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FILED

MAY 6 2019

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

 ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-17-1256-BTaF

)

DAVID MRDUTT and CHRISTINA ) Bk. No. 11-61029-HLB

MRDUTT, )

)

Debtors. )

 )

)

DEVIN DERHAM-BURK, Chapter ) 

13 Trustee, )

)

Appellant, ) 

) 

v. ) O P I N I O N

) 

DAVID MRDUTT; CHRISTINA )

MRDUTT, )

)

Appellees. )

______________________________)

Argued and Submitted on May 25, 2018, 

at San Francisco, California

Filed - May 6, 2019

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding

 

Appearances: Jane Z. Bohrer argued for appellant Devin Derham- 

 Burk, Chapter 13 Trustee. 

 

Before: BRAND, TAYLOR and FARIS, Bankruptcy Judges.
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BRAND, Bankruptcy Judge:

Chapter 131 trustee, Devin Derham-Burk ("Trustee"), appeals

an order granting the debtors' motion to modify their chapter 13

plan. The debtors proposed to modify their confirmed plan to

surrender their residence to the lender. Trustee opposed the

motion as untimely, because it was filed seven months after the

debtors had completed their plan payments to Trustee. The

bankruptcy court held that, because the debtors had not cured

their prepetition mortgage arrears as provided for in the plan,

the payments under the plan were not complete; therefore, the

motion to modify was timely under § 1329(a). The court allowed

the plan modification under § 1329(c) to surrender the residence,

even though the 60-month time period set forth in § 1329(c) had

already expired. 

We agree with the bankruptcy court that the debtors' plan

payments were not complete for purposes of § 1329(a). We

conclude, however, that the debtors could not modify their plan to

surrender their residence, because the surrender was a payment

made outside the 60-month time limit. Accordingly, we REVERSE.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

David and Christina Mrdutt filed their chapter 13 bankruptcy

case on November 30, 2011. Their residence, valued at $235,000, 

was encumbered by two deeds of trust in favor of Wells Fargo. 

Wells Fargo filed two related secured proofs of claim: one for

$406,299.67 for the first lien (the primary mortgage), which

1 Unless specified otherwise, all chapter and section 

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and

all "Rule" references are to the Federal Rules of Bankruptcy

Procedure. 

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included nearly $65,000 in prepetition arrears; and one for

$42,427.01 for the second lien (a HELOC). The Mrdutts later

obtained an order avoiding the wholly unsecured second lien, which

was contingent upon their completion of a chapter 13 plan and

receiving discharges. 

Prior to plan confirmation, the Mrdutts filed a declaration

required by local guidelines stating that their request to Wells

Fargo to modify the primary mortgage loan was still pending. 

Months later, with the loan modification still pending, the

bankruptcy court confirmed the Mrdutts' second amended chapter 13

plan on December 11, 2012 ("Plan"). The 60-month Plan provided $0

for allowed general unsecured claims. The Plan also provided that

all prepetition mortgage arrears would be cured if Wells Fargo

approved the loan modification; if Wells Fargo disapproved it, the

Mrdutts would file a modified plan to pay the arrears. The

Mrdutts also agreed to make all postpetition mortgage payments

directly to Wells Fargo.2

Following confirmation, the Mrdutts continued to make regular

payments to Trustee and the case proceeded uneventfully until

after they made their final Plan payment to her in October 2016,

which she distributed in November. In December 2016, Mr. Mrdutt

wrote a letter to the bankruptcy judge asking her to stop Wells

Fargo from foreclosing on the residence. Sadly, Mrs. Mrdutt had

passed away from cancer. Mr. Mrdutt explained that Wells Fargo

was refusing to deal with him for a loan modification because the

2 The Mrdutts' "cure and maintain" plan for a long-term

mortgage debt is authorized by § 1322(b)(5), which allows a

debtor's plan to provide for the curing of any prepetition default

within a reasonable time and maintaining postpetition mortgage

payments while the case is pending. See Cohen v. Lopez (In re

Lopez), 372 B.R. 40 (9th Cir. BAP 2007), aff'd, 550 F.3d 1202 (9th

Cir. 2008).

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loan was in Mrs. Mrdutt's name only. 

