United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: DAVID MRDUTT and CHRISTINA MRDUTT, Debtors.
DAVID MRDUTT; CHRISTINA MRDUTT, Appellees. DEVIN DERHAM-BURK, Chapter 13 Trustee, Appellant,
and Submitted on May 25, 2018, at San Francisco, California
from the United States Bankruptcy Court for the Northern
District of California, Honorable Hannah L. Blumenstiel,
Bankruptcy Judge, Presiding
Z. Bohrer argued for appellant.
Derham-Burk, Chapter 13 Trustee.
Before: BRAND, TAYLOR and FARIS, Bankruptcy Judges.
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
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,
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
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 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.
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
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.
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 loan was in Mrs. Mrdutt's name
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'
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
response, the Mrdutts 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
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.
bankruptcy court had jurisdiction under 28 U.S.C.
§§ 1334 and 157(b)(2)(L). We have jurisdiction
under 28 U.S.C. § 158.
the bankruptcy court err in determining that, because the
Mrdutts had not completed all payments under the Plan due to
their failure to satisfy the prepetition mortgage arrears,
the Motion to Modify was timely under § 1329(a)?
the bankruptcy court err in determining that the Plan, as
modified, complied with the time limits set forth in §