PLG NEWSNews + updates + recent press
|
Archives
January 2025
December 2024
October 2024
August 2024
July 2024
June 2024
May 2024
March 2024
February 2024
August 2023
May 2023
April 2023
January 2023
November 2022
September 2022
August 2022
June 2022
April 2022
March 2022
September 2021
August 2021
July 2021
June 2021
May 2021
April 2021
March 2021
February 2021
January 2021
December 2020
October 2020
September 2020
August 2020
July 2020
June 2020
May 2020
April 2020
March 2020
February 2020
January 2020
December 2019
November 2019
October 2019
August 2019
June 2019
May 2019
April 2019
February 2019
January 2019
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
May 2018
March 2018
January 2018
December 2017
October 2017
September 2017
August 2017
July 2017
On December 6, 2018, the Eleventh Circuit Court of Appeals decided a case of first impression in Dukes v. Suncoast Credit Union. The issue before the Court was whether a chapter 13 plan’s reference to a claim as being paid outside the plan was “provided for” by the plan and thereby included in the discharge. The Eleventh Circuit concluded it was not discharged. This is excellent news for servicers. The case involved a chapter 13 plan that stated that Suncoast Credit Union’s claim would be “treated outside”. The chapter 13 trustee did not make any payments toward the claim and the debtor received a discharge. Subsequently, the Credit Union foreclosed and sought a deficiency judgment against the debtor. The debtor reopened the bankruptcy case with the intent of obtaining an order stating that the debt was discharged. The bankruptcy court found it was not discharged and the debtor appealed to the district court which sided with the bankruptcy court.
The Eleventh Circuit explored the meaning of “provided for” as stated in §1328(a) and ultimately concluded that merely mentioning that the mortgage would be paid outside the bankruptcy, did not “provide for” the mortgage within the context of the chapter 13 plan. Thus, claims wholly governed by the original loan instruments rather than the terms of the bankruptcy plan are not “provided for” in the sense Chapter 13 contemplates. In other words, absent a provision in the plan providing for payment of the claim, the claim is not “provided for” and does not survive the discharge. IMPACT ON SERVICERS Cramdowns The most common scenario is the cramdown situation. Often times, a loan is valued inside the plan and either the plan or valuation order is silent as to the treatment of taxes and insurance. In this situation, the loan is de-escrowed and the taxes and insurance are not included in the chapter 13 plan. Thus, they are not “provided for”. This means that any amounts disbursed by the servicer during the course of the bankruptcy are not discharged and the servicer is free to seek recoupment from the debtor. However, the caveat being that any recoupment must occur prior to a lien release being recorded. Therefore, it is imperative that counsel by contacted prior to recording the lien release in order to advise on how to recoup any outstanding disbursements. Determination of Final Cure Another scenario this may arise is when either the debtor or trustee seeks a Determination of Final Cure under Rule 3002.1(h). For instance, Padgett Law Group (“PLG”) recently handled a case on behalf of a client whereby the debtor was seeking an order stating that the entire loan had been paid and was discharged. In that case, the debtor’s chapter 13 plan did not provide for the full claim amount. Rather, it provided for adequate protection payments in the hopes of the debtor obtaining a loan modification that never occurred. The plan did not provide for the arrears or regular ongoing payments. Relying on the bankruptcy court’s opinion in this case, PLG opposed the debtor and obtained a favorable order stating that the claim survived the discharge and the debtor was responsible for paying it. HOW TO PROCEED GOING FORWARD While this is a favorable decision servicers, it is important that servicers continue to keep accurate records of chapter 13 plan treatment and contact counsel prior to writing off a disbursements. By the same token, servicers should immediately contact counsel after making escrow disbursements on loans that are crammed down and or do not provide for escrow. This is to ensure that prompt action is taken to seek reimbursement. Depending on the nature of the bankruptcy, it may be prudent to file a Motion for Relief from Stay or compel plan modification based on the disbursements being rendered administrative expenses under §503. Qualified bankruptcy counsel should be able to review the case and propose the best legal strategy. Lastly, it is important to note that this decision is only binding in the Eleventh Circuit, which encompasses Florida, Georgia and Alabama. For more information contact the author, Seth J. Greenhill, Esq, Bankruptcy Attorney, Padgett Law Group. Comments are closed.
|
PLG BLOG DISCLAIMER
The information contained on this blog shall not constitute legal advice or a legal opinion. The existence of or review and/or use of this blog or any information hereon does not and is not intended to create an attorney-client relationship. Further, no information on this blog should be construed as investment advice. Independent legal and financial advice should be sought before using any information obtained from this blog. It is important to note that the cases are subject to change with future court decisions or other changes in the law. For the most up-to-date information, please contact Padgett Law Group (“PLG”). PLG shall have no liability whatsoever to any user of this blog or any information contained hereon, for any claim(s) related in any way to the use of this blog. Users hereby release and hold harmless PLG of and from any and all liability for any claim(s), whether based in contract or in tort, including, but not limited to, claims for lost profits or consequential, exemplary, incidental, indirect, special, or punitive damages arising from or related to their use of the information contained on this blog or their inability to use this blog. This Blog is provided on an "as is" basis without warranties of any kind, either express or implied, including, but not limited to, warranties of title or implied warranties of merchantability or fitness for a particular purpose. |
Padgett Law Group and Padgett Law Group EP are D/B/As of Timothy D. Padgett, P.A. Timothy D. Padgett, P.A.'s practice areas include creditors' rights, estate planning and probate, real estate transactions and litigation. Not all practices or services are available in all states in which Timothy D. Padgett, P.A. practices.
PRIVACY STATEMENT | WEBSITE DESIGN BY SQFT.MANAGEMENT
|