                                                              FILED
                                                               MAY 6 2019
                                                         SUSAN M. SPRAUL, CLERK
 1                                                           U.S. BKCY. APP. PANEL
                                                             OF THE NINTH CIRCUIT
 2                           ORDERED PUBLISHED
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
                              OF THE NINTH CIRCUIT
 4
 5   In re:                        )     BAP No.    NC-17-1256-BTaF
                                   )
 6   DAVID MRDUTT and CHRISTINA    )     Bk. No.    11-61029-HLB
     MRDUTT,                       )
 7                                 )
                    Debtors.       )
 8                                 )
                                   )
 9   DEVIN DERHAM-BURK, Chapter    )
     13 Trustee,                   )
10                                 )
                    Appellant,     )
11                                 )
     v.                            )           O P I N I O N
12                                 )
     DAVID MRDUTT; CHRISTINA       )
13   MRDUTT,                       )
                                   )
14                  Appellees.     )
     ______________________________)
15
16                   Argued and Submitted on May 25, 2018,
                          at San Francisco, California
17
                              Filed - May 6, 2019
18
               Appeal from the United States Bankruptcy Court
19                 for the Northern District of California
20      Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding
21
22   Appearances:    Jane Z. Bohrer argued for appellant Devin Derham-
                     Burk, Chapter 13 Trustee.
23
24
25   Before:   BRAND, TAYLOR and FARIS, Bankruptcy Judges.
26
27
28
 1   BRAND, Bankruptcy Judge:
 2
 3           Chapter 131 trustee, Devin Derham-Burk ("Trustee"), appeals
 4   an order granting the debtors' motion to modify their chapter 13
 5   plan.       The debtors proposed to modify their confirmed plan to
 6   surrender their residence to the lender.      Trustee opposed the
 7   motion as untimely, because it was filed seven months after the
 8   debtors had completed their plan payments to Trustee.      The
 9   bankruptcy court held that, because the debtors had not cured
10   their prepetition mortgage arrears as provided for in the plan,
11   the payments under the plan were not complete; therefore, the
12   motion to modify was timely under § 1329(a).      The court allowed
13   the plan modification under § 1329(c) to surrender the residence,
14   even though the 60-month time period set forth in § 1329(c) had
15   already expired.
16           We agree with the bankruptcy court that the debtors' plan
17   payments were not complete for purposes of § 1329(a).      We
18   conclude, however, that the debtors could not modify their plan to
19   surrender their residence, because the surrender was a payment
20   made outside the 60-month time limit.      Accordingly, we REVERSE.
21                   I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
22           David and Christina Mrdutt filed their chapter 13 bankruptcy
23   case on November 30, 2011.      Their residence, valued at $235,000,
24   was encumbered by two deeds of trust in favor of Wells Fargo.
25   Wells Fargo filed two related secured proofs of claim:         one for
26   $406,299.67 for the first lien (the primary mortgage), which
27
             1
28           Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all "Rule" references are to the Federal Rules of Bankruptcy
     Procedure.

                                         -2-
 1   included nearly $65,000 in prepetition arrears; and one for
 2   $42,427.01 for the second lien (a HELOC).    The Mrdutts later
 3   obtained an order avoiding the wholly unsecured second lien, which
 4   was contingent upon their completion of a chapter 13 plan and
 5   receiving discharges.
 6        Prior to plan confirmation, the Mrdutts filed a declaration
 7   required by local guidelines stating that their request to Wells
 8   Fargo to modify the primary mortgage loan was still pending.
 9        Months later, with the loan modification still pending, the
10   bankruptcy court confirmed the Mrdutts' second amended chapter 13
11   plan on December 11, 2012 ("Plan").    The 60-month Plan provided $0
12   for allowed general unsecured claims.    The Plan also provided that
13   all prepetition mortgage arrears would be cured if Wells Fargo
14   approved the loan modification; if Wells Fargo disapproved it, the
15   Mrdutts would file a modified plan to pay the arrears.    The
16   Mrdutts also agreed to make all postpetition mortgage payments
17   directly to Wells Fargo.2
18        Following confirmation, the Mrdutts continued to make regular
19   payments to Trustee and the case proceeded uneventfully until
20   after they made their final Plan payment to her in October 2016,
21   which she distributed in November.     In December 2016, Mr. Mrdutt
22   wrote a letter to the bankruptcy judge asking her to stop Wells
23   Fargo from foreclosing on the residence.    Sadly, Mrs. Mrdutt had
24   passed away from cancer.    Mr. Mrdutt explained that Wells Fargo
25   was refusing to deal with him for a loan modification because the
26
27        2
             The Mrdutts' "cure and maintain" plan for a long-term
     mortgage debt is authorized by § 1322(b)(5), which allows a
28   debtor's plan to provide for the curing of any prepetition default
     within a reasonable time and maintaining postpetition mortgage
     payments while the case is pending. See Cohen v. Lopez (In re
     Lopez), 372 B.R. 40 (9th Cir. BAP 2007), aff'd, 550 F.3d 1202 (9th
     Cir. 2008).