In January 2017, Wells Fargo moved for relief from stay to

foreclose its first lien on the residence. The Mrdutts had failed

to make postpetition mortgage payments totaling $123,819. The

outstanding debt for the primary mortgage was now $536,861. The

residence was still valued at $235,000. The bankruptcy court

granted stay relief but ordered that its effectiveness was stayed

until entry of the Mrdutts' discharges. 

In June 2017, Trustee filed notices of plan completion and

requested that the case be closed without discharge. Trustee

asserted that the Mrdutts were not entitled to a discharge because

they had failed to deal with their prepetition mortgage arrears.

In response, the Mrdutts3 moved to modify their Plan ("Motion

to Modify"). Because they ultimately did not receive the loan

modification, they wished to modify the Plan to surrender the

residence. Trustee argued that the Motion to Modify was untimely,

because plan payments had been completed months prior. 

After a hearing, the bankruptcy court granted the Motion to

Modify, finding that it was timely under § 1329(a) and that the

Mrdutts could surrender the residence even though the 60-month

time period under § 1329(c) had expired. Trustee timely appealed.

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(L). We have jurisdiction under 28 U.S.C. § 158.

III. ISSUES

1. Did the bankruptcy court err in determining that, because the 

Mrdutts had not completed all payments under the Plan due to their

3 Mr. Mrdutt continued to prosecute the case on behalf of

himself and his late wife. As a result, we refer to the Mrdutts

in the plural. 

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failure to satisfy the prepetition mortgage arrears, the Motion to

Modify was timely under § 1329(a)? 

2. Did the bankruptcy court err in determining that the Plan, as 

modified, complied with the time limits set forth in § 1329(c)? 

IV. STANDARDS OF REVIEW

Modification under § 1329 is discretionary and is reviewed

for an abuse of discretion. Powers v. Savage (In re Powers), 202

B.R. 618, 623 (9th Cir. BAP 1996). A bankruptcy court abuses its

discretion if it applies the wrong legal standard or its factual

findings are illogical, implausible or without support in the

record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820,

832 (9th Cir. 2011).

While the bankruptcy court's decision whether to allow

modification is reviewed for abuse of discretion, whether the

bankruptcy court was correct in its interpretation of the

applicable statutes is reviewed de novo. Mattson v. Howe (In re

Mattson), 468 B.R. 361, 367 (9th Cir. BAP 2012) (citing Towers v.

United States (In re Pac.-Atl. Trading Co.), 64 F.3d 1292, 1297

(9th Cir. 1995)).

V. DISCUSSION

A. The bankruptcy court did not err in determining that Plan

payments were not complete for purposes of § 1329(a) and that

the Motion to Modify was timely.

A plan is a contract between the debtor and the debtor's

creditors. Max Recovery, Inc. v. Than (In re Than), 215 B.R. 430,

435 (9th Cir. BAP 1997). The order confirming a chapter 13 plan,

upon becoming final, represents a binding determination of the

rights and liabilities of the parties as specified by the plan. 

8 COLLIER ON BANKRUPTCY ¶ 1327.02 (Richard Levin & Henry J. Sommer

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eds. 16th ed. 2019). 

Under the Plan, the Mrdutts agreed to cure their prepetition

mortgage arrears either through a loan modification or a modified

plan. They also agreed to make all postpetition mortgage payments

directly to Wells Fargo. When the loan modification failed, the

Mrdutts sought to modify the Plan to surrender the residence to

Wells Fargo sixty-seven months after the first Plan payment was

due and after they had made all sixty Plan payments to Trustee.4

The Mrdutts acknowledged that the Code did not necessarily support

their position. Nevertheless, they were seeking a way to get a

discharge. 

Section 1329 provides that the bankruptcy court may modify a

confirmed plan "[a]t any time after confirmation of the plan, but

before the completion of payments under such plan[.]" § 1329(a)

(emphasis added). See Danielson v. Flores (In re Flores), 735

F.3d 855, 859 (9th Cir. 2013) (en banc) (plan modification must

occur before the completion of payments under the plan); In re

Profit, 283 B.R. at 573 (same). The bankruptcy court reasoned

that plan modification was still possible under § 1329(a), because

the Mrdutts had not completed their plan payments due to the

outstanding obligation of the prepetition mortgage arrears. 

