§ 158.7     Long-Term Debts
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 158.7, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Section 1328(a)(1) excepts from discharge at completion of all payments any debt “provided for under § 1322(b)(5).” Section 1322(b)(5) permits a Chapter 13 debtor to cure default and maintain payments while the case is pending “on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due.”1

[2]

The most common § 1322(b)(5) debts in Chapter 13 cases are home mortgages and, occasionally, a student loan or long-term car note. When the debtor proposes to cure default and maintain contract payments on a long-term debt, the balance due when all other payments to creditors are completed under the plan is not discharged.2

[3]

Section 1328(a)(1) says nothing about an exception to discharge for claims dealt with under § 1322(b)(3). Section 1322(b)(3) permits a Chapter 13 plan to “provide for the curing or waiving of any default.”3 Discussed elsewhere,4 § 1322(b)(3) is sometimes used to rehabilitate debts that do not extend beyond the life of the plan. However, there is nothing in § 1322(b)(3) to limit its use to “short-term” debts. The general power to cure or waive default in § 1322(b)(3) might be exercised by a debtor with respect to a long-term debt. If usable in this way, there is no exception to discharge in § 1328 for a long-term debt dealt with by curing or waiving default under § 1322(b)(3).

[4]

If a Chapter 13 debtor cannot discharge a debt provided for under § 1322(b)(5), then when or how does a Chapter 13 debtor get relief from such a claim? The answer probably is that the debtor has to perform the contract according to its terms. In other words, the lien and any other contract or state law rights of a creditor with a claim provided for under § 1322(b)(5) are enforceable until the debtor completes performance consistent with the contract. One court held that a Chapter 13 debtor was not entitled to a judgment quieting title to the debtor’s homestead because at the time of completion of payments to other creditors and entry of discharge, the debtor had not yet paid in full the allowed secured portion of an undersecured mortgage provided for by the plan under § 1322(b)(5).5 This court directed that all payments during the plan must be credited against the allowed secured portion of the mortgage, but release of the lien was not appropriate until payment of the secured claim in full with interest.

[5]

What about long-term debt paid directly by the debtor?6 If the confirmed plan states that the debt being paid directly by the debtor is provided for under § 1322(b)(5), then the exception to discharge in § 1328(a)(1) would apply. However, Chapter 13 plans often are not this precise. More likely, the plan says something like “the first mortgage will be paid directly by the debtor.” Such a plan does not clearly provide for the mortgage under § 1322(b)(5), and the mortgage is at risk of losing the protection from discharge in § 1328(a)(1). On the flip side, one reported decision concludes that payment of a long-term debt directly by the debtor does not “provide for” the debt for purposes of § 1328(a), and thus, the debtor’s personal liability is not discharged at the completion of payments to other creditors.7 Creditors should insist that direct payment of a long-term debt be provided for under the plan with a specific reference to § 1322(b)(5). Debtors should avoid direct payment of creditors altogether—whether the underlying debts are long-term or not.8

[6]

Problems abound at discharge with respect to home mortgages that are treated as long-term debts in Chapter 13 cases.9 Too often, a Chapter 13 debtor will complete payments to creditors under the plan, including payments to cure default on a home mortgage, but according to the mortgage company records, the debtor is still in default.

[7]

There are several common causes of this problem.10 The debtor may have defaulted in payments, generating a postconfirmation arrearage. The mortgage holder’s proof of claim may have inaccurately stated the amount or components of the arrearage claim. The mortgage contract may call for changes in the monthly payment based on changes in the interest rate or changes in the amount necessary for the payment of taxes or insurance. If no one acted during the plan to modify payments, a new arrearage develops under the contract. The mortgage servicer’s computer may have accumulated late charges or other fees each month if payments under the plan are timed differently than required by contract. The contract may permit the mortgage holder to apply payments first to expenses such as attorneys’ fees, then to interest and principal. The mortgage contract may have passed through the hands of so many mortgage-servicing companies that no one has a complete record of payments during the Chapter 13 case.11 By whatever route, the discharge is entered in the Chapter 13 case because the debtor has completed payments according to the Chapter 13 trustee’s records, but the debtor then faces a foreclosure notice because the mortgage is immediately in default.

