§ 156.1 — Timing and Procedure for Discharge and Objecting to Discharge

Revised: July 22, 2004

[1]

“As soon as practicable after completion by the debtor of all payments under the plan,” the court “shall” grant the debtor a discharge.1 In most jurisdictions, the discharge order is entered automatically after the trustee signals that payments have been completed. In a few jurisdictions, the debtor or the trustee causes entry of the discharge order by filing a notice of completion of payments or a motion for entry of discharge.2 In the Eastern District of California, the bankruptcy court requires the Chapter 13 trustee to mail the final report to all creditors and wait 30 days for objections as a mechanism to determine whether the debtor is entitled to discharge.3

[2]

The Bankruptcy Code is silent with respect to when the “completion . . . of all payments under the plan” occurs for purposes of discharge under § 1328(a). The issue is not as simple as first appears.

[3]

The typical Chapter 13 plan contains several provisions for “payments.” There will be payments to secured claim holders that may be quite specific as to installments and total amount.4 There may be a percentage payable to unsecured claims that is usually not specific as to timing or amount.5 Then there may be a “base” or minimum total contribution that is coupled with a required number of payments or a specified minimum percentage of distribution to allowed unsecured claims.6 Special debts such as priority claims often have separate provisions, for example, for payment in full, without time or amount parameters.7 And there are dramatic variations from district to district in the content of Chapter 13 plans. It is not always immediately obvious from the plan itself when payments are completed.

[4]

For example, in In re Carr,8 the confirmed plan required the debtor to make payments of $100 per month for 36 months. In addition, the plan provided, “All claims entitled to a priority under 11 U.S.C. § 507 shall be paid in full.”9 The motion to allow claims listed priority claims totaling $3,720.62. After 36 monthly payments of $100, the debtor moved for discharge pursuant to § 1328(a). The district court sustained the trustee’s objection to entry of discharge, explaining as follows:

Under the terms of the plan, the debtor was to make payments of $100.00 for 36 months which would total $3,600.00 As to payment of claims, the plan provided that “[a]ll claims entitled to a priority under 11 U.S.C. § 507 shall be paid in full. . . .”
        Therefore, reading the terms of the plan, which provided for full payment of all priority claims, in conjunction with the Motion to Allow Claims which provided for $3,720.62 in priority claims, the debtor was obligated to fully pay these claims in order to be entitled to a discharge. Despite this obligation, the debtor’s plan only provided for payments totaling $3,600. . . . [T]he debtor was not entitled to a discharge in that he had not yet completed “all payments under the plan” as required by § 1328. [Footnote omitted.] Although the debtor did complete the 36 payments as required, the payments did not total the amount needed to pay 100% of the “claims entitled to priority under 11 U.S.C. § 507” as also required by the plan.10
[5]

Applying the logic of Carr, if the plan states the amount of money required of the debtor but fixes no minimum percentage distribution to creditors, an objection to confirmation was missed11 but payments are complete and the debtor is entitled to discharge when the required amount has been paid to the trustee without regard to the percentage of debt paid. This outcome is illustrated in Meyer v. Pagano.12 The confirmed plan required the debtor to pay the trustee “the sum of $100 for 36 months.” The plan was a “pot plan”13 that paid unsecured claim holders “pro tanto,” but there was no provision for full payment of priority claims. This omission, of course, would have been fatal to confirmation had a priority claim holder objected.14 No one objected.

[6]

The California Uninsured Employers Fund filed proof of a priority claim for $157,910. When the debtor completed 36 payments of $100, the Fund and the trustee objected to entry of discharge. The bankruptcy and district courts held that the debtor was entitled to discharge because the only financial test of the completion of payments was satisfied:

[T]he text of the Plan plainly provides that Debtor must make 36 monthly payments of $100, and that such payments will satisfy “all” claims. . . . [T]he subject Plan contains no ambiguity as to the extent of payments to be made on priority claims. . . . Debtor has completed the 36 monthly payments of $100 as required under the Plan. Because the Plan, as confirmed, does not require Debtor to pay priority claims in full, Debtor has completed all payments required under the Plan. Accordingly, the bankruptcy court did not err by granting Debtor’s motion for a discharge pursuant to § 1328.15
[7]

Carr offers a reasonable interpretation of when payments are completed under a Chapter 13 plan. It makes sense to look at the entire plan and to declare completion of payments when all of the financial conditions stated in the plan are satisfied.

[8]

This approach is consistent with the cases interpreting the similar “completion of payments” language in § 1329(a).16 Section 1329(a) permits modification of a Chapter 13 plan at any time after confirmation but “before the completion of payments under such plan.”17 The completion-of-payments issue arises at modification when the debtor tries to pay off the plan sooner than anticipated at confirmation. When the balance of the plan is tendered in a lump sum—for example, from exempt property, from the sale or refinancing of a home or from gifts of family members—the trustee or a creditor sometimes responds with a motion to modify to increase the amount the debtor must pay by requiring payments to continue for at least 36 months or for the original anticipated duration.18 It has generally been held that payments are complete, postconfirmation modification is precluded and the debtor is entitled to a discharge when the debtor tenders to the Chapter 13 trustee funds sufficient to pay the balance due under the plan, without regard to whether the number of payments made or the number of months elapsed is precisely as predicted at the time of confirmation.19

[9]

Determining whether the financial conditions for discharge are satisfied becomes a problem when the plan is ambiguous or when circumstances change after confirmation. For example, in In re Harter,20 the confirmed plan required the debtor to pay $260 a month for five years. Unsecured creditors were promised 25 percent. In addition, the plan required the debtor to contribute any distribution received from a specified probate estate. The debtor was forbidden to interfere with or delay distributions from the estate.

[10]

Five years passed. The debtor paid $260 each month, and unsecured claim holders received 25 percent. When the debtor demanded a discharge, the trustee and others objected on the ground that there had been no distribution to the debtor from the probate estate. Reading the terms of the plan together, the bankruptcy court quite reasonably concluded that satisfaction of the minimum dividend and five-year payment requirements completed payments under the plan notwithstanding that the debtor had not yet received an inheritance:

[T]he court rejects [the] argument that the plan requires the Debtor [to] pay over his inheritance regardless of when he receives it. The plan required the Debtor to contribute the Estate Distributions that he received within the five-year plan period, or the additional time that it took the Debtor to complete the minimum plan payments, and the Debtor was directed to help facilitate the likelihood that he would actually receive his Estate Distributions before the plan was completed. If the Debtor has complied with the Court’s directive in good faith and was unsuccessful in obtaining a distribution, then the plan is complete.21
[11]

When circumstances change after confirmation, the debtor may have to modify the confirmed plan to clarify when payments are completed for purposes of discharge. In Systems & Services Technologies, Inc. v. Davis (In re Davis),22 the confirmed plan provided that SST held a $6,000 claim secured by a car. After confirmation, the automatic stay was lifted, and SST recovered and disposed of the car. The Chapter 13 trustee discontinued payments to SST on account of its secured claim when stay relief was granted and the car was liquidated. The debtor completed payments to other creditors, and a discharge was entered. SST moved to vacate the discharge because its “secured” claim had not been paid through the plan. The Eleventh Circuit agreed with SST that the debtor did not complete payments under the plan because the plan was never modified after the surrender of SST’s collateral: “Absent bankruptcy court order of modification, the confirm[ed] plan must be executed as originally approved. . . . Davis did not fulfill the payments required by the Plan and the Chapter 13 discharge was improper.”23

[12]

Tax refunds can complicate the completion of payments. It is common for Chapter 13 plans to require the debtor to pay tax refunds to the trustee during the life of the plan.24 When the plan provides for three years of monthly payments to satisfy the disposable income test at confirmation25 and the plan also requires the debtor to pay tax refunds to the trustee, the tax refund provision does not reduce either the length of the plan or the amount of money that must otherwise be paid to the trustee to complete payments.26

[13]

Midkiff v. Dunivent (In re Midkiff)27 illustrates another problem with tax refunds and the completion of payments under a plan: tax refunds are not received during the year for which the refund is due. When the confirmed plan requires the debtor to pay tax refunds to the trustee, can the plan be completed if a refund will be payable next year for overpayment of taxes for the current year? In Midkiff the confirmed plan required the debtor to contribute “tax refund(s) to which the debtor(s) is entitled during the first 36 months of the plan.”28 On April 4, 2001, the trustee certified completion of payments. The court entered a discharge. Within a few days the trustee received the debtor’s tax refund for tax year 2000.

