36-month or 60-month – In the M.D. Fla., you are required to stay for at least one.
Chapter 13 debtors in the Middle District of Florida, Fort Myers Division were dealt a hard blow by the court recently. The issue relates to early completion of a Chapter 13 plan once confirmed. To give a little foundation information, Chapter 13 requires a debtors to pay what they can afford to pay for a period of 3 to 5 years (5 years is mandatory of above median income families). In the past, once a plan was confirmed, if a debtor was able to pay the balance early from a source of funds not attachable by the bankruptcy such as family help or from an exempt asset like a retirement account, they could get out of bankruptcy early.
It is well-settled in the 11th Circuit (the Circuit covering Florida) that Chapter 13 cases cannot be confirmed unless the debtors provide payments for the applicable 3 to 5 year term unless a debtor is paying 100% of the claims. This was decided by the Eleventh Circuit Court of Appeals in the 2010 case In re Tennyson. Following the Tennyson decision, the local Chapter 13 Trustee began objecting to early payouts on the basis that per the confirmed plan and reasoning of Tennyson, early payoff was no longer available.
The Debtors in the recent opinion issued by the bankruptcy court requested their plan be modified to a one time payoff amount. The Debtors’ argument was that confirmation of a plan is governed by a different set of statutory requirements than modification and the provision concerning modification did not have a durational requirement making Tennyson inapplicable.
The bankruptcy court ultimately disagreed and stated it must consider all of the confirmation requirements in modification with much of its reasoning weighing towards the possibility of more money for the creditors. The problem with the opinion anticipating more money for the creditors is the exact opposite can occur as well, i.e. the debtor could lose income and modify the plan payment downward, move for a hardship discharge, or convert to chapter 7. Had the debtor been allowed to payout early, the creditors would have received all of the anticipated funds and at an earlier time.
Besides disagreeing with the court’s decision, the begging question really is why is the trustee objecting – why is there a gamble for more money, especially in these hard economic times when most incomes are not expected to increase?
This Blog was written by Attorney David Fineman, Esq. of The Dellutri Law Group, P.A. Mr. Fineman practices Bankruptcy Law, Fair Credit Reporting Act Law, Fair Debt Collection Practices Act Law and in other areas of Consumer Law.
