Margaret Chambers

1 The Trustee urged dismissal of the case with a bar against refiling as Debtor had advanced
the same positions in her prior case which was dismissed because of Debtor’s inability to propose
a feasible plan.
UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 13
:
MARGARET CHAMBERS, 	: 	Bankruptcy No. 04-15260DWS
dba Great Start Child Care, 	:
:
Debtor. 	:
MEMORANDUM OPINION
BY: 	DIANE WEISS SIGMUND, Chief Bankruptcy Judge
Before the Court is the Debtor’s Motion (the “Motion”) to Reconsider Order dated
February 3, 2005 (the “Order”) denying confirmation of Debtor’s Chapter 13 plan and
dismissing Debtor’s Chapter 13 case. 	Sterling Home Loan, Inc. (“Sterling”) has filed an
objection thereto which is supported by the Chapter 13 Trustee (the “Trustee”).1 For the
reasons that follow, the Motion shall be denied.
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 1 of 11

2 Her first case, no. 02-34627, was filed on October 15, 2002 and dismissed on
December 10, 2003 for the same reason as this case was dismissed, i.e., there was no confirmable
plan filed nor could one be confirmable. 11U.S.C. § 1307(c)(1), (3)(4) and (5). I shall take judicial
notice of the docket entries in this and the prior case. 	Fed.R.Evid. 201, incorporated in these
proceedings by Fed.R.Bankr.P. 9017. See Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d
1194, 1200 n.3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. Ill. 1993); 	In re
Paolino, 1991 WL 284107, at *12 n. 19 (Bankr. E.D. Pa. 1991). While a court may not take judicial
notice sua sponte of facts contained in the debtor’s file that are disputed, In re Augenbaugh, 125
F.2d 887 (3d Cir. 1942), it may take judicial notice of adjudicative facts “not subject to reasonable
dispute ... [and] so long as it is not unfair to a party to do so and does not undermine the trial court’s
factfinding authority.” 	In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir. 1995) (citing
Fed.R.Evid. 201(f) advisory committee note (1972 proposed rules). Moreover, “factual assertions
in pleadings, which have not been superceded by amended pleadings, are judicial admissions against
the party that made them. Larson v. Gross Bank, 204 B.R. 500, 502 (W.D. Tex. 1996) (statements
in schedules). See also In re Musgrove, 187 B.R. 808 (Bankr. N.D. Ga. 1995) (same); In re Leonard,
151 B.R. 639 (Bankr. N.D.N.Y. 1992) (same).
3 In furtherance of this position, she contemporaneously filed an adversary proceeding
seeking to have Countrywide’s lien invalidated. Doc. No. 8. A similar proceeding had been filed
in her prior case which was dismissed for lack of plan feasibility, directing Debtor to litigate these
non-bankruptcy claims in state court. Rather than do so, she returned here, filing a new petition and
another adversary proceeding.
-2-
BACKGROUND
On April 14, 2004 Debtor filed this Chapter 13 case, her second. 2 Her Chapter 13
plan (the “Plan”) provides for sixty monthly payments of $100. 	Plan ¶ 2, Doc. No. 7.
It expressly states that Debtor had rescinded her mortgage loan held by Countrywide Home
Loans, Inc. (“Countrywide”), 3 and would make no payments under the Plan to it, noting
that she could not do so with her limited income and would not do so because she did
not believe she owed any sum to the mortgagee. Id. ¶¶ 3, 5. The Plan also provides that
the automatic stay shall remain in effect until the case is closed and relief should be allowed
only if there is a substantial payment delinquency. Id. ¶ 8.
Sterling, who stands now in the place of Countrywide, filed an objection to
confirmation of the Plan contending that the Plan was infeasible under § 1325(a)(6),
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 2 of 11

