Valueless Mortgage Avoidable in Chapter 13

The U.S. Court of Appeals for the Eight Circuit affirmed a U.S. District Court ruling which upheld a bankruptcy court’s confirmation of Chapter 13 debtors’ plan that proposed to void a wholly unsecured lien on their personal residence. According to the lower courts, the anti-modification provision in Bankruptcy Code Sec. 1322(b)(2), which generally prohibits the…

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Undistributed Plan Funds Paid to Creditors upon Conversion to Chapter 7

Post-petition plan payments being held by a Chapter 13 trustee for eventual distribution to creditors under a confirmed repayment plan rightfully were distributed to creditors pursuant to the plan after the debtor converted the case to Chapter 7. According to the U.S. Court of Appeals for the Fifth Circuit, policy considerations and equity favor paying…

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Lien-Stripping Allowed in “Chapter 20

A bankruptcy court’s ruling that a Chapter 13 debtor could strip off two wholly unsecured mortgages from her home even though the debtor did not qualify for a Chapter 13 discharge was affirmed by the U.S. Court of Appeals for the Eleventh Circuit because the debtor’s ineligibility for a discharge was irrelevant to the proposed…

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Court Approves Use of Current IRS Expense Standards to Plan Modification

Debtors could use current IRS standards when modifying their confirmed Chapter 13 plan because the requirements of Bankruptcy Code Sec. 1325(b) do not apply to the modification of confirmed plans. The debtors’ confirmed plan proposed to pay 100 percent of unsecured claims. Subsequent to confirmation, the debtors’ income substantially decreased, and the debtors sought to…

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Failure to Comply with Confirmed Plan Justifies Stay Relief

A bankruptcy court abused its discretion by denying a mortgage-creditor’s stay relief motion because the debtors’ repeatedly failed to make post-petition mortgage payments as required under the terms of their confirmed Chapter 13 plan. The debtors’ confirmed plan provided that post-petition mortgage payments would be made directly to the lender. Despite this provision, the debtors…

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