[14]

The trustee moved for relief from the discharge order on the ground that payments were not actually completed until the tax refund was administered. The bankruptcy court, the Bankruptcy Appellate Panel for the Tenth Circuit and the U.S. Court of Appeals for the Tenth Circuit all agreed with the trustee: because the debtor became “entitled” to the refund during the first 36 months, the plan was not completed until that refund was paid to the trustee notwithstanding that it arrived after 36 months of other payments.

[15]

The lesson of Davis is that changes in the debtor’s circumstances after confirmation may require modification of the plan, else the completion of payments for discharge purposes will be measured by the wrong standard months or years later in the Chapter 13 case. Midkiff and Harter counsel caution in the drafting of plan provisions that tap sources of income that may or may not actually be received by the debtor or the trustee by some discrete point in time. Tax refunds should be described in terms of “receipt” rather than “entitlement” to avoid stranding the plan until a tax return is due in the year following the year in which payments are otherwise completed under the plan.

[16]

There are exceptions to the discharge in Chapter 13 cases and there are deadlines for filing complaints objecting to the dischargeability of debts that change depending on whether discharge is sought before or after the completion of payments. Also, the timeliness of a complaint to determine the dischargeability of debt in a Chapter 13 case may be different for different kinds of debt.

[17]

Prior to the 1990 bankruptcy amendments, if the debtor was entitled to a discharge after completion of payments under § 1328(a), the only debts that were not dischargeable were debts “not provided for” by the plan,29 long-term obligations under § 1322(b)(5)30 and debts described in 11 U.S.C. § 523(a)(5)—alimony, maintenance or support.31 The 1990 bankruptcy amendments32 added three other kinds of debts that are not dischargeable after completion of payments under the plan: student loans under § 523(a)(8);33 debts arising from the operation of a motor vehicle while legally intoxicated under § 523(a)(9);34 and restitution included in a sentence on the debtor’s conviction of a crime under § 1328(a)(3).35 The Bankruptcy Reform Act of 1994 added “a criminal fine” included in a sentence on the debtor’s conviction of a crime as an exception to discharge in Chapter 13 cases filed after October 22, 1994.36

[18]

The “fraud” exceptions to discharge in §§ 523(a)(2), (4) and (6) and the new exception to discharge for property settlements in § 523(a)(15) are not exceptions to discharge in a Chapter 13 case at the completion of payments under § 1328(a).37 Under § 523(c), complaints to determine the dischargeability of debts under § 523(a)(2), (4), (6) or (15) must be filed in the bankruptcy court, and under Bankruptcy Rule 4007(c), a special deadline 60 days after the first date set for the meeting of creditors applies to complaints under § 523(c). This 60-day time limit has no application in Chapter 13 cases at the completion of payments under a plan but does come into play when the debtor seeks a discharge before the completion of payments under the plan.38

[19]

Determination of the dischargeability of a debt in a Chapter 13 case requires an adversary proceeding commenced by filing a complaint under Part VII of the Bankruptcy Rules.39 Objecting to entry of the discharge order and seeking relief from the discharge order are used by creditors in the reported cases but are not the proper procedure for excepting a debt from discharge in a Chapter 13 case. Appeal of the discharge order is not a substitute for a complaint objecting to the dischargeability of a debt.40

[20]

Either the debtor or the creditor can file a complaint under § 523(a)(5), (a)(8) or (a)(9).41 The exception to discharge for restitution or a criminal fine included in a sentence on the debtor’s conviction of a crime is found in § 1328(a)(3). The courts can be expected to treat it like the other exceptions to dischargeability found in § 523(a) and cross-referenced in § 1328(a)(2). An objection to the dischargeability of restitution or a criminal fine will be commenced by the filing of a complaint, and either the debtor or the creditor has standing to file the complaint.

[21]

That the typical Chapter 13 debtor is not entitled to discharge until after completion of payments under the plan has affected whether bankruptcy courts entertain complaints objecting to the dischargeability of debts before the debtor completes payments. For example, after the 1990 amendments, student loans described in § 523(a)(8) are nondischargeable in Chapter 13 cases upon completion of payments under the plan, except under the conditions stated in § 523(a)(8).42 One of the exceptions to the exception to discharge for educational loans is that “excepting such debt from discharge . . . will impose an undue hardship on the debtor and the debtor’s dependents.”43 Some courts have held that “undue hardship” cannot be determined in a Chapter 13 case until the debtor is eligible for discharge—at the completion of payments under the plan—thus, a complaint to determine the dischargeability of an educational loan is premature if filed before the debtor is eligible for discharge.44 The Bankruptcy Appellate Panel for the Ninth Circuit has flip-flopped on this issue, now holding that a complaint to determine the dischargeability of a student loan is timely filed at any time during a Chapter 13 case.45 In Education Resources Institute v. Ekenasi (In re Ekenasi),46 the U.S. Court of Appeals for the Fourth Circuit held that a Chapter 13 debtor is not prohibited to file an adversary proceeding to determine the dischargeability of a student loan in advance of entitlement to discharge, but the debtor bears a difficult burden to prove undue hardship for § 523(a)(8) purposes because the Chapter 13 case itself bears significantly on the debtor’s ability to pay. As explained by the Fourth Circuit:

[W]e decline to adopt a hard and fast rule which would preclude bankruptcy courts from ever entertaining a proceeding to discharge student loan obligations until at or near the time the debtor has completed payments under a confirmed Chapter 13 plan. . . . [W]e can envision exceptional circumstances where the [Brunner v. New York State Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987)] factors could be predicted with sufficient certainty in advance of the conclusion of a Chapter 13 proceeding. Nevertheless, while we do not preclude debtors from seeking a discharge determination of student loan debts prior to the completion of payments under a confirmed Chapter 13 plan, . . . it will be most difficult for a debtor, who has advanced his education at the expense of government-guaranteed loans, to prove with requisite certainty that the repayment of his student loan obligations will be an “undue burden” on him during a significant portion of the repayment period of the student loans when the debtor chooses to make that claim far in advance of the expected completion date of his plan.47
[22]

In reported decisions concerning debts founded on contract or tort, courts generally hold that complaints to determine dischargeability are premature until the debtor completes payments under the plan.48 This makes sense because, except for student loans, restitution and drunk driving, claims sounding in tort or contract are discharged if the debtor completes payments under the plan.

[23]

In contrast, when the claims at issue are taxes, most courts have concluded that the debtor need not wait until discharge to file a complaint to determine dischargeability in a Chapter 13 case. For example, in Craine v. United States (In re Craine),49 the debtor listed the IRS with a priority claim for unpaid withholding taxes of the debtor’s corporation. The plan provided for full payment of priority claims. The IRS had notice but neither objected to confirmation nor filed a timely proof of claim.

