The estate of a chapter 13 debtor who dies before completing plan payments may still be granted a discharge despite the decedent’s inability to complete the required financial management course, according to Bankruptcy Judge Michael M. Parker of San Antonio.
The debtor confirmed her chapter 13 plan in 2019. The plan called for 100% payment to both secured and unsecured creditors. However, the debtor died in 2021 before completing plan payments.
The debtor’s daughter completed the plan payments. She and the representative of the debtor’s estate filed a motion asking Judge Parker to waive the requirement for completing the financial management course as a condition to receiving a discharge under Section 1328(g).
First, Judge Parker dealt with Bankruptcy Rule 1016, which deals with deceased debtors. The rule provides:
In [the event of the death or incompetency of the debtor], the estate shall be administered and the case concluded in the same manner,
so far as possible, as though the death or incompetency had not occurred. If a reorganization, family farmer's debt adjustment, or
individual's debt adjustment case is pending under chapter 11, chapter 12, or chapter 13, the case may be dismissed; or if further
administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as
possible, as though the death or incompetency had not occurred.
Because the rule does not mandate dismissal on the debtor’s death, Judge Parker focused on the possibility of further administration and the best interests of the parties. Given that plan payments had been completed, he said that “‘further administration’ requires only the ministerial task of completing a financial management course” mandated by Section 1328(g).
Judge Parker observed that “the Debtor’s death defeats the purpose of the course requirement, which is to prevent bankruptcy recidivism.” He said that the “long history of plan payments” and the completion of payments by the daughter “is an acceptable way to keep administering a case so that it can be concluded as though the Debtor had not died.”
However, the possibility of further administration “does not end the inquiry into whether the case may continue,” Judge Parker said. Rule 1016 also requires consideration of the best interest of the parties.
Allowing the case to continue without completion of the financial management course “would not impact the Debtor’s creditors,” Judge Parker said. He therefore found that “further administration of this case is possible and in the best interest of the parties for purposes of Rule 1016.”
Nonetheless, compliance with Rule 1016 “doesn’t solve the deceased Debtor’s primary problem, her inability to complete a financial management course to satisfy § 1328(g)(1),” Judge Parker said. Sections 1328(g)(1) and (2) provide:
(1) The court shall not grant a discharge under this section to a debtor unless after filing a petition the debtor has completed an
instructional course concerning personal financial management described in section 111.
(2) Paragraph (1) shall not apply with respect to a debtor who is a person described in section 109(h)(4) . . . .
Judge Parker went on to say that Section 109(h)(4) “excludes debtors who cannot complete a financial management course due to ‘[i]ncapacity, disability, or active military duty in a military combat zone.’” The subsection defines a person with a “disability” as someone who is “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet [financial management course].”
Judge Parker held that “the Debtor’s death constitutes a disability under § 109(h)(4).” Moreover, he said that “death defeats the purpose of the financial management course requirement, which is to prevent bankruptcy recidivism.”
Because the completion of plan payments permitted the continued administration of the case, and because he found death to constitute a disability, Judge Parker granted the motion to waive compliance with the requirement to complete a financial management course.
The estate of a chapter 13 debtor who dies before completing plan payments may still be granted a discharge despite the decedent’s inability to complete the required financial management course, according to Bankruptcy Judge Michael M. Parker of San Antonio.
The debtor confirmed her chapter 13 plan in 2019. The plan called for 100% payment to both secured and unsecured creditors. However, the debtor died in 2021 before completing plan payments.
The debtor’s daughter completed the plan payments. She and the representative of the debtor’s estate filed a motion asking Judge Parker to waive the requirement for completing the financial management course as a condition to receiving a discharge under Section 1328(g).