Although there were some growing pains, most of our clients have been extremely pleased with the Conduit Program. Without the Conduit Program, a Chapter 13 discharge is at risk. This is because the Fifth Circuit has ruled that a Debtor is not eligible to receive a discharge unless he or she has made all payments required under the plan. According to the Fifth Circuit ruling, plan payments are not limited to Trustee payments, but also include direct payments the Debtor committed to paying when the case confirmed. The conduit program has been in place since October 1, 2016.
This ruling seems confusing, but the Fifth Circuit’s ruling would apply in the following scenario: Mr. and Mrs. X filed a Chapter 13 plan in 2013 to include mortgage arrears. Mr. and Mrs. X agreed to pay their ongoing mortgage payments directly to their Mortgage Lender, ABC Bank, for the duration of the bankruptcy and the Chapter 13 Plan confirmed. Mr. and Mrs. X experienced a financial hardship in 2016 and missed 6 mortgage payments but resumed their regular mortgage payments in 2017. It is 2018 and Mr. and Mrs. X are ready to receive their Chapter 13 Discharge. Just before the judge is set to sign the Discharge Order, ABC Bank files paperwork showing 6 missed mortgage payments. Suddenly, Mr. and Mrs. X’s Motion for Discharge is stopped. They are no longer eligible for a Chapter 13 Discharge.
Mr. and Mrs. X still have options. If you see yourself in Mr and Mrs. X’s story, you may be feeling concerned. The best thing to do is to contact us right away so we can develop a plan of action. There is no need to feel embarrassed; it is best to approach this situation as early as possible. Don’t wait until the end of your case. You can email me at [email protected] to discuss your options or call us at 214-974-3390.