Great Lakes Higher Education Corp. v. Pardee (In Re Pardee) , 98 Daily Journal DAR 4135 ( 1998 )

OPINION

JOHN E. RYAN, Bankruptcy Judge.

Robert and Darlene Pardee (“Appellees”) filed a chapter 13 plan (the “Plan”) that purported to discharge postpetition interest on a nondischargeable student loan debt (the “Discharge Provision”) owed to Great Lakes Higher Education Corp. (“Appellant”). Appellant failed to object to the Plan, and the Plan was subsequently confirmed. After Ap-pellees received their chapter 13 discharge, Appellant attempted to collect interest that had accrued on the unpaid principal after the bankruptcy petition .was filed. Appellees filed a motion (the “Motion”) to enforce the discharge and to enjoin permanently Appellant from attempting to collect postpetition interest on the student loan debt. The bankruptcy court granted the Motion and enjoined Appellant from further collection activity. We AFFIRM.

I. FACTS

The facts are undisputed. On August 14, 1992, Appellees filed their chapter 13 bankruptcy petition. On September 9, 1992, Appellant filed its proof of claim (the “Claim”) in the amount of $26,015.22. The Claim did not seek either prepetition or postpetition interest.

The Plan proposed to pay the chapter 13 trustee (the “Trustee”) $515 per month for 60 months for a total of $30,900. The Plan also purported to pay Appellant’s student loan debt as follows:

e. Education Loan(s): The Debtors have two separate obligations for their student loans which are as follows:

(2) Great Lakes Higher Education, 2401 International Way, Madiseon [sic] WI 53704 in the amount of $26,235.00. This obligation was incurred by Robert McKnight Pardee and [is] in default. Great Lakes [Higher] Education shall receive the total amount of $26,235.00 for its claim and any remaining unpaid amounts, if any, including any claims for interest, shall he discharged by the plan.

(second emphasis added).

On June 8, 1993, the Plan was confirmed (the “Confirmation Order”). The Confirmation Order was entered on August 5, 1993. Appellant failed to object to its treatment under the Plan.²

On April 9, 1996, Appellees received their chapter 13 discharge after paying all obligations pursuant to the Plan. After Appellant received full payment of its principal and prepetition interest under the Plan, Appellant demanded and attempted to collect $6,095.92 in postpetition interest. Appellees filed a motion to reopen the bankruptcy case, which was granted, and filed the Motion requesting that the bankruptcy court enforce the discharge and permanently enjoin Appellant from collecting postpetition interest on the student loan debt.

On January 6, 1997, the bankruptcy court granted the Motion by minute order and entered its Order to Enforce Discharge and Permanent Injunction (the “Injunction Order”) on January 29, 1997. The bankruptcy court held that: (1) Appellant was bound by the language of the Plan and its failure to request postpetition interest in the Claim or object to the Discharge Provision constituted a waiver of any claim for postpetition interest; (2) Appellant had no claim for postpetition interest because the principal and pre-petition interest on the nondischargeable student loan debt was paid in full under the Plan; and (3) Bankruptcy Code (the “Code”)³ § 502(b)(2) did not permit Appellant to assert a nondischargeable claim for postpetition interest on the student loan because the debt was paid in full through the Plan.

Accordingly, the bankruptcy court ordered that Appellant “cease and desist in its collection efforts against Debtors ...” and “file the appropriate documentation with the various taxing credit bureaus, governmental agencies and taxing agencies that indicates that the student loan has been paid in full.” The bankruptcy court also ordered Appellant to pay attorney’s fees and costs to Appellees. On January 21, 1997, Appellant filed a premature notice of appeal .⁴

II.ISSUES ON APPEAL

1. Whether the bankruptcy court erred in holding that Appellant was precluded from collecting postpetition interest on the Claim because the Claim was paid in full under the Plan.

2. Whether the bankruptcy court erred in holding that Appellant, who faded to object to the Plan provision discharging postpetition interest on the Claim, was bound by the Plan even though the provision was contrary to the Code.