[24]

After the claims bar date, the debtors filed a complaint to determine the dischargeability of the taxes that would not be paid to the IRS because the Service did not file a proof of claim.50 The IRS moved to dismiss on the ground that the complaint was not ripe because the debtor was not yet eligible for a discharge. The bankruptcy court disagreed and explained why it is sometimes important for Chapter 13 debtors to have access to court to determine the dischargeability of taxes early in a Chapter 13 case:

Because the tax liabilities in this case do not fall within the categories of debts listed in Section 523(c), a dischargeability complaint may be filed “at any time” pursuant to Rule 4007(b). . . . [T]he claim of the United States was scheduled . . . . The United States did not file a proof of claim, and the Order of Confirmation provides that the Trustee will not make any distribution to the United States under the confirmed plan . . . . The payments required under the plan as confirmed are scheduled to be completed no earlier than July 1, 1999. Consequently, according to the United States’ theory, the Debtors must wait more than three years to learn whether a $12,000 claim, which is not receiving distribution through the plan, will be discharged. The Debtors contend that early resolution of the issue will enable them to modify their plan to propose payment to the United States, and thereby prevent the accrual of additional interest and penalties. Given these circumstances, the Court finds that the Complaint to Determine Dischargeability of Debt is permitted under Rule 4007(b) . . . and that the matters raised in the Complaint are ripe for adjudication.51
[25]

In Clavelle v. United States (In re Clavelle),52 soon after confirmation of a 60-month plan, the debtors filed an adversary proceeding to determine the dischargeability of taxes. The United States moved to dismiss on the ground that the complaint was premature. The district court affirmed the bankruptcy court’s conclusion that the complaint was not premature because Bankruptcy Rule 4007(b) provides that a complaint to determine dischargeability “other than under § 523(c) may be filed at any time.”

[26]

Bankruptcy Rule 4007(b) perhaps is not a complete answer to this issue. Taxes are dischargeable in a Chapter 13 case unless the debtor seeks a hardship discharge under § 1328(b).53 Taxes described in § 507(a)(8)54 are priority claims in a Chapter 13 case and are entitled to full payment under § 1322(a)(2) as a condition for confirmation of any plan.55 However, the taxes that are excepted from discharge by § 523(a)(1) at a hardship discharge under § 1328(b) are not excepted from discharge at the completion of payments under § 1328(a). In Clavelle, a complaint to determine dischargeability of the sort contemplated by Bankruptcy Rule 4007(b) was not necessary to determine whether the tax claims were entitled to priority under § 507 and thus to full payment as a condition of confirmation. The extent of priority taxes was a question certainly ripe for decision without regard to dischargeability or Bankruptcy Rule 4007. It is not obvious why the court addressed the dischargeability of taxes in the first instance. Other courts have observed that it is premature to determine whether taxes are dischargeable prior to completion of payments under the plan.56

[27]

That Bankruptcy Rule 4007(b) permits the filing of a complaint to determine dischargeability “at any time” does not answer the question whether such a complaint is ripe or premature before completion of payments under the plan. As explained by one bankruptcy court in the context of a complaint to determine the dischargeability of a student loan filed soon after confirmation, “the fact that Federal Rule of Bankruptcy Procedure 4007(b) provides that a § 523(a)(8) proceeding ‘may be filed at any time’ is not controlling of the issue before the Court. The lack of a time limitation should not be interpreted as meaning that any proceeding filed pursuant to Bankruptcy Rule 4007(b) is ripe for adjudication.”57

[28]

Section 1328(b) permits the entry of a discharge “at any time after the confirmation of a plan” if certain conditions are met.58 Procedure for obtaining a so-called “hardship” discharge is not specified in the Rules. The general practice seems to be that a hardship discharge is requested by motion from the debtor.

[29]

In some jurisdictions, the debtor gives notice to all creditors of the motion for hardship discharge, and creditors have a specified time in which to file written objections; in the absence of a timely objection, the debtor submits an order for hardship discharge. In other jurisdictions, there is always a hearing on a debtor’s application under § 1328(b), with or without an objection from a party in interest. Some courts take evidence from the debtor at the hardship discharge hearing; others permit the debtor to submit an affidavit in support of the § 1328(b) motion. At a hearing on hardship discharge, the debtor has the burden of proving the conditions specified in § 1328(b).

[30]

A creditor that desires to intercept a debtor’s motion for a hardship discharge should always file a written objection and request a hearing. Although an objection to a debtor’s motion for hardship discharge is an objection to discharge that could require an adversary proceeding under Bankruptcy Rule 7001(4), there are no reported decisions requiring an objecting creditor to file an adversary proceeding to contest a Chapter 13 debtor’s request for discharge in advance of completion of payments.

[31]

Creditors are entitled to an opportunity to object to the dischargeability of debts when the debtor seeks a hardship discharge under § 1328(b). Unlike discharge after the completion of all payments under a plan under § 1328(a), if the debtor seeks a hardship discharge under § 1328(b), the fraud exceptions to discharge in § 523(a)(2), (4) and (6) and the property settlement exception in § 523(a)(15) are applicable and a special deadline for the filing of complaints under § 523(c) is provided in Bankruptcy Rule 4007(d).

[32]

Bankruptcy Rule 4007(d) requires that on the motion of a debtor for hardship discharge, the court shall fix a deadline for the filing of complaints to determine the dischargeability of debts under § 523(c) and the court shall give “no less than 30 days’ notice of the time fixed to all creditors in the manner provided in Rule 2002.”59 It has been held that a complaint objecting to discharge on a ground specified in § 523(c) that is only applicable at hardship discharge is premature when filed before the debtor has requested a hardship discharge.60

[33]

Bankruptcy Rule 4007(d) is anything but a model of clarity. The Rule does not specify how long creditors have to object to the dischargeability of debts under § 523(c) after a Chapter 13 debtor moves for a hardship discharge. The Rule does not specify from what date the period of time for objection will run. Rule 4007(d) does tell us that creditors are entitled to at least 30 days’ notice of the period for objecting to dischargeability, whatever that period may be. One interpretation of Bankruptcy Rule 4007(d) would be that the court must fix a time period for filing objections, fix the date from which that time period will commence and then give 30 days’ notice of both the period and the date of its beginning. Reasoning from Bankruptcy Rule 4007(c),61 bankruptcy courts might fix a 60-day period that begins 30 days after notice that the debtor is seeking a hardship discharge under § 1328(b). Neither the Code nor the Rules prevent a court from fixing a shorter period—conceivably the period could be as short as one day longer than the 30-day notice required by Rule 4007(d).

[34]

When the debtor is granted a hardship discharge under § 1328(b), jurisdiction to determine the dischargeability of debts under § 523(a)(2), (4), (6) and (15) is exclusively in the bankruptcy court, and the complaint under § 523(c) must be filed within the time period fixed by the court under Bankruptcy Rule 4007(d). A complaint to determine the dischargeability of debts after hardship discharge under other subsections of § 523(a) can be filed at any time in the bankruptcy court or in any state court that has jurisdiction over the debtor. The Chapter 13 case can be reopened without payment of an additional filing fee for the purpose of filing a complaint to determine the dischargeability of a debt.62

[35]

It has been held that the Chapter 13 trustee has standing to object to the overall discharge of a debtor in a Chapter 13 case, but the trustee lacks standing to object to the dischargeability of any individual debt.63 It is not clear what grounds could be asserted by the trustee or any party in interest to bar a debtor’s discharge in its entirety in a Chapter 13 case. There is no procedure for bringing a complaint to bar the debtor’s discharge under § 727 because § 727 is not applicable in Chapter 13 cases.64 A creditor or other party in interest might object to the entry of discharge if the debtor has not yet completed payments under the plan—the precondition for discharge stated in § 1328(a).65 However, an objection on the ground that the debtor has not completed payments under the plan is not an argument that the debtor is barred from receiving a discharge in the Chapter 13 case; rather, it is an objection that discharge is premature. Even if the objection is sustained, the debtor could complete payments under the plan and then be entitled to discharge under § 1328(a).