The question before us is whether the Plan was "complete" for

purposes of § 1329(a) even though the Mrdutts failed to cure their

prepetition mortgage arrears. Trustee maintains that only

4 The 60-month maximum term for chapter 13 plans begins to

run from the date when plan payments are statutorily required to

commence, no more than 30 days after the plan is filed. Profit v.

Savage (In re Profit), 283 B.R. 567, 575 (9th Cir. BAP 2002). The

Mrdutts filed their initial plan in December 2011.

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payments to the chapter 13 trustee are "payments under such plan"

and that plan payments are "complete" once the debtor has made all

plan payments to the trustee. We must determine what constitutes

"payments under such plan" within the meaning of § 1329(a). Is it

limited to those payments made to the trustee or does it include a

debtor's direct payments to creditors? 

While no controlling authority defines payments for purposes

of plan modification under § 1329(a), courts have held in the

discharge context of § 1328(a)5 that a debtor's direct payments to

a creditor for a debt treated by the plan are payments under the

plan. Precisely, when the chapter 13 plan provides for the curing

of prepetition mortgage arrears and a debtor's direct postpetition

maintenance payments in accordance with § 1322(b)(5), such direct

payments are "payments under the plan." And if the debtor does

not complete "all payments under the plan," the debtor is not

entitled to a discharge. 

In re Coughlin, 568 B.R. 461, 474 (Bankr. E.D.N.Y. 2017), is

an excellent example of the overwhelming majority of courts which

have interpreted the term "payments" in § 1328(a) to include

direct payments by the debtor to a creditor. See also Kessler v.

Wilson (In re Kessler), 655 F. App'x. 242, 244 (5th Cir. July 8,

2016) (when a plan provides for the curing of mortgage arrears as

well as direct maintenance payments, both payments fall "under the

plan" for purposes of § 1328(a) because both payments concern the

5 Section 1328(a) provides, in relevant part, that "as soon

as practicable after completion by the debtor of all payments

under the plan . . . the court shall grant the debtor a discharge

of all debts provided for by the plan or disallowed under section

502 . . . ." (Emphasis added). 

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same claim; debtors' discharge properly denied for not making

direct maintenance payments to creditor despite making all plan

payments to trustee) (citing Foster v. Heitkamp (In re Foster),

670 F.2d 478 (5th Cir. 1982) (when the plan provides for curing of

mortgage arrears, a debtor's direct mortgage payments to creditor

are payments under the plan)); Evans v. Stackhouse, 564 B.R. 513,

518-20 (E.D. Va. 2017) (debtor's direct maintenance payments

provided for in the plan were payments under the plan for purposes

of § 1328(a)); In re Dowey, 580 B.R. 168, 172-73 (Bankr. D.S.C.

2017) (rejecting debtor's argument that payments under the plan in

§ 1328(a) means only those payments made to the chapter 13

trustee); In re Hoyt–Kieckhaben, 546 B.R. 868, 874 (Bankr. D.

Colo. 2016) (both cure and maintenance payments are equal and

necessary parts of a plan's treatment of a secured claim under 

§ 1322(b)(5) and thus any payment made to effectuate the plan's

treatment of the claim is a payment under the plan for purposes of

discharge); In re Heinzle, 511 B.R. 69, 78-79 (Bankr. W.D. Tex.

2014) (debtors entitled to discharge only when they make all

payments under the plan, which includes cure and maintenance

payments under § 1322(b)(5)). 

The court in Coughlin relied, in part, on Rake v. Wade, 508

U.S. 464 (1993), and the Supreme Court's interpretation of the

phrase "provided for by the plan" in § 1325(a)(5).6 In Rake, each

debtor's chapter 13 plan proposed to pay all postpetition mortgage

payments directly to the creditor and to cure the prepetition

6 Notably, the debtor in Coughlin had already received a

discharge despite failing to remain current on postpetition

mortgage payments. The court was not aware of the default until

after the discharge order had been entered. Ultimately, the court

declined to vacate the discharge order despite the default,

because the discharge had not been obtained by the debtor's fraud. 

