533 B.R. 482
Bankr. W.D. Pa.2015Background
- Paul and Beth Ann Klaas filed Chapter 13 on December 31, 2009; an amended plan paying $3,017/month over 60 months was confirmed March 14, 2011.
- The confirmed plan provided for payment of secured claims and an estimated $8,837 pool for general unsecured creditors.
- Creditor Elizabeth Shovlin holds an unsecured claim (obtained by transfer) and did not object to confirmation.
- After 61 months the Chapter 13 trustee audited the case and reported a $1,123 shortfall needed to complete plan funding; trustee moved to dismiss but said she would withdraw if the Debtors cured the deficiency.
- Debtors made two payments (total $2,665), curing the shortfall; the trustee withdrew her motion, but Shovlin continued to seek dismissal arguing (1) payments past 60 months violate 11 U.S.C. §1322(d) and (2) the Debtors’ personal financial management course and certification were untimely.
- The Debtors filed the course completion on March 24, 2015 (after completing the course Feb 27, 2015); final plan payment(s) were posted March 16 and March 24, 2015.
Issues
| Issue | Shovlin's Argument | Debtors' Argument | Held |
|---|---|---|---|
| Whether a debtor may cure a confirmed plan shortfall after 60 months (§1322(d) limit) | §1322(d) prohibits any extension of plan performance past five years; last payment at month 63 is impermissible and warrants dismissal or denial of discharge | §1322(d) limits plan term at confirmation but does not bar a debtor from curing a post-confirmation default within a reasonable time; cure here completed promptly and in good faith | Court: §1322(d) is not a rigid "drop-dead" bar to curing a deficiency after 60 months; dismissal not required where debtor cures in reasonable time and acts in good faith |
| Whether failure to timely file personal financial management certification requires dismissal | Debtors filed certification after the date when last plan payment was due, so discharge should be denied or case dismissed | Rule 1007(c) sets the filing time as the date of the last plan payment but courts may enlarge the time; here certification was filed the same day trustee received final payment | Court: Debtors complied with Rule 1007(c) because the final payment and the certification were filed/received contemporaneously; failure to certify affects discharge eligibility, not automatic dismissal |
Key Cases Cited
- In re Henry, 368 B.R. 696 (N.D. Ill. 2007) (discussing §1322(d) purpose to limit plan length and protect debtor freedom)
- In re Aubain, 296 B.R. 624 (Bankr. E.D.N.Y. 2003) (holding statutory limit does not prohibit curing plan payments after five years)
- In re Brown, 296 B.R. 20 (Bankr. N.D. Cal. 2003) (confirmed plan needing extra time to finish payments is not automatically dismissed)
- In re Roberts, 279 B.R. 396 (B.A.P. 1st Cir. 2000) (contrasting outcome where material unpaid obligations justified dismissal)
- Marrama v. Citizens Bank of Massachusetts, 549 U.S. 365 (2007) (chapter 13 discharge policy supports fresh start for honest debtors)
- In re Borkowski, 446 B.R. 220 (Bankr. W.D. Pa. 2011) (distinguishable: creditor's delay in protecting rights caused prejudice when plan term expired)