[36]

In one of the few reported cases in which a Chapter 13 trustee has formally objected to discharge, the debtor originally proposed a 36-month plan but completed payments seven months early. The Chapter 13 trustee attacked entry of the discharge, arguing that the debtor should be required to continue to make payments to creditors. The court rejected the argument.66 In In re Carr,67 the court sustained a trustee’s objection to entry of discharge when the debtor’s payments into the plan were insufficient to pay allowed claims as required by the confirmed plan. In one sense, the court in Carr denied the debtor a discharge. More accurately, the court refused entry of an order of discharge pending completion of payments under the plan. The debtor in Carr still had the opportunity to complete payments under the plan and then be entitled to discharge under § 1328(a).

[37]

Perhaps the closest analogue to an objection to discharge in a Chapter 13 case is a creditor’s motion to condition dismissal of the case that the debtor is precluded from discharging some or all debts in any future bankruptcy case. Discussed in detail elsewhere,68 some courts have interpreted § 349(a) to authorize “dismissal with prejudice”—here meaning dismissal with prejudice to the discharge of debt in a future bankruptcy case.69 These cases typically are initiated by motions to dismiss, not by motions or complaints to bar the debtor’s discharge. Once the Chapter 13 debtor has completed payments under the plan and is entitled to discharge under § 1328(a), it will be truly unusual facts to justify dismissal with prejudice under § 349(a). It has been held that entry of discharge in the Chapter 13 case renders moot a motion to dismiss filed, but not decided, earlier in the Chapter 13 case.70

[38]

Creditors have had little luck stopping Chapter 13 cases at the discharge stage. A creditor that failed to object to confirmation was barred from objecting to discharge under § 1328 when the debtor completed payments consistent with the confirmed plan.71 The message for creditors is that an objection to discharge is not a useful substitute for good advocacy in opposition to the plan earlier in the case.


 

1  11 U.S.C. § 1328(a).

 

2  See Linzy v. Keeton (In re Linzy), Nos. 4:96-BK-42297 E, 4:01-AP-4001, 2002 WL 32114564, at *3–*4 (Bankr. E.D. Ark. Aug. 30, 2002) (unpublished) (Discharge should have been entered when debtor completed payments under 36-month plans, but wasn’t because trustee failed to submit certificate of completion; entry of discharge rather than dismissal is appropriate remedy several years later when debtor brought adversary proceeding for a declaration of entitlement to discharge. “Upon the expiration of the Plan’s term and receipt of all Plan payments, the Trustee is required to file a final report so that the Court can grant the debtor a discharge and close the case. Fed. R. Bankr. P. 5009; 11 U.S.C. §§ 350(a), 704(9), and 1302(b)(2). Pursuant to 11 U.S.C. § 1328, the Court must grant a debtor a discharge upon completion of all plan payments as soon as it is practicable . . . . The Court’s practice is to wait until it receives a ‘Certificate of Final Payment and Application for Issuance of Order of Discharge’ from the Trustee’s office before entering the debtor’s discharge. . . . [T]he Trustee failed to file a Certificate of Final Payment upon the completion of Ms. Linzy’s Plan payments. . . . [T]he case should have been closed at that time . . . Ms. Linzy should not be prejudiced because her case was not closed when it should have been.”).

 

3  In re Avery, 272 B.R. 718, 728–31 (Bankr. E.D. Cal. 2002) (Chapter 13 debtors are not entitled to full-payment discharge until after trustee’s final report has been served on all creditors; confirmation order is vacated when timely filed proof of claim was misinterpreted and discharge was entered without payment. AIF filed a timely proof of claim complete in all respects except that it failed to state any amount due. AIF attached copies of promissory note. Trustee recorded AIF’s proof of claim as “$0.00.” Plan proposed to pay 100% over 60 months. Fifteen months after confirmation, trustee’s records showed that plan was paid in full. Trustee filed final report, and discharge was entered. AIF moved to vacate discharge approximately one year later. “It is vital to the accuracy of the final report that the debtor and creditors be served with it before the court approves it, discharges the debtor’s liability for pre-petition claims, and discharges the trustee from his duties. . . . Fed. R. Bankr. P. 5009 . . . requires notice, at least inferentially. . . . If parties in interest have the right to object to the final report, someone must serve them with it. . . . Logic suggests that the entry of a chapter 13 discharge, like approval of the final report, hinges upon a showing that claims were paid in accordance with the plan. . . . In the context of a chapter 13 case where the debtor has made all of the plan payments, the debtor is entitled to discharge if those payments permitted the trustee to pay claims ‘in accordance with the plan.’ The approval of the final report, then, signals to the court that it is appropriate both to discharge the debtor and close the estate because it has been fully administered. Conditioning a chapter 13 discharge on the approval of a final report may result in a significant lag between the debtor’s last plan payment and the entry of a discharge. This delay could exceed 90 days after the trustee mails the last dividend checks to creditors because 11 U.S.C. § 347(a) requires them to wait 90 ‘days after the final distribution under section . . . 1326’ before stopping payment on uncashed checks. . . . [A]ny delay in processing the debtor’s discharge pales in comparison to the delay inflicted upon the debtor’s creditors throughout the chapter 13 case. . . . In the future, before this court will issue a chapter 13 discharge, the trustee must serve the debtor, creditors, and the United States Trustee with a copy of his proposed final report along with a notice that these parties in interest have 30 days to object to it. . . . The trustee must mail the final report and notice 33 days before the deadline for filing objections.”).

 

4  See §§ 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders, 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.

 

5  See § 170.1 [ Methods of Paying Unsecured Claims ] § 101.3  Methods of Paying Unsecured Claims.

 

6  See § 170.1 [ Methods of Paying Unsecured Claims ] § 101.3  Methods of Paying Unsecured Claims.

 

7  See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment, 100.1 [ Deferred Payments Are Permitted ] § 73.4  Deferred Payments Are Permitted, 100.2 [ Interest Not Required, with Exceptions ] § 73.5  Interest Not Required, with Exceptions and 291.1 [ Treatment of Priority Claims ] § 136.1  Treatment of Priority Claims.

 

8  159 B.R. 538 (D. Neb. 1993).

 

9  159 B.R. at 539.

 

10  159 B.R. at 541–43. Accord Roberts v. Boyajian (In re Roberts), 279 F.3d 91, 92–93 (1st Cir. 2002) (Debtors that completed 60 monthly payments required by confirmed plan were not entitled to discharge because minimum dividend to unsecured creditors had not been paid and postpetition tax claims were not paid in full. Confirmed plan required 60 monthly payments of $474; unsecured creditors were guaranteed a 10% dividend; postpetition claims “shall be paid in monthly installments, within their appropriate class.” After confirmation, IRS filed postpetition claims for trust fund taxes. More than six years after confirmation, trustee moved to dismiss because debtors’ payments were insufficient to pay postpetition tax claims and 10% dividend. “[T]he courts uniformly have held that a confirmed chapter 13 plan provision requiring a fixed percentage return to unsecured creditors takes precedence over a companion provision prescribing the aggregate payments to be made to the chapter 13 trustee.” The debtors were mistaken “that their completion of the payment schedule prescribed in their confirmed plan relieved them of their clear responsibility to comply with the other provisions of the plan, including their obligation to pay all priority tax claims and a ten percent dividend on allowed unsecured claims.”); In re Delmonte, 237 B.R. 132, 134–35, 136–38 (Bankr. E.D. Tex. 1999) (Debtors have not completed payments and are not entitled to a discharge because plan contemplated payment of a deficiency claim to a creditor that repossessed and sold its collateral after confirmation. Confirmed plan provided that a creditor would repossess and foreclose upon its collateral and “the unsecured portion of the debt, if any, shall be treated as any other unsecured creditor.” In July of 1998, the trustee filed a final report and account. On August 6, 1998, the repossessing creditor filed an amended proof of claim for $26,975.61, representing the deficiency. “[I]n the case before the Court, the debtor has not completed their payments under the Plan. A Chapter 13 debtor has a two-fold obligation under a confirmed plan. It ‘must make the plan payments required of it and those payments must be sufficient to do what the plan proposes.’ . . . [N]either the number of payments nor percentage of distribution alone should be dispositive of the completion of payments issue.”); In re Goude, 201 B.R. 275, 277 (Bankr. D. Or. 1996) (Debtors have completed 60 monthly payments but are not entitled to a discharge because $3,331 is needed to complete the payment of priority claims and the debtor is not able to modify the plan to pay that amount. “In order for the debtors’ confirmed plan to comply with § 1322, it must provide for payment, in full, of all debts entitled to priority. Since the debtors have not paid the priority debts in full, they have not completed all of the payments under the plan such as would entitle them to receive a discharge pursuant to § 1328(a).” Because the debtors cannot modify the plan to solve the problem, the case is dismissed.); In re Rivera, 177 B.R. 332 (Bankr. C.D. Cal. 1995) (Approving the logic of In re Carr, 159 B.R. 538 (D. Neb. 1993), and In re Phelps, 149 B.R. 534 (Bankr. N.D. Ill. 1993), “completion of payments” occurs when the specified percentage of payment of unsecured claims is accomplished, not when a specified period of time has passed. Confirmed plan provided that unsecured claim holders would receive 65% of allowed claims and debtor would make monthly payments for three years. Because the total of allowed claims substantially exceeded scheduled amounts, at the end of 36 months, the plan was $15,000 shy of paying the 65% dividend. On the trustee’s motion to dismiss, the court found that the debtors had not completed their payments under the plan for purposes of discharge under § 1328(a) because 36 months was insufficient to pay unsecured claim holders the 65% required by the plan.). But see In re Friauf, 172 B.R. 273, 276 (Bankr. D. Minn. 1994) (Because priority claim of the IRS was “provided for” in the confirmed plan, proof of claim of the IRS purposefully filed nearly four and one-half years after the petition is allowable and is entitled to payment consistent with the confirmed plan but only until the debtor completes payments under the plan. “[T]he plan originally filed provided for payment in full of priority claims as required by § 1322(a). It met the standards for confirmation. Now that the IRS has filed its claim it is entitled to be paid on a priority basis until such time as Debtor completes payments under the plan. As soon as Debtor completes payments under the plan, however, she is entitled to a discharge of all debts ‘provided for’ by the plan. . . . Debtor will complete her payments under the plan before she pays all priority claims in full. This is not the fault of the Debtor. Rather, it is due to the extreme and purposeful delay of the IRS in filing its claim. A plain reading of sections 1322(a) and 1328(a) of the Bankruptcy Code compels the conclusion that, while the IRS is entitled to be paid on a priority basis, in futuro, Debtor is entitled to a discharge once she has made all payments under the plan.”).

 

11  See § 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment for discussion of the full-payment requirement with respect to priority claims; see § 160.1 [ In General: Plan Payments vs. Hypothetical Liquidation ] § 90.1  In General: Plan Payments vs. Hypothetical Liquidation for discussion of the minimum payment required by the best-interests-of-creditors test; see § 163.1 [ In General ] § 91.1  In General for discussion of the amount required by the projected disposable income test. See also § 170.1 [ Methods of Paying Unsecured Claims ] § 101.3  Methods of Paying Unsecured Claims for discussion of the different methods of paying the minimum distribution required for unsecured claims.

 

12  No. C 01-0848 MMC, 2002 WL 31159110 (N.D. Cal. Sept. 25, 2002) (unpublished).

 

13  See § 170.1 [ Methods of Paying Unsecured Claims ] § 101.3  Methods of Paying Unsecured Claims for the definition and discussion of “pot” plans.

 

14  See § 98.1 [ Plan Must Provide Full Payment ] § 73.1  Plan Must Provide Full Payment.

 

15  2002 WL 31159110, at *4–*6.

 

16  See § 253.1 [ Standing, Timing and Procedure ] § 126.1  Standing, Timing and Procedure.

 

17  11 U.S.C. § 1329(a).

 

18  See §§ 253.1 [ Standing, Timing and Procedure ] § 126.1  Standing, Timing and Procedure, 255.1 [ Does Disposable Income Test Apply? ] § 126.3  Does Disposable Income Test Apply? and 268.1 [ To Extend or Reduce the Time for Payments ] § 127.11  To Extend or Reduce the Time for Payments.

 

