Mildred Dukes v. Suncoast Credit Union: Potential for Uniformity on Discharge of Mortgage Loan Debt in Chapter 13 Bankruptcy Cases in the Eleventh Circuit

Author: Starlett M. Massey

As a general rule, 11 U.S.C. § 1328 (“Section 1328”) states that a debtor is discharged of all debts that are either (i) provided for by the plan or (ii) disallowed.  Section 1328 establishes a few exceptions to discharge, one of which pertains to certain long-term debts that mature after the final plan payment, including a mortgage that matures after completion of a plan (“Long-term Mortgage”).  Section 1328(a)(1) excludes from discharge debts that are “provided for under section 1322(b)(5),” the Bankruptcy Code provision which allows debtors to cure any default and maintain regular payments on both unsecured and secured claims that mature after the final plan payment.  Thus, Section 1328 explicitly states Long-term Mortgages that are provided for by a Chapter 13 plan are not discharged.  Put another way, if a debtor is curing arrearages and maintaining payments on a Long-term Mortgage through a Chapter 13 plan, the exception clearly applies and the debt is not discharged.

However, Section 1328 does not explicitly address situations where a Long-term Mortgage is paid outside a Chapter 13 plan and left unaffected.  Additionally, Section 1328 does not provide an exception from discharge for a mortgage that matures prior to the final plan payment (“Short-term Mortgage”).  The general rule of discharge, thus, applies to a Short-term Mortgage: the debt is discharged if it is either provided for by the plan or disallowed.

As a result, bankruptcy courts have reached varied decisions regarding when certain mortgage loans are discharged, based on the interpretation of “provided for by the plan.”  The United States Supreme Court discussed the meaning of “provided for by the plan” as used by Section 1322(b)(5) in a different context in the case of Rake v. Wade.[1]  The Rake Court stated, “[t]he most natural reading of the phrase to ‘provid[e] for by the plan’ is to ‘make a provision for’ or ‘stipulate to’ something in a plan.”[2]

Two schools of thought have developed with regard to whether Long-term and Short-term Mortgages are discharged in Chapter 13 based on the Rake Court’s interpretation. For purposes of this discussion, they are referred to as the Broad View and the Narrow View.  The broader interpretation holds that a mere reference to a claim, even just a statement that the claim will be paid directly by the debtor outside the plan, amounts to the claim being “provided for by the plan.”  This view holds that a claim is discharged if it is merely referenced by a plan, unless one of the exceptions to discharge listed in Section 1328(a) applies (the “Broad View”).  According to the Broad View, if a Chapter 13 plan states a Short-term Mortgage will be paid outside the plan, the debt is still “provided for by the plan” and subject to discharge.[3]  Under the logic of this view, a Long-term Mortgage paid outside the plan would be considered “provided for by the plan.”  One might think, under this logic, the claim would then fall under the exception from discharge of Section 1328.  That is, if the claim is considered provided for under the plan, then it would also be considered provided for under section 1322(b)(5).  However, at least one court, has held a Long-term Mortgage that is paid outside the plan and left unaffected is not “provided for under section 1322(b)(5),” and, thus, is not excepted from discharge under Section 1328(a)(1).[4]  Under the Broad View, if a mortgage does not fall under the exception and is paid outside the plan, it would be discharged.  The curious result is that a mortgage would only be non-dischargeable if a debtor is curing arrearages.  If a debtor is current on a mortgage and merely continues to pay the regular payments, the debt would be discharged upon completion of a plan.

The other school of thought, a more narrow interpretation of “provided for by the plan,” holds that a claim that is paid directly by the debtor outside the plan is not considered “provided for by the plan,” and is, thus, not discharged (the “Narrow View”).  According to the Narrow View, if a Chapter 13 plan states a Short-term or Long-term Mortgage will be paid outside the plan, the debt is not “provided for by the plan” and will not be discharged.  With regard to a Long-term Mortgage, the exception to discharge would also not apply because the debt would not be considered “provided for under 1322(b)(5).”

Fortunately, it is likely that 11th Circuit law will soon be settled on the issue.  In the case of In re Dukes, 9:09-BK-02778-FMD, 2015 WL 3825978 (Bankr. M.D. Fla. June 18, 2015), a Middle District of Florida Bankruptcy Court adopted the Narrow View, holding that a claim paid outside of a plan is not “provided for by the plan,” and, consequently, not subject to discharge.  The debtor appealed, and the United States District Court for the Middle District of Florida affirmed the Bankruptcy Court’s decision adopting the narrow interpretation of “provided for by the plan.”  In re Dukes, 2:15-CV-420-FTM-99, 2016 WL 5390948 (M.D. Fla. Sept. 27, 2016).  The debtor again appealed, commencing the case of Mildred Dukes v. Suncoast Credit Union, 16-16513, which is currently pending in the United States Court of Appeals for the Eleventh Circuit.  Oral argument was held on September 19, 2017.  Thus, in short time there will be uniform 11th Circuit law on the issue of whether a claim paid outside a Chapter 13 plan is considered “provided for by the plan” if the plan states that the debtor will pay the claim outside the plan.

In the event the Eleventh Circuit adopts the Narrow View, controlling law will hold that mortgages paid outside a Chapter 13 plan are not discharged because they are not “provided for by the plan.”   In sum, the Eleventh Circuit’s adoption of the Narrow View would be akin to the reaffirmation of all Long-term Mortgages where the collateral is not surrendered and the reaffirmation of all Short-term Mortgages that are paid outside the plan.

[1] 508 U.S. 464, 473 (1993).

[2] Id.

[3] See, In re Rogers, 494 B.R. 664, 667 (Bankr. E.D.N.C. 2013).

[4] In re Cramer, 477 B.R. 736, 738 (Bankr. E.D. Wis. 2012).


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