P. 3015(g)(1).General Rule: Liens Pass Through Bankruptcy UnaffectedThe debtor argued that the terms of her confirmed Chapter 13 plan were binding on the bank, regardless of its lack of participation in her case, and that accordingly, the bank’s lien in the vehicle was invalidated when the property of her bankruptcy estate re-vested in her following confirmation of the plan, citing 11 U.S.C. § 1327. The Court observed that the debtor’s argument was foreclosed by “the sound reasoning and precedent” of the Fourth Circuit’s holding in Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. 1995).

Section 1322(b)(2) of the Bankruptcy Code generally forbids modifying interest rates on claims secured by the debtor’s principal residence. Once a plan is confirmed, however, the confirmed plan provisions bind the debtor and each creditor, even if those provisions improperly modify an interest rate under section 1322(b) or otherwise contradict the Bankruptcy Code (see 11 U.S.C. §1327(a)). Relying on the Fifth Circuit’s res judicata test, the court found that Montanaro was barred from relitigating its claim value because (1) Montanaro and the debtors had been parties throughout the confirmation process and discharge proceedings; (2) the court had jurisdiction to issue the confirmation order; (3) the confirmation order was a final adjudication on the merits; and (4) both suits involved the same cause of action.

This takeaway would likely apply to municipalities participating in Chapter 13 cases as well since, like section 1141(c) of the Bankruptcy Code, section 1327(c) similarly states “the property vesting in the debtor …is free and clear of any claim or interest of any creditor provided for by the plan.” See 11 U.S.C. §1327(c). [View source.]