face
here:

39

[T]he plan that was confirmed here was fatally defective in its arbitrary
reduction of [the creditor's] secured arrearage claim. We do not believe the need
for finality of confirmed plans extends to circumstances present in this case:
where a debtor misuses, whether or not intentionally, the plan confirmation
process to reduce a valid claim without the requisite notice and opportunity to
be heard. In any event, 502(a) is the statutory provision which specifically
governs questions of claims allowance and, consequently, should control over
the more general policy considerations embodied in 1327(a).

40

130 B.R. at 321 (referring to the lack of due process afforded the creditor
because it did not have notice of the objection to its proof of claim). The
concurrence interpreted 1327(a) to bind the parties to the distribution amount
under the plan, but not the amount of the claim determined by 502(a). Id. at
322. Thus, the debtor could not satisfy the lien until the entire claim amount
was paid, whether pursuant to the plan or otherwise. Id. The concurrence relied,
in part, on the language of 1322(b)(10) which, by implication, prohibits the
confirmation of a plan inconsistent with Title 11 one such inconsistency

being "for a plan to effectively determine the amount of a secured claim," a

result inconsistent with 502(a) and Rule 3007. Id. at 322. Both the majority
and the concurring judges agreed that a proof of claim pursuant to 502(a)
controlled the amount of the creditor's allowed claim, even if the plan amount
differed, and held that the plan could not reduce an arrearage claim.
41

The facts here compel an identical result: Universal's secured claim is

unaffected by the Plan and survives the bankruptcy unimpaired.10 See In re
Thomas, 883 F.2d 991, 997 (11th Cir.1989) (holding that a secured creditor's
lien survived a Chapter 13 discharge even though it had not been provided for
in the plan and the secured creditor had not filed a proof of claim).

42

Nevertheless, because the plan was invalid at the point of its completion, we
are urged by Universal to dismiss the Chapter 13 petition. Universal argues that
the bankruptcy court erred by denying its motion to dismiss the Chapter 13
Plan because the Plan failed to comply with 1325 of the bankruptcy code.
Bateman argues that the denial was proper because the Plan, as confirmed, is
res judicata pursuant to 1327(a) and Universal does not make any allegations
of fraud, which is the only basis to revoke a confirmed plan under 1330(a).11
Although Universal's lien and arrearage claim survives, we will not reverse the
district court's order affirming the bankruptcy court's order denying Universal's
motion to dismiss the bankruptcy altogether.

43

Universal had the opportunity to object to the Plan's treatment of its claim at
the confirmation hearing or appeal the confirmed plan and, had it done so, the
Plan could not have been properly confirmed over its objection. See 1325.
Universal, albeit within its rights, filed a proof of claim to be provided for by
the Plan, yet, chose not to involve itself in the Chapter 13 proceedings and
bypassed these opportunities to correct the discrepancy before the Plan was
confirmed. Furthermore, Universal continued to accept the payments even
though it should have been apparent that they were less than adequate to satisfy
its arrearage claim. Universal arguably had reason to remain disengaged from
the proceedings because it assumed its properly filed proof of claim was
sufficient to protect its interests absent a notice of objection by Bateman.
Because it did not vindicate its rights at the appropriate stages of the Chapter 13
process, however, Universal cannot now argue for a dismissal of the petition at
its near conclusion without assuming some responsibility for letting the
discrepancy go this far unchallenged. Accordingly, we decline to unravel three
years of diligent execution of the Plan to correct a discrepancy that every party
in interest Bateman, Universal, the trustee, and even the bankruptcy judge
should have noticed and rectified before the Plan was confirmed. Were we
to do so, the prejudice afforded Bateman and the other parties in interest would