III.STANDARD OF REVIEW

We review conclusions of law, including the bankruptcy court’s interpretation of the Bankruptcy Code, de novo. See Grey v. Federated Group, Inc. (In re Federated Group, Inc.), 107 F.3d 730, 732 (9th Cir.1997) (citing Abele v. Phoenix Suns Ltd. Partnership (In re Harrell), 73 F.3d 218, 219 (9th Cir.1996)).

IV.DISCUSSION

A Appellant Was Not Precluded From Collecting Postpetition Interest On The Claim Because The Claim Was Paid In Full Under The Plan.

The bankruptcy court held that Appellant’s claim for postpetition interest on the Claim was discharged or extinguished by Appellees’ completion of the Plan, when the principal and prepetition interest was “paid in full.” We disagree.

Student loan debts are nondisehargeable in bankruptcy unless either the payment first became due more than seven years before the date of filing the bankruptcy petition, or the debtor can prove that excepting the debt from discharge will impose an undue hardship. See 11 U.S.C. § 523(a)(8).⁵ This nondischargeability provision applies in chapter 13. Section 1328 states in pertinent part:

(a) As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt —

(2) of the kind specified in paragraph (5), (8), or (9) of section 523(a) of this-title;

11 U.S.C. § 1328(a)(2) (emphasis added).

However, the Code is silent as to whether postpetition interest on a nondisehargeable student loan is nondisehargeable in bankruptcy. The seminal case on this issue is Bruning v. United States, 376 U.S. 358, 84 S.Ct. 906, 11 L.Ed.2d 772 (1964). In Bruning, a ease decided under the Bankruptcy Act of 1898, the Supreme Court held that although postpetition interest on a nondis-chargeable tax debt could not be paid by the bankruptcy estate, it nevertheless survived bankruptcy and could be recovered personally from the debtor. Id. at 361, 84 S.Ct. at 908. The Court reasoned that “interest is an integral part of a continuing debt,” and becomes part of the debt itself. Id. at 360, 84 S.Ct. at 908. The Court distinguished between the disallowance of postpetition interest against the bankruptcy estate on a non-dischargeable debt, and the creditor’s right to recover postpetition interest on a nondis-chargeable debt from the debtor personally after the discharge has been entered. Id. at 362-63, 84 S.Ct. at 908-09. The Court also recognized that the reasons for denying post-petition interest as a claim against the bankruptcy estate, “the avoidance of unfairness as between competing creditors and the avoidance of administrative inconvenience,” are inapplicable to an action brought against the debtor personally. Id.

Here, the bankruptcy court erroneously held that Bruning was inapplicable to the. instant case because Bruning was decided under the Bankruptcy Act and is distinguishable because the “allowed” portion of the nondisehargeable debt was “paid in full” through the bankruptcy estate, whereas in Bruning, only part of the underlying debt was paid. This conclusion is not supported by principles of statutory construction or stare decisis. Unless Congress expressly manifests its intent to change well-established judicial interpretation of the bankruptcy laws as they existed prior to enactment of the Bankruptcy Code in 1978, we must presume that pre-Code interpretations of the Act have survived the enactment. See United States v. Ron Pair Enter., Inc., 489 U.S. 235, 244-45, 109 S.Ct. 1026, 1032, 103 L.Ed.2d 290 (1989); Rodriguez v. United States, 480 U.S. 522, 525, 107 S.Ct. 1391, 1393, 94 L.Ed.2d 533 (1987) (per curiam). As the Eighth Circuit aptly stated:

Taken together, sections 502 and 523 simply demonstrate Congress’ intent to codify the general principle that applied under Bruning. Postpetition interest is disallowed against the bankruptcy estate under section 502. Priority tax claims remain nondisehargeable for individual debtors _Thus, postpetition interest is non-dischargeable and the [debtors] remain liable. for that interest subsequent to the bankruptcy proceedings.

Hanna v. United States (In re Hanna), 872 F.2d 829, 831 (8th Cir.1989).

Additionally, although the Ninth Circuit has not addressed whether the Bruning rule continues to apply under the Code, five circuit courts have held that Bruning remains good law under the Code. See Leeper v. Pennsylvania Higher Educ. Assistance Agency (In re Leeper), 49 F.3d 98, 101-02 (3d Cir.1995); Fullmer v. United States (In re Fullmer), 962 F.2d 1463, 1468 (10th Cir. 1992); Burns v. United States (In re Burns), 887 F.2d 1541, 1543 (11th Cir.1989); Hanna, 872 F.2d 829, 831 (8th Cir.1989); and Bradley v. United States, 936 F.2d 707, 709-10 n. 3 (2d Cir.1991) (stating in dictum that the weight of authority supports the view that a debtor is personally liable for postpetition interest on unpaid taxes). Accordingly, we join the unanimous circuit court authority that has addressed this issue and conclude that Bmning retains its vitality under the Bankruptcy Code.

Furthermore, the overwhelming majority of bankruptcy courts have extended the Supreme Court’s Bmning principle to apply to postpetition interest on nondischargeable student loans. See Wagner v. Ohio Student Loan Comm’n (In re Wagner), 200 B.R. 160, 163 (Bankr.N.D.Ohio 1996); In re Sullivan, 195 B.R. 649, 652 (Bankr.W.D.Tex.1996); Branch v. Unipac/Nebhelp (In re Branch), 175 B.R. 732 (Bankr.D.Neb.1994); In re Shelbayah, 165 B.R. 332, 337 (Bankr.N.D.Ga.1994); Ridder v. Great Lakes Higher Educ. Corp. (In re Ridder), 171 B.R. 345, 347-48 (Bankr.W.D.Wis.1994); and Jordan v. Colorado Student Loan Program (In re Jordan), 146 B.R. 31, 32-33 (D.Colo.1992). Because we find no reason to limit the Bmning principle to nondischargeable tax debts, we conclude that postpetition interest on a nondischargeable student loan debt is nondischargeable under the Code. Finally, because chapter 13 specifically incorporates the non-dischargeability provisions of § 523(a)(8), the Bmning principle also applies in chapter 13.

We turn next to whether postpetition interest on the Claim was discharged or extinguished because the Plan paid the Claim in full. The bankruptcy court, citing In re Wasson, 152 B.R. 639 (Bankr.D.N.M.1993), held that full payment of the Claim under the Plan discharged any claim for postpetition interest. We disagree with the Wasson holding and conclude that the bankruptcy court’s reliance on Wasson was erroneous.

In Wasson, the chapter 13 plan provided for full payment of principal and prepetition interest on a nondischargeable student loan debt. The student loan creditor objected to the debtor’s chapter 13 plan because it did not provide for postpetition interest. The court overruled the objection on the basis that because postpetition interest is disallowed under § 502(b)(2), postpetition interest on student loans may be discharged when the allowed claim is paid in full.

However, the Wasson court confused the concept of claim disallowance ' under § 502(b)(2), in which a claim for unmatured interest cannot be paid from the bankruptcy estate, with the concept of nondischargeability under §§ 523(a)(8) and 1328(a)(2). Section 502(b)(2) clearly disallows⁶ recovery of unmatured interest from the bankruptcy estate. Therefore, this rule bars recovery from the bankruptcy estate of postpetition interest on a nondischargeable debt. See H.R.Rep. No. 95-595, 95th Cong., 2nd Sess. 62 (1978), reprinted in 1978 U.S.C.C.A.N. 5848, 6308-09. However, § 502(b)(2) does not proscribe recovery from the debtor personally for non-dischargeable debts that are not paid from the bankruptcy estate. Because postpetition interest on a nondischargeable debt cannot be paid from the bankruptcy estate, the holder of the unpaid claim may seek to recover on that claim once the discharge injunction has been lifted (i.e., once plan payments have been completed in a chapter 13 case). While the discharge provision of § 1328 generally discharges all debts provided for by the plan or disallowed under § 502, student loan debts are specifically excepted from discharge. See 11 U.S.C. § 1328(a)(2). Thus, applying the Bruning principle, postpetition interest on nondischargeable student loan debts are also excepted from discharge under § 1328(a)(2).

Additionally, Wasson overlooked the distinction between “claims” and “allowed claims.” Under §§ 523(a)(8) and 1328(a)(2), student loan “debts” are excepted from discharge. Debt is defined as “liability on a claim,” 11 U.S.C. § 101(12), and “claim” is defined as a “right to payment, whether or not such right is ... matured [or] unma-tured.” Id. § 101(5)(A) (emphasis added). Although the Code precludes postpetition interest on an “allowed claim,” §§ 523(a)(8) and 1328(a)(2) do not limit their exceptions from discharge to an allowed claim.

We note that Congress used the term “allowed claims” in certain parts of the Code. See, e.g., §§ 726(a) and 1129(b)(2). These sections support the general rule that only “allowed claims” will be paid through the bankruptcy estate.' However, Congress, by not using the term “allowed claim” in § 1328(a)(2), did not intend to limit the dis-chargeability provisions to “allowed claims.” Certainly, Congress knew how to limit liability for nondischargeable debts to allowed claims if this was its intent. However, the dischargeability exceptions extend to certain “debts,” which are defined as rights to payment, “whether matured or unmatured.” Accordingly, § 502(b)(2) only precludes the payment of postpetition interest from the bankruptcy estate. Once the discharge injunction is lifted at the completion of chapter 13 plan payments, the student loan creditor may collect the unpaid interest on its nondis-chargeable debt from the debtor personally.

Similarly, we disagree with the bankruptcy court that one hundred percent payment ■ of principal and prepetition interest pursuant to the Plan extinguished or discharged postpetition interest on the Claim. The Claim was not “paid in full” because Appellant did not receive postpetition interest. Only the “allowed claim” was fully paid. Consequently, Appellant was not precluded from recovering postpetition interest on the Claim just because Appellees completed their Plan payments. Although we disagree with the bankruptcy court’s reasoning, as discussed below, we affirm on other grounds.

B. The Plan Was Res Judicata Regarding The Discharge Provision.

Appellant argues that the bankruptcy court erroneously concluded that Appellant waived any elaim for postpetition interest and is bound by the Discharge Provision in the Plan. We disagree.

1. Appellant’s Failure To Object To The Discharge Provision Constituted A Waiver Of Its Right To Collect Postpe- ■ tition Interest On The Claim.

Generally, a creditor is not required to object to a plan provision that does not purport to pay postpetition interest because any attempt to collect postpetition interest through the bankruptcy estate is precluded under § 502(b)(2). See Ridder, 171 B.R. at 347.⁷ However, when the chapter 13 plan contains a provision that purports to discharge a nondischargeable debt in violation of §§ 523(a) and 1328(a), the student loan creditor with notice of this plan provision must object to the plan or appeal the confirmation order. The failure to do so constitutes a waiver of its right to collaterally attack the confirmed plan postconfirmation on the basis that the plan contains a provision contrary to the Code. The creditor, therefore, is bound by the terms of the confirmed plan pursuant to § 1327(a).

Under § 1327(a), “[t]he provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.” 11 U.S.C. § 1327(a). “‘The purpose of § 1327(a) is the same as the purpose served by the general doctrine of res judicata. There must be finality to a confirmation order so that all parties may rely upon it without concern that actions which they may thereafter take could be upset because of a later change or revocation of the order.... In re Walker, 128 B.R. 465, 467 (Bankr.D.Idaho 1991) (quoting 5 Lawrence P. King et al., Collier on Bankruptcy ¶ 1327.01[1] (15th ed.1990)).

The concept of the preclusive effect of final orders is a basic principle of American jurisprudence. In Stoll v. Gottlieb, 305 U.S. 165, 59 S.Ct. 134, 83 L.Ed. 104 (1938), the Supreme Court addressed the enforceability of a provision in a corporate debtor’s plan that provided for the cancellation of a bond guaranty. The creditor did not object to the plan. However, after confirmation, the creditor filed a state court action to recover on the guaranty. The Supreme Court held that the finality of the bankruptcy confirmation order barred the creditor from litigating its claim. Id. at 171-72, 59 S.Ct. at 137-38. The plan was res judicata even though the bankruptcy court did not have subject matter jurisdiction to release the guarantor on his guaranty of the debtor’s obligations. Id. at 171 & n. 8, 59 S.Ct. at 137 & n. 8.

Similarly, in Celotex Corp. v. Edwards, 514 U.S. 300, 313, 115 S.Ct. 1493, 1501, 131 L.Ed.2d 403 (1995), the Supreme Court affirmed its principle enunciated in Stoll that a party that does not appeal a final order is precluded from collaterally attacking that order. In Celotex, the appellees filed suit in the United States District Court for the Northern District of Texas against Celotex and others alleging asbestos-related injuries. The district court entered a $281,025.80 judgment in favor of appellees and against Celo-tex. Id. at 302, 115 S.Ct. at 1493. Celotex posted a supersedeas bond to stay execution of the judgment while it appealed the judgment. The Fifth Circuit affirmed, thereby rendering appellant’s judgment final. Id.

Celotex subsequently filed a chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Middle District of Florida. In addition to the automatic stay, the bankruptcy court exercised its equitable powers under § 105(a) and issued an injunction “to augment the protection afforded Cel-otex by the automatic stay.” Id. at 303, 115 S.Ct. at 1493.

Appellees then filed a motion in the district court seeking permission to execute against the surety on the bond. Id. Celotex brought to the district court’s attention the fact that the bankruptcy court had reaffirmed the § 105 injunction “and made clear that the injunction prohibited judgment creditors like respondents from proceeding against sureties without the Bankruptcy Court’s permission.” Id. Despite the bankruptcy court’s reaffirmation and clarification of the § 105 injunction, the district court permitted appellees to execute on the bond against the surety. Id. at 304, 115 S.Ct. at 1497.

The Fifth Circuit affirmed, holding that the § 105 injunction issued by the bankruptcy court was issued in error. Id. at 305, 115 S.Ct. at 1497-98. The court held that although the bankruptcy court had jurisdiction to stay proceedings involving third parties, the injunction was issued in error because the supersedeas bond was posted “ ‘to cover precisely the type of eventuality which occurred in this case, insolvency of the judgment creditor.’ ” Id. (citing Edwards (Edwards II) v. Armstrong World Indus., Inc., 6 F.3d 312, 319 (5th Cir.1993)).

The United States Supreme Court accepted certiorari and reversed. The Court stated:

We háve made clear that “‘[i]t is for the court of first instance to determine the question of the validity of the law, and until its decision is reversed for error by orderly review, either by itself or by a higher court, its orders based on its decision are to be respected.’ ” [citations omitted]. If respondents believed the Section 105 Injunction was improper, they should have challenged it in the Bankruptcy Court, like other similarly situated bonded judgment- creditors have done.... If dissatisfied with the Bankruptcy Court’s ultimate decision, respondents can appeal “to the district court for the judicial district in which the bankruptcy judge is serving,” ... and then to the Court of Appeals for the Eleventh Circuit.... Respondents chose not to pursue this, course of action, but instead to collaterally attack the Bankruptcy Court’s Section 105 Injunction in the Federal Courts in Texas. This they cannot be permitted to do without seriously undercutting the orderly process of the law.

Id. at 313. Thus, Celotex enforces the basic principle enunciated in Stoll that a final order that is not appealed cannot be collaterally attacked in a later proceeding even if the order was entered in error.

The Ninth Circuit recently addressed the issue of the binding effect of a chapter 11 plan of reorganization. In Trulis v. Barton, 107 F.3d 685 (9th Cir.1995), several creditors challenged a provision in a confirmed plan that released consenting creditors’ claims against the debtor’s principals. The creditors, postconfirmation, argued that the release provisions were not enforceable under state law. The Ninth Circuit rejected this argument and held that “[sjince the plaintiffs never appealed the bankruptcy court’s confirmation order, the order is a final judgment and plaintiffs cannot challenge the bankruptcy court’s jurisdiction over the subject matter.” Id. at 691. The court also stated:

“Creditors who do not wish to release third party debtors pursuant to the principal debtor’s plan of reorganization should object to confirmation of the plan on the ground that such a plan provision is viola-tive of section 524 and not within the power, even jurisdiction, of the bankruptcy court.... The point is that only a direct attack is available and collateral attack is unavailable.”

