In re Coleman, Bankruptcy No. 3-79-02750.

• Decision Date: 31 January 1980
• Docket Number: Bankruptcy No. 3-79-02750.
• Citation: 5 BCD 1300,2 BR 348
• Parties: In re Theresa Virginia COLEMAN, Debtor.
• Court: U.S. Bankruptcy Court — Western District of Kentucky

2 B.R. 348 (1980)

In re Theresa Virginia COLEMAN, Debtor.

Bankruptcy No. 3-79-02750.

United States Bankruptcy Court, W.D. Kentucky.

January 31, 1980.

Jan C. Morris, Louisville, Ky., for Chap. 13 debtor.

G. Wm. Brown, Louisville, Ky., for trustee.

MEMORANDUM AND ORDER

MERRITT S. DEITZ, Jr., Bankruptcy Judge.

We are called upon for the first time to measure a tendered Chapter 13 petition against the requirements of the Bankruptcy Reform Act. Substantial compliance will, of course, result in the plan being confirmed; failure of compliance will bring about a denial of confirmation.

The petition of Theresa Virginia Coleman lists ten unsecured creditors owed a total of $4,845. Her plan proposes to pay them $1 each, or a total of $10.

Two secured creditors are listed. They are the Kissel Company, whose debt of $6,200 is secured by a first mortgage on the Coleman residence, and Georgia T. Wilcox, holding a junior mortgage on the residence in the amount of $3,593, which has been reduced to judgment in foreclosure proceedings.

The plan proposes to treat both mortgages outside the plan — that is, for Mrs. Coleman to continue to make both monthly mortgage payments in accordance with the contract terms, without any supervision or involvement by this Court or its trustee.

In addition, the plan provides for an arrearage of $1,500 on the Wilcox mortgage (a vendor's lien, actually, retained in the deed from Wilcox to Coleman) to be paid in full over the three-year life of the plan.¹

At the confirmation hearing, Mrs. Wilcox appeared, by counsel, to formally reject the plan and to contend that the amount due is not simply the arrearage (reported as $1,500), but rather the full amount of principal, interest and costs, totaling $4,472, pursuant to the judgment in the foreclosure proceeding.

Also at the confirmation hearing, the trustee recommended against confirmation on the ground that the "plan"² had not been proposed "in good faith" as required by the Bankruptcy Code.³

Counsel for Mrs. Coleman argues that since the Code permits plan payments to extend over a three-year period (§ 1322(c)), the proposal to satisfy the vendor's lien arrearage within that period also satisfies the requirement of § 1322(b)(5) that a plan "provide for the curing of any default within a reasonable time" on any long-term secured claim.

Counsel asserts, in effect, that "three years" is synonymous with "reasonable time", and that a provision to cure a default within three years meets the reasonable time requirement. To this position the trustee takes gross exception, in his written recommendation against confirming the plan.

Anticipatory of appeal, counsel for the debtor requested that the controversy be reduced to written findings of fact and conclusions of law. They are herewith presented.

We concur in the recommendation of the trustee that confirmation should be denied. We hold that three years is not, on the facts of this case, a reasonable time within which to cure a default which was already four years old when the Chapter 13 petition was filed.

The grammarian will detect that we are here postulating a negative rule, not a positive one. We are not attempting to attach affirmative meaning to the intentionally flexible term, "reasonable time". We simply hold that three years is not a reasonable time within which to cure a default, on the facts of this case.

It is not our intention, in this case of first impression, to attempt to establish permissible parameters of "reasonable time", although we take notice of the prevailing practice of mortgage lenders, absent bankruptcy, of accepting accelerated payments (at a...