This case deals with two competing motions to modify a chapter 13 plan. The debtor sold his home post-confirmation and sought to modify to remove the mortgage payments. The trustee moved to modify to restrict the debtor’s use of the homestead proceeds to only the purchase of a new home before the exemption lapsed. Any non-exempt funds, and those which lose their exemption, the trustee claimed, would have to be committed to repayment of creditors.
To resolve the competing motions, the court had to choose a side in the present split in authority as to how to apply the best-interest-of-creditors test (the “BIC test”) to a post-confirmation modification. In this case, the home had significantly increased in value post-confirmation. Some courts require a reevaluation of the debtor’s asset values as of the time of the modification, which would require the debtor to pay more to his creditors if the property has increased in value. Other courts have held that, while the test should be applied to the proposed modification, the valuation date continues to be the confirmed plan’s effective date, which is usually close in time to the confirmation date. The purpose of the test’s reapplication at the time of modification is to ensure that creditors will still receive as much as they would have if the debtor had originally filed a chapter 7 case. In this decision, the court sides with the latter camp and held that the post-confirmation increase in the home’s value was irrelevant under the BIC test because the proper measuring date for the home’s value was still the plan’s effective date.
Second, the court had to choose sides on a split in authority as to whether a post-confirmation increase in value belongs to the chapter 13 estate under § 1306(a) or whether it belongs to the debtor, whose property revested in him at confirmation in accordance with § 1327(b). Once again, the court sided with the debtor and followed those courts who hold that “vesting” at confirmation terminates the chapter 13 estate and the creditor’s rights in the property, except to the extent specified in the plan. Accordingly, the increased home value belonged to the debtor.