In Re Euliano
442 B.R. 177
Bankr. D. Mass.2010Background
- Debtors Francis W. Euliano, Jr. and Susan Y. Euliano filed a Chapter 13 petition in the Western Division of the District of Massachusetts.
- Countrywide Home Loans held a mortgage on the Debtors' residence and filed a prepetition secured claim including $8,000 in arrears.
- The Debtors proposed a Plan paying $8,000 of prepetition arrears over 60 months, with postpetition mortgage payments outside the Plan.
- Countrywide timely filed a proof of claim for $246,473.37, including $15,871.83 in prepetition arrears, which exceeded the Plan’s arrears treatment.
- Neither Countrywide, the Debtors, nor the Trustee objected to the Plan before confirmation, and the Plan was confirmed on December 30, 2009.
- Post-confirmation, the Debtors continued to make plan and mortgage payments; in July 2010, the Trustee moved to dismiss for cause under 11 U.S.C. § 1307(c)(1).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to provide full prepetition arrears warrants dismissal under § 1307(c)(1). | Trustee argues an unreasonable delay prejudices creditors by not curing arrears in full. | Debtors contend plan confirms and binds parties; dismissal is inappropriate absent changed circumstances. | Dismissal allowed; plan fails to cure arrears in full within a reasonable time. |
| Whether § 1322(b)(5) requires full arrearage payment to cure a default within a reasonable time. | Trustee asserts plan does not cure arrears in full, violating § 1322(b)(5). | Debtors maintain flexible plan design and that completion yields a fresh start. | Plan does not provide for payment in full; thus not cured within a reasonable time. |
| Whether Espinosa governs post-confirmation relief to modify or dismiss. | Espinosa does not justify post-confirmation noncompliance; modification/dismissal may be warranted. | Debtors rely on Espinosa to shield plan as binding and binding treatment of Countrywide Claim. | Espinosa does not preclude dismissal here; the plan’s treatment remains vulnerable to modification or dismissal. |
| Whether the case should be dismissed or the plan modified to cure the discrepancy between claim and plan. | Trustee seeks dismissal or modification to reflect full arrears. | Debtors seek to maintain plan as confirmed, arguing res judicata and feasibility. | Case dismissed unless Debtors file a motion to modify within 30 days. |
Key Cases Cited
- In re Nosek, 544 F.3d 34 (1st Cir. 2008) (1322(b)(5) curing arrears requires full payment; plan must cure within reasonable time)
- In re Fili, 257 B.R. 370 (1st Cir. BAP 2001) (plan treatment can bind creditors when plan provides fair notice, but not override later claims)
- In re Ryan, 431 B.R. 1 (Bankr.D.Mass. 2010) (plan res judicata as to treatment; post-confirmation arrears may require separate handling)
- Espinosa, 130 S. Ct. 1367 (2010) (plan confirmation not voided; due process notice considerations apply)