Margaret Kinney v. HSBC Bank USA

Tenth Circuit splits with the Third and Seventh Circuits on allowing a debtor to cure defaults after a five-year plan has ended.

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Case Type:
Case Status:
20-1122 (10th Circuit, Jul 23,2021) Published
A Chapter 13 debtor who does not make all plan payments within the five-year maximum plan period is not eligible for a discharge under 11 U.S.C. § 1328(a), even if the debtor makes the payments shortly after the end of the five-year period. The Bankruptcy Code, even though ambiguous, puts a strict cap on the maximum length of a Chapter 13 plan and thus when plan payments must be made. The issue of whether a debtor who makes late payments under a Chapter 13 plan with a period of less than five years is eligible for a discharge was not considered.
Procedural context:
The debtor's mortgage lender moved to have the debtor's chapter 13 case dismissed after the end of the plan period because the debtor missed two mortgage payments that were due under the plan. The bankruptcy court granted the motion, concluding that it could not grant the debtor a discharge under 11 U.S.C. § 1328(a). The debtor appealed.
Margaret L. Kinney filed a Chapter 13 petition. The bankruptcy court confirmed her plan, which called for payments over five years (the maximum plan period under 11 U.S.C. § 1322(d)), through November 2018. Ms. Kinney was in a car accident in March 2018. Due to expenses from the accident, Ms. Kinney missed two mortgage payments due under her plan. The mortgage lender asked the bankruptcy court to dismiss Ms. Kinney's chapter 13 case after the five-year plan period ended. Ms. Kinney paid the missed payments, but the bankruptcy court granted the lender's motion and dismissed Ms. Kinney's chapter 13 case. The bankruptcy court concluded that § 1328(a) prohibited the court from granting Ms. Kinney a discharge. The Tenth Circuit affirmed, reasoning that payments made after the end of the five-year period were not "subject to" or "authorized by" the plan. The Tenth Circuit thus concluded that Ms. Kinney's late payments were not "payments 'under' the plan." 11 U.S.C. § 1328(a). Consequently, Ms. Kinney was not entitled to a discharge.

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