                                      -3-
 1   loan was in Mrs. Mrdutt's name only.
 2        In January 2017, Wells Fargo moved for relief from stay to
 3   foreclose its first lien on the residence.    The Mrdutts had failed
 4   to make postpetition mortgage payments totaling $123,819.    The
 5   outstanding debt for the primary mortgage was now $536,861.    The
 6   residence was still valued at $235,000.    The bankruptcy court
 7   granted stay relief but ordered that its effectiveness was stayed
 8   until entry of the Mrdutts' discharges.
 9        In June 2017, Trustee filed notices of plan completion and
10   requested that the case be closed without discharge.    Trustee
11   asserted that the Mrdutts were not entitled to a discharge because
12   they had failed to deal with their prepetition mortgage arrears.
13        In response, the Mrdutts3 moved to modify their Plan ("Motion
14   to Modify").   Because they ultimately did not receive the loan
15   modification, they wished to modify the Plan to surrender the
16   residence.   Trustee argued that the Motion to Modify was untimely,
17   because plan payments had been completed months prior.
18        After a hearing, the bankruptcy court granted the Motion to
19   Modify, finding that it was timely under § 1329(a) and that the
20   Mrdutts could surrender the residence even though the 60-month
21   time period under § 1329(c) had expired.     Trustee timely appealed.
22                             II. JURISDICTION
23        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
24   and 157(b)(2)(L).   We have jurisdiction under 28 U.S.C. § 158.
25                               III. ISSUES
26   1.   Did the bankruptcy court err in determining that, because the
27   Mrdutts had not completed all payments under the Plan due to their
28
          3
             Mr. Mrdutt continued to prosecute the case on behalf of
     himself and his late wife. As a result, we refer to the Mrdutts
     in the plural.

                                     -4-
 1   failure to satisfy the prepetition mortgage arrears, the Motion to
 2   Modify was timely under § 1329(a)?
 3   2.   Did the bankruptcy court err in determining that the Plan, as
 4   modified, complied with the time limits set forth in § 1329(c)?
 5                          IV. STANDARDS OF REVIEW
 6        Modification under § 1329 is discretionary and is reviewed
 7   for an abuse of discretion.   Powers v. Savage (In re Powers), 202
 8   B.R. 618, 623 (9th Cir. BAP 1996).     A bankruptcy court abuses its
 9   discretion if it applies the wrong legal standard or its factual
10   findings are illogical, implausible or without support in the
11   record.   TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820,
12   832 (9th Cir. 2011).
13        While the bankruptcy court's decision whether to allow
14   modification is reviewed for abuse of discretion, whether the
15   bankruptcy court was correct in its interpretation of the
16   applicable statutes is reviewed de novo.    Mattson v. Howe (In re
17   Mattson), 468 B.R. 361, 367 (9th Cir. BAP 2012) (citing Towers v.
18   United States (In re Pac.-Atl. Trading Co.), 64 F.3d 1292, 1297
19   (9th Cir. 1995)).
20                               V. DISCUSSION
21   A.   The bankruptcy court did not err in determining that Plan
          payments were not complete for purposes of § 1329(a) and that
22        the Motion to Modify was timely.
23        A plan is a contract between the debtor and the debtor's
24   creditors.   Max Recovery, Inc. v. Than (In re Than), 215 B.R. 430,
25   435 (9th Cir. BAP 1997).   The order confirming a chapter 13 plan,
26   upon becoming final, represents a binding determination of the
27   rights and liabilities of the parties as specified by the plan.
28   8 COLLIER ON BANKRUPTCY ¶ 1327.02 (Richard Levin & Henry J. Sommer