568 B.R. at 474-76. 

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mortgage arrearages, without interest, over the term of the plan. 

The issue was whether the oversecured mortgage creditor was

entitled to postpetition interest on the arrearages, when the

contract did not so provide. Because the plans "provided for" the

creditor's claim by establishing repayment terms for the

arrearages as permitted by § 1322(b)(5), the Court ruled that the

creditor was entitled to interest on them. Id. at 473.

To reach its holding, the Court reviewed § 1328(a), which

also contains the phrase "provided for by the plan," and noted:

As used in § 1328(a), that phrase is commonly understood

to mean that a plan 'makes a provision' for, 'deals with,'

or even 'refers to' a claim. [Citation omitted]. In

addition, § 1328(a) unmistakably contemplates that a plan

'provides for' a claim when the plan cures a default and

allows for the maintenance of regular payments on that

claim, as authorized by § 1322(b)(5). Section 1328(a)

states that 'all debts provided for by the plan' are

dischargeable, and then lists three exceptions. One type

of claim that is 'provided for by the plan' yet excepted

from discharge under § 1328(a) is a claim 'provided for

under section 1322(b)(5) of this title.' § 1328(a)(1). 

If claims that are subject to § 1322(b)(5) were not

'provided for by the plan,' there would be no reason to

make an exception for them in § 1328(a)(1). 

Id. at 474-75. While the question of whether a debtor has

completed "all payments under the plan" was not at issue in Rake,

construing this language in § 1328(a) narrowly to include only

those payments made to the chapter 13 trustee proves difficult

given the Supreme Court's broad construction of "provided for by

the plan," in that same section, to include claims that are merely

referred to in the plan. See In re Gonzales, 532 B.R. 828, 832

(Bankr. D. Colo. 2015).7

7 But see Dukes v. Suncoast Credit Union (In re Dukes), 909

F.3d 1306 (11th Cir. 2018). In Dukes, the debtor was current on

her mortgage payments at the time she filed her chapter 13 case

but became delinquent at some point after confirmation. The

mortgage lender foreclosed on its second lien and sought a

(continued...)

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Only two courts have held that a debtor's direct payments on

a nonmodifiable, nondischargeable residential mortgage loan under

§ 1322(b)(5) are not "payments under the plan" for purposes of 

§ 1328(a). The first was In re Gibson, 582 B.R. 15, 24 (Bankr.

C.D. Ill. 2018). In reviewing the language of § 1328(a), the

Gibson court reasoned that the "ambiguous" phrase "all payments

under the plan," which is used to define when completion of

payments occurs (thus triggering entitlement to a full compliance

discharge), and the phrase "provided for by the plan," which is

used to describe the scope of the discharge, should have different

meanings. The court concluded that the phrase "'under the plan'

was intended to have a narrower effect, allowing for the

possibility that not all creditors holding debts provided for by

the plan are receiving payments under the plan" — i.e., direct

7(...continued)

personal judgment against the debtor post-discharge on its first

lien. The mortgage lender reopened the debtor's case, seeking a

determination that the first mortgage debt had not been

discharged. 

Relying on a narrow reading of Rake, the Eleventh Circuit

held that the plan did not "provide for" the mortgage payments for

purposes of § 1328(a), because the plan merely stated that

postpetition payments would be made "outside the plan"; the plan

did not set forth any repayment terms for any portion of the

lender's mortgage. Id. at 1313-15. The Eleventh Circuit

alternatively held that the first mortgage debt was not discharged

based on § 1322(b)(2), which prohibits modification of the rights

of holders of claims secured by the debtor's principal residence. 

Id. at 1316-18. 

We note that the situation presented in Dukes was different

from that in this case. There, the debtor was prepetition current

on her mortgage payments. The Dukes court did not address the

issue presented here, whether cure and maintain payments under 

§ 1322(b)(5) are payments under the plan. Nevertheless, we also

disagree with Dukes's narrow interpretation of Rake and whether

postpetition mortgage payments are payments under the plan for the

reasons set forth in this decision.