[8]

Faced with changing mortgage payments that were not paid through the plan, one court held that amounts advanced by the mortgage holder during the Chapter 13 case for taxes and insurance premiums were discharged upon completion of payments when the plan provided for payment of the mortgage at the regular contract amount.12 This is an odd outcome. Apparently, the plan called for monthly payments at exactly the amount required under the mortgage contract at the time of confirmation. After confirmation, the debtor defaulted under the plan several times, and the amount necessary for taxes and insurance increased. The creditor did not object to confirmation and did not raise the issue of unpaid taxes and increased insurance premiums until after completion of payments and entry of discharge.

[9]

Section 1328(a)(1) excepts from discharge in a Chapter 13 case “any debt . . . (1) provided for under § 1322(b)(5).” The “debt” is defined by the mortgage contract. Typically, § 1322(b)(2) prohibits modification of that contract by the Chapter 13 plan.13 If the mortgage contract required the debtor to pay taxes and insurance and required a certain payment each month, § 1328(a)(1) prohibits the debtor from escaping those obligations through confirmation of a plan that treats the mortgage holder under § 1322(b)(5). The plan provision for monthly payment of the mortgage at the original contract amount was binding on the creditor under § 1327(a).14 However, discharge of the mortgage debt is controlled by § 1328(a). After completion of payments under the plan, amounts due by contract that have not been paid through the plan are excepted from discharge by § 1328(a)(1).

[10]

Other courts have recognized that § 1328(a)(1) protects the holder of a long-term mortgage from discharge when the plan provides for payment under § 1322(b)(5). For example, in Telfair v. First Union Mortgage Corp. (In re Telfair),15 the confirmed plan required the debtor to “make regular postpetition payments as they become due” on the debtor’s home mortgage. The plan made no other provision for the payment of postpetition debt. During the Chapter 13 case and after discharge, the mortgage holder applied a portion of the regular monthly payments first to reimbursement of fees and expenses incurred in filing postconfirmation requests for relief from the stay and then to premiums for forced written insurance. At the completion of payments under the plan, the mortgage was in default. The debtor attacked the mortgage holder, claiming violations of the automatic stay and of the discharge injunction. The bankruptcy court and the U.S. Court of Appeals for the Eleventh Circuit disagreed:

[T]he discharge of § 1328(a) specifically excludes any debt provided for under § 1322(b)(5), which provision applies to the treatment of the debt due First Union under the debtor’s plan. The debtor’s plan does not provide for postpetition debt due First Union other than the regular monthly payments and the discharge does not affect the debt due First Union pursuant to § 1322(b)(5). As the discharge does not affect the debt due First Union, the discharge injunction of § 524 has no application.16
[11]

Other courts have acknowledged that unpaid monthly installments and arrearages provided for under § 1322(b)(5) are not discharged by § 1328(a), but the courts have struggled to avoid an immediate mortgage foreclosure at the completion of payments under the plan. For example, in In re Brown,17 the mortgage holder had a $2,800 arrearage at the filing but mistakenly filed an arrearage claim for only $1,800. The debtor completed payments under the plan, and discharge was entered. The court held that the additional $1,000 of arrearage claim was not discharged; however, the court prohibited the creditor from declaring the mortgage in default, because the confirmed and completed plan provided for payment of any arrearage claim in full. Instead, the creditor was permitted to add the omitted arrearage to the principal balance due on its mortgage and to collect that additional arrearage after completion of the regularly scheduled payments under the mortgage contract.18 Similarly, in Dupree v. Lomas Mortgage USA, Inc. (In re Dupree),19 the debtor used § 1322(b)(5) to provide for both the secured and the unsecured portions of an undersecured mortgage holder’s claim. The debtor failed to make direct payments sufficient to pay the unsecured dividend to the mortgage holder prior to discharge at completion of payments to other creditors under the plan. The court held that the mortgage holder’s unsecured claim was not discharged under § 1328(a)(1) and ordered the debtor to pay interest after discharge to compensate the mortgage holder for the delay in payments.