                                      -5-
 1   eds. 16th ed. 2019).
 2           Under the Plan, the Mrdutts agreed to cure their prepetition
 3   mortgage arrears either through a loan modification or a modified
 4   plan.       They also agreed to make all postpetition mortgage payments
 5   directly to Wells Fargo.      When the loan modification failed, the
 6   Mrdutts sought to modify the Plan to surrender the residence to
 7   Wells Fargo sixty-seven months after the first Plan payment was
 8   due and after they had made all sixty Plan payments to Trustee.4
 9   The Mrdutts acknowledged that the Code did not necessarily support
10   their position.      Nevertheless, they were seeking a way to get a
11   discharge.
12           Section 1329 provides that the bankruptcy court may modify a
13   confirmed plan "[a]t any time after confirmation of the plan, but
14   before the completion of payments under such plan[.]"       § 1329(a)
15   (emphasis added).      See Danielson v. Flores (In re Flores), 735
16   F.3d 855, 859 (9th Cir. 2013) (en banc) (plan modification must
17   occur before the completion of payments under the plan); In re
18   Profit, 283 B.R. at 573 (same).      The bankruptcy court reasoned
19   that plan modification was still possible under § 1329(a), because
20   the Mrdutts had not completed their plan payments due to the
21   outstanding obligation of the prepetition mortgage arrears.
22           The question before us is whether the Plan was "complete" for
23   purposes of § 1329(a) even though the Mrdutts failed to cure their
24   prepetition mortgage arrears.      Trustee maintains that only
25
26
             4
             The 60-month maximum term for chapter 13 plans begins to
27   run from the date when plan payments are statutorily required to
     commence, no more than 30 days after the plan is filed. Profit v.
28   Savage (In re Profit), 283 B.R. 567, 575 (9th Cir. BAP 2002). The
     Mrdutts filed their initial plan in December 2011.

                                         -6-
 1   payments to the chapter 13 trustee are "payments under such plan"
 2   and that plan payments are "complete" once the debtor has made all
 3   plan payments to the trustee.      We must determine what constitutes
 4   "payments under such plan" within the meaning of § 1329(a).      Is it
 5   limited to those payments made to the trustee or does it include a
 6   debtor's direct payments to creditors?
 7           While no controlling authority defines payments for purposes
 8   of plan modification under § 1329(a), courts have held in the
 9   discharge context of § 1328(a)5 that a debtor's direct payments to
10   a creditor for a debt treated by the plan are payments under the
11   plan.       Precisely, when the chapter 13 plan provides for the curing
12   of prepetition mortgage arrears and a debtor's direct postpetition
13   maintenance payments in accordance with § 1322(b)(5), such direct
14   payments are "payments under the plan."      And if the debtor does
15   not complete "all payments under the plan," the debtor is not
16   entitled to a discharge.
17           In re Coughlin, 568 B.R. 461, 474 (Bankr. E.D.N.Y. 2017), is
18   an excellent example of the overwhelming majority of courts which
19   have interpreted the term "payments" in § 1328(a) to include
20   direct payments by the debtor to a creditor.      See also Kessler v.
21   Wilson (In re Kessler), 655 F. App'x. 242, 244 (5th Cir. July 8,
22   2016) (when a plan provides for the curing of mortgage arrears as
23   well as direct maintenance payments, both payments fall "under the
24   plan" for purposes of § 1328(a) because both payments concern the
25
26           5
             Section 1328(a) provides, in relevant part, that "as soon
     as practicable after completion by the debtor of all payments
27   under the plan . . . the court shall grant the debtor a discharge
     of all debts provided for by the plan or disallowed under section
28   502 . . . ." (Emphasis added).

                                         -7-
 1   same claim; debtors' discharge properly denied for not making
 2   direct maintenance payments to creditor despite making all plan
 3   payments to trustee) (citing Foster v. Heitkamp (In re Foster),
 4   670 F.2d 478 (5th Cir. 1982) (when the plan provides for curing of
 5   mortgage arrears, a debtor's direct mortgage payments to creditor
 6   are payments under the plan)); Evans v. Stackhouse, 564 B.R. 513,
 7   518-20 (E.D. Va. 2017) (debtor's direct maintenance payments
 8   provided for in the plan were payments under the plan for purposes
 9   of § 1328(a)); In re Dowey, 580 B.R. 168, 172-73 (Bankr. D.S.C.
10   2017) (rejecting debtor's argument that payments under the plan in
11   § 1328(a) means only those payments made to the chapter 13
12   trustee); In re Hoyt–Kieckhaben, 546 B.R. 868, 874 (Bankr. D.
13   Colo. 2016) (both cure and maintenance payments are equal and
14   necessary parts of a plan's treatment of a secured claim under
15   § 1322(b)(5) and thus any payment made to effectuate the plan's
16   treatment of the claim is a payment under the plan for purposes of
17   discharge); In re Heinzle, 511 B.R. 69, 78-79 (Bankr. W.D. Tex.
18   2014) (debtors entitled to discharge only when they make all
19   payments under the plan, which includes cure and maintenance
20   payments under § 1322(b)(5)).
21        The court in Coughlin relied, in part, on Rake v. Wade, 508
22   U.S. 464 (1993), and the Supreme Court's interpretation of the
23   phrase "provided for by the plan" in § 1325(a)(5).6   In Rake, each
24   debtor's chapter 13 plan proposed to pay all postpetition mortgage
25   payments directly to the creditor and to cure the prepetition
26
27
          6
             Notably, the debtor in Coughlin had already received a
28   discharge despite failing to remain current on postpetition
     mortgage payments. The court was not aware of the default until
     after the discharge order had been entered. Ultimately, the court
     declined to vacate the discharge order despite the default,
     because the discharge had not been obtained by the debtor's fraud.
     568 B.R. at 474-76.