far exceed the possible benefit to Universal at this juncture. This is so, for the
most part because, going forward from the conclusion of the plan, Universal
retains its secured claim for the arrearage. Bateman will not benefit from a
windfall from a plan that should not have been confirmed in the first place.
Because we decide that Universal's claim is unimpaired under the confirmed
plan, it is not inequitable and is, in fact, synchronous to give the Plan its full
intended res judicata effect under 1327. Also, in pragmatic terms, this action
would be disastrous to Bateman and her pursuit of financial solvency and would
afford Universal little more in remedial terms than it already possesses by
nature of its secured claim under 1322. Moreover, although Universal was not
required to "show up" at the Chapter 13 confirmation proceedings or file the
proof of claim for its secured claim, it did inject itself into the proceedings by
seeking payment under the Plan to satisfy its secured claim for arrearage, as it
was entitled to do. By electing to do so, Universal assumed some level of
responsibility for ensuring that the Plan accounted for its claim in full, or at
least objecting to or appealing from the confirmation if it did not. By failing to
do so, Universal "ignore[d] the confirmation hearing only at [its] peril." 8
Collier on Bankruptcy 1327.02[1][a] at 1327-4 (15th rev. ed.2003). The
extent of that peril, however, demands clear definition within the terms of the
bankruptcy provisions, as discussed supra. Accordingly, the district court's
order affirming the bankruptcy court's denial of Universal's motion to dismiss is
AFFIRMED.
44

However, to the extent that Universal had any rights to act against Bateman
pursuant to the terms of the mortgage, it retains those rights despite the terms of
the Plan. See Cen-Pen Corp. v. Hanson, 58 F.3d 89, 92-93 (4th Cir.1995)
(citing In re Honaker, 4 B.R. 415, 417 (Bankr. E.D.Mich.1980)) (refusing to
permit a debtor, by "[t]he simple expedient of passing their residence through
the bankruptcy estate," to enjoy a "greater interest in the residence than they
enjoyed prior to filing their Chapter 13 petition.").12

III. CONCLUSION
45

We hold that although the parties are bound to the terms of the Plan, as
confirmed, Universal's secured claim for arrearage survives the Plan and it
retains its rights under the mortgage until Universal's claim is satisfied in full. If
that satisfaction is not forthcoming, after the automatic stay is lifted, Universal
will be entitled to act in accordance with the rights as provided in the mortgage
to satisfy its claim. Accordingly, the district court's affirmance of the
bankruptcy court's order granting Bateman's objection is REVERSED. The
district court's affirmance of the bankruptcy court's denial of Universal's motion
to dismiss is AFFIRMED because Universal cannot collaterally attack the Plan

and is bound by its terms pursuant to 1327.

46

AFFIRMED in part and REVERSED in part.

Notes:
1

Universal filed the claim with the bankruptcy court file and did not serve the
claim on the other parties. Bateman would have us give credence to this fact, as
did the bankruptcy court and the district court, to indicate that Universal was
attempting to sidestep procedure and fair dealing. Universal comported with the
procedural requirements that existed in 1996; however, in December 1998, the
local bankruptcy rules were amended to require service of a proof of claim on
the parties, ostensibly to serve the interest of heightened communication
between parties. M.D. Fla. Bankr.R. 3002-1(E). At the time of the pendency of
the Chapter 13 case, Universal was under no obligation other than to file the
proof of claim, as it did

The Plan provision stated:

*
1. Universal Amer. Mtg. Arrearage $21,600.00*thru
Nov.1996

...
* * This figure is disputed.
If CREDTIOR [sic] CAN SHOW THAT MORE THAN $21,600.00 IS IN
ARREARS THEN Interest should be reset from 10.5% to 9% on the
outstanding principal sum owing at the time the Petition in the bankruptcy was
filed. A reduction in the interest rate on the promisory [sic] note does not
modify rights under the mortgage. The reduction in interest is equitable and will
allow debtor to obtain a second mortgage in the 60th month and pay off any
arrears which have not been paid in full.
R1-2-B1; R1-2-B3; R1-2-B6.
3

Title 11, United States Code 502(a) provides: "A claim or interested, proof of
which is filed under section 501 of this title, is deemed allowed, unless a party
in interest ... objects."
Section 1322 provides, in relevant part:

