Chapter 7 Post-Confirmation Issues

• Jurisdiction: United States

Chapter 7: Post-Confirmation Issues

Confirmation of a chapter 11 plan does not mean that the bankruptcy case is over. This is especially true in the case of an individual chapter 11, where a debtor generally cannot receive a discharge until all payments under the plan are completed. During the time that payments under the plan are being made, the debtor can either keep the case open or seek to administratively close the case, pending the completion of the plan payments.

As long as there are no other post-confirmation issues to address, it is generally advantageous for a debtor to seek to administratively close the case to ease the burdens of continued reporting to the bankruptcy court and the payment of U.S. Trustee fees. Upon completion of the plan payments, the debtor can then seek to reopen the case in order to file a motion for final decree and seek the entry of the debtor's discharge.

I. Post-Confirmation Issues Prior to the Closing of the Case

A. Post-Confirmation Reporting

Upon the confirmation of a chapter 11 plan, the debtor is still required to continue ongoing reporting requirements to the court and to the U.S. Trustee. In particular, a debtor must continue to file monthly operating reports until the bankruptcy case is closed. Every regional U.S. Trustee's Office has promulgated forms for monthly operating reports, including those specific for individual debtors. Some regions allow for the filing of quarterly (instead of monthly) operating reports post-confirmation.

However, until the case is closed, the requirement to file these operating reports continues, even after confirmation. Some jurisdictions may allow the filing of affidavit(s) of disbursements in lieu of a formal operating report, however, depending on the circumstances of the case.

B. Post-Confirmation U.S. Trustee Fees

Similarly, a debtor is also required to continue paying U.S. Trustee fees, pursuant to 28 U.S.C. § 1930(a)(6), until the case is closed (or converted or dismissed). The amount of the quarterly fee is based on disbursements made during the prior quarter. Disbursements are calculated by using either the monthly (or quarterly) operating reports that continue post-confirmation (or the affidavit(s) of disbursements). These U.S. Trustee fees cannot be prorated. As a result, from a debtor's standpoint, it is usually advantageous to seek to close the bankruptcy case as soon as possible to avoid these ongoing fees.

C. Post-Confirmation Jurisdiction

Post-confirmation, it may be necessary for a party to come back to bankruptcy court to seek specific relief. For example, a party may have defaulted on the terms of a confirmed plan, may want to effectuate a sale of property or may want to commence litigation identified in the plan. However, there is a difference among the circuits with respect to the scope of a bankruptcy court's post-confirmation jurisdiction.

The starting point for bankruptcy jurisdiction is 28 U.S.C. § 1334, which provides a jurisdictional grant of authority to district and bankruptcy courts over "all cases under title 11" or "all civil proceedings arising under title 11, or arising in or related to cases under title 11." Most courts distinguish between pre-and post-confirmation jurisdiction and hold that the essential inquiry is whether there is a close nexus to the bankruptcy plan or proceeding sufficient to uphold bankruptcy court jurisdiction over the matter.²⁸³

In addition to the specific grant of jurisdiction under 28 U.S.C. § 1334, the Bankruptcy Code itself provides for some degree of post-confirmation jurisdiction. 11 U.S.C. § 1142(b) provides that a bankruptcy court "may direct the debtor and any other necessary party to execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act, including the satisfaction of any lien, that is necessary for the consummation of the plan." This specific grant of authority has been found to include, among other things:

• implementation of the terms of a confirmed plan;
• resolution of objections to claims;
• determination of avoidance actions;
• ordering third parties to perform acts necessary to consummate a confirmed plan; and
• ordering parties to refrain from taking actions that interfere with the implementation of a confirmed plan.

Bankruptcy plans themselves should contain retention-of-juris-diction provisions — that is, a confirmed plan acts as both a contract that binds the parties and as an order of the bankruptcy court. Parties may enforce a confirmed plan in nonbankruptcy court just as they would enforce any other contract. However, most debtors prefer the bankruptcy court, which has the superior knowledge and expertise to handle post-confirmation issues. Therefore, notwithstanding the statutory grant of jurisdiction discussed above, individual chapter 11 plans should specify exactly what the bankruptcy court retains jurisdiction to do.

D. Plan Default

1. By the Debtor

Ascertaining post-confirmation jurisdiction is particularly important when it comes to default of the plan. In most individual chapter 11 plans, the debtor's primary obligation is to pay certain of the debtor's creditors, pursuant to the payment terms set forth in the plan. Unlike nonindividual chapter 11 plans, which often involve many other complicated terms, conditions and scenarios, the individual chapter 11 plan will primarily set forth payment terms to...