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payments by the debtor to a creditor. Id. at 19 (emphasis in

original). It followed, therefore, that completion of "all

payments under the plan" meant only those payments made to the

trustee. Id. The court disagreed with the "absolutist" view that

§ 1328(a) should be construed in a way that would make every

uncured default on a direct payment grounds for dismissing a case

without discharge. Id. at 23. 

The Gibson court believed that Rule 3002.18 was to blame for

the recent trend favoring dismissal without discharge in cases

where the debtor made the required payments to the trustee but

failed to make all of the direct mortgage payments to the

creditor. Id. at 18-19. The court observed that, prior to the

rule's adoption in 2011, the trustee generally was not privy to a

debtor's direct payment status, and thus "countless" debtors pre2011 had received a discharge despite arrears on direct payments. 

Id. at 18. 

The other case holding that a debtor's direct payments are

not "payments under the plan" for purposes of § 1328(a) is the

recent case of In re Rivera, No. 2:13-20842, 2019 WL 1430273, at

*4-6 (Bankr. D. Ariz. Mar. 28, 2019). As with Gibson, the debtors

in Rivera had paid their prepetition mortgage arrears over the

course of the plan but failed to make all of their direct

postpetition mortgage payments to the creditor. The court relied

heavily on Gibson to hold that "payments under the plan" means

8 Rule 3002.1 requires lienholders on the debtor's principal

residence to disclose, in response to the trustee's notice of

final cure payment, whether the debtor is current on postpetition

mortgage payments. 

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only those payments made to the trustee. It also viewed the

direct payments by the debtors as payments "outside the plan,"

even though the plan provided for both the curing of the

prepetition mortgage arrears and the debtors' direct postpetition

mortgage payments to the creditor. Id. at *9. Interestingly, the

Rivera court opined that the debtors could still seek to modify

the plan under § 1329(a) to pay the postpetition arrears, but then

conversely noted that a plan cannot be modified after completion

of the payments under the plan, which, under the court's

reasoning, occurred when the debtors made their last payment to

the trustee. Id. at *10. 

Arguably, the facts in both Gibson and Rivera weighed heavily

on those courts' decisions to deny the motions to dismiss without

discharge. In Gibson, the debtors' failure to make direct

payments on their second mortgage was due to an innocent

misunderstanding of their plan's requirements; they thought the

trustee was going to make those payments. Further, the mortgage

creditor failed to take any action until after the debtors had

made their last plan payment to the trustee even though the

creditor never received any direct maintenance payments. 582 B.R.

at 22-23. In Rivera, the debtors did not default on their

postpetition mortgage payments until after the 41-month plan was

complete. 2019 WL 1430273, at *9-10. Thus, denying the debtors a

discharge under those facts seemed particularly harsh. 

While Gibson and Rivera are thoughtful and well-intended

decisions, we respectfully disagree. And we perceive some flaws

with interpreting the phrase "payments under the plan" to include

only those payments made to the trustee. One is the different

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outcomes that would result in conduit versus non-conduit

jurisdictions. See In re Coughlin, 568 B.R. at 474. In a conduit

district, where all payments to creditors are made by the chapter

13 trustee, postpetition mortgage payments would unquestionably be

payments under the plan. But in a non-conduit or direct-pay

district, postpetition mortgage payments made directly by the

debtor would not be considered payments under the plan. The

trustee in a conduit district would quickly observe the debtor's

failure to pay the mortgage and could seek dismissal, if the

debtor did not seek to modify the plan. In a non-conduit

district, the debtor would know he stopped paying the mortgage,

but, absent a motion for relief from stay from the mortgage

creditor, the trustee, the court and other creditors would not

know of the default, at least not until the trustee files her

notice of final cure payment and the mortgage creditor responds

with its statement in accordance with Rule 3002.1(g). As the

Coughlin court correctly observed, whether postpetition mortgage

payments are paid directly by the debtor or paid by the chapter 13

trustee should not be dispositive of granting a discharge under 

§ 1328(a). 568 B.R. at 474. A direct-pay debtor should not

receive a discharge that a conduit debtor would not. Such a

result "is inconsistent both with the words and intent of chapter

13." Id. 