[12]

Frustrated by foreclosure notices moments after the completion of payments, from mortgage servicers three or four times removed from the original transaction, debtors and trustees in Chapter 13 cases are striking back. Citing the Real Estate Settlement Procedures Act20 and Florida state law, one district court held that a mortgage holder waived its right to recover advances for the payment of taxes and insurance during a Chapter 13 case by failing to give the debtor or the Chapter 13 trustee timely notice of the deficiencies.21 That the mortgage holder feared violating the automatic stay was not a defense because the court found that giving notice was permitted by the Bankruptcy Code and required by other state and federal laws.

[13]

Clever trustees have stepped in to help debtors deal with mortgage holders. In In re Chess,22 the confirmed plan provided that the trustee would serve as disbursing agent for ongoing mortgage payments and a prepetition arrearage claim. The mortgage holder filed a proof of claim for the arrearages. The mortgage-servicing agent changed twice during the Chapter 13 case. A few months before the completion of payments, the Chapter 13 trustee filed a “customary motion” requesting that the mortgage holder “appear and show cause, if any, why its records should not reflect that the debtor’s mortgage was current.” The mortgage holder did not appear or respond. An order was entered finding that the mortgage was current. One month after discharge, the mortgage holder refused the debtor’s regular monthly payment, claiming that the mortgage was in default and scheduled for foreclosure. The debtor reopened the Chapter 13 case and filed a complaint for injunction and damages. The bankruptcy court held that the mortgage holder was bound by the order that the mortgage was current: “[I]t appears to the court that Fairbanks Capital Corporation arguably ‘laid in wait’ for the discharge order to be entered so that it could then proceed to foreclose upon the property for the arrearage which had knowingly been accruing for over seven months.”23

[14]

Detailed elsewhere,24 § 1322(b)(5) is available to cure default and maintain payments on long-term unsecured debts as well as secured debts. Occasionally, § 1322(b)(5) will be attractive to a Chapter 13 debtor who has a large unsecured debt that either must be paid in full to accomplish confirmation or would be nondischargeable no matter what treatment is provided through the plan. In these situations, the use of § 1322(b)(5) will help the debtor confirm a plan and manage the large unsecured debt during the life of the plan, but the balance of the debt will survive discharge at the completion of payments.

[15]

For example, in In re Gordon,25 prior to the petition the IRS agreed that the debtor would pay $110 a month toward tax debts exceeding $85,000. The debtor’s plan proposed to continue this arrangement. The debtor acknowledged that the balance of the claim would survive discharge under § 1328(a). The bankruptcy court held that the debtor’s proposal was consistent with § 1322(b)(5) and was confirmed over the objection of the IRS. In In re Ford,26 the bankruptcy court permitted the debtor to separately classify a long-term unsecured debt to an insurance company for reimbursement of damages from a prepetition accident, again using § 1322(b)(5) to manage the long-term unsecured debt. The argument was made in Ford that long-term treatment of an unsecured debt was likely to result in abuse by debtors of the power in § 1322(b)(5). The court was not persuaded because of the exception to discharge for long-term unsecured debt treated in this way: “Because § 1322(b)(5) debts are made non–dischargeable by § 1328(a)(1), the Court feels there is, at best, a remote possibility that today’s ruling will spurn legions of debtors on to classify credit card debt in such a way.”27

[16]

Student loans have become an important example of the nondischargeability of long-term unsecured debts in Chapter 13 cases. The use of § 1322(b)(5) to manage long-term student loans has increased since the 1990 Code amendments rendered most educational loans nondischargeable in Chapter 13 cases.28 Several reported decisions hold that long-term treatment under § 1322(b)(5) is an appropriate if not preferred plan provision for dealing with a nondischargeable educational loan.29 This treatment requires separate classification of the student loan and triggers unfair-discrimination analysis under § 1322(b)(1).30

[17]

If the debtor chooses long-term treatment under § 1322(b)(5), at the completion of payments to other creditors the balance of the student loan will be excepted from discharge by § 1328(a)(1). The holder of the student loan will be entitled by contract and by § 1328(a)(1) to collect all of its pre- and postpetition interest and other charges.31 A student loan provided for under § 1322(b)(5) would be nondischargeable for two reasons—because of the exception to discharge in § 1328(a)(1) for debts provided for under § 1322(b)(5); and because an educational loan described in § 523(a)(8) is excepted from discharge by § 1328(a)(2).

