Court Opinion

ID: 4014278
Source: CourtListenerOpinion
Date Created: 2016-07-09 00:01:02.861395+00
Date Added: 2024-06-11T07:44:53.206326
License: Public Domain

Case: 15-11252        Document: 00513584492       Page: 1    Date Filed: 07/08/2016

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT     United States Court of Appeals
                                                                                    Fifth Circuit

                                                                                   FILED
                                    No. 15-11252                                 July 8, 2016
                                  Summary Calendar                              Lyle W. Cayce
                                                                                     Clerk

In the Matter of: Richard Eugene Kessler, Jr., Virginia Mae Kessler
                 Debtors
--------------------------------------

RICHARD EUGENE KESSLER, JR.; VIRGINIA MAE KESSLER,

                Appellants

v.

ROBERT B. WILSON, Chapter 13 Trustee,

                Appellee

                   Appeal from the United States District Court
                        for the Northern District of Texas
                              USDC No. 6:15-CV-40

Before CLEMENT, OWEN, and HIGGINSON, Circuit Judges.
PER CURIAM:*
        Debtor-Appellants Richard and Virginia Kessler (the “Kesslers”) appeal
the denial of their request to discharge debts in their Chapter 13 bankruptcy
plan.

        *Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
     Case: 15-11252      Document: 00513584492         Page: 2    Date Filed: 07/08/2016

                                      No. 15-11252
       The Kesslers filed for Chapter 13 bankruptcy in November 2009, and the
bankruptcy court confirmed their plan. Their Chapter 13 plan provided for
monthly payments to a trustee to cure their pre-petition mortgage arrears and
for direct payments to certain secured creditors, including regular, post-
petition mortgage payments to Bank of America Home Loans (“BOA”), the
mortgagee. The Kesslers completed all payments due to the trustee, but did
not make the direct mortgage payments, resulting in a post-petition arrearage
of $40,922.89.
       Despite their failure to make the post-petition mortgage payments, the
Kesslers moved for discharge. The bankruptcy court denied their motion
because the Kesslers had not made the direct payments on their mortgage debt
and therefore did not satisfy the requirements of 11 U.S.C. § 1328(a). 1 The
Kesslers appealed to the district court, arguing that the bankruptcy court erred
by holding that: (1) payments on the post-petition mortgage debt were provided
for “under the plan” and thus nonpayment barred discharge; and (2) BOA did
not waive its right to object to the Kesslers’ failure to make their mortgage
payments. The district court affirmed the bankruptcy court, and the Kesslers
appealed.
                                Standard of Review
       We review the bankruptcy court’s findings of fact for clear error and
decide issues of law de novo. In re Packer, 816 F.3d 87, 91 (5th Cir. 2016) (per
curiam).
                                      Discussion
       The Kesslers argue that the district court erred in relying on In re Foster,
670 F.2d 478 (5th Cir. 1982) to conclude that their post-petition mortgage

       1 Under § 1328(a), once a debtor completes all payments under the plan, courts shall,
with a few exceptions, grant a discharge of the debts provided for by the plan.
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payments were required payments under the plan. And the Kesslers contend
that even if their failure to make payments is construed as a failure to comply
with § 1328(a), BOA waived any objection to the discharge by failing to
challenge their motion.
      Chapter 13 bankruptcy is governed by § 1328(a). Debtors may obtain
discharge of their debts through a court-confirmed payment plan that directs
payment of their debts out of their future income over a period of time. And the
court shall grant discharge of the debts “as soon as practicable after completion
. . . of all payments under the plan.” 11 U.S.C. § 1328(a). Long-term debts, like
the Kesslers’ mortgage, on which the last payment is due after the final
payment under the plan, cannot be discharged. A plan may provide, however,
for curing default on such debts and for maintaining post-petition payments.
11 U.S.C. §§ 1322(b)(5), 1328(a)(1). Because post-petition mortgage payments
are explicitly nondischargeable under § 1322(b)(5), the Kesslers argue that
these direct payments fall outside of their plan and cannot be required for
discharge under § 1328(a).
      In Foster, we considered a bankruptcy court’s refusal to confirm a
Chapter 13 plan that provided for current payments on the debtor’s mortgage
to be made “outside the plan,” i.e. directly to the creditors. 670 F.2d at 482. We
concluded that the bankruptcy code allows for such direct payments, and
explained that post-petition mortgage payments, whether paid directly or
through a trustee, are paid “under the plan” when the plan also provides for
the curing of pre-petition arrears on the debt. Id. at 486, 488–89. Thus, a
Chapter 13 plan does not need to provide for curing default on § 1322(b)(5)
debts, but if it does, then it must also provide for maintenance of the post-
petition payments. Id. at 488–89 (“[A] plan cannot provide that the current
portion of a mortgage claim will be made ‘outside the plan’ . . . when the
arrearages on the mortgage claim are being cured under § 1322.”). Both the
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payments toward curing pre-petition mortgage arrears and the post-petition
maintenance payments fall under a Chapter 13 plan because both payments
concern the same claim. Id. at 493.
       The district court rightly concluded that Foster controls here. The
Kesslers’ Chapter 13 plan included terms for curing their pre-petition
mortgage arrears and provided for maintenance of post-petition payments.
Because the Kesslers failed to complete post-petition mortgage payments that
fall under the plan, they do not qualify for discharge under the plain terms of
§ 1328(a), which instructs a court to grant discharge only after completion of
all payments under the plan. 11 U.S.C. § 1328(a).
       The Kesslers’ argument that Foster does not control has no merit. They
contend that Foster is inapplicable because it concerned plan confirmation
(rather than discharge) and dealt with a since-repealed provision regarding
trustee fees. 2 But in Foster, we decided the larger question of whether
payments on § 1322(b)(5) debts fall within a Chapter 13 plan. We held that
post-petition payments of § 1322(b)(5) debts fall under the plan when pre-
petition defaults are also provided for in the plan. Foster, 670 F.3d at 489, 493.
Here, the Kesslers plainly included terms in their Chapter 13 plan for
maintaining their post-petition mortgage payments; therefore, their post-
petition payments are payments under the plan as required by Foster.
       Finally, the Kesslers argue that the bankruptcy court should have
granted discharge because BOA waived its right to challenge discharge when
it did not respond or object to their discharge motion. This argument also has
no merit. The Kesslers erroneously rely on United Student Aid Funds, Inc. v.
Espinosa, 559 U.S. 260 (2010) for their contention that trustees or creditors

       2The repealed provision, 11 U.S.C. § 1302(e)(2), stated that trustees “shall collect such
percentage fee from all payments under plans in the cases under this chapter for which such
individual serves as standing trustee.” 11 U.S.C. § 1302(e)(2) (repealed 1986).
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must object. In Espinosa, the Supreme Court refused to grant relief under Fed.
R. Civ. Pro. 60(b)(4) from a discharge order several years after a creditor failed
to object to the discharge. 559 U.S. at 263–64. The Court concluded that the
creditor had not been denied due process that would justify Rule 60(b)(4) relief
because it had notice of the plan’s contents and confirmation; the creditor thus
had the opportunity to object to confirmation but did not do so. Espinosa, 559
U.S. at 276. But nothing in Espinosa stands for the proposition that a creditor’s
failure to object to a requested discharge requires a bankruptcy judge to grant
a discharge. Section 1328 contains no requirement that trustees or creditors
must object in order for a court to deny discharge. 11 U.S.C. § 1328.
      For the reasons set forth above, we AFFIRM the judgment of the district
court, which affirmed the bankruptcy court’s denial of discharge.

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