Following a Motion for Relief from Stay filed by ASC, the Debtor argued that ASC was not a a “party in interest” and lacked standing as there was neither an endorsement on the note nor an allonge affixed and presented in support of the Motion. \
Avoiding this issue, the Bankruptcy Court held “that a confirmed Chapter 13 plan, which represents a new contractual agreement between debtors and their creditors, is res judicata on the issue of a creditor’s rights as a party in interest with standing to seek relief from the stay.” In re Jeter, No. 08-07872-HB, 2011 WL 6014173, at *3 (Bankr. D.S.C. Dec. 1, 2011) (citing In re Neals, 459 B.R. 612, 617 (Bankr. D.S.C. 2011). A Debtor cannot wait “until after the creditor asserted a default [to] [raise] or [revive] any such challenge.” Accordingly, pursuant to First Union Commercial Corp. v. Nelson, Mullins, Riley and Scarborough (In re Varat Enterprises, Inc.), 81 F.3d 1310,1315 (4th Cir. 1996) (citing Brown v. Felsen, 442 U.S. 127, 132 (1979)), “the confirmation order in this case is a final judgment with res judicata effect and that the Debtor is estopped from asserting that ASC is not a party in interest with standing to bring the Motion.”
This case again affirms that Debtors should list ALL claims as disputed in petition (or at the very least as “NOT ADMITTED”) and specifically decline admission of claim in any Objection to Claim or other pleading.
It is also worth noting that the Standard Confirmation Order for cases in the Middle District provides both that “providing for a claim under the plan does not bar objections to the claim” and that “[n]otwithstanding the allowance of a claim as secured, all rights under Title 11 to avoid liens are reserved and confirmation of the plan is without res judicata effect as to any action to avoid a lien.” See:
The typical Eastern District Motion for Confirmation also provides that confirmation “will be without prejudice to objections to claims and avoidance actions….” Since nearly identical language appears in the standard Wester District plan (“Confirmation of this plan does not bar a party in interest from objecting to a claim for good cause shown.”), it is not clear why the Debtor is not allowed to object to the claim, which forms the basis for the Motion for Relief , on the grounds of standing. This argument was specifically rejected on this grounds by Judge Stocks in Lilley v. Wells Fargo, N.A. (In re Lilley), 2011 Bankr. LEXIS 1406, 2011 WL 1428089 (Bankr. M.D.N.C. Apr. 12, 2011), who held that the Confirmation Order preserved the Debtor’s right to object to claims.
For a copy of the opinion, please see: