Evans v. Stackhouse
564 B.R. 513
E.D. Va.2017Background
- Debtor Marlene Evans filed Chapter 13 in 2010; her confirmed Third Amended Plan (Nov. 14, 2014) provided trustee payments to cure pre-petition arrears and required the debtor to continue direct post-petition mortgage payments to CitiFinancial per the note.
- Trustee filed a Rule 3002.1(f) Notice of Final Cure Payment (Aug. 26, 2015) stating the trustee had paid arrears; lender agreed arrearage cured but reported debtor was delinquent on direct mortgage payments.
- Debtor argued she had made all plan payments (trustee payments) and therefore was entitled to a §1328 discharge; trustee moved to close without discharge and then to convert or dismiss after the court found discharge inappropriate.
- Bankruptcy Court denied discharge and ordered conversion or dismissal; the trustee moved to dismiss and the Bankruptcy Court granted dismissal on March 7, 2016. Debtor appealed to the District Court.
- District Court reviews legal questions de novo and factual findings for clear error; parties stipulated to the material facts (including continued direct-payment delinquencies and large HOA arrears).
Issues
| Issue | Evans' Argument | Trustee's Argument | Held |
|---|---|---|---|
| Whether "all payments under the plan" in 11 U.S.C. §1328(a) includes debtor's direct post-petition mortgage payments | "All payments under the plan" means only trustee payments; direct payments are "pursuant to the contract" and not "under the plan" | Payments that are provided for or "dealt with" by the confirmed plan—whether paid via trustee or directly—are payments under the plan; §1322(b)(5) ties curing arrears to maintaining post-petition payments | Held: Direct mortgage payments that the plan provides for are "payments under the plan," so failure to complete them defeats entitlement to a §1328 discharge |
| Whether Rule 3002.1(f) altered the scope of §1328(a) or improperly exposes debtors to denial of discharge | Rule 3002.1(f) was intended to protect debtors from surprise foreclosures and should not be used to deny discharges | Rule 3002.1(f) simply exposes whether post-petition direct payments were made; it does not change §1328(a) | Held: Rule 3002.1(f) does not reinterpret §1328(a); disclosure of direct-payment defaults is a collateral effect that properly prevents discharge when plan terms were unmet |
| Whether failure to complete direct payments is a "material default" under 11 U.S.C. §1307(c)(6) warranting dismissal or conversion | Nonpayment of direct mortgage installments (per contract) is not a material default absent lender action under the contract | Failure to make direct payments that the confirmed plan required is a material default of the plan term; conversion or dismissal is appropriate | Held: Debtor materially defaulted by not completing direct payments; because Debtor declined conversion to Chapter 7, dismissal under §1307(c) was appropriate |
| Whether denying discharge here contravenes the purposes of the Code (e.g., BAPCPA aims to reduce repeat filings) | Denying discharge for direct-payment delinquencies undermines Chapter 13's broader discharge policy and increases repeat filings | Enforcing confirmed-plan terms furthers the Code; debtors may modify plans or convert if unable to comply | Held: Enforcing plan completion is consistent with the Code and precedent; denial of discharge was proper |
Key Cases Cited
- Foster v. D.A. Neff Co., 670 F.2d 478 (5th Cir. 1982) (post-petition mortgage payments are "under the plan" when the plan cures pre-petition arrears under §1322(b)(5))
- Rake v. Wade, 508 U.S. 464 (1993) (a plan "provides for" a claim when it cures default and allows maintenance of regular payments under §1322(b)(5))
- In re Russell, 458 B.R. 731 (Bankr. E.D. Va. 2010) (payments are "under the plan" if the plan defines or deals with them)
- In re Kessler, [citation="655 F. App'x 242"] (5th Cir. 2016) (affirming that post-petition mortgage payments fall under the plan when pre-petition arrears are cured by the plan; failure to complete such payments defeats §1328 discharge)
- In re Heinzle, 511 B.R. 69 (Bankr. W.D. Tex. 2014) (trustee's Rule 3002.1(f) notice certifies trustee cure payments only; lender's Rule 3002.1(g) response addresses debtor's post-petition payments)
- In re Formaneck, 634 B.R. 29 (Bankr. D. Colo. 2015) (failure to complete direct mortgage payments is material default; dismissal appropriate where debtor does not seek conversion)