Friday, June 02, 2017

bankruptcy - Ch. 13 - grace period to cure arrearage shortly after expiration of plan term

In re Klaas – 3d Cir. – June 1, 2017


The Bankruptcy Code sets certain limits on the amount of time that debtors may be required to remain in Chapter 13 proceedings and make payments on their debts. This case presents two questions of first impression among the Courts of Appeals:

            - whether bankruptcy courts have discretion to grant a brief grace period and discharge debtors who cure an arrearage in their payment plan shortly after the expiration of the plan term, and if so,
            - what factors are relevant for the bankruptcy court to consider when exercising that discretion.


Because we conclude the Bankruptcy Code does permit a bankruptcy court to grant such a grace period and the Bankruptcy Court did not abuse its discretion in granting one here, we will affirm the rulings of the District Court, which in turn affirmed the relevant order and judgment of the Bankruptcy Court.

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