Id. (quoting 5 LawRence P. King et al., Collier On Bankruptcy ¶ 1141.01[1] n. 17a (15th ed.1995)).⁸

Additionally, this reasoning has been applied to confirmed chapter 13 plans. In In re Gregory, 705 F.2d 1118, 1120 (9th Cir.1983), the bankruptcy court confirmed the debtor’s chapter 13 plan that provided for no payment to unsecured creditors and a discharge of all debts. Nobody objected to the plan at the confirmation hearing. However, two months after the plan was confirmed, Lawrence Tractor Co., an unsecured creditor, filed a complaint to determine the dischargeability of a debt for a number of reasons including the allegation that “only debts ‘provided for’ in a plan are dischargeable under section 1328(a), and a debt for which zero payment is proposed is not so provided for.” Id. The Ninth Circuit stated:

[TJhis court need not rule on the legality of zero-payment plans in general or of Gregory’s in particular. The order confirming the plan has become final. Lawrence’s failure to raise this objection at the confirmation hearing or to appeal from the order of confirmation should preclude its attack on the plan or any provision therein as illegal in a subsequent proceeding.

Id. at 1121.

We have similarly recognized the finality of confirmation orders. In Ground Sys., Inc. v. Albert (In re Ground Sys., Inc.), 213 B.R. 1016 (9th Cir. BAP 1997), the bankruptcy court confirmed the chapter 11 trustee’s amended plan of reorganization. The plan required the case to remain open until the plan was fully consummated. No one objected at confirmation to this provision. However, postconfirmation, the debtor filed a motion for an order granting a final decree. An unsecured creditor opposed the motion arguing that the plan expressly authorized the estate to remain open until all plan payments were made. The bankruptcy court denied the motion and stated that, although the plan provision is unacceptable and in conflict with the Code and should not have survived confirmation, once the plan had been confirmed, the specific provisions of the plan must be carried out. Id. at 1018..

We affirmed the bankruptcy court’s order denying the request for a final decree. We held that the plan did not violate the Code, however, “[e]ven if we agreed with the bankruptcy court that the plan violated the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure, we agree with ASI [unsecured creditor] that it was proper for the bankruptcy court to give res judicata effect to the plan’s terms.” Id. at 1019. We followed the holdings of Trulis, 107 F.3d at 691, Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1049-50 (5th Cir.1987), and Bowen v. United States (In re Bowen), 174 B.R. 840, 847-48 (Bankr.S.D.Ga.1994), which stand for the proposition that a plan provision that is contrary to the Code or is otherwise illegal may not be challenged posteonfirmation for the first time.⁹ Thus, the finality of confirmation orders is a bedrock principle of bankruptcy law in the Ninth Circuit.

While the Plan should not have been confirmed with the Discharge Provision, the Plan is res judicata as to all issues that could have or should have been litigated at the confirmation hearing. See Heritage Hotel Partnership I, Ltd. v. Valley Bank of Nevada (In re Heritage Hotel Partnership I), 160 B.R. 374, 377 (9th Cir. BAP 1993) (“It is now well-settled that a bankruptcy court’s confirmation order is a binding, final order, accorded full res judicata effect and precludes the raising of issues which could or should have been raised during the pendency of the case, such as typical lender liability causes of action.”) (citing Eubanks v. F.D.I.C., 977 F.2d 166, 171 (5th Cir.1992)), aff'd, 59 F.3d 175 (9th Cir.1995); In re Szostek, 886 F.2d 1405, 1406 (3d Cir.1989) (“[Although prior to confirmation the bankruptcy court and trustee do have a responsibility to verify that a Chapter 13 plan complies with the Bankruptcy Code provisions, after the plan is confirmed the policy favoring the finality of confirmation is stronger than the bankruptcy court’s and the trustee’s obligations to verify a plan’s compliance with the Code.”). Thus, Appellant was bound by the terms of the Plan.

We recognize that this holding is contrary to the conclusion reached in Ridder, with which we disagree. In Ridder, Great Lakes (the same creditor here) failed to object to a plan provision that denied interest on its student loan claim. After the debtor received her discharge, Great Lakes demanded that the debtor pay all postpetition interest that accrued. The' bankruptcy court held that because the student loan debt was non-dischargeable, Great Lakes could collect postpetition interest post-discharge from the debtor. The court stated that since Great Lakes was not entitled to postpetition interest under the Code, it had no reason to object to the plan, and thus, “[a]ny attempt by Great Lakes to object to confirmation would have been frivolous.” Ridder, 171 B.R. at 348.