                                     -8-
 1   mortgage arrearages, without interest, over the term of the plan.
 2   The issue was whether the oversecured mortgage creditor was
 3   entitled to postpetition interest on the arrearages, when the
 4   contract did not so provide.   Because the plans "provided for" the
 5   creditor's claim by establishing repayment terms for the
 6   arrearages as permitted by § 1322(b)(5), the Court ruled that the
 7   creditor was entitled to interest on them.   Id. at 473.
 8        To reach its holding, the Court reviewed § 1328(a), which
 9   also contains the phrase "provided for by the plan," and noted:
10        As used in § 1328(a), that phrase is commonly understood
          to mean that a plan 'makes a provision' for, 'deals with,'
11        or even 'refers to' a claim. [Citation omitted]. In
          addition, § 1328(a) unmistakably contemplates that a plan
12        'provides for' a claim when the plan cures a default and
          allows for the maintenance of regular payments on that
13        claim, as authorized by § 1322(b)(5).     Section 1328(a)
          states that 'all debts provided for by the plan' are
14        dischargeable, and then lists three exceptions. One type
          of claim that is 'provided for by the plan' yet excepted
15        from discharge under § 1328(a) is a claim 'provided for
          under section 1322(b)(5) of this title.' § 1328(a)(1).
16        If claims that are subject to § 1322(b)(5) were not
          'provided for by the plan,' there would be no reason to
17        make an exception for them in § 1328(a)(1).
18   Id. at 474-75.   While the question of whether a debtor has
19   completed "all payments under the plan" was not at issue in Rake,
20   construing this language in § 1328(a) narrowly to include only
21   those payments made to the chapter 13 trustee proves difficult
22   given the Supreme Court's broad construction of "provided for by
23   the plan," in that same section, to include claims that are merely
24   referred to in the plan.   See In re Gonzales, 532 B.R. 828, 832
25   (Bankr. D. Colo. 2015).7
26
          7
             But see Dukes v. Suncoast Credit Union (In re Dukes), 909
27   F.3d 1306 (11th Cir. 2018). In Dukes, the debtor was current on
     her mortgage payments at the time she filed her chapter 13 case
28   but became delinquent at some point after confirmation. The
     mortgage lender foreclosed on its second lien and sought a
                                                          (continued...)

                                     -9-
 1        Only two courts have held that a debtor's direct payments on
 2   a nonmodifiable, nondischargeable residential mortgage loan under
 3   § 1322(b)(5) are not "payments under the plan" for purposes of
 4   § 1328(a).   The first was In re Gibson, 582 B.R. 15, 24 (Bankr.
 5   C.D. Ill. 2018).   In reviewing the language of § 1328(a), the
 6   Gibson court reasoned that the "ambiguous" phrase "all payments
 7   under the plan," which is used to define when completion of
 8   payments occurs (thus triggering entitlement to a full compliance
 9   discharge), and the phrase "provided for by the plan," which is
10   used to describe the scope of the discharge, should have different
11   meanings.    The court concluded that the phrase "'under the plan'
12   was intended to have a narrower effect, allowing for the
13   possibility that not all creditors holding debts provided for by
14   the plan are receiving payments under the plan" — i.e., direct
15
          7
16         (...continued)
     personal judgment against the debtor post-discharge on its first
17   lien. The mortgage lender reopened the debtor's case, seeking a
     determination that the first mortgage debt had not been
18   discharged.

19        Relying on a narrow reading of Rake, the Eleventh Circuit
     held that the plan did not "provide for" the mortgage payments for
20   purposes of § 1328(a), because the plan merely stated that
     postpetition payments would be made "outside the plan"; the plan
21   did not set forth any repayment terms for any portion of the
     lender's mortgage. Id. at 1313-15. The Eleventh Circuit
22   alternatively held that the first mortgage debt was not discharged
     based on § 1322(b)(2), which prohibits modification of the rights
23   of holders of claims secured by the debtor's principal residence.
     Id. at 1316-18.
24
          We note that the situation presented in Dukes was different
25   from that in this case. There, the debtor was prepetition current
     on her mortgage payments. The Dukes court did not address the
26   issue presented here, whether cure and maintain payments under
     § 1322(b)(5) are payments under the plan. Nevertheless, we also
27   disagree with Dukes's narrow interpretation of Rake and whether
     postpetition mortgage payments are payments under the plan for the
28   reasons set forth in this decision.