[18]

There is some risk to providing for a student loan under § 1322(b)(5). If the debtor cures default and maintains payments under § 1322(b)(5), then the debt is excepted from discharge by § 1328(a)(1) without regard to whether the student loan is also excepted from discharge by § 523(a)(8). In other words, a student loan provided for under § 1322(b)(5) is nondischargeable at the completion of payments under the plan even if the debtor could demonstrate “undue hardship” for purposes of the exception to the nondischargeability of educational loans in § 523(a)(8)(B). Any Chapter 13 debtor who hopes to win an undue hardship battle in the future should not provide for the student loan under § 1322(b)(5).

[19]

This disability to discharge a long-term student loan provided for under § 1322(b)(5) probably extends to any future bankruptcy case filed by the debtor. Under 11 U.S.C. § 523(b), a debt that is excepted from discharge under § 523(a)(8) is dischargeable in a subsequent bankruptcy case if the undue hardship exception to discharge is proved in the subsequent case. There is no reference in § 523(b) to a debt excepted from discharge in a prior bankruptcy case under § 1328(a)(1).


 

1  11 U.S.C. § 1322(b)(5). See § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations, § 81.1  Overview: General Rules for Saving Debtor’s Home§ 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994, § 88.9  Long-Term Debts and § 101.4  Curing Default and Maintaining Payments on Unsecured Debt.

 

2  Telfair v. First Union Mortgage Corp., 216 F.3d 1333, 1337 n.8 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001) (In dicta in a note, because the confirmed plan provided for mortgage holder under § 1322(b)(5), assessment and collection of attorney’s fees during and after discharge in Chapter 13 case did not violate discharge provisions of § 1328 or § 524. The attorney’s fees were allowed by contract, and the mortgage was excluded from discharge because provided for under § 1322(b)(5).); Homebanc v. Chappell (In re Chappell), 984 F.2d 775 (7th Cir. 1993) (Section 1328(a)(1) excepts from discharge long-term debts provided for under § 1322(b)(5).); In re Ford, 221 B.R. 749, 753 (Bankr. W.D. Tenn. 1998) (“[Section] 1322(b)(5) debts are made non–dischargeable by § 1328(a)(1).”); Dupree v. Lomas Mortgage USA, Inc. (In re Dupree), 183 B.R. 270 (Bankr. W.D. Okla.) (Although undersecured mortgage holder is bound by confirmation of pre-Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993), plan that bifurcated its undersecured claim and provided for release of lien upon payment of secured portion, debtor is not entitled to a judgment quieting title after entry of discharge because the plan treated undersecured mortgage holder under § 1322(b)(5), and at the time of discharge, the debtor had not yet paid the allowed secured portion of the undersecured mortgage holder’s claim in full. Debtor is entitled to have all payments credited against the allowed secured portion of the stripped-down claim, but release of the mortgage holder’s lien is not appropriate until completion of payment in full with interest of the allowed secured portion of the mortgage holder’s claim. In addition, because the mortgage holder’s claim was dealt with through the plan by direct payments of the debtor, the mortgage holder is entitled to a second lien to secure the dividend that should be paid on account of the unsecured portion of the undersecured claim until the unsecured portion is paid in full with interest by the debtor directly to the mortgage holder. Interest is payable on account of the unsecured portion of the undersecured claim because the debtor failed to pay the appropriate dividend on account of the unsecured portion of the undersecured claim prior to discharge at completion of payments to other creditors under the plan. Neither the secured nor the unsecured portion of the claim was discharged because both were provided for under § 1322(b)(5).), on reconsideration, 188 B.R. 991 (Bankr. W.D. Okla. 1995) (Lomas Mortgage is bound by plan confirmed in 1991 to accept bifurcation of its undersecured mortgage; however, because of a mix-up between the debtor and the Chapter 13 trustee, the unsecured portion of Lomas’s split claim was not paid consistent with the confirmation order. Lomas is entitled to a postdischarge lien on the debtor’s residence to secure payment of the portion of its unsecured claim that should have been paid during the Chapter 13 plan. Also, Lomas is entitled to interest on its unpaid, unsecured claim to compensate it for the failure to receive payments during the plan.); In re Brown, 121 B.R. 768 (Bankr. S.D. Ohio 1990) (The unpaid balance of a long-term debt survives discharge in a Chapter 13 case.).