We reject the analysis in Ridder. It would not have been frivolous for Great Lakes to object to confirmation in Ridder or here. While Appellant is not entitled to collect unmatured interest from the bankruptcy estate pursuant to § 502(b)(2), the Discharge Provision precludes Appellant from collecting postpetition interest from Appellees by discharging Appellees’ liability on any postpetition interest on the Claim. The Plan clearly altered Appellant’s rights. The Ridder court failed to address the binding affect-of a confirmed chapter 13 plan when the creditor fails to timely object to the plan. Because a confirmed plan binds the creditors and debt- or under § 1327(a), Appellant cannot, after the order of confirmation is final and after Appellees have fully performed on the Plan, collaterally attack the confirmation order by seeking to collect interest on the Claim in direct violation of the terms of the Plan.

We are also mindful that the Seventh Circuit has taken a contrary position with which we also disagree. In In re Escobedo, 28 F.3d 34 (7th Cir.1994), a chapter 13 plan that did not include allowed administrative and tax priority claims as required under § 1322(a)(2) was confirmed without objection. Nearly five years after plan confirmation and two years after the debtor’s final payment, the trustee petitioned the court to either modify the plan’s payment schedule to include the already allowed administrative and tax priority claims, or dismiss the plan altogether. Id. at 34-35. The debtor did not modify the plan and the bankruptcy court dismissed the entire plan. Id. at 34. The district court affirmed. Id. at 35. The Seventh Circuit also affirmed. The court held that because the debtor’s proposed plan did not comply with the mandatory provision of § 1322(a)(2), “any supposed confirmation was nugatory and properly dismissed.” Id. Consequently, the court held that the plan was not res judicata as to the omitted priority claims. Id.

We respectfully disagree with the holding in Escobedo because it is contrary to overwhelming Ninth Circuit authority and the general principle upholding the preclusive effect of final orders. While the Plan should not have been confirmed with the Discharge Provision, once confirmed, the Plan was not “nugatory” but was binding on the parties' pursuant to § 1327(a) and the well-established principle that a party that fails to appeal a final order cannot collaterally attack that order. See Celotex, 514 U.S. at 313, 115 S.Ct. at 1501, Stoll, 305 U.S. at 171-72, 59 S.Ct. at 137-38, and Gregory, 705 F.2d at 1121. Accordingly, we hold that under § 1327(a), Appellant is bound by the terms of the Plan, and the Plan is res judicata on any attempt to circumvent the binding effect of the Discharge Provision.

2. Appellant’s Failure To Object To The Chapter 13 Plan Constituted An Implied Acceptance Of The Plan.

Additionally, a creditor’s failure to object to the chapter 13 plan at the plan confirmation hearing constitutes an implied acceptance of the plan. See Andrews v. Loheit, 49 F.3d 1404, 1409 (9th Cir.1995) (citing In re Gregory, 705 F.2d at 1121; In re Szostek, 886 F.2d at 1413; and In re Brown, 108 B.R. 738, 740 (Bankr.C.D.Cal.1989)). This is because “no mechanism for plan acceptance by creditors exists in a chapter 13 case (unlike in a chapter 11 case where the creditors may vote for plan confirmation)_” In re Brown, 108 B.R. at 740. Thus, “acceptance is implied when an objection is not raised” to the chapter 13 plan. Id. It is not unlawful “for a creditor to stipulate or consent to be treated in a manner not technically as stringent as required in the Code.” In re Walker, 128 B.R. at 467 (Bankr.D.Idaho 1991). Having impliedly accepted the Plan, including the Discharge Provision, Appellant is precluded from objecting to the Discharge Provision for the first time on appeal. As stated above, the bankruptcy court found that Appellant received notice of its treatment under the Plan. Appellant does not contest this finding.

V. CONCLUSION

In summary, the bankruptcy court erred in concluding that a holder of a nondischargeable student loan debt was precluded from collecting postpetition interest on this debt if the creditor’s allowed claim is paid in full pursuant to the chapter 13 plan. We are bound by the Supreme Court’s holding in Bruning and reject the bankruptcy court’s reliance on Wasson.

