(Published) - In re Hoyt-Kieckhaben, Case No. 11-13705 EEB, February 23, 2016

This case is similar to several recent chapter 13 cases in this district in which the debtor failed to make her direct payments to the mortgage holder for a substantial period of the plan but sought to receive a discharge on the basis of having made all of the payments required to be paid to the trustee. Judge Brown follows the holding of other divisions in this court that both trustee payments and direct mortgage payments are payments "under the plan," and that failure to make any of these payments prohibits the debtor from receiving a discharge.


In determining that the direct mortgage payments were payments “under the plan,” the Court relied heavily on In re Foster, 670 F.2d 478 (5th Cir. 1982), which reviews the historical underpinnings of chapter 13. It recognized that prior versions of the statute required the consent of every secured creditor as a condition of plan confirmation. If the debtor could not secure the consent of a particular secured creditor, the debtor would simply leave this creditor out of the plan altogether. Thus, if the plan made absolutely no provision for a secured creditor, then the debtor could make payments "outside the plan" under the contractual terms of their agreement. But if the plan cures an arrearage or otherwise specifies any treatment for this claim in the plan, then all payments on the claim are deemed "under the plan" regardless of who disburses the payments to the mortgage holder. Judge Brown then traces the Code sections that leave the question of who should act as the disbursing agent of mortgage payments to the court's discretion. Thus, this decision may serve as a foundation for Judge Brown's analysis of upcoming issues in this district as to conduit mortgage payments and whether a debtor may truly make payments on secured debts "outside the plan."


Judge Brown also ruled that the failure to make direct mortgage payments was a “material default by the debtor with respect to the term of a confirmed plan,” and was cause to dismiss or convert the case under § 1307(c). Because the Debtor requested conversion of her case if she was not entitled to a chapter 13 discharge, neither the chapter 13 trustee nor the mortgage lender opposed conversion, and there was no suggestion of bad faith, the case was converted to chapter 7.