19  Profit v. Savage (In re Profit), 283 B.R. 567, 577 (B.A.P. 9th Cir. 2002) (Debtors were entitled to discharge when trustee accepted money completing payments under the plan. Confirmed 60-month plan required debtors to pay postconfirmation tax refunds to the trustee. Unbeknownst to the trustee, the debtors acquired real property, received forgiveness of indebtedness and then sold real property after confirmation. When the trustee found out about the forgiveness of indebtedness, the trustee moved to modify the plan to require the debtors to contribute the new value to increase payments to creditors. While the motion to modify was pending, the debtors tendered and the trustee accepted a lump-sum payment of the balance due under the original plan, including the postconfirmation tax refunds. “Trustee did not move to dismiss Debtors’ chapter 13 case on the grounds that they did not turn over the Proceeds for distribution. Instead, Trustee unconditionally accepted the lump sum payment and the 1998 tax refund in completion of the plan payments without any reservation concerning the outcome of the motion to modify. . . . Debtors completed their chapter 13 payments, and thus they are entitled to a discharge under § 1328(a).”); Bayshore Nat’l Bank of LaPorte v. Smith, 252 B.R. 107, 109–10 (E.D. Tex. 2000) (Lump-sum payoff of plan with gift from family completed payments under the plan and entitled debtor to a discharge. “Courts should not view the number of payments or the duration of a plan as controlling on the issue of whether a plan has been completed or not. . . . Here, the debtor completed her plan payments when she paid the balance of her plan from a gift that she obtained from her parents. The debtor discharged her obligation to her creditors as provided for in her confirmed plan and the bankruptcy court was correct in granting her a discharge.”); Casper v. McCullough (In re Casper), 154 B.R. 243, 246–47 (N.D. Ill. 1993) (Once Chapter 13 debtors have paid to the Chapter 13 trustee the amount necessary to pay the percentage of unsecured claims called for by the confirmed plan, payments under the plan are complete and postconfirmation modification under § 1329(a) is not available. Confirmed plan called for payment of 10% of unsecured claims over 60 months. Because priority claims were allowed at lower amounts than scheduled and because several claim holders did not file proofs of claim, the debtors were able to tender a lump sum to the trustee approximately two years after confirmation in an amount sufficient to pay 10% of the allowed claims of unsecured creditors. Two days after receiving the money from the debtors, the Chapter 13 trustee moved to modify the plan, claiming that the debtors could pay 80% of allowed unsecured claims over the 60- month period originally provided in the plan. “[W]hen a debtor completes his or her obligation to a class of creditors as provided in a plan, his or her payments are complete. . . . The bankruptcy courts should look to the substance of the plan and the nature of the debtor’s total obligation to the allowed creditors in order to discern when payments under a plan are completed. . . . [T]his court does not consider the number of payments or the duration of a plan as controlling. . . . [W]hen the debtor completes payments under the plan to the Trustee which satisfies his or her percentage obligation to each class of creditors, there is no period between that point and the point at which the bankruptcy court enters an order discharging the debt within which an amendment is possible. . . . Accordingly, the ‘completion of payments’ under 11 U.S.C. § 1329(a) occurs when the debtor pays to the Trustee, the full amount the plan requires the debtor to pay which satisfies the percentage the debtor proposed to pay to a class of creditors.”); In re Richardson, 283 B.R. 783, 802 (Bankr. D. Kan. 2002) (Trustee’s objection to motion for discharge on the ground that insurance proceeds received after confirmation should be paid to creditors was an untimely motion to modify because the debtors completed payments under the plan soon after filing motion for discharge. Plan confirmed in 1997 required the debtors to pay $64,800 over 36 months at $1,800 per month. In 1998, the debtors received $400,000 of life insurance proceeds when their adult son died in an automobile acc,ident. In August 2000, the debtors filed a motion for discharge. The trustee objected arguing that the insurance proceeds were “disposable income” that must be committed to the plan. “Since the debtors have completed their plan payments in this case, the trustee can no longer obtain modification of the plan to effect the result he desires. . . . In their motion for discharge, the Richardsons maintained that they had completed the payments according to the plan terms. In the motion, they reviewed the status of their 36-month plan payments and noted that an additional payment of $3,519.02 would complete their payments and entitle them to a discharge under § 1328(a). This is correct since the trustee’s records in the file, of which the court takes judicial notice, show that he received a $3,519.02 payment on September 5, 1997 [sic 2000?]. Additionally, the records show that with this payment, the Richardsons exceeded their $64,800 plan obligation by $400.”); In re Parffrey, 264 B.R. 409, 414 (Bankr. S.D. Tex. 2001) (Bankruptcy court cannot dismiss Chapter 13 case for failure of the debtor to file or pay postpetition federal income taxes when debtor tendered the completion of payments to the trustee one day before the hearing on the IRS’s motion to dismiss. “If the Court had discretion in the matter, the Court would deny a discharge and dismiss the case for bad faith . . . . But Congress did not see fit to give bankruptcy judges discretion on this point. The statute provides that when payments are complete, the Court shall grant a discharge.”); In re Smith, 237 B.R. 621, 623, 625–27 (Bankr. E.D. Tex. 1999) (Nothing in Bankruptcy Code prevents a Chapter 13 debtor from prepaying a plan with a gift from family members without notice to creditors; debtor is entitled to a discharge. Confirmed plan provided that the debtor would pay $14,495.27 in 56 monthly payments. Prior to the 27th month, debtor received a gift from her family of $7,755.55—the balance due for months 27–56 under the plan. “The Debtor tendered that sum to the Trustee. The Trustee accepted the money and thereafter distributed it to creditors pursuant to the provisions of the confirmed Plan.” The trustee then issued a notice of plan completion to which a creditor objected. Creditor argued that lump sum payment was in effect a postconfirmation modification under § 1329 to change the duration of the plan that was not confirmable because § 1325(b) required payments for at least 36 months. . . . BNB attempts to transpose the real issue of the Debtor’s entitlement to discharge under the language of § 1328(a) into a dispute regarding a post-confirmation modification of a chapter 13 plan under § 1329(a). . . . [T]he Debtor has not sought, nor does she need, a plan modification. . . . [T]his Debtor has completed all payments required by the confirmed Chapter 13 plan and is entitled to the entry of a discharge order under § 1328(a). . . . [W]ithout providing advance notice to any party, a Chapter 13 debtor may tender all the payments due and owing under a confirmed plan on an accelerated basis and thereby create an entitlement to a discharge. . . . Once all of the payments prescribed by the confirmed plan are made, whether received by the trustee singularly over a series of months, or received in an aggregate amount in one prepayment, this Court is of the opinion that such a debtor has accomplished a ‘completion . . . of all payments under the plan’ and becomes at that moment statutorily entitled to the entry of a discharge under the plain language of § 1328(a). . . . This statutory scheme, under which a Chapter 13 debtor may tender all the payments due and owing under a confirmed plan on an accelerated basis, and thereby create an entitlement to a discharge under § 1328(a) without providing advance notice to any party, advances the interests of creditors in the vast majority of cases by encouraging debtors to investigate and to utilize all available means to expedite the completion of plan payments to creditors.”); In re Bergolla, 232 B.R. 515, 517–18 (Bankr. S.D. Fla. 1999) (Debtors are entitled to a discharge because they tendered to the trustee a lump sum equivalent to the remaining payments under their 60-month plan. On February 6, debtors paid the trustee $26,693.52 from the sale of exempt homestead property. This was the amount remaining due under the 60-month plan. On February 10, the debtors’ plan was confirmed. The debtors then moved to compel the trustee to issue a final report and discharge. “Debtors chose to pay their debts by selling their family home, an exempt asset. . . . [T]heir homestead . . . would not be available for distribution to their unsecured creditors. . . . [T]he creditors not only receive more than they would have in a Chapter 7, but also receive the full amount to be paid to them under the confirmed plan in one lump sum payment rather than in individual payments spread out over the course of four and a half years. The present value of such payments is obviously an additional benefit to be reaped by the creditors. Although 11 U.S.C. § 1329 permits the postconfirmation modification of a Chapter 13 Plan, the Court finds that modification of the Debtors[’] plan in this case is unwarranted. . . . The Debtors should be granted a discharge. . . . To sell one’s homestead, an exempt asset otherwise unreachable by creditors, and apply the proceeds thereof toward paying unsecured creditors is something that should be encouraged and rewarded.”); In re Jordan, 161 B.R. 670 (Bankr. D. Minn. 1993) (In dicta, Chapter 13 plan is completed and the debtor is entitled to discharge where payroll deductions exceed the amount necessary to pay 50% of unsecured claims consistent with the confirmed plan. That the trustee has accumulated excess funds that could pay a higher percentage to unsecured claim holders is irrelevant. Once the debtor paid to the trustee sufficient funds to pay unsecured claim holders the 50% called for by the plan, the trustee is without standing to seek modification of the plan and the debtor is entitled to entry of discharge.). Accord In re Phelps, 149 B.R. 534 (Bankr. N.D. Ill. 1993); In re Chancellor, 78 B.R. 529 (Bankr. N.D. Ill. 1987).

 

20  279 B.R. 284 (Bankr. S.D. Cal. 2002).

 

21  279 B.R. at 290.

 

22  314 F.3d 567 (11th Cir. 2002).

 

23  314 F.3d at 570–71.

 

24  See § 91.2  Projected (Disposable) Income and § 92.1  In General for discussion of tax refunds as projected disposable income at confirmation.

 

25  See discussion beginning at § 91.1  In General and § 92.1  In General.

 

26  See, e.g., Abbott v. Stewart (In re Abbott), Nos. WY-02-058, 98-21571, 2003 WL 22003359 (B.A.P. 10th Cir. Aug. 25, 2003) (unpublished) (Debtor not entitled to discharge after only 33 of 36 payments required by confirmed plan; provision that tax refunds would reduce the term of the plan could only shorten the plan if the debtor had already made the 36 payments otherwise required.). See also In re Jones, 301 B.R. 840, 845 (Bankr. E.D. Mich. 2003) (In re Freeman, 86 F.3d 478 (6th Cir. 1996), requires that “tax refunds constitute disposable income that must be applied to plan payments”; “base plan” amended to include tax refunds fails disposable income test because base amount was not also modified to reflect the addition of the tax refunds.).

 

27  271 B.R. 383 (B.A.P. 10th Cir. 2002), aff’d, 342 F.3d 1194 (10th Cir. 2003).

 

28  271 B.R. at 384.