4 Due to the rescission, Debtor contends that Sterling should be compelled to satisfy its lien,
and has commenced an adversary proceeding in furtherance of that end. Chambers v. Countrywide
Home Loans, Inc. et al., adv. no. 04- 0451. The consequence of success in the litigation is that she
would own an unencumbered interest in her resident real estate which she has valued at $50,000.
Under the best interests of creditor’s test of § 1325(a)(4), creditors must receive at least what they
would receive in a liquidation under Chapter 7. Since the total funding of Debtor’s plan is $6,000,
clearly her Plan does not distribute the value of that asset and as such would violate § 1325(a)(4).
5 While the Motion does not invoke Rule 59(e) (or any applicable procedural rule for that
matter), as it was brought within ten days after entry of the Order and clearly is an attempt to alter
or amend that order, it is properly treated as a Rule 59(e) motion. 	E.g., NAACP v. Town of
Harrison, 907 F.2d 1408, 1411 n.5 (3d Cir. 1990).
-3-
failed to meet the “best interests of creditor’s test” under § 1325(a)(4)4 and failed to make
distribution to Sterling under the Plan contrary to § 1322(b)(1), (b)(2) and/or (b)(5).
While Debtor scheduled Countrywide as holding a claim in the amount of $96,060.31
secured by real property valued at $50,000, Exhibits O-1 and O-2, neither Countrywide nor
Sterling filed a proof of claim. Debtor has also scheduled creditors holding unsecured
claims in the amount of $25,262.68. These claims are classified in Class Five of the Plan but
unless there is a clerical mistake in the Plan, are not to receive any distribution. Plan ¶ 4.
DISCUSSION
This matter comes before me on a motion to reconsider governed by Fed. R. Civ. P.
59(e), applicable here pursuant to Federal Rule of Bankruptcy Procedure 9023.5 Federal
courts are cautioned that they should “grant such motions sparingly because of their strong
interest in finality of judgment.” Seleras v. M/V Cartagena de Indias, 959 F. Supp. 270 (E.D.
Pa. 1997) (quoting Continental Cas. Co. v. Diversified Indus., Inc., 884 F.Supp. 937, 943
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 3 of 11

-4-
(E.D. Pa. 1995). 	I am mindful that "[t]he purpose of a motion for reconsideration is to
correct manifest errors of law or fact or to present newly discovered evidence." 	Harsco
Corp. v. Zlotnicki, 779 F.2d 906, 908 (3d Cir. 1985), cert. denied, 476 U.S. 1171 (1986).
The purpose of a Rule 59(e) motion is to allow the court
to 	reevaluate 	the 	basis 	of 	its 	decision. 	... 	Motions 	for
reconsideration are not at the disposal of an unsuccessful party
to "rehash" the same arguments and facts previously presented.
Keyes v. National Railroad Passenger Corporation, 766 F.Supp. 277, 280 (E.D. Pa. 1991)
(citations omitted). As the court in Durkin v. Taylor, 444 F.Supp. 879, 889 (E.D. Va. 1977)
stated that “[w]hatever may be the purpose of Rule 59(e) it ... [was not] ... intended to give
the unhappy litigant one additional chance to sway the judge.”
Debtor contends that the Court erred in entertaining Sterling’s objection to
confirmation (the “Objection”) because it lacked standing by reason of its failure to file
a proof of claim in this case. 	Assuming it had standing, Debtor also contends that the
Objection lacked merit. Finally, she appears to clain some procedural unfairness as a result
of the confirmation hearing having proceeded on the scheduled date.
A.
Section 1324 states that “a party in interest” may object to confirmation of a plan.
As the Bankruptcy Code does not define “party in interest,” the term has not surprisingly
been the subject of numerous published opinions. It is true that some courts have construed
that phrase to require the party to hold an allowed claim as Debtor urges here. 	In In re
Stewart, 46 B.R. 73 (Bankr. D. Ore. 1985), the court relying on the bankruptcy treatise
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 4 of 11

6 Ironically in the most recent edition of Collier, the commentators now cite Stewart as
authority for the statement that “a creditor who does not hold an allowed claim, because, for
example, a proof of claim was never filed, generally is not a party in interest with standing to object
to confirmation of the plan.” King, 8 Collier on Bankruptcy ¶ 1324.03, at 1324-5 and n.5 (15th ed.
2004).
-5-
Collier’s statement that “any holder of an allowed claim may object to confirmation on the
grounds that it failed to comply with § 1325,” concluded that a claimant who had not filed
a formal proof of claim could not be a party in interest and therefore had no standing to
object to confirmation.6 A more recent decision taking this view, In re Dennis, 230 B.R. 244
(Bankr. D. N.J. 1999), explained that a creditor whose claim has been disallowed is not a
party in interest if the basis of the objection to confirmation is the failure to pay a claim that
has been disallowed. 	Id. at 255 (emphasis added). 	Assuming without deciding that this
narrow construction of “party in interest” is correct, neither Collier (upon which Stewart
finds its authority) nor Dennis state a rule without exceptions and both leave open the
possibility that standing would be found where the objection does not relate to payment of
a disallowed claim. 	Moreover, at least one court has concluded that an objection to
confirmation serves as an informal proof of claim conferring standing on the creditor to
object to the plan. In re Michels, 286 B.R. 684, 690 (8th Cir. BAP 2002). See also In re
Ungar, 70 B.R. 519, 521 (Bankr. E.D. Pa. 1987).
Other courts, including the Third Circuit Court of Appeals, have viewed the term
more broadly to include a creditor without regard to whether its claim has been timely filed.
In In re Kressler, 252 B.R. 632 (Bankr. E.D. Pa. 2000), my colleague Honorable Thomas M.
Twardowski held that a holder of a lien, which debtors’ proposed Chapter 13 plan sought
to cramdown and avoid, was a party in interest and had standing to object to confirmation
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 5 of 11

