Case Summary:
The Debtors filed a Chapter 13 plan which provided for the Debtors to make direct monthly payments to the Department of Education on their student loans. The Department of Education consented to a reduced payment on the student loans “to enhance the feasibility of the plan.” The Trustee objected to the plan on the grounds that the plan unfairly discriminated against a class of unsecured creditors and that the plan proposed direct payments to the Department of Education in an amount less than that called for by the pre-bankruptcy contract.

The Debtors’ Chapter 13 plan was not confirmed. It was determined that the Debtors’ plan failed to comply with 11 U.S.C. §1322(b)(5) and failed to demonstrate that its treatment of the Department of Education claim was not unfair discrimination between classed of unsecured claims. Furthermore, it was determined that the direct payment to the Department of Education was impermissible.

Statute/Rule References:
11 U.S.C. § 1322(b)(1)
11 U.S.C. § 1322(b)(5)

Key Terms:
Claims - Classes
Direct Payments
Discharge 
Long-Term Debt
Maintenance of Payments
Specificity of Statute
Student Loans