(b) Subject to subsections (a) and (c) of this section, the plan may
...
(2) modify the rights of holders of secured claims, other than a claim secured
only by a security interest in real property that is the debtor's principal
residence ...;
...
(5) notwithstanding paragraph (2) of this subsection, provide for the curing of
any default within a reasonable time and maintenance of payments while the
case is pending on any unsecured claim or secured claim on which the last
payment is due after the date on which the final payment under the plan is due;
...
(10) include any other appropriate provision not inconsistent with this title.
11 U.S.C. 1322 (emphasis added).
Title 11 United States Code 1325 provides, in pertinent part:
(a) Except as provided in subsection (b), the court shall confirm a plan if
(1) the plan complies with the provisions of this chapter and with the applicable
provisions of this title;
...
(3) the plan has been proposed in good faith and not by any means forbidden by
law;
...
(5) with respect to each allowed secured claim provided for by the plan
(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that the holder of such claim retain the lien securing
such claim; and
(ii) the value, as of the effective date of the plan, of property to be distributed
under the plan on account of such claim is not less than the allowed amount of
such claim; or
(C) the debtor surrenders the property securing such claim to such holder; and
(6) the debtor will be able to make all payments under the plan and to comply
with the plan.
11 U.S.C. 1325(a). Subsection (b) pertains to unsecured creditors' claims and
is not pertinent to the facts here.
4

Although Universal does not argue that the Plan did not conform to 1322,
which provides for the mandatory provisions of a confirmed plan, we will
address the effect of 1322(b)(2), prohibiting the modification of Universal's
secured mortgage claim. As discussedinfra, whether the Plan was confirmed in
violation of 1322 or 1325 is irrelevant to the disposition of this case,
because the res judicata effect of 1327 prohibits the collateral attack of a
confirmed plan. Stoll v. Gottlieb, 305 U.S. 165, 172, 59 S.Ct. 134, 137-38, 83
L.Ed. 104 (1938). We decide this case within the context of the special
treatment afforded mortgage lenders by 1322(b)(2) and do not express an
opinion as to the result with regard to a general secured creditor.

Often a debtor will be in default under the mortgage prior to filing a Chapter 13
petition, resulting in a mortgagee's secured claim for arrearage. Under 1322(b)
(5), the debtor can "cure" such arrears of a mortgage without improperly
"modifying" the secured creditor's rights in violation of 1322(b)(2)In re
Hoggle, 12 F.3d 1008, 1010 n. 3 (11th Cir.1994) (holding that a confirmed plan
can be modified to cure pre or post-petition defaults, so long as it meets the
requirements of 1322(b)(5)) (citing 5 Collier on Bankruptcy, 1322.09[1], at
1322-19 (15th rev. ed.1993)). The effect of 1322(b)(2) and (5) is to potentially
split the treatment of mortgagee's secured claim by the plan one secured
claim for the mortgage going forward and one secured claim for the arrearage
but it does not compromise the amount of the aggregate secured claim or the
rights of the secured creditor to recover the arrearage. Nobelman, 508 U.S. at
331-32, 113 S.Ct. at 2111.

We will not lecture on the various roles and responsibilities delegated to and
required of each party in interest participating in a Chapter 13 plan

confirmation; however, we deem it necessary to urge all parties to carefully

execute their responsibilities such that every confirmed plan will result in a
synthesis of the interests of all participants in a consistent manner. The interest
of one party is not to the exclusion of all others; rather, every party, most
importantly the debtor who is seeking the protection of the bankruptcy court,
benefits from a confirmed plan that includes accurate and thorough treatment of
all claims. Moreover, it is the independent duty of the bankruptcy court to
ensure that the proposed plan comports with the requirements of the
bankruptcy codeSee In re Gurst, 76 B.R. 985, 989 (Bankr.E.D.Pa.1987); In re
Harris, 62 B.R. 391, 393 n. 1 (Bankr. E.D.Mich.1986); In re Bowles, 48 B.R.
502, 505 (Bankr.E.D.Va.1985).
7

The parties dispute whether the provisions of 1325 are mandatory to an extent
that would warrant vacating a confirmed plan and dismissing the
bankruptcyCompare In re Szostek, 886 F.2d 1405, 1411 (3d Cir.1989) (holding
that 1325(a) is not mandatory, but rather "sufficient," whereas 1322 is
mandatory) with In re Nenonen, 232 B.R. 803, 805 (M.D.Fla.1998) (noting that
1325(a) provisions are mandatory in the context of a direct appeal from a
confirmation order). This question, however, appears to be settled by Associates
Commercial Corp. v. Rash, 520 U.S. 953, 956, 117 S.Ct. 1879, 1882, 138
L.Ed.2d 148 (1997): "To qualify for confirmation under Chapter 13, the
[debtors'] plan had to satisfy the requirements set forth in 1325(a) of the
Code." Because our decision rests on a different ground, we do not decide that
issue.