 

3  11 U.S.C. § 1322(b)(3).

 

4  See §§ 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations, 142.1 [ Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994 ] § 85.1  Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994 and 143.1 [ Demand, Matured and Balloon Loans; “Short-Term” Mortgages after October 22, 1994 ] § 85.2  Demand, Matured and Balloon Loans; “Short-Term” Mortgages after October 22, 1994.

 

5  Dupree v. Lomas Mortgage USA, Inc. (In re Dupree), 183 B.R. 270 (Bankr. W.D. Okla.), on reconsideration, 188 B.R. 991 (Bankr. W.D. Okla. 1995).

 

6  See also §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 64.4 [ Compensation on Direct Payments by Debtor ] § 54.6  Compensation on Direct Payments by Debtor, 103.2 [ Direct Payment of Secured Claims by Debtor ] § 74.8  Direct Payment of Secured Claims by Debtor before BAPCPA, 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee and 157.1 [ Direct Payments by Debtor ] § 89.1  Direct Payments by Debtor.

 

7  See, discussed in § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502, Mayflower Capital Co. v. Huyck (In re Huyck), 252 B.R. 509, 513–14 (Bankr. D. Colo. 2000) (Real estate mortgage paid “outside” the plan was not provided for and was not discharged; holder can pursue the debtors personally for a deficiency when the property was foreclosed after discharge. The confirmed plan provided for the cure of prepetition mortgage arrearages through the trustee and payment of the continuing monthly payment “outside the plan.” Debtors completed payments, and a discharge was entered. After discharge, the debtors defaulted, and mortgage holder foreclosed. A $61,529.07 deficiency resulted. Mortgage holder filed a complaint for a declaratory judgment whether the deficiency was discharged. “Defendants [the debtors] chose not to modify the rights of Community Bank. . . . Accordingly, Defendants, consistent with 11 U.S.C. § 1322(b)(2), left unaffected the bundle of rights of [sic] Community Bank had under its Note—this bundle of rights included the right to pursue a deficiency.” Citing Rake v. Wade, 508 U.S. 464, 474, 113 S. Ct. 2187, 2192, 124 L. Ed. 2d 424 (1993), “‘[t]he most natural reading of the phrase to ‘provid[e] for the plan’ is to ‘make provision for’ or ‘stipulate to’ something in the plan.’ . . . Here, the Defendants’ Plan split Community Bank’s secured claim into two separate categories: (1) the amount to cure—paid through the Plan and (2) the regular monthly payments—paid outside of the Plan. The amount to cure was ‘provided for’ under the Plan. The regular monthly payments—i.e., the maintenance of the underlying Note and Deed of Trust during the pendency of the bankruptcy—were not ‘provided for’ under the Plan. . . . The Defendants simply chose to make ongoing payments to this secured creditor outside of the Plan. The ramification of this decision was that the Defendants did not (and could not) invoke the ‘cramdown’ provisions of 11 U.S.C. § 1325(a)(5). Instead, Defendants, outside of the Chapter 13 Plan, would be required to either pay the debt according to the original contract or work out some arrangement with Community Bank . . . . Another byproduct of the Defendant’s choice to make regular ongoing payments to Community Bank outside of the Plan was that the debt would not be discharged under 11 U.S.C. § 1328(a).”).

 

8  See §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee and 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502.