-6-
of a plan, notwithstanding that its proof of claim had been disallowed as untimely. The Third
Circuit Court of Appeals agreed, finding that the lienholder had a pecuniary interest that
was not extinguished, and as such was a party in interest who could object. In re Kressler,
40 Fed.Appx. 712, 2002 WL 1723885 (3d Cir. 2002). As other courts have noted, there is
nothing in the Bankruptcy Code that requires a creditor to have an allowed claim to object
to confirmation under § 1325(a), the provision invoked by Sterling. 	This provision is
distinguishable from § 1325(b) which expressly confers standing upon holders of allowed
claims. Other courts eschewing the proof of claim requirement and giving effect to the broad
term “party in interest” adopted by Congress (as opposed to holder of an allowed claim or
even holder of a claim), find support for their view in the provisions of Chapter 11 where
§ 1109 makes clear that a party in interest includes all persons whose pecuniary interests
are directly affected by the bankruptcy case. Davis v. Mather (In re Davis), 239 B.R. 573,
579 (10th Cir. BAP 1999); In re Turpen, 218 B.R. 908, 911 (Bankr. N.D. Iowa 1998).
Even had the Third Circuit not presaged its rejection of the narrow interpretation of
“party in interest” advanced by Debtor, the language of the statute and the purpose of the
standing requirement convince me that a filed proof of claim is not a threshold requirement
of standing to object to a Chapter 13 plan. 	Absent fraud, all creditors whose claims are
provided thereunder are bound by a confirmed plan without regard to whether they file a
proof of claim. A secured creditor that fails to object to confirmation does so at its peril as
it will be deemed to have accepted the plan. In re Szostek, 886 F.2d 1405, 1410 (3d Cir.
1989). Debtor’s Plan provides with respect to Sterling’s claim that no payments would be
made and that the stay would remain in effect unless there was a payment default under the
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 6 of 11

7 Presumably Mr. Scholl views the ability to secure continuances as unlimited although
regular appearances in this Court have put him on notice that such is not the case. This stance is
particularly curious given his observation in Fricker where then Judge Scholl noted:
The creditor has the initial burden of articulating a clear and cognizable objection.
However, the debtor has the burden of ultimate persuasion, and is therefore obliged
to make a record if such is necessary to persuade us to overrule the objection and
confirm the plan in the face of such an objection. Moreover, we are empowered to
raise §§ 1325(a)(3), (a)(5), or (a)(6) objections sua sponte at the confirmation
hearings. As in the case of many § 1325(b)(1)(B) objections, we may be able to
resolve many such objections without adducing any testimony. We would go further
and state that we would grant the debtor a continuance as of course to meet any
objection raised sua sponte or belatedly and/or orally. However, if timely written
objections are filed, the debtor acts at peril in not appearing to testify in support of
confirmation at the confirmation hearing.
Id. at 438 (emphasis added).
-7-
Plan. 	Since Sterling will not receive any distribution, there can be no payment default.
Under Debtor’s Plan, it is contemplated that Sterling would be held hostage without payment
in Debtor’s bankruptcy for the five year term of her Plan. It is apparent that the Plan affects
Sterling’s pecuniary interest, and it follows that Sterling is a party in interest with standing
to object to confirmation.
Moreover, I reject the insinuation that there was some unfairness to the Debtor by the
Court proceeding with confirmation on the re-scheduled hearing date. Debtor contends in
the Motion that the issues and focus of the hearing were not clear and no notice was provided
to the Debtor that the plan had to be confirmed that day. My recollection is that Debtor’s
counsel David A. Scholl sent an associate to cover the hearing for him, a hearing that had
been continued at his request on three occasions over a four month period. Doc. Nos. 14, 18
and 19. The associate’s request for another continuance was opposed and denied. However,
he was given the opportunity to consult with Mr. Scholl by telephone, and then participated
fully in the hearing calling the Debtor to testify. 7 Finally Debtor’s contention that the issues
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 7 of 11