AlthoughIn re Justice Oaks II, Ltd. applied to a Chapter 11 bankruptcy case, in

In re Clark, 172 B.R. 701, 704 (Bankr.S.D.Ga. 1994), the court applied In re
Justice Oaks in the Chapter 13 context. We also find it appropriate to do so
here.

The issue was not addressed under 1322(b)(2) because the secured claim was
not a mortgage on a principal residence. The mandatory language of 1322
makes the analogous result in Simmons even more compelling

10

Bateman refers us to the decision inIn re Duggins, 263 B.R. 233

(Bankr.C.D.Ill.2001), in support of its argument that the Plan, as confirmed, is
res judicata, and therefore, established Universal's claim at the $21,600.00
amount. The bankruptcy court in In re Duggins held that an undersecured
creditor was bound to the confirmed plan's valuation of the underlying
collateral, even though it filed a proof of claim evidencing a higher valuation
just before the plan's confirmation, because the creditor had adequate notice of
the plan's valuation of the collateral, and the proof of claim would not be
permitted to substitute for a timely objection to the confirmation plan. Id. at

244.
The case In re Duggins is distinguishable in terms fatal to Bateman's argument.
First, the secured claim in In re Duggins was for a television set, id. at 235,
which is not afforded the same protection as a mortgage on a principal
residence by 1322(b)(2). Thus, the secured claim was bifurcated pursuant to
506(a) and secured only to the extent of the collateral's value; the remainder
was relegated to unsecured status. Id. at 236 (citing Assocs. Commercial Corp.
v. Rash, 520 U.S. 953, 117 S.Ct. 1879, 138 L.Ed.2d 148 (1997)). Section
1322(b)(2) prohibits such treatment of mortgages on principal residences.
Second, the dispute centered around the valuation of the collateral, not the
amount of the claim itself. The bankruptcy court concluded that the claims
process did not assign to a collateral valuation the same evidentiary effect of a
proof of claim as to the amount of the claim itself. Id. at 238. The collateral's
valuation was better determined in the confirmation process, and therefore the
creditor was bound by the plan's valuation. Id. Because of these distinctions,
we do not find the language in In re Duggins to be applicable to the issue
before us.
11

Section 1330(a) provides: "On request of a party in interest at any time within
180 days after the date of the entry of an order of confirmation ... the court may
revoke such order if such order was procured by fraud." Universal does not
argue the presence of fraud. Accordingly, revocation of the order of
confirmation is not permitted under this section. Furthermore, the motion to
dismiss was filed well in excess of 180 days after confirmation

12

We stated inIn re Thomas that, although the lien survived, the creditor "lost its
right to recover any deficiency it may have from the estate or from the debtors."
883 F.2d at 997 (citing, inter alia, In re Burrell, 85 B.R. 799, 800-01
(Bankr.N.D.Ill.1988)). In re Thomas involved a secured interest on a mobile
home which is not real property and not subject to the anti-modification
provision of 1322(b)(2). 8 Collier on Bankruptcy, 1322.06[1][a][ii] at 132224.1 (15th rev. ed. 2003). Thus, the language in In re Thomas, does not apply
here. We also take this opportunity to distinguish In re Tepper, 279 B.R. 859
(Bankr.M.D.Fla.2002), which held that a secured claim for a tax lien as
modified under a confirmed plan binds the secured creditor to the treatment
afforded under the plan. Id. at 864. Based upon the language of 1322(b),
which prohibits the modification of a mortgagee's interest, we will not extend
the reasoning in In re Tepper to enable a discharge resulting from an explicitly
prohibited modification.