                                      -10-
 1   payments by the debtor to a creditor.     Id. at 19 (emphasis in
 2   original).    It followed, therefore, that completion of "all
 3   payments under the plan" meant only those payments made to the
 4   trustee.    Id.   The court disagreed with the "absolutist" view that
 5   § 1328(a) should be construed in a way that would make every
 6   uncured default on a direct payment grounds for dismissing a case
 7   without discharge.    Id. at 23.
 8        The Gibson court believed that Rule 3002.18 was to blame for
 9   the recent trend favoring dismissal without discharge in cases
10   where the debtor made the required payments to the trustee but
11   failed to make all of the direct mortgage payments to the
12   creditor.    Id. at 18-19.   The court observed that, prior to the
13   rule's adoption in 2011, the trustee generally was not privy to a
14   debtor's direct payment status, and thus "countless" debtors pre-
15   2011 had received a discharge despite arrears on direct payments.
16   Id. at 18.
17        The other case holding that a debtor's direct payments are
18   not "payments under the plan" for purposes of § 1328(a) is the
19   recent case of In re Rivera, No. 2:13-20842, 2019 WL 1430273, at
20   *4-6 (Bankr. D. Ariz. Mar. 28, 2019).     As with Gibson, the debtors
21   in Rivera had paid their prepetition mortgage arrears over the
22   course of the plan but failed to make all of their direct
23   postpetition mortgage payments to the creditor.    The court relied
24   heavily on Gibson to hold that "payments under the plan" means
25
26        8
             Rule 3002.1 requires lienholders on the debtor's principal
27   residence to disclose, in response to the trustee's notice of
     final cure payment, whether the debtor is current on postpetition
28   mortgage payments.

                                        -11-
 1   only those payments made to the trustee.      It also viewed the
 2   direct payments by the debtors as payments "outside the plan,"
 3   even though the plan provided for both the curing of the
 4   prepetition mortgage arrears and the debtors' direct postpetition
 5   mortgage payments to the creditor.      Id. at *9.   Interestingly, the
 6   Rivera court opined that the debtors could still seek to modify
 7   the plan under § 1329(a) to pay the postpetition arrears, but then
 8   conversely noted that a plan cannot be modified after completion
 9   of the payments under the plan, which, under the court's
10   reasoning, occurred when the debtors made their last payment to
11   the trustee.   Id. at *10.
12        Arguably, the facts in both Gibson and Rivera weighed heavily
13   on those courts' decisions to deny the motions to dismiss without
14   discharge.   In Gibson, the debtors' failure to make direct
15   payments on their second mortgage was due to an innocent
16   misunderstanding of their plan's requirements; they thought the
17   trustee was going to make those payments.      Further, the mortgage
18   creditor failed to take any action until after the debtors had
19   made their last plan payment to the trustee even though the
20   creditor never received any direct maintenance payments.      582 B.R.
21   at 22-23.    In Rivera, the debtors did not default on their
22   postpetition mortgage payments until after the 41-month plan was
23   complete.    2019 WL 1430273, at *9-10.    Thus, denying the debtors a
24   discharge under those facts seemed particularly harsh.
25        While Gibson and Rivera are thoughtful and well-intended
26   decisions, we respectfully disagree.      And we perceive some flaws
27   with interpreting the phrase "payments under the plan" to include
28   only those payments made to the trustee.      One is the different


                                      -12-
 1   outcomes that would result in conduit versus non-conduit
 2   jurisdictions.   See In re Coughlin, 568 B.R. at 474.   In a conduit
 3   district, where all payments to creditors are made by the chapter
 4   13 trustee, postpetition mortgage payments would unquestionably be
 5   payments under the plan.   But in a non-conduit or direct-pay
 6   district, postpetition mortgage payments made directly by the
 7   debtor would not be considered payments under the plan.    The
 8   trustee in a conduit district would quickly observe the debtor's
 9   failure to pay the mortgage and could seek dismissal, if the
10   debtor did not seek to modify the plan.   In a non-conduit
11   district, the debtor would know he stopped paying the mortgage,
12   but, absent a motion for relief from stay from the mortgage
13   creditor, the trustee, the court and other creditors would not
14   know of the default, at least not until the trustee files her
15   notice of final cure payment and the mortgage creditor responds
16   with its statement in accordance with Rule 3002.1(g).   As the
17   Coughlin court correctly observed, whether postpetition mortgage
18   payments are paid directly by the debtor or paid by the chapter 13
19   trustee should not be dispositive of granting a discharge under
20   § 1328(a).   568 B.R. at 474.   A direct-pay debtor should not
21   receive a discharge that a conduit debtor would not.    Such a
22   result "is inconsistent both with the words and intent of chapter
23   13."   Id.
24          In addition, the promise to maintain postpetition payments to
25   a mortgage creditor is a mandatory element of the treatment of
26   claims subject to § 1322(b)(5), and it is not severable.     In re
27   Dowey, 580 B.R. at 174.    Failing to perform this promise is a
28   material default of the plan, subjecting the case to dismissal


