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Summarizing by Lars Fuller


By implication, the Eleventh Circuit would allow a general chapter 13 discharge to a debtor who defaults on direct mortgage payments, an issue where lower courts are split.

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Case Type:
Case Status:
16-16513 (11th Circuit, Dec 06,2018) Published
In affirming the bankruptcy court and the district court, the Eleventh Circuit held that a chapter 13 debtor's plan did not discharge the credit union's mortgage at the conclusion of her plan because the plan simply stated that the debtor would make payments to the credit union directly outside of the plan, and therefore, the debt was not "provided for" by a plan under section 1328. The Eleventh Circuit also held that the discharge of the credit union's debt would violate section 1322(b)(2) by modifying the credit union's right to seek a deficiency judgment against the debtor.
Procedural context:
Appeal from the United States District Court for the Middle District of Florida.
Debtor filed her chapter 13 petition in 2009, and her plan was confirmed in 2010. At the time of confirmation, the debtor had two mortgages with a credit union, both of which were secured by her primary residence, and the debtor was current on both mortgages. The credit union only filed a proof of claim for the second mortgage. The plan stated that the debtor would make payments directly to the credit union, rather than through the chapter 13 trustee, and did not otherwise provide for the debt. Specifically, the plan did not provide any repayment terms for the mortgages, a schedule for repayments, or otherwise modify the mortgages' terms. The debtor completed the payments under her plan and received her discharge in 2012. However, the debtor had only made a few of the payments to the credit union during the life of the plan and failed to make any payments to the credit union in 2011 or at any time thereafter. In 2013, the credit union foreclosed its second mortgage on the debtor's home based on the payment defaults and sought a deficiency judgment for the balance remaining on the first mortgage. In 2014, the credit union moved to reopen the bankruptcy case and initiated an adversary proceeding to determine that the debtor's personal liability on the first mortgage had not been discharged. The bankruptcy court granted the credit union's summary judgment motion and ruled that the first mortgage was not discharged and that a discharge was violative of section 1322. The district court affirmed. On appeal the Eleventh Circuit, the debtor argued that the the plan provided for the credit union's debt and, for the first time, contended that the mortgage was discharged because the credit union failed to file a proof of claim. The Eleventh Circuit rejected the argument because it was not preserved in the lower courts and because a contrary holding would also violate section 1322.
Jill Pryor and Julie Carnes, Circuit Judges, and Conway, District Judge

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