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Section 1328 Discharge - Judge Gargotta

In re Ferguson (February 24, 2015)

Issue(s): Whether a hardship discharge under § 1328(b) constitutes proceeding and concluding a case in the same manner, to the extent possible, as if death had not occurred. Whether Debtor has met the requirements for a hardship discharge § 1328(b).

Holding(s): If a plan has been confirmed, a deceased debtor may receive a hardship discharge under § 1328(b) if it is in the best interest of the parties. Here, debtor meets the first and third requirements of the three pronged test for a hardship discharge because a modification for a deceased person is not practicable as only a debtor may propose a Chapter 13 plan. Debtor meets the second requirement because the value of the property actually distributed under the plan is not less than the amount that would have been paid on such claim if the estate had been liquidated under chapter 7.

In re Heinzle (May 29, 2014)

Issue(s): Whether denial of the Chapter 13 discharge under § 1328 is appropriate when the debtor does not make all the direct payments required by the plan.

Holding(s): Relying on Fifth Circuit precedence, the Court held that mortgage payments paid by debtor directly to the creditor, as opposed to the Trustee disbursing monies to the creditor, are payments under the plan. This type of arrangement is called a “direct” payment. Under § 1328, a debtor must make all payments under the plan in order to qualify for a discharge. Therefore, Debtors were not entitled to a discharge as direct payments are payments under the plan and Debtors had failed to make direct payments to the home mortgage lender.