In addition, the promise to maintain postpetition payments to

a mortgage creditor is a mandatory element of the treatment of

claims subject to § 1322(b)(5), and it is not severable. In re

Dowey, 580 B.R. at 174. Failing to perform this promise is a

material default of the plan, subjecting the case to dismissal

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under § 1307(c)(6).9 In re Young, No. 12–11509, 2017 WL 4174363,

at *2 (Bankr. M.D. La. Sept. 9, 2017); In re Dowey, 580 B.R. at

174 (citing In re Formaneck, 534 B.R. 29, 35 (Bankr. D. Colo.

2015)); In re Heinzle, 511 B.R. at 82-83. We have difficulty

reconciling that a debtor can receive a discharge after failing to

make maintenance payments under § 1322(b)(5), when that same

failure is grounds for case dismissal. See In re Dowey, 580 B.R.

at 174. 

While we understand the concern in Gibson and Rivera about

misuse of Rule 3002.1, simply because debtors prior to 2011 were

flying under the radar and receiving discharges despite not making

all maintenance payments as required under § 1322(b)(5), does not

mean that such practice was correct or give it any legitimacy. 

Perhaps as an unintended consequence, Rule 3002.1 has merely

exposed the problem at a point in the case where modification to

cure the postpetition arrears is no longer an option.

Lastly, to interpret "payments under the plan" to include

only those payments made to the trustee raises an additional

concern in cases where debtors have chosen to retain their home

and the confirmed plan does not provide a 100% dividend to

unsecured claims. The computation of disposable income to pay

creditors under § 1325(b) takes into account the promised direct

payments for housing, including § 1322(b)(5) maintenance payments. 

Debtors who fail to make these payments, which often amount to

9 Section 1307(c)(6) provides, in relevant part: 

[O]n request of a party in interest or the United States

trustee and after notice and a hearing, the court may 

. . . dismiss a case under this chapter . . . for cause, 

including . . . material default by the debtor with 

respect to a term of a confirmed plan[.]

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tens of thousands of dollars, benefit from years of living without

mortgage payments at the expense of creditors. Had the debtor

sold or surrendered the home, the distribution to unsecured

creditors may have been the full amount owed as opposed to pennies

on the dollar or nothing. See In re Dowey, 580 B.R. at 174; In re

Formaneck, 534 B.R. at 34; Stephen J. Maier, Living Mortgage and

Interest Free?: The Unwarranted Discharge For Debtors Who Fail To

Make Direct Post-Petition Mortgage Payments, 82 ALB. L. REV. 643,

649 (2018). See also In re Coughlin, 568 B.R. at 473 ("Chapter 13

debtors who do not pay their post-petition mortgage payments are

essentially claiming a deduction to which they are not

entitled."). The concern is very real in this case. The Mrdutts

failed to pay $123,819 in postpetition mortgage payments, yet they

paid nothing to unsecured creditors. This raises the question of

good faith for purposes of plan confirmation and plan modification

under § 1325(a)(3). 

Accordingly, we join the overwhelming majority of courts

holding that a chapter 13 debtor's direct payments to creditors,

if provided for in the plan, are "payments under the plan" for

purposes of a discharge under § 1328(a) and hold that this same

rule should apply in the context of post-confirmation plan

modifications under § 1329(a). Although the language in § 1328(a)

is slightly different from that in § 1329(a) — § 1328(a) uses the

phrase "payments under the plan" while § 1329(a) uses the phrase

"payments under such plan" — we see no reason to interpret these

phrases differently. The word "such" simply describes the plan

which has been confirmed. See In re Goude, 201 B.R. 275, 277

(Bankr. D. Or. 1996) ("There is no reason to attach a different

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meaning to the completion of payments required in § 1328(a) from

the same requirement in § 1329(a)."). 

Trustee argues that our cases Profit, Fridley and Escarcega

support her position that the "completion of payments" under a

plan for purposes of § 1329(a) means only those payments a debtor

makes to the chapter 13 trustee. We disagree. 

