“It ain’t over till it’s over,” according to a unanimous U.S. Supreme Court in deciding whether a bankruptcy court’s order denying plan confirmation is a final order for the purposes of appeal. Bullard v. Blue Hills Bank, ___ U.S. ___, 135 S. Ct. 1686, 1693 (2015). In ruling that such an order is not final, the Court has reduced debtors’ leverage over creditors in the context of a reorganization plan.

Plan Confirmation Rulings Generally. In a Chapter 13 case, it is not unusual for a debtor to propose multiple plans in an effort to resolve objections and gain confirmation of the bankruptcy court. Generally, there are three potential outcomes resulting from a bankruptcy court hearing on confirmation of a Chapter 13 plan: (1) confirmation of the plan after overruling any objections; (2) denial of plan confirmation and dismissal of the Chapter 13 case; or (3) denial of plan confirmation allowing the debtor to propose an amended plan. The first two outcomes are undisputedly final, appealable orders. However, finality of an order denying confirmation of a reorganization plan under the latter category, where a debtor is given leave to propose an amended plan, had been the subject of a circuit split.

Prior to the Supreme Court’s decision in Bullard, the Third, Fourth and Fifth Circuits permitted a Chapter 13 debtor to appeal a bankruptcy court’s order denying confirmation of a Chapter 13 plan as a “final order,” even where the debtor was afforded an opportunity to propose another plan. The prospect of an appeal (or multiple appeals after denial of each successive plan) created significant leverage in favor of a debtor in dealing with creditors because

“[a]n appeal extends the automatic stay that comes with bankruptcy, which can cost creditors money and allow a debtor to retain property he might lose if the Chapter 13 proceeding turns out not to be viable.” Bullard, 135 S. Ct. at 1693. The Supreme Court’s ruling eliminates this leverage.

Facts and History. In Bullard, the debtor, Louis Bullard, filed his third amended Chapter 13 plan in which he proposed to pay claims of creditors over a five-year period, including Blue Hills Bank, which held a $346,000 mortgage on a multi-family property owned by the debtor. Bullard valued the property at $245,000. Therefore, the debtor bifurcated Blue Hills’ debt into a $245,000 secured claim (the value of the real property) and an unsecured claim for the $101,000 balance. Bullard’s plan proposed to pay Blue Hills’ secured claim by continuing regular mortgage payments years beyond the plan’s five-year term. The treatment of the unsecured portion of Blue Hills’ claim was the same distribution for other unsecured creditors––a 5 percent dividend over the five-year term, or approximately $5,000.

The bank’s objection to confirmation of the amended plan was sustained by the Massachusetts bankruptcy court on the grounds that the repayment of the bifurcated secured portion of its claim beyond the five-year term of the plan is impermissible under Chapter 13 of the Bankruptcy Code. In re Bullard, 475 B.R. 304, 313-14 (Bankr. D. Mass. 2012). The bankruptcy court denied confirmation of the plan and ordered Bullard to submit a new plan within 30 days. Id. at 314.

Bullard appealed the denial of plan confirmation to the Bankruptcy Appellate Panel of the United States Court of Appeals for the First Circuit (“BAP”). On appeal, the BAP held that the bankruptcy court’s order denying confirmation of Bullard’s plan was not a final appealable order because it allowed the debtor to propose a further amended plan. Nevertheless, the BAP exercised its discretion to hear an appeal from the interlocutory order that allows interlocutory appeals with leave of the court. The BAP granted leave because of the legal issues raised–whether a debtor can repay a bifurcated secured claim beyond the term proposed in the plan–for which there was a split in the decisions of the Massachusetts bankruptcy court. The BAP affirmed the bankruptcy court’s decision on substantive grounds. See In re Bullard, 494 B.R. 92 (BAP 1st Cir. 2013).

The debtor again appealed, but the United States Court of Appeals for the First Circuit dismissed the appeal on the grounds of lack of jurisdiction, holding that an order denying confirmation of a plan is not final as long as a debtor may propose another plan. See In re Bullard, 752 F.3d 483, 486-90 (1st Cir. 2014). Bullard sought review by the Supreme Court, which was granted. Bullard v. Hyde Park Sav. Bank, 135 S. Ct. 781 (2014). The Supreme Court affirmed.

Supreme Court Reasoning. At the outset of its decision, the Court noted that “Congress has long treated orders in bankruptcy cases as immediately appealable ‘if they finally dispose of discrete disputes within the larger case.’” Bullard, 135 S. Ct. at 1689. However, in the process of evaluating a plan of reorganization where the goal is to move the bankruptcy case forward, only plan confirmation or dismissal of the case “alters the status quo and fixes the rights and obligations of the parties” and thus are treated as final, appealable orders. Id. at 1692.

An order confirming a plan is final because it results in a plan that binds debtors and creditors, carries preclusive effect, re-vests estate property in the debtor and renders that property free and clear of claims other than provided in the plan. Id. at 1692. Similarly, when plan confirmation is denied and the case is dismissed, the possibility of a discharge as well as other Chapter 13 benefits is eliminated and the automatic stay terminates and potentially becomes limited in future bankruptcy filings. Id. at 1692-93.

Conversely, denial of plan confirmation with leave to further amend the plan “changes little” because the automatic stay remains in effect, the parties’ positions remain intact and the debtor retains the chance of ultimately obtaining a discharge. Id. at 1693. In the Court’s view, “‘[f]inal’ does not describe this state of affairs.” Id.

In analogizing the prospect of repeated appeals of orders denying plan confirmation to Chutes and Ladders (a board game made up of 100 squares containing “ladders”––certain squares that advance a player forward a certain number of squares––and “chutes”––certain squares that send a player back a certain number of squares), the Court noted that permitting the debtor to appeal each successive iteration of a Chapter 13 plan that is denied creates significant delays and inefficiencies because “each climb up the appellate ladder and slide down the chute can take more than a year.” Id. at 1693. “Avoiding such delays and inefficiencies is precisely the reason for a rule of finality.” Id. In determining that an order denying plan confirmation with leave to file another plan is not final, the Court promotes a policy of expediency in the bankruptcy process and encourages debtors to work with creditors to develop a plan that can promptly be confirmed. Id.

Effect on Chapter 11 Cases. It is unclear what impact Bullard will have on Chapter 11 proceedings. Although the issue was broadly framed to include the Chapter 11 plan confirmation process in the First Circuit, the Supreme Court considerably narrowed it:

“[t]he present dispute is about how to define the immediately appealable ‘proceeding’ in the context of the consideration of Chapter 13 plans.” Id. at 1692. In addition, despite the parties’ repeated reference to Chapter 11 practice, the Court was careful to limit its comments and concerns specifically to Chapter 13 cases. So even if Bullard influences Chapter 11 practice, it does not squarely resolve the issue of the appealability of orders denying confirmation of Chapter 11 plans.

Regardless, Bullard is a positive step for creditors––including mortgage holders––because it reduces the possibility that the creditor will be caught up in a seemingly endless string of successive appeals.

For more information about Bullard, please contact Donald H. Cram, III at