However, this error was harmless given the facts of this case. Although the Plan should not have been confirmed because it included the Discharge Provision, which was inconsistent with the Code, once confirmed, it was res judicata and binding on Appellant. Additionally, Appellant’s failure to object to the Plan at the confirmation hearing constituted an implied acceptance of the Plan. By failing to appeal the Confirmation Order and having impliedly accepted the Plan, Appellant cannot now collaterally attack the Plan. Accordingly, we AFFIRM.

2 . The bankruptcy court found that Appellant received notice of its treatment under the Plan. Appellant does not challenge this finding.

3 . The Code is set forth in 11 U.S.C. §§ 101-1330 (1998).

4 .The notice of appeal was timely filed pursuant to Federal Rule of Bankruptcy Procedure 8002(a). See Fed.R.Bankr.P. 8002(a) ("A notice of appeal filed after the announcement of a decision or order but before entry of the judgment, order, or decree shall be treated as filed after such entry and on the date thereof.”).

5 . Section 523(a)(8) states as follows:

(a) A discharge under section 727, 1141, 1228(a) 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

(8) for an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for an obligation to repay funds received as an educational benefit, scholarship, or stipend, unless—

(A) such loan, benefit, scholarship, or stipend overpayment first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition; or

(B) excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor’s dependents.

11 U.S.C. § 523(a)(8).

Neither limitation expressed in §§ 523(a)(8)(A) or (B) are applicable here.

6 . The term "disallowed” is not entirely accurate. Unsecured creditors are entitled to postpetition interest on their claims pursuant to § 726(a) if the bankruptcy estate is solvent. Because chapter 13 adopts the "best interest of creditor’s test” to provide creditors with at least the amount that they would receive if the bankruptcy estate were liquidated under chapter 7, an unsecured creditor is entitled to collect postpetition interest in chapter 13 if the bankruptcy estate is solvent. See 11 U.S.C. § 1325(a)(4).

7 . Similarly, a creditor is not required to request postpetition interest in its proof of claim because postpetition interest is disallowed under § 502(b)(2), and thus, such a request would be futile. See United States v. River Coal Co., Inc., 748 F.2d 1103, 1108 (6th Cir.1984); Wagner, 200 B.R. at 165 (holding that a creditor is not barred from collecting postpetition interest merely because it did not file a claim for postpetition interest which is expressly made optional under §. 1305).

8 . See also Boundary County, Idaho v. Woldson, 144 F.2d 17, 20 (9th Cir.1944) ("‘Whether the issues determined by the Idaho decree were rightly or wrongly determined, is no longer open to inquiry having been rendered by a court which had jurisdiction to render it, and having long since become final, that decree, even though erroneous, is valid and conclusive on the parties thereto and all persons claiming under them.’ ” (citations omitted)), cert. denied, 324 U.S. 843, 65 S.Ct. 678, 89 L.Ed. 1405 (1945); Carnico Television Inc. v. National Broadcasting, Co. (In re De Laurentiis Entertainment Group Inc.), 963 F.2d 1269, 1275 n. 13 (9th Cir.) (recognizing, in dictum, that a plan of reorganization may hind creditors even if it is legally erroneous), cert. denied, 506 U.S. 918, 113 S.Ct. 330, 121 L.Ed.2d 249 (1992). Cf. Western Equities, Inc. v. Harlan, 783 F.2d 839, 840 (9th Cir.1986) (holding that because the plan did not clearly provide that the debtor intended to disregard the terms of a secured promissory note on debtor’s residence, the creditor was not bound by the plan provision to the extent that it purported to modify its secured claim).

9 . See also Anaheim Sav. and Loan Assoc. v. Evans (In re Evans), 30 B.R. 530, 531 (9th Cir. BAP 1983) (citing Matter of Willey, 24 B.R. 369 (Bankr.E.D.Mich.1982)) ("Section 1327 precludes a creditor from asserting, after confirmation, any other interest than that provided for it in the confirmed plan. The issues of adequate protection, lack of equity, and necessity for a successful rehabilitation of the chapter 13 debtor were all res judicata as of the confirmation'of the plan.”).