Eleventh Circuit holds that debt is not “provided for” in the chapter 13 plan when the debt will be paid outside of the plan

The Eleventh Circuit affirmed a Florida district court’s holding In re Dukes, 909 F.3d 1306 (11th Cir. Dec. 6, 2018), that a mortgage debt was not discharged under 11 U.S.C. § 1328(a) when the debt was paid outside of the chapter 13 plan because it was not “provided for” in the plan. As such, the debt was not discharged.

The debtor in the case was current on her mortgage payments at the time she filed bankruptcy which meant there was no arrearage included in her chapter 13 plan. The plan provided that adequate protection payments would be made to the mortgage creditor, but it included no payment schedule, meaning the debtor would pay the mortgage debt directly, i.e., outside the plan. The mortgage creditor did not object and the plan was confirmed.

While she was in bankruptcy, however, the debtor defaulted on the mortgage and the mortgage creditor lifted the automatic stay. Thereafter, the debtor made all of the payments required under the plan and received a discharge of all the debts “provided for” by the plan. After the entry of the discharge, the mortgage creditor foreclosed on the property and obtained a deficiency judgment against the debtor. Because of the discharge, and presumably to avoid a claim tag they had violated the discharge, the mortgage creditor reopened the bankruptcy and filed an adversary complaint seeking a determination that the mortgage debt was not discharged. The bankruptcy court entered summary judgment for the mortgage creditor concluding that the mortgage debt was not “provided for” under the plan and, even if it were, the anti-modification provisions of 11 U.S.C § 1332(b)(2) precluded an alteration of the secured creditor’s rights.

On appeal, the debtor argued the mortgage debt was “provided for” under the plan because the plan recognized the debt would be paid; albeit outside the plan. According to the debtor, the mere mention of the debt in the plan meant the debt was “provided for”. The Court disagreed, finding that the term “provide for” means to “make a provision or stipulate to something.” Because the plan did not “make a provision for” the mortgage debt or “stipulate to” something about the debt in the plan, the mortgage debt was not “provided for”. A debt is provided for where it is governed by the terms of the plan, not by the mere mention of the debt.

The Court also rejected the debtor’s argument that the discharge would not violate the anti-modification rules because the mortgage creditor consented to the modification as evidenced by its failure to object to the plan. The Court held that a mortgage creditor could not have agreed to a modification of its rights because the plan provided merely the debt would be provided outside the plan. Therefore, the failure to object to the plan could not be interpreted as an agreement to terms, which, again, were not provided for under the plan. The debtor’s contention that the discharge was not a modification of the mortgage creditor’s rights was illogical. The mortgage documents allowed the creditor to seek a deficiency judgement. To deny it this right, would be a “modification” of its rights.

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