 

29  See § 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.

 

30  See § 351.1 [ Long-Term Debts ] § 158.7  Long-Term Debts.

 

31  See § 158.1  Alimony, Maintenance or Support and § 159.5  Domestic Support Obligations: § 523(a)(5).

 

32  See Pub. L. No. 101-508, 104 Stat. 1388 (Nov. 5, 1990); Pub. L. No. 101-581, 104 Stat. 2865 (Nov. 15, 1990); Pub. L. No. 101-647, 104 Stat. 4916 (Nov. 29, 1990).

 

33  See § 158.2  Student Loans and § 159.6  Student Loans: § 523(a)(8).

 

34  See § 158.3  Driving while Intoxicated and § 159.8  Boating or Flying while Intoxicated: § 523(a)(9).

 

35  See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

36  11 U.S.C. § 1328(a)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 302, 108 Stat. 4106 (1994). See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4  Criminal Restitution and Criminal Fines.

 

37  See below in this section and see § 157.1  Broadest Discharge Available§ 157.2  BAPCPA Shrank the Discharge, § 158.1  Alimony, Maintenance or Support§ 159.5  Domestic Support Obligations: § 523(a)(5) and § 159.7  Willful or Malicious Injury: § 1328(a)(4).

 

38  See below in this section and see § 160.1  In General, § 160.6  Exceptions to Hardship Discharge before BAPCPA and § 160.7  Exceptions to Hardship Discharge Added or Changed by BAPCPA.

 

39  See Fed. R. Bankr. P. 4007(e), 7001(6). See, e.g., Gould v. Gregg, Hart, Farris & Rutledge, 137 B.R. 761 (W.D. Ark. 1992) (Determination whether a debt for attorneys’ fees awarded to the debtor’s ex-spouse is dischargeable in a Chapter 13 case requires the filing of an adversary proceeding. That the debtor failed to object to addressing the issue of dischargeability in the context of an objection to confirmation could waive the procedural defect; however, a real party in interest, the debtor’s ex-wife, was not properly before the bankruptcy court when it ruled on the dischargeability of the debt. Portion of the bankruptcy court’s order ruling on the nondischargeability of the attorneys’ fee was vacated and remanded.).

 

40  See Neal v. Neal (In re Neal), 302 B.R. 275, 279 (B.A.P. 8th Cir. 2003) (Former spouse’s appeal of discharge order is moot because her support debt is nondischargeable under § 1328(a)(2); appeal of order of discharge “is of no practical significance. . . . [W]e can offer Connie no relief that is not already available to her.”).

 

41  Fed. R. Bankr. P. 4007(a).

 

42  The conditions to this exception have changed several times since 1990. See § 158.2  Student Loans and § 159.6  Student Loans: § 523(a)(8).

 

43  11 U.S.C. § 523(a)(8).

 

44  See, e.g., Bender v. Educational Credit Mgmt. Corp. (In re Bender), 297 B.R. 126 (D. Neb. 2003) (Debtor’s § 523(a)(8) complaint filed a few months after Chapter 13 petition is not ripe and must await completion of payments under the plan.); Pair v. United States (In re Pair), 269 B.R. 719, 721 (Bankr. N.D. Ala. 2001) (Adopting Raisor v. Education Loan Servicing Center (In re Raisor), 180 B.R. 163 (Bankr. E.D. Tex. 1995), “[t]he fact that a complaint under § 523(a)(8) can be filed at anytime [sic] under Rule 4007(b) does not mean that such a complaint is actually ripe for adjudication. . . . [T]he issue is not ripe for adjudication until the end of a Chapter 13 case when the debtor’s financial circumstances are clearer.”); Soler v. United States (In re Soler), 250 B.R. 694, 696–97 (Bankr. D. Minn. 2000) (The dischargeability of student loans under 11 U.S.C. § 523(a)(8) and 42 U.S.C. § 294f(g) cannot be determined until the debtor becomes eligible for a discharge. “Under § 523, the dischargeability of most debts is dependent entirely on the nature of the debt itself . . . . However, the dischargeability of a student loan depends not only on the nature of the debt, but also depends on the debtor’s situation at the time of discharge. For example, under § 523(a)(8) a student loan will be discharged if excepting it from the debtor’s discharge would constitute an undue hardship. This determination revolves entirely around how survival of the debt would affect the debtor financially. Similarly, a determination of unconscionability under 42 U.S.C. § 294f(g) will depend on the debtor’s situation at the time of discharge. Thus, a determination of dischargeability is based on the situation (which admittedly might include a determination of the debtor’s future prospects) at the time of discharge. Thus, any trial must occur after the discharge or at least close enough in time to the discharge to enable the parties to present competent evidence for the court to make a determination of the debtor’s situation as of the date of the discharge. In addition, I agree that such a determination is not ripe. A dischargeability determination is only necessary if there is a discharge. Under the current circumstances, the debtor’s discharge is not only remote in time, it is speculative.”); Raisor v. Education Loan Servicing Ctr., Inc. (In re Raisor), 180 B.R. 163, 166–67 (Bankr. E.D. Tex. 1995) (Debtors’ complaint to determine the dischargeability of student loans filed soon after confirmation is premature because the court cannot determine the “undue hardship” criteria until the debtor becomes entitled to a discharge at the completion of payments. “The Fifth Circuit in Rubarts v. First Gibraltar Bank (In re Rubarts), 896 F.2d 107, 109 (5th Cir. 1990), stated in dictum that the issue of dischargeability is not ripe under Chapter 13 until either after the Chapter 13 plan has been successfully completed or the debtor has applied for a hardship discharge under § 1328(b). Because neither of these two events has occurred to date, the matter before the Court is premature. . . . At this juncture, neither the parties nor the Court can fully address [the undue hardship] factors. . . . [I]t is speculative at this time what the Debtors’ income and expenses will be at the time the Plan is scheduled for completion. . . . [B]ecause other unsecured debts will be discharged after the completion of the Plan, the elimination of these debts could facilitate the Debtors’ abilities to repay the PLUS Loans. . . . [B]y attempting to discharge the PLUS Loans prior to the completion of the Plan, the Debtors are not demonstrating a good faith effort to repay the obligation. . . . [T]he Court can best follow congressional intent of preserving student loans from discharge if the Court can fully and accurately analyze the Debtors’ financial condition at the time the discharge is granted. . . . [B]ecause there is uncertainty regarding whether the Plan will be completed and a discharge granted, proceeding further at this time is an inefficient use of very limited judicial resources. . . . [T]he fact that Federal Rule of Bankruptcy Procedure 4007(b) provides that a § 523(a)(8) proceeding ‘may be filed at any time’ is not controlling of the issue before the Court. The lack of a time limitation should not be interpreted as meaning that any proceeding filed pursuant to Bankruptcy Rule 4007(b) is ripe for adjudication.”); United States v. Cleveland, 89 B.R. 69 (B.A.P. 9th Cir. 1988); United States v. Williams (In re Williams), 96 B.R. 149 (Bankr. N.D. Ill. 1989); United States v. Dunevitz (In re Dunevitz), 94 B.R. 190 (Bankr. D. Colo. 1988). See also In re Battrell, 105 B.R. 65 (Bankr. D. Or. 1989). See also § 158.2  Student Loans and § 159.6  Student Loans: § 523(a)(8).

