IN RE: KELVIN JACKSON CASE NO. 95-50697

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

IN RE:

KELVIN JACKSON CASE NO. 95-50697

PATRICIA JACKSON

DEBTORS

MEMORANDUM OPINION

This case was heard by the court on October 23, 1995, on the motion of Cincinnati Insurance Company, by counsel, for an extension of time within which to file its claim. With the motion filed on September 30, 1995, the movant submitted its proof of claim in the amount of $7,022.01.

The debtors filed a joint petition for relief under chapter 13 of the Bankruptcy Code on May 4, 1995.

The first date set for the meeting of creditors was June 9, 1995. Accordingly, the last day for filing claims by creditors holding unsecured claims was 90 days from that date or September 7, 1995.

The initial plan filed by the debtors with their petition and their first amended plan filed on June 29, 1995, both so-called pool plans, were disapproved by the chapter 13 trustee because they did not provide for a meaningful distribution to unsecured creditors. This was because the amount to be paid to the trustee under the latter plan was only $10,800, whereas the projected amount of secured and priority claims of creditors approximated that amount, leaving an insufficient amount for payment of interest on secured claims and administrative expenses, and no allowance for payment of unsecured claims. The second amended plan filed by the debtor on July 27, 1995, providing for payment of .20 cents on the dollar on unsecured claims after payment of secured priority claims, was confirmed by the court on August 5, 1995.

The indebtedness to Cincinnati Insurance Company was not listed in the schedules to the original petition, with the result that said creditor did not receive notice of this bankruptcy proceeding until after confirmation of the plan.

On or about June 23, 1995 Cincinnati Insurance Company commenced an action against the debtors in the Jessamine Circuit Court to recover damages for theft/conversion of insured property (a motor vehicle) by a minor child of the debtors, an incident which had occurred on or about November 14, 1994. The summons and complaint in that action were served on the debtor Patricia Jackson on June 30, 1995.

On August 23, 1995 the debtors filed an amendment to Schedule F to their petition listing Cincinnati Insurance Company as an unsecured creditor, and on that date served a copy of the amendment on Cincinnati Insurance Company's counsel in the state court action. The insurance carrier was not directly served with the amendment. According to Cincinnati Insurance Company's motion for an extension of time to file its proof of claim, counsel for the insurance company was on military duty from August 19 until September 5, 1995, and did not become aware of the September 7, 1995 deadline for filing claims until the deadline had passed.

In the schedules to their petition the debtors understated the amount of the arrearage on their home mortgage and the amount of their indebtedness for state and federal taxes. They stated the amount of the arrearage on their home mortgage to be $4,701.00; the actual amount according to the proof of claim of Source One Mortgage is $6,887.89. The debtors listed their obligation for federal and state taxes as $2,193.07 federal and $300.00 state. The IRS has filed a claim for taxes in the amount of $6,731.96 priority and $1,335.64 unsecured, a total of $8,067.60. The Commonwealth of Kentucky has filed a claim for taxes in the amount of $4,494.31.

The secured indebtedness to be paid under the plan is home mortgage arrearage of $6,887.00 plus automobile indebtedness of $1,500.00, or a total of $8,387.00; the priority indebtedness to be paid under the plan is [federal taxes $6,731.96 and state taxes $4,494.31] $11,226.27. The unsecured indebtedness to be paid under the plan, without inclusion of the $7,022.01 claim of Cincinnati Insurance Company, is [$4,616.11 5] $923.22. The total indebtedness to be paid under the plan, exclusive of interest on secured claims and administrative expenses, is $20,536.00, substantially more than the amount of $18,000.00 the debtors propose to pay to the trustee during the permitted five-year life of the plan.

The addition of the $7,022.01 claim of Cincinnati Insurance Company to this debt structure simply makes the plan more unfeasible.

CONCLUSIONS OF LAW:

There is no authority in the applicable statutes or Federal Rules of Bankruptcy Procedure for the court to extend the time for filing a claim under the factual circumstances presented by this case. 11 U.S.C. 502; Rule 3002(c).

The provision in 11 U.S.C. 523(a)(3) for excepting a debt from discharge if the creditor does not receive notice of the bankruptcy in time to file a proof of claim is applicable in a chapter 13 case only when a debtor is granted a hardship discharge under 11 U.S.C. 1328(b).

The debt of Cincinnati Insurance Company was added by amendment after confirmation of the plan. The confirmed plan did not deal with this unliquidated, unsecured claim for the amount of $7,022.01. If this debt were included, the plan is rendered unfeasible and nonconfirmable.

The equitable solution dictated by the facts of this case is to set aside confirmation of the plan on the ground the plan is not feasible. 11 U.S.C. 105(a). This will afford the debtors an opportunity to formulate a new plan or, in the alternative, to convert this case to a case under chapter 7 of the Bankruptcy Code. If the debtors opt for the latter alternative, the time for filing

 

claims will be extended. Rule 1019(2), Federal Rules of Bankruptcy Procedure.

Dated:

By the court -

 

_____________________________

JOE LEE, CHIEF JUDGE

 

Copies to:

 

Daniel E. Murner, Esq.

James L. Hayden, Esq.

Sidney N. White, Esq.

Debtors

 

 

 

 

 

 

 

 

f:\opinions\1996\jackson

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

 

IN RE:

 

KELVIN JACKSON CASE NO. 95-50697

PATRICIA JACKSON

 

DEBTORS

 

 

 

ORDER

 

 

 

In conformity with the Memorandum Opinion of the court this day entered, IT IS ORDERED AND ADJUDGED as follows:

1. The motion of Cincinnati Insurance Company for an extension of time within which to file a proof of claim is overruled.

2. The order entered on August 9, 1995 confirming the debtors' Second Amended Chapter 13 Plan dated July 27, 195 is set aside.

Dated:

By the court -

 

_____________________________

JOE LEE, CHIEF JUDGE

 

Copies to:

 

Daniel E. Murner, Esq.

James L. Hayden, Esq.

Sidney N. White, Esq.

Debtors