                                      -13-
 1   under § 1307(c)(6).9    In re Young, No. 12–11509, 2017 WL 4174363,
 2   at *2 (Bankr. M.D. La. Sept. 9, 2017); In re Dowey, 580 B.R. at
 3   174 (citing In re Formaneck, 534 B.R. 29, 35 (Bankr. D. Colo.
 4   2015)); In re Heinzle, 511 B.R. at 82-83.    We have difficulty
 5   reconciling that a debtor can receive a discharge after failing to
 6   make maintenance payments under § 1322(b)(5), when that same
 7   failure is grounds for case dismissal.    See In re Dowey, 580 B.R.
 8   at 174.
 9        While we understand the concern in Gibson and Rivera about
10   misuse of Rule 3002.1, simply because debtors prior to 2011 were
11   flying under the radar and receiving discharges despite not making
12   all maintenance payments as required under § 1322(b)(5), does not
13   mean that such practice was correct or give it any legitimacy.
14   Perhaps as an unintended consequence, Rule 3002.1 has merely
15   exposed the problem at a point in the case where modification to
16   cure the postpetition arrears is no longer an option.
17        Lastly, to interpret "payments under the plan" to include
18   only those payments made to the trustee raises an additional
19   concern in cases where debtors have chosen to retain their home
20   and the confirmed plan does not provide a 100% dividend to
21   unsecured claims.    The computation of disposable income to pay
22   creditors under § 1325(b) takes into account the promised direct
23   payments for housing, including § 1322(b)(5) maintenance payments.
24   Debtors who fail to make these payments, which often amount to
25
          9
26             Section 1307(c)(6) provides, in relevant part:

27        [O]n request of a party in interest or the United States
          trustee and after notice and a hearing, the court may
28        . . . dismiss a case under this chapter . . . for cause,
          including . . . material default by the debtor with
          respect to a term of a confirmed plan[.]

                                      -14-
 1   tens of thousands of dollars, benefit from years of living without
 2   mortgage payments at the expense of creditors.   Had the debtor
 3   sold or surrendered the home, the distribution to unsecured
 4   creditors may have been the full amount owed as opposed to pennies
 5   on the dollar or nothing.   See In re Dowey, 580 B.R. at 174; In re
 6   Formaneck, 534 B.R. at 34; Stephen J. Maier, Living Mortgage and
 7   Interest Free?:   The Unwarranted Discharge For Debtors Who Fail To
 8   Make Direct Post-Petition Mortgage Payments, 82 ALB. L. REV. 643,
 9   649 (2018).    See also In re Coughlin, 568 B.R. at 473 ("Chapter 13
10   debtors who do not pay their post-petition mortgage payments are
11   essentially claiming a deduction to which they are not
12   entitled.").   The concern is very real in this case.   The Mrdutts
13   failed to pay $123,819 in postpetition mortgage payments, yet they
14   paid nothing to unsecured creditors.    This raises the question of
15   good faith for purposes of plan confirmation and plan modification
16   under § 1325(a)(3).
17        Accordingly, we join the overwhelming majority of courts
18   holding that a chapter 13 debtor's direct payments to creditors,
19   if provided for in the plan, are "payments under the plan" for
20   purposes of a discharge under § 1328(a) and hold that this same
21   rule should apply in the context of post-confirmation plan
22   modifications under § 1329(a).   Although the language in § 1328(a)
23   is slightly different from that in § 1329(a) — § 1328(a) uses the
24   phrase "payments under the plan" while § 1329(a) uses the phrase
25   "payments under such plan" — we see no reason to interpret these
26   phrases differently.   The word "such" simply describes the plan
27   which has been confirmed.   See In re Goude, 201 B.R. 275, 277
28   (Bankr. D. Or. 1996) ("There is no reason to attach a different