 

45  United Student Aid Funds Inc. v. Taylor (In re Taylor), 223 B.R. 747, 751 (B.A.P. 9th Cir. 1998) (Debtors’ complaint to determine the dischargeability of student loans is timely at any time during Chapter 13 case. Debtors filed a complaint to determine the dischargeability of student loans under § 523(a)(8) more than two months before confirmation of a plan. “Under Federal Rule of Bankruptcy Procedure . . .  4007(b), a § 523(a)(8)(B) action can be brought at any time. . . . Superior Court v. Heincy (In re Heincy), 858 F.2d 548 (9th Cir. 1988) . . . is distinguishable. In Heincy, the debt was for criminal restitution. . . . Such a debt is dischargeable in a chapter 13 upon completion of the plan payments. . . . However, student loans are excepted from a § 1328 discharge. . . . United States v. Cleveland (In re Cleveland), 89 B.R. 69, 72 (9th Cir. B.A.P. 1988), . . . is also distinguishable. . . . HEAL loans cannot be discharged until ‘after the expiration of the seven–year period . . . .’ . . . In Cleveland, we held that the complaint was ‘premature’ because the clear language of § 292f(g) prohibited a discharge until the expiration of the § 292f(g) waiting period. . . . [S]tudent loans can be discharged pursuant to § 523(a)(8) if the petition is filed seven years after the loan first became due or repayment will cause a debtor undue hardship. . . . The filing of a complaint at any time to discharge a student loan based on undue hardship does not conflict with any statutory right or procedure or with public policy.”).

 

46  325 F.3d 541 (4th Cir. 2003).

 

47  325 F.3d at 547. Accord Cota v. United States Dep’t of Educ. (In re Cota), 298 B.R. 408, 416–17 (Bankr. D. Ariz. 2003) (Debtor is not premature to bring § 523(a)(8) adversary proceeding in second year of Chapter 13 case because, applying Brunner v. New York Higher Education Services Corp., 831 F.2d 395 (2d Cir. 1987), test, “[e]ven after they complete their Chapter 13 Plan, the Debtors will not, based on their income and expenses, be able to maintain a minimal standard of living for themselves and their dependents and pay the Student Loan Obligation.”).

 

48  See Nikoloutsos v. Nikoloutsos, 222 B.R. 297 (E.D. Tex. 1998) (Bankruptcy court appropriately granted summary judgment to the debtor in a dischargeability complaint filed by state court plaintiff holding a judgment for malicious assault by the debtor on the ground that the complaint was not ripe for adjudication. Because the issue of dischargeability under § 1328(a) does not ripen until the debtor becomes entitled to discharge by completing payments, dismissal without prejudice of the victim’s complaint to determine dischargeability was appropriate.), rev’d on other grounds, 199 F.3d 233 (5th Cir. 2000); Oseen v. Walker (In re Oseen), 133 B.R. 527 (Bankr. D. Idaho 1991) (Covenant not to compete may be a “claim” that can be discharged under § 1328; however, debtor’s complaint to determine dischargeability of covenant is premature when covenant is binding for five years and the term of the confirmed plan is 56 months. State court injunction prohibiting debtor from violating the covenant is not dischargeable even upon completion of payments under the plan.).

 

49  206 B.R. 598 (Bankr. M.D. Fla. 1997).

 

50  See §§ 279.1 [ Priority Claims, Including Requests for Payment of Administrative Expenses ] § 132.6  Priority Claims, Including Requests for Payment of Administrative Expenses and 288.1 [ Failure to File Proof of Claim ] § 135.5  Failure to File Proof of Claim.

 

51  206 B.R. at 600–01.

 

52  1994 U.S. Dist. LEXIS 18203 (W.D. La. Dec. 12, 1994), and No. 93-2059, 1994 WL 780695 (W.D. La. Dec. 8, 1994).

 

53  See § 157.1  Broadest Discharge Available§ 157.2  BAPCPA Shrank the Discharge, § 160.6  Exceptions to Hardship Discharge before BAPCPA and § 160.7  Exceptions to Hardship Discharge Added or Changed by BAPCPA.

 

54  11 U.S.C. § 507(a)(8), formerly 11 U.S.C. § 507(a)(7), redesignated by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994).

 

55  See § 73.1  Plan Must Provide Full Payment, § 136.1  Treatment of Priority Claims, § 136.2  Taxes before BAPCPA and § 136.3  Taxes after BAPCPA.

 

56  See Lilley v. United States (In re Lilley), 181 B.R. 809, 814 (Bankr. E.D. Pa.) (In an aside, it is “premature” to determine whether obligations to the IRS are dischargeable prior to completion of payments under the plan and “the ripening of his eligibility for discharge.”), aff’d in part, rev’d in part, 185 B.R. 489 (E.D. Pa. 1995), rev’d, 91 F.3d 491 (3d Cir. 1996).

 

57  Raisor v. Education Loan Servicing Ctr., Inc. (In re Raisor), 180 B.R. 163, 167 (Bankr. E.D. Tex. 1995). Accord Pair v. United States (In re Pair), 269 B.R. 719 (Bankr. N.D. Ala. 2001).

 

58  See discussion beginning at § 160.1  In General.

 

59  Fed. R. Bankr. P. 4007(d).

 

60  See In re Auld, 187 B.R. 351, 353 (Bankr. D. Kan. 1995) (Pro se former spouse’s letter filed with the clerk is treated as an objection to confirmation and as an objection to discharge. Claim is not in the nature of alimony, maintenance or support and can be nondischargeable only under new § 523[(a)](15). “If debtor does not complete his plan payments and moves the Court for a hardship discharge, Drummond may reassert her objection to discharge under § 523(a)(15). If she does so, and the debtor cannot make the factual showings required by § 523(a)(15), Drummond will prevail. However, at this point in the proceeding, the objection is premature.”).

 

61  Bankruptcy Rule 4007(c) fixes the deadline for filing complaints to determine the dischargeability of debts under § 523(c) as “no later than 60 days after the first date set for the meeting of creditors under section 341(a).” Rule 4007(c) is not applicable in Chapter 13 cases. Moreover, when a Chapter 13 debtor requests a discharge in advance of the completion of payments, there will be no new meeting of creditors under § 341(a) from which to count the 60-day period in Bankruptcy Rule 4007(c).

 

62  Fed. R. Bankr. P. 4007(b). See In re Wolff, 175 B.R. 27 (Bankr. E.D. Ark. 1994) (It is appropriate to reopen Chapter 13 case to permit the IRS to file a complaint to determine the dischargeability of its claim. United States filed a secured claim that apparently was not paid through the plan, and the parties disputed whether the government’s lien survived discharge. That the United States failed to object to confirmation does not preclude reopening of the case to determine the extent of the discharge or to determine whether the discharge should be revoked.).

 

63  In re Dunn, 83 B.R. 694 (Bankr. D. Neb. 1988).

 

64  In re Meltzer, 11 B.R. 624 (E.D.N.Y. 1981); Cornett v. Galt (In re Galt), 70 B.R. 57 (Bankr. S.D. Ohio 1987); In re Ponteri, 31 B.R. 859 (Bankr. D.N.J. 1983).

 

65  See discussion above in this section.

 

66  In re Moss, 91 B.R. 563 (Bankr. C.D. Cal. 1988).

 

67  159 B.R. 538 (D. Neb. 1993). See discussion of Carr above in this section.

 

68  See § 153.2  Consequences of Dismissal Added or Changed by BAPCPA and § 153.3  Court-Imposed Conditions and Restrictions on Dismissal.

 

69  See, e.g., Leavitt v. Soto (In re Leavitt), 171 F.3d 1219 (9th Cir. 1999) (Chapter 13 case dismissed with prejudice bars future discharge of the debtor’s current debts under § 349(a).).

 

70  See Forbes v. Forbes (In re Forbes), 218 B.R. 48, 52 (B.A.P. 8th Cir. 1998) (Entry of discharge renders moot motion to dismiss pending for two years but not ruled upon by the bankruptcy court. “[T]he Bankruptcy Code required entry of the discharge and . . . Grace bears some measure of the blame by failing to press her dismissal motion. Therefore, we conclude that the bankruptcy court did not abuse its discretion in refusing to vacate the discharge order.”).

 

71  West v. Costen, 826 F.2d 1376 (4th Cir. 1987).