11th Circuit narrowly interprets Espinosa in Chapter 13 Bankruptcy

In a recent opinion, the 11th Circuit Court of Appeals made a narrow interpretation of the Supreme Court’s Espinosa decision. The Supreme Court ruled in Espinosa that a chapter 13 plan, which had been approved and completed years ago, was binding upon a student loan creditor even if the order might have originally been erroneous. The reasoning was that under Federal Rule 60(b)(4), a petitioner can set aside a judgment if it is void. The student loan creditor claimed that the prior bankruptcy orders were void because they were erroneous. The Supreme Court denied this and stated that Rule 60(b)(4) can’t be a substitute for a timely appeal. In other words, the student lender sat on their rights.

In the recent Bozeman decision, the 11th Circuit said Espinosa did not apply because this was not a request to set aside a judgment as void under Rule 60(b)(4). Instead, the chapter 13 bankruptcy case was active and nearing the completion. The dispute was whether the original plan confirmation order required the bankruptcy court to discharge the remaining mortgage loan balance in violation of 11 U.S.C. § 1322(b)(2). The 11th Circuit ruled that the anti-modification provision of § 1322(b)(2) prevail and therefore the bankruptcy court could not discharge the remaining mortgage loan balance.