Posted by NCBRC - March 23rd, 2020
The Bankruptcy Court for the Eastern District of Michigan found that the debtor may modify her chapter 13 plan to reduce her plan payments based on the post-confirmation enactment of the HAVEN Act, which provides for exclusion of veteran’s disability benefits from CMI. In re Gresham, No. 18-56289 (Bankr. E.D. Mich. March 10, 2020).
In August, 2019, Congress enacted the Honoring American Veterans in Extreme Need Act (HAVEN), which articulates an “express exclusion to CMI for certain compensation, pension, pay, annuity, or allowance paid ‘in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services.’” The stated purpose of the amendment was to correct an “obvious inequity” in section 101(10A) which excludes social security benefits from CMI but not similar veteran’s benefits. As a result of the new legislation, the chapter 13 debtor here sought to modify her 100% chapter 13 plan to exclude those benefits from her CMI and reduce her monthly plan payments. The trustee objected, seeking the court’s direction as to the appropriate application of the HAVEN Act in light of the fact that it was enacted after the debtor’s plan was confirmed without objection. Read More
Posted by NCBRC - June 7th, 2019
Debtors were precluded from modifying their plan to surrender their residence where the surrender was a “payment” under the plan and was beyond the sixty-month plan period. Derham-Burk v. Mrdutt (In re Mrdutt), No. 17-1256 (B.A.P. 9th Cir. May 6, 2019).
When chapter 13 debtors, Christina and David Mrdutt, filed their bankruptcy petition, Wells Fargo held two liens on their residence. The first lien was under-secured and the second wholly unsecured. The Mrdutts were also almost $65,000 in arrears on their mortgage. They proposed a plan providing for curing their mortgage arrearage either after loan modification or as proposed in a later plan modification. In the meantime, the Mrdutts agreed to maintain direct mortgage payments to Wells Fargo outside the plan.
The bankruptcy court confirmed their plan while their request to modify the primary mortgage was still pending with Wells Fargo. The Mrdutts made all 60 of their plan payments, but failed to maintain necessary direct payments to Wells Fargo. Ms. Mrdutt died of cancer during the bankruptcy, and Wells Fargo, being Wells Fargo, refused to discuss loan modification with Mr. Mrdutt because only Ms Mrdutt’s name was on the loan. Wells Fargo never approved a loan modification, and the mortgage arrears were not cured either through the plan or outside it. Read More
Posted by NCBRC - January 31st, 2019
In Brown v. Viegelahn, No.18-282 the District Court for the Western District of Texas, on its own motion, certified an appeal to the Fifth Circuit to resolve a dispute among lower courts concerning the so-called Molina language in which a chapter 13 debtor paying less that his entire disposable income to his 100% plan, is required to agree that he will not later modify the plan to pay less than 100% to unsecured creditors. (appeal certified, Jan. 22, 2019). Read More
Posted by NCBRC - October 12th, 2017
A loan modification to cure a post-confirmation default on direct mortgage payments must be approved by the court prior to expiration of the chapter 13 plan. In re Hanley, 2017 WL 3575847, No. 11-76700 (Bankr. E.D. N.Y. Aug. 14, 2017).
Brian and Anahi Hanley’s confirmed chapter 13 plan provided for cure of their mortgage default through the plan and for regular mortgage payments to be made directly to the mortgagee, Nationstar Mortgage, LLC. They fell behind on their direct mortgage payments and, several months before completion of their plan, they entered into a trial loan modification which would cure the post-confirmation default. Though the Hanleys made all payments under the loan modification, they failed to sign and return the Loan Modification Approval Letter within the time required by Nationstar.
At the expiration of their plan, Nationstar filed a Rule 3002.1 Response notifying the court of the default based on the loan as it stood prior to the trial loan modification. The trustee moved to dismiss their bankruptcy without discharge. The Hanley’s moved to strike Nationstar’s Response and sought to modify their plan to allow them to cure the default in accordance with the terms of the loan modification. Read More
Posted by NCBRC - September 8th, 2017
So long as the modification is proposed in good faith a debtor may modify a plan which originally provided for a “910 Claim” to be paid off in its entirety, to one in which she surrenders the vehicle and treats any deficiency as unsecured. In re Fayson, No. 16-10013 (Bankr. D. Del. July 13, 2017).
After experiencing maintenance problems and a dispute relating to an undelivered warranty on her 910 vehicle, Tabitha Fayson sought to modify her chapter 13 plan to surrender the vehicle and treat the deficiency as unsecured. Citing In re Nolan. 232 F.3d 528 (6th Cir. 2000), the creditor argued that modification she sought was prohibited under the Code. The court disagreed and joined the majority of bankruptcy courts finding that treatment of 910 claims may be modified in the manner sought by Ms. Fayson. Read More
Posted by NCBRC - July 6th, 2017
“A chapter 13 debtor’s direct payments to a secured creditor pursuant to a ‘cure and maintain’ plan are ‘payments under the plan’ for purposes of § 1328(a), and a debtor who fails to make such payments is not entitled to a discharge under 11 U.S.C. § 1328(a).” In re Coughlin, No. 11-76202 and In re Sangamaya, No. 12-71109 (Bankr. E.D. N.Y. June 15, 2017). Read More
Posted by NCBRC - July 13th, 2016
The trustee may modify a chapter 13 plan based on the debtor’s post-confirmation increase in ability to pay. Germeraad v. Powers (In re Powers), No. 15-3237 (7th Cir. June 23, 2016). Elvie Owens-Powers and Myrick Powers had a confirmed plan under which they would pay off their secured creditors and pay $22,000 toward their unsecured debts. Upon receiving their tax return during the plan, the trustee noticed a $50,000 increase in Mr. Powers’ income and sought an order requiring them to modify their plan under section 1329 to increase their monthly plan contributions. The bankruptcy court denied the motion to modify on the basis that it was not supported by any provision of the Code, and, alternatively, that the facts did not support modification. In re Powers, 507 B.R. 262 (Bankr. C.D. Ill. 2014). The district court affirmed on the basis that the Code did not permit the modification. It did not address the alternative factual basis for the bankruptcy court’s decision. In re Powers, __ B.R. __, 2015 WL 5725701, at *2 (C.D. Ill. Sep. 30, 2015). Read More
Posted by NCBRC - August 17th, 2015
A bankruptcy court rejected a chapter 13 trustee’s valuation of the debtor’s pre-petition cause of action and found that an estimated value of the state court case should not be included in the plan distributions but that the plan may be modified if the debtor obtains a money judgment during the commitment period. In re Morales, No. 12-7296 (Bankr. P.R. July 2, 2015). Read More
Posted by NCBRC - April 23rd, 2015
Using inflexible reasoning, a bankruptcy court found that the debtors could not amend their plan to make mortgage payments outside the plan. In re Vela, No. 12-06512 (Bankr. W.D. Mich. March 13, 2015). Read More
Posted by NCBRC - March 31st, 2015
When the major contributor to the debtors’ joint chapter 13 plan died, the surviving spouse fell to below median status and the applicable commitment period fell from 5 years to 3 years. In re Childers, No. 10-10405 (Bankr. N.D. Tex. Jan. 26, 2015). Read More
