557 B.R. 625
Bankr. N.D. Ill.2016Background
- Debtors Thomas L. Handy and Mary Handy filed Chapter 13 on Nov. 4, 2015; a modified plan was confirmed in January–June 2016 providing various secured creditor payments and $860/month plan payments.
- Official Form 22C-1 shows the Debtors' current monthly income is below the Illinois median for their household, so their applicable commitment period is three years.
- The Trustee moved to dismiss the case for "term of plan" 17 days after the June 6, 2016 modification, asserting the plan would complete in 86 months; Debtors contend completion will occur in 70 months.
- The confirmed/modified plans and payments resulted in uncertainty whether the plan would exceed statutory three- or five-year term limits under 11 U.S.C. §§ 1322(d), 1329(c).
- The court evaluated whether dismissal is required when a confirmed plan will extend beyond the applicable commitment period or whether the debtors may be allowed a reasonable period to cure defaults and finish payments.
Issues
| Issue | Trustee's Argument | Debtors' Argument | Held |
|---|---|---|---|
| Whether a Chapter 13 case must be dismissed when the confirmed/modified plan will require payments beyond the applicable 3- or 5-year commitment period | Move to dismiss because plan will complete in 86 months (exceeds statutory term) | Oppose dismissal; plan will complete sooner (70 months) and debtors should be allowed time to finish payments | Dismissal is not required solely because debtors need additional time; motion denied absent proof the extension is unwarranted |
| Whether the Bankruptcy Code’s plan-term limits (3/5 years) mandate dismissal rather than allowing cure of arrears outside the scheduled period | Trustee implies plan-term limits trigger dismissal | Debtors rely on authorities allowing cure of defaults and modest extensions to finish plan | Court holds §1322/1329 prohibit confirming plans exceeding limits but do not mandate dismissal; courts may permit reasonable time to cure defaults outside scheduled period |
| Whether Debtors are in material default under the confirmed plan | Trustee asserts additional months needed (18) indicates default warranting dismissal | Debtors say only 10 months needed and are not in material default | Court finds no material default on the record and denies dismissal; Trustee may present evidence to the contrary at hearing |
Key Cases Cited
- In re Henry, 368 B.R. 696 (N.D. Ill. 2007) (refusing to dismiss solely because debtor needed additional months to complete plan)
- Christensen v. Black (In re Black), 292 B.R. 693 (10th Cir. BAP 2003) (modified plans may not provide for payments beyond applicable commitment period)
- Shovlin v. Klaas, 539 B.R. 465 (W.D. Pa. 2015) (courts may allow reasonable time to cure unanticipated arrearages incurred during sixty-month period)
- Germeraad v. Powers, 826 F.3d 962 (7th Cir. 2016) (debtors may be required to cure defaults outside the five-year schedule; §1329(c) limits scheduling but not cure payments)
- In re Cutillo, 181 B.R. 13 (Bankr. N.D.N.Y. 1995) (dismissal/ conversion is discretionary and decided case-by-case in best interests of creditors and estate)
- In re Nahat, 315 B.R. 368 (Bankr. N.D. Tex. 2004) (policy behind term limits protects debtors from excessively long repayment periods)