8 As the standing argument was not made at the hearing, my refusal to confirm the Plan was
based on the Objection and therefore I have addressed the standing argument now raised by Debtor.
However, I come to the same conclusion exercising my independent duty to determine the Plan
satisfies confirmation requirements. In re Vincente, 257 B.R. 168, 176 (Bankr. E.D. Pa. 2001).
Indeed given the court’s sua sponte obligation to withhold confirmation where the plan is legally
flawed, courts have rejected standing objections as moot when they independently conclude that a
plan is not confirmable. In re Fox, 249 B.R. 140, 144 (Bankr. D.S.C. 2000); In re Zaleha, 162 B.R.
309, 313 (Bankr. D. Idaho 1993).
-8-
were not focused is belied by the detailed objection filed and served by Sterling.
In short, whether before the Court on Sterling’s Objection or by reason of my
independent duty to scrutinize Debtor’s Plan for compliance with §§ 1322 and 1325(a), 8 the
issues that formed the basis of my refusal to confirm Debtor’s Plan were rightfully before me
for adjudication. 	Accordingly, I turn next to the Debtor’s contention that my ruling was
incorrect.
B.
While asserting that I failed to discern the absence of merit to the Objection, the
Motion fails to advance any legal grounds for this position. 	None is provided by the
contention that Debtor is capable of confirming another plan “with slight modifications.”
Debtor had four months to file that modified plan and failed to do so. While I do not think
the outcome would be any different were a modified plan filed, it is the actual plan, not a
hypothetical one, that is before this Court. None is provided by the statement that Debtor is
current in her monthly payment obligation to the Trustee since contrary to Debtor’s
argument, the Objection did not relate to maintenance of payments to the Trustee. Rather it
is the fact that the $100 monthly plan payment amount does not relate to the amount required
to fund a confirmable plan in which Debtor either retains the equity in her residence (if lien
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 8 of 11

-9-
avoided) or pays Sterling (if lien not avoided). The Plan pays too little under either scenario.
The fatal flaw of Debtor’s Plan has not been addressed. Debtor seeks to confirm a
plan that treats the Sterling mortgage loan as rescinded and fails to pay the value of the asset
as required by § 1325(a)(4). The Plan is not prepared to meet the best interests of creditors
test if Debtor is successful in her adversary case in which she seeks to have the mortgage lien
invalidated. Her contention that she is not required to do so since Sterling presently has a
lien in excess of the property’s value is disingenuous given her treatment of Sterling under
the Plan. 	As Debtor neither pays Sterling as a secured creditor or leaves it outside the
bankruptcy case to exercise its state law remedies, the Plan violates § 1322 by seeking to
modify the rights of a secured creditor whose collateral is solely residential real estate.
Debtor cannot have it both ways. If she is successful in rescinding her mortgage, she must
reimburse Sterling the amount of the loan proceeds and dedicate the value of the
unencumbered property to her Plan. In re Williams, 291 B.R. 636 (Bankr. E.D. Pa. 2003).
She has done neither, is incapable by her own admission of doing either, and accordingly the
Plan fails. For these reasons as already stated on the record of the hearing on February 3,
2005, confirmation was denied and Debtor’s Chapter 13 case was dismissed under
§ 1307(c)(1) and (5).
An Order consistent with this Memorandum Opinion shall issue.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
Dated: 	June 1, 2005
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 9 of 11

UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 13
:
MARGARET CHAMBERS, 	: 	Bankruptcy No. 04-15260DWS
dba Great Start Child Care, 	:
:
Debtor. 	:
ORDER
AND NOW, this 1st day of June 2005, upon consideration of the Debtor’s Motion
(the “Motion”) to Reconsider Order dated February 3, 2005 denying confirmation of
Debtor’s Chapter 13 plan and dismissing Debtor’s Chapter 13 case, after notice and hearing
and for the reasons stated in the accompanying Memorandum Opinion;
It is hereby ORDERED that the Motion is DENIED.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 10 of 11

Copies to:
David A. Scholl, Esquire
Regional Bankruptcy Center
Law Office of David A. Scholl
#6 St. Albans Avenue
Newtown, PA 19073
Jeffrey Meyers, Esquire
BALLARD SPAHR ANDREWS
& INGERSOLL, LLP
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
William C. Miller, Esquire
Standing Chapter 13 Trustee
P. O. Box 40119
Philadelphia, PA 19106-0119
Case 04-15260-dws Doc 33 Filed 06/01/05 Entered 06/01/05 14:27:45 Desc Main
Document Page 11 of 11