In Murphy, Jr. v. O’Donnell v. Goalski, 474 F.3d 143 (4th Cir. 2007), the Fourth Circuit determined when and how a confirmed Chapter 13 plan may be modified. There were two fact patterns at issue in this matter and the Court started out by setting forth the principal that a confirmed Chapter 13 plan is “a new and binding contract, sanctioned by the court, between the debtors and their pre-confirmation creditors,” id., citing Matter of Penrod, 169 B.R. 910, 916 (Bankr.N.D.Ind. 1994).
The Court continued that, “like other contracts, a confirmed Chapter 13 plan is subject to modification.” Murphy, 474 F.3d at 148 (citing In re Arnold, 869 F.2d 240, 241 (4th Cir. 1989); but see snarky comment (unlike other contracts, both parties do not need to consent to the modification). Section 1329 of the Bankruptcy Code provides that a confirmed plan may be modified at any time after confirmation of the plan but before the completion of payments at the request of the debtor, the Chapter 13 trustee, or an allowed unsecured creditor in order to, among other things, increase or reduce the amount of payments on claims of a particular class provided for by the plan, [or to} extend or reduce the time for such payments. See 11 U.S.C. 1329.
The Court directed that a three part inquiry is required to determine if it will allow a modification of the plan. For the first part of that inquiry, the bankruptcy court must first determine if the debtor experienced a substantial and unanticipated change in his post-confirmation financial condition. This inquiry will inform the bankruptcy court of the question of whether the doctrine of res judicata prevents modification of the confirmed plan. Next, the court must decide whether the proposed modification meets one of the circumstances listed in §1329(a). If so, the court must then consider whether the proposed modification complies with §1329(b)(1).