Chapter 13 • Motion to Dismiss • Sixty-Month Period • Complete Discharge

In Re Klaas, PICS Case No. 17-0960 (3d Cir. June 1, 2017) Krause, J. (26 pages).

District Court properly affirmed bankruptcy court's granting of a grace period to debtors who made the final payment on their base plan a few weeks after the end of the 60-month period because the bankruptcy court had the discretion under the code to grant a reasonable grace period for debtors to cure an arrearage. Affirmed.

Appellee debtors filed a voluntary Chapter 13 bankruptcy petition in 2009 and proposed a plan that required payments of $2,500 per month for 60 months. The bankruptcy court confirmed the plan, debtors made consistent monthly payments and after 60 months had paid more than their projected plan base. Sixty-one months after the start of the plan, appellee trustee filed a motion to dismiss the case under 11 US.C. §1307(c) alleging that her final calculations showed that debtors still owed $1,000 to complete their base plan. Debtors cured the arears within 16 days and trustee withdrew her motion. However, by that time, trustee's motion had been joined by appellant creditor and creditor argued the last payment was invalid because the plan and code required all payments to be completed within 60 months. The bankruptcy court found that the failure to completely fund the plan base within 60 months was a material default but the default was not the result of unreasonable delay by debtors, that debtors promptly corrected the deficiency, that the delay did not alter the timing of plan distributions to creditors and the court denied the motion to dismiss. Creditor filed a complaint objecting to the discharge of debtors' debts and the bankruptcy court, relying on its past ruling and the law of the case doctrine, granted summary judgment in favor of debtors and issued a complete discharge. The District Court affirmed on appeal and creditor appealed.