                                      -15-
 1   meaning to the completion of payments required in § 1328(a) from
 2   the same requirement in § 1329(a).").
 3          Trustee argues that our cases Profit, Fridley and Escarcega
 4   support her position that the "completion of payments" under a
 5   plan for purposes of § 1329(a) means only those payments a debtor
 6   makes to the chapter 13 trustee.     We disagree.
 7          Profit actually supports our decision here.     In Profit, the
 8   confirmed 60-month plan required the debtors to remit a tax refund
 9   to the trustee.   283 B.R. at 570.    At some point prior to the
10   plan's 54th month, the debtors gave the trustee a lump-sum payment
11   which completed the projected plan payments.     However, the debtors
12   did not turn over the tax refund.     Id. at 570-71.   In the 54th
13   month of the plan, the trustee moved to modify the plan to, among
14   other things, compel the debtors to turn over the tax refund.        Id.
15   at 571.   The debtors argued that the motion was untimely because
16   the plan payments had been completed, and that the outstanding tax
17   refund was not a plan payment.
18          The Panel held that, because the plan required the debtors to
19   remit the tax refund to the trustee, the tax refund was a "plan
20   payment" for purposes of § 1329(a).     Id. at 573-74.   The Panel
21   further held that the motion to modify was timely under § 1329(a),
22   because the plan payments had not been completed at the time the
23   motion was filed due to the debtors' failure to remit the tax
24   refund.   In so holding, the Panel noted that, "[i]t is generally
25   held that the payments alluded to [in § 1329(a)] are the payments
26   required to be made by the debtor under the plan terms."      Id. at
27   573.   Contrary to Trustee's argument, Profit did not hold that
28   only those payments a debtor makes to the chapter 13 trustee are


                                      -16-
 1   "payments under such plan" for plan modification purposes under
 2   § 1329(a).
 3        Trustee never cited Fridley v. Forsythe (In re Fridley), 380
 4   B.R. 538 (9th Cir. BAP 2007), to the bankruptcy court, and In re
 5   Escarcega, 573 B.R. 219 (9th Cir. BAP 2017), was issued after she
 6   filed this appeal.   Trustee argues that these cases reinforce
 7   Profit's holding that the "completion of payments" for purposes of
 8   § 1329(a) properly relates to the payments that a debtor must pay
 9   to the trustee under the terms of his or her plan.   Again,
10   Profit's holding is not as narrow as Trustee suggests.   Further,
11   Fridley and Escarcega simply recognized the temporal requirements
12   of chapter 13 plans and that payments under a plan must continue
13   for the duration provided for in the initial plan, absent
14   modification, before they can be considered "complete" for
15   purposes of discharge and modification.   See In re Escarcega, 573
16   B.R. at 240; In re Fridley, 380 B.R. at 543-44.   These cases did
17   not hold that "completion of payments" for purposes of § 1329(a)
18   means only those payments a debtor makes to the chapter 13
19   trustee.
20        Even if Trustee were correct that the payments were complete
21   when the Mrdutts made their final payment to her, we would still
22   disagree with Trustee's conclusion.    In effect, the Plan required
23   the Mrdutts to make monthly payments in a fixed amount plus an
24   additional amount necessary to cure their prepetition arrears,
25   unless they obtained a loan modification that eliminated the
26   arrears.   These additional monthly payments were required payments
27   even though the Mrdutts did not take the required steps to
28   quantify them.


                                     -17-
 1         Trustee's arguments are also undermined by her action of
 2   filing the notices of plan completion.   In those notices, Trustee
 3   asserted that the Mrdutts were not entitled to a discharge because
 4   they had failed to deal with their prepetition mortgage arrears.
 5   In other words, the notices suggest that Plan payments were not
 6   complete for purposes of a discharge under § 1328(a) because of
 7   the uncured arrears.   If that is true, then why should they be
 8   considered complete for purposes of plan modification under
 9   § 1329(a)?   It makes little sense to say that a debtor's plan
10   payments are complete for determining whether the debtor has
11   timely moved to modify the plan, but to say they are not complete
12   for the purpose of denying the debtor a discharge.
13        The Plan provided for the curing of the Mrdutts' prepetition
14   mortgage arrears by either a loan modification or a modified plan
15   and for direct postpetition mortgage payments to Wells Fargo.     We
16   conclude that all of these payments were "payments under such
17   plan" for purposes of § 1329(a).   Because the Mrdutts failed to
18   satisfy the obligation of their prepetition arrears, and also
19   failed to make their direct postpetition mortgage payments, their
20   Plan payments were not "complete" under § 1329(a).   Accordingly,
21   we agree with the bankruptcy court that the Motion to Modify was
22   timely.
23   B.    The bankruptcy court erred in determining that the Plan, as
           modified, complied with § 1329(c).10
24
25         Although the bankruptcy court did not expressly rule that
26
27         10
             Section 1329(c) mandates that a modification "may not
     provide for payments over a period that expires after the
28   applicable commitment period under section 1325(b)(1)(B) after the
     time that the first payment under the original confirmed plan was
     due, unless the court, for cause, approves a longer period, but
     the court may not approve a period that expires after five years
     after such time."