Profit actually supports our decision here. In Profit, the

confirmed 60-month plan required the debtors to remit a tax refund

to the trustee. 283 B.R. at 570. At some point prior to the

plan's 54th month, the debtors gave the trustee a lump-sum payment

which completed the projected plan payments. However, the debtors

did not turn over the tax refund. Id. at 570-71. In the 54th

month of the plan, the trustee moved to modify the plan to, among

other things, compel the debtors to turn over the tax refund. Id.

at 571. The debtors argued that the motion was untimely because

the plan payments had been completed, and that the outstanding tax

refund was not a plan payment. 

The Panel held that, because the plan required the debtors to

remit the tax refund to the trustee, the tax refund was a "plan

payment" for purposes of § 1329(a). Id. at 573-74. The Panel

further held that the motion to modify was timely under § 1329(a),

because the plan payments had not been completed at the time the

motion was filed due to the debtors' failure to remit the tax

refund. In so holding, the Panel noted that, "[i]t is generally

held that the payments alluded to [in § 1329(a)] are the payments

required to be made by the debtor under the plan terms." Id. at

573. Contrary to Trustee's argument, Profit did not hold that

only those payments a debtor makes to the chapter 13 trustee are

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"payments under such plan" for plan modification purposes under 

§ 1329(a). 

Trustee never cited Fridley v. Forsythe (In re Fridley), 380

B.R. 538 (9th Cir. BAP 2007), to the bankruptcy court, and In re

Escarcega, 573 B.R. 219 (9th Cir. BAP 2017), was issued after she

filed this appeal. Trustee argues that these cases reinforce

Profit's holding that the "completion of payments" for purposes of

§ 1329(a) properly relates to the payments that a debtor must pay

to the trustee under the terms of his or her plan. Again,

Profit's holding is not as narrow as Trustee suggests. Further,

Fridley and Escarcega simply recognized the temporal requirements

of chapter 13 plans and that payments under a plan must continue

for the duration provided for in the initial plan, absent

modification, before they can be considered "complete" for

purposes of discharge and modification. See In re Escarcega, 573

B.R. at 240; In re Fridley, 380 B.R. at 543-44. These cases did

not hold that "completion of payments" for purposes of § 1329(a)

means only those payments a debtor makes to the chapter 13

trustee.

Even if Trustee were correct that the payments were complete

when the Mrdutts made their final payment to her, we would still

disagree with Trustee's conclusion. In effect, the Plan required

the Mrdutts to make monthly payments in a fixed amount plus an

additional amount necessary to cure their prepetition arrears,

unless they obtained a loan modification that eliminated the

arrears. These additional monthly payments were required payments

even though the Mrdutts did not take the required steps to

quantify them. 

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Trustee's arguments are also undermined by her action of

filing the notices of plan completion. In those notices, Trustee

asserted that the Mrdutts were not entitled to a discharge because

they had failed to deal with their prepetition mortgage arrears. 

In other words, the notices suggest that Plan payments were not

complete for purposes of a discharge under § 1328(a) because of

the uncured arrears. If that is true, then why should they be

considered complete for purposes of plan modification under 

§ 1329(a)? It makes little sense to say that a debtor's plan

payments are complete for determining whether the debtor has

timely moved to modify the plan, but to say they are not complete

for the purpose of denying the debtor a discharge. 

 The Plan provided for the curing of the Mrdutts' prepetition

mortgage arrears by either a loan modification or a modified plan

and for direct postpetition mortgage payments to Wells Fargo. We

conclude that all of these payments were "payments under such

plan" for purposes of § 1329(a). Because the Mrdutts failed to

satisfy the obligation of their prepetition arrears, and also

failed to make their direct postpetition mortgage payments, their

Plan payments were not "complete" under § 1329(a). Accordingly,

we agree with the bankruptcy court that the Motion to Modify was

timely. 

B. The bankruptcy court erred in determining that the Plan, as

modified, complied with § 1329(c).10

Although the bankruptcy court did not expressly rule that

10 Section 1329(c) mandates that a modification "may not

provide for payments over a period that expires after the

applicable commitment period under section 1325(b)(1)(B) after the

time that the first payment under the original confirmed plan was

due, unless the court, for cause, approves a longer period, but

the court may not approve a period that expires after five years

after such time." 

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modification was permissible under § 1329(c), it implicitly ruled

that it was by granting the Motion to Modify. Trustee argues that

the court had no statutory authority to approve a modified plan

that provided for payments several months beyond the 60-month time

limit. We agree. 