 

9  See § 81.1  Overview: General Rules for Saving Debtor’s Home§ 82.1  Prepetition Defaults—When is Property “Sold” at Foreclosure?§ 82.2  Postpetition Defaults, § 83.1  In General: Rake and Contracts before October 22, 1994§ 83.2  Section 1322(e): Contracts after October 22, 1994§ 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994§ 83.4  Rate of Interest to Cure Default: Contracts after October 22, 1994§ 83.5  Undersecured Mortgage and Interest to Cure Default§ 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges and discussion beginning at § 84.1  In General.

 

10  See also §§ 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

11  Another good reason why long-term home mortgages should always be paid through the trustee in Chapter 13 cases. See §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee and 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502.

 

12  In re Conway, 126 B.R. 28 (Bankr. D. Del. 1991).

 

13  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman. See, e.g., In re Guevara, 258 B.R. 59, 61–62 (Bankr. S.D. Fla. 2001) (Without citation to § 1328(a)(1), increases in taxes and insurance during the Chapter 13 plan are not discharged at the completion of payments because the confirmed plan only provided for arrearages and the ongoing monthly payment. “The terms of the mortgage provide for the payment of the annual shortfalls by the Debtors and 11 U.S.C. § 1322(b)(2) requires payment thereof pursuant to the mortgage provisions. Section 1322(b)(2) of the Bankruptcy Code prohibits modification of the basic contract provisions for payments to a creditor secured by the Debtors’ principal residence. Therefore, the Debtors’ liability under the terms of their mortgage, which includes payment of all taxes and insurance, is unaffected by the Debtors’ plans.”).

 

14  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

15  224 B.R. 243 (Bankr. S.D. Ga. 1998), aff’d, Case No. 98-00193-CV-1 (S.D. Ga. 1999), aff’d, 216 F.3d 1333 (11th Cir. 2000), cert. denied, 531 U.S. 1073, 121 S. Ct. 765, 148 L. Ed. 2d 666, reh’g denied, 531 U.S. 1185, 121 S. Ct. 1173, 148 L. Ed. 2d 1030 (2001).

 

16  224 B.R. at 249, aff’d, 216 F.3d at 1337 n.8.

 

17  121 B.R. 768 (Bankr. S.D. Ohio 1990).

 

18  See also Owens v. Fleet Mortgage (In re Owens), 132 B.R. 293, 297 (Bankr. E.D. Pa. 1991) (Citing with approval the concurring opinion in Fireman’s Fund Mortgage Corp. v. Hobdy (In re Hobdy), 130 B.R. 318 (B.A.P. 9th Cir. 1991), court concludes that §§ 502(a) and 1327(a) “may be harmonized by interpreting § 1327(a) as dictating that the plan binds the parties to the amount the trustee will distribute under the plan, but is not binding as to the amount of the claim.” Confirmed plan called for payment of $10,000 as the secured portion of a mortgage holder’s undersecured claim. In an adversary proceeding filed before confirmation, but tried and decided after confirmation, it was determined that the secured portion was actually $15,000. Debtor cannot bind mortgage holder to the valuation assumed in a plan merely by obtaining confirmation. However, secured claim holder is not entitled to relief from the stay and is bound by the plan to receive only $10,000 (present value) through the confirmed plan. Debtor will be left with “a residual security interest” at the completion of payments under the plan, because the allowed amount of the mortgage holder’s secured claim exceeds the amount debtor will pay through the confirmed plan. Debtor might wish to amend confirmed plan to liquidate entire allowed secured claim.).

 

19  183 B.R. 270 (Bankr. W.D. Okla.), on reconsideration, 188 B.R. 991 (Bankr. W.D. Okla. 1995).

 

20  12 U.S.C. § 2609(b).

 

21  Chase Manhattan Mortgage Corp. v. Padgett, 268 B.R. 309 (S.D. Fla. 2001).

 

22  268 B.R. 150 (Bankr. W.D. Tenn. 2001).

 

23  268 B.R. at 158.

 

24  See §§ 155.2 [ Long-Term Debts ] § 88.9  Long-Term Debts and 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4  Curing Default and Maintaining Payments on Unsecured Debt.