                                     -18-
 1   modification was permissible under § 1329(c), it implicitly ruled
 2   that it was by granting the Motion to Modify.   Trustee argues that
 3   the court had no statutory authority to approve a modified plan
 4   that provided for payments several months beyond the 60-month time
 5   limit.   We agree.
 6        No fewer than three Code provisions, §§ 1322(d), 1325(b)(4),
 7   and 1329(c), prohibit a plan exceeding five years in length.
 8   Section 1329(c) specifically prohibits the court from approving a
 9   plan modification that would "provide for payments" beyond five
10   years.   Here, the 60-month period for the Plan expired in October
11   2016; the Motion to Modify was filed in June 2017, the 67th month
12   after which the Mrdutts' first Plan payment came due.
13        Although we held in Profit that the trustee's motion to
14   modify was timely under § 1329(a) due to incomplete plan payments,
15   we also held that the trustee's modification request failed
16   because it required payments in excess of the 60-month time
17   limitation in § 1329(c) and its counterpart, § 1322(d).   283 B.R.
18   at 573-74.   See also In re Heinzle, 511 B.R. at 79 (modification
19   may not occur after completion of the 60-month term for plan
20   payments); In re Goude, 201 B.R. at 276-77 (dismissing case
21   because plan could not be modified since the 60-month period had
22   expired and plan could not be extended to include payment of
23   priority tax claims).
24        The Mrdutts sought to modify the Plan to surrender the
25   residence in satisfaction of the Wells Fargo debt.   They argue
26   that surrender is not a "payment" and therefore does not violate
27   the 60-month rule in § 1329(c).    We conclude that surrender is a
28   form of payment for purposes of § 1329(c).   Numerous courts have

                                       -19-
 1   so held.   See Bank One, N.A. v. Leuellen, 322 B.R. 648, 652-54
 2   (S.D. Ind. 2005); In re Fayson, 573 B.R. 531, 535 (Bankr. D. Del.
 3   July 13, 2017)("Surrender of collateral is a form of payment under
 4   the Code."); In re Dennett, 548 B.R. 733, 737 (Bankr. N.D. Tex.
 5   2016) (holding that surrender is a payment of debt but allowing
 6   plan modification to surrender because debtors were only 40 months
 7   into their 60-month plan); In re Jones, 538 B.R. 844, 849 (Bankr.
 8   W.D. Okla. 2015) (holding that § 1322(b)(8), which applies to plan
 9   modifications under § 1329(a), "plainly and unequivocally
10   contemplates that surrender of collateral is a form of payment");
11   In re Tucker, 500 B.R. 457, 462 (Bankr. N.D. Miss. 2013); In re
12   Davis, 404 B.R. 183, 194-95 (Bankr. S.D. Tex. 2009). Thus,
13   allowing the surrender after the 60-month term had expired was
14   contrary to § 1329(c).
15        Besides a time limitation problem, it is not clear that
16   modification of the Plan was even appropriate.    A modified plan is
17   essentially a new plan and must be consistent with the statutory
18   requirements for confirmation.    In re Profit, 283 B.R. at 574;
19   McDonald v. Louquet (In re Louquet), 125 B.R. 267, 268 (9th Cir.
20   BAP 1991).   This includes compliance with §§ 1322(a), 1322(b),
21   1323(c), and 1325(a).    See § 1329(b)(1).   At minimum, good faith
22   was in question when unsecured creditors received nothing under
23   the Plan while the Mrdutts retained over $100,000 by failing to
24   make their required postpetition mortgage payments.    See
25   § 1325(a)(3).
26        This is not a case where the debtors sought a reasonable
27   extension of time beyond the 60 months to catch up on some missed
28   plan payments or fees.    See In re Profit, 283 B.R. at 576 n.11

                                      -20-
 1   (noting the difference between plan modification and the cure of
 2   plan payments within a reasonable time after the plan has expired
 3   in order to prevent case dismissal).    The Mrdutts asked the
 4   bankruptcy court to modify a confirmed plan to surrender an asset
 5   of the estate and extinguish a secured claim seven months after
 6   the 60-month period had already expired.    The court had no
 7   authority to modify a plan that allowed for payment beyond the 60-
 8   month time limit.   Accordingly, it abused its discretion in
 9   granting the Motion to Modify.
10                              VI. CONCLUSION
11        We do not ignore the sad facts of this case and the
12   bankruptcy court's understandable desire to do equity.   But the
13   Mrdutts should have been more proactive in their bankruptcy case
14   and sought relief from the court when it was apparent that the
15   loan modification with Wells Fargo was futile.   The same goes for
16   Wells Fargo, which sat idly by and did not seek relief from stay
17   until after the Mrdutts had made all of their Plan payments to
18   Trustee and the postpetition mortgage arrears were so
19   astronomical.   However, for the reasons stated above, we REVERSE.
20
21
22
23
24
25
26
27
28

                                      -21-
