Direct Mortgage Payments Are Not ‘Provided For’ in a Plan, Eleventh Circuit Holds

For the first time among the courts of appeals, two judges on an Eleventh Circuit panel held that direct payments by a chapter 13 debtor to a mortgagee are not “provided for by the plan” under Section 1328(a), even if the plan says the payments will be made directly. However, all three judges agreed that a general chapter 13 discharge did not eliminate the debtor’s personal liability for a deficiency on a home mortgage. The majority’s December 6 opinion by Circuit Judge Julie Carnes means that chapter 13 debtors with direct mortgage payments may have lost a battle, but they could have won a larger war. Whether direct mortgage payments are made under a plan has greater significance in a related context. A chapter 13 debtor who has made “all payments under the plan” is entitled to a discharge under Section 1328(a). If the Eleventh Circuit’s holding with respect to debts “provided for by the plan” also applies to “all payments under the plan,” then a chapter 13 debtor who has defaulted on direct mortgage payments would still be entitled to a chapter 13 discharge shedding other debts that were provided for in the plan. On the question of a general chapter 13 discharge, the lower courts are split on whether failure to make direct mortgage payments bars a chapter 13 debtor’s general discharge.

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