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Section 1307 Conversion or dismissal (Judge Gargotta)

In re Heinzle (May 29, 2014)
Issue:  Whether the Court should deny Debtors’ discharge and dismiss their case for failure to make direct post-petition mortgage payments as contemplated by their Chapter 13 Plan.

Holding:  The Court denied discharge and gave Debtors 14 days to convert their case or have the Court dismiss.  The terms of Debtors’ Chapter 13 Plan required tshem to make their post-petition mortgage payments directly to their mortgage creditor rather than the Trustee.  Although these direct payments did not go through the Trustee, they were still “payments under the Plan” for the purpose of 11 U.S.C. § 1328(a).  Debtors’ failure to make all payments due under the Plan rendered them ineligible for discharge under 11 U.S.C. § 1328(a).  Debtor’s failure to make the direct payments was also a material default justifying dismissal for cause under 11 U.S.C. § 1307(c)(6).

In re Lanehart (Sep. 9, 2008)
Issue: Is Debtors’ failure to attend the pre-confirmation meeting with Trustee or her representative and to provide requested information at that meeting constitutes grounds for dismissal under § 1307(c)(1), as causing unreasonable delay that is prejudicial to creditors?
Holding: The Court finds that Chapter 13 Trustee’s Motion to Dismiss Chapter 13 case should be conditionally granted. “The Trustee did not allege any additional grounds for dismissal under § 1307, nor did she allege any facts that would show that there was a delay caused by the Debtors’ failure to attend the conference, or that creditors were prejudiced as a result of any such delay. Accordingly, the facts alleged do not support dismissal. However, the Debtors through their counsel have admitted that they are not in contact with him and so are unable to prosecute their Chapter 13 case. In essence, through their counsel they have indicated their lack of opposition to dismissal provided they are given the opportunity to convert their case to one under Chapter 7 instead. The Court will therefore so order.”