 

25  217 B.R. 973 (Bankr. S.D. Ga. 1997).

 

26  221 B.R. 749 (Bankr. W.D. Tenn. 1998).

 

27  221 B.R. at 753.

 

28  See §§ 153.1 [ Student Loans ] § 88.6  Student Loans, 155.2 [ Long-Term Debts ] § 88.9  Long-Term Debts, 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4  Curing Default and Maintaining Payments on Unsecured Debt and 346.1 [ Student Loans ] § 158.2  Student Loans.

 

29  See §§ 153.1 [ Student Loans ] § 88.6  Student Loans, 155.2 [ Long-Term Debts ] § 88.9  Long-Term Debts and 171.1 [ Curing Default and Maintaining Payments on Unsecured Debt ] § 101.4  Curing Default and Maintaining Payments on Unsecured Debt. See, e.g., Groves v. LaBarge (In re Groves), 39 F.3d 212, 215 (8th Cir. 1994) (“Alternatively, the debtor may treat the student loan obligation as a long-term indebtedness under § 1322(b)(5), curing arrearages within a reasonable time and thereafter maintaining regular payments.”); McDonald v. Sperna (In re Sperna), 173 B.R. 654, 659–60 (B.A.P. 9th Cir. 1994) (“Section 1322(b)(5) . . . is one of the mechanisms which the Debtors may be able to utilize to obtain their fresh start.”); In re Cox, 186 B.R. 744 (Bankr. N.D. Fla. 1995) (Plan can separately classify student loan for payment directly by the debtor consistent with § 1322(b)(5), notwithstanding that the effect is to pay 42.3% of the student loan over the life of a plan that only pays 18% to other unsecured claim holders.); In re Benner, 156 B.R. 631, 634 (Bankr. D. Minn. 1993) (“Long-term student loan obligations with payment terms that extend beyond completion of the plan fall squarely within the ambit of section 1322(b)(5).”); In re Dodds, 140 B.R. 542 (Bankr. D. Mont. 1992) (Rejecting the “bright-line” test adopted in In re Taylor, 137 B.R. 60 (Bankr. W.D. Okla. 1992), court confirms payment in full of nondischargeable student loan “outside” the plan with contract interest according to contract terms over a period of 54 months while other unsecured claims are to receive approximately 79% over 36 months through the plan. Treating student loans as long-term debts satisfies the confirmation requirement that a separate classification cannot unfairly discriminate.); In re Saulter, 133 B.R. 148 (Bankr. W.D. Mo. 1991) (Applying four-part test, it is unfair discrimination to separately classify nondischargeable student loan creditors for 100% payment and 10% payment of other unsecured creditors. “The basis for the discriminatory treatment in debtor’s plan appears to be the fact that the student loan indebtedness is not dischargeable. . . . In essence, debtor’s plan shifts the student loan nondischargeability burden from herself on to her general unsecured creditors by paying them less during the course of her plan so that she might repay her full student loan indebtedness. . . . There is nothing to stop debtor from carrying out a plan without such unfair discrimination. Debtor need only formulate a plan which treats her student loans as long term indebtedness under § 1322(b)(5). Even though such treatment may require treating student loans differently than other unsecured debt, it cannot be said that it would unfairly discriminate because the treatment would be in full accordance with Code provisions. . . . Any other treatment that discriminates in favor of student loan creditors at the expense of the other unsecured creditors where the final scheduled student loan payment falls due after the date of the plan is unfairly discriminatory.”); In re Geehan, 59 B.R. 600 (Bankr. S.D. Ohio 1986) (In a case proposing to pay 10% to unsecured claim holders, court instructs debtor to separately classify student loan that would be nondischargeable in a Chapter 7 case and to provide for curing of the arrearages and payment of the regular monthly payments due on the student loan during the life of the plan.).

 

30  See § 87.1  Power to Classify Unsecured Claims: Tests for Unfair Discrimination, § 88.6  Student Loans and § 88.9  Long-Term Debts.

 

31  See § 346.1 [ Student Loans ] § 158.2  Student Loans.