Discharge Despite Unpaid Mortgage Fees

Posted by NCBRC - December 23, 2021

The chapter 13 debtor was entitled to discharge despite the fact that she had incurred but not paid fees and assessments under her mortgage contract while she was paying the mortgage outside the plan, where the creditor had not sought payment of those fees and assessments prior to plan completion. In re Brown, — B.R. —-, 2021 WL 4480832 (Bankr. D. S.C. Sept. 15, 2021) (case no. 16-4122).

In this case, the debtor’s plan provided for the trustee to pay off the mortgage arrears through the plan and the debtor to maintain all other payments according to the mortgage agreement outside the plan. After she successfully completed her plan, the mortgage creditor, Citizen’s Bank, objected to discharge arguing that the debtor owed $1,085 in post-petition fees and assessments.

While the debtor did not dispute that she had incurred the fees and assessments, she argued that they were not “payments under the plan,” as contemplated by section 1328(a), which would preclude discharge if not paid at plan completion.

The court noted that generally, under section 1322(b)(5), a debtor’s ongoing mortgage payments outside the chapter 13 plan are considered “payments under the plan,” for purposes of discharge. In this case, however, the debtor’s obligation to maintain her mortgage payments were governed by the terms of the mortgage contract, and that contract did not make the fees payable except upon demand by the creditor. While there was no dispute that the fees had been properly assessed, the creditor had not demanded their payment as of completion of the debtor’s plan. For that reason, the $1,085 had not come due under the terms of the mortgage contract and could not be considered an unpaid payment under the plan within the meaning of section 1328(a). Rather, the court found, “[t]he incurred fees are due as part of a claim with a last payment due after the date of the final plan payment and not subject to the discharge.” Because the fees had not yet come due, the debtor’s failure to pay them prior to plan completion did not preclude discharge.

Brown Bankr DSC Sept 2021


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