No fewer than three Code provisions, §§ 1322(d), 1325(b)(4),

and 1329(c), prohibit a plan exceeding five years in length.

Section 1329(c) specifically prohibits the court from approving a

plan modification that would "provide for payments" beyond five

years. Here, the 60-month period for the Plan expired in October

2016; the Motion to Modify was filed in June 2017, the 67th month

after which the Mrdutts' first Plan payment came due. 

Although we held in Profit that the trustee's motion to

modify was timely under § 1329(a) due to incomplete plan payments,

we also held that the trustee's modification request failed

because it required payments in excess of the 60-month time

limitation in § 1329(c) and its counterpart, § 1322(d). 283 B.R.

at 573-74. See also In re Heinzle, 511 B.R. at 79 (modification

may not occur after completion of the 60-month term for plan

payments); In re Goude, 201 B.R. at 276-77 (dismissing case

because plan could not be modified since the 60-month period had

expired and plan could not be extended to include payment of

priority tax claims).

The Mrdutts sought to modify the Plan to surrender the 

residence in satisfaction of the Wells Fargo debt. They argue

that surrender is not a "payment" and therefore does not violate

the 60-month rule in § 1329(c). We conclude that surrender is a

form of payment for purposes of § 1329(c). Numerous courts have

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so held. See Bank One, N.A. v. Leuellen, 322 B.R. 648, 652-54

(S.D. Ind. 2005); In re Fayson, 573 B.R. 531, 535 (Bankr. D. Del.

July 13, 2017)("Surrender of collateral is a form of payment under

the Code."); In re Dennett, 548 B.R. 733, 737 (Bankr. N.D. Tex.

2016) (holding that surrender is a payment of debt but allowing

plan modification to surrender because debtors were only 40 months

into their 60-month plan); In re Jones, 538 B.R. 844, 849 (Bankr.

W.D. Okla. 2015) (holding that § 1322(b)(8), which applies to plan

modifications under § 1329(a), "plainly and unequivocally

contemplates that surrender of collateral is a form of payment");

In re Tucker, 500 B.R. 457, 462 (Bankr. N.D. Miss. 2013); In re

Davis, 404 B.R. 183, 194-95 (Bankr. S.D. Tex. 2009). Thus,

allowing the surrender after the 60-month term had expired was

contrary to § 1329(c). 

Besides a time limitation problem, it is not clear that

modification of the Plan was even appropriate. A modified plan is

essentially a new plan and must be consistent with the statutory

requirements for confirmation. In re Profit, 283 B.R. at 574;

McDonald v. Louquet (In re Louquet), 125 B.R. 267, 268 (9th Cir.

BAP 1991). This includes compliance with §§ 1322(a), 1322(b),

1323(c), and 1325(a). See § 1329(b)(1). At minimum, good faith

was in question when unsecured creditors received nothing under

the Plan while the Mrdutts retained over $100,000 by failing to

make their required postpetition mortgage payments. See

§ 1325(a)(3). 

This is not a case where the debtors sought a reasonable

extension of time beyond the 60 months to catch up on some missed

plan payments or fees. See In re Profit, 283 B.R. at 576 n.11

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(noting the difference between plan modification and the cure of

plan payments within a reasonable time after the plan has expired

in order to prevent case dismissal). The Mrdutts asked the

bankruptcy court to modify a confirmed plan to surrender an asset

of the estate and extinguish a secured claim seven months after

the 60-month period had already expired. The court had no

authority to modify a plan that allowed for payment beyond the 60-

month time limit. Accordingly, it abused its discretion in

granting the Motion to Modify.

VI. CONCLUSION

We do not ignore the sad facts of this case and the

bankruptcy court's understandable desire to do equity. But the

Mrdutts should have been more proactive in their bankruptcy case

and sought relief from the court when it was apparent that the

loan modification with Wells Fargo was futile. The same goes for

Wells Fargo, which sat idly by and did not seek relief from stay

until after the Mrdutts had made all of their Plan payments to

Trustee and the postpetition mortgage arrears were so

astronomical. However, for the reasons stated above, we REVERSE.

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