Case Summary:
The debtors’ home was sold at a sheriff’s sale. The successful bidder deposited the required 10% down payment of $27,500.00 but backed out of the transaction prior to confirmation of the sale. The confirmation hearing was canceled and the state court entered an order authorizing the transfer of the down payment to the creditor as a payment on its judgment claim. The debtors then filed chapter 13. Under their plan they sought to de-accelerate the mortgage debt and resume making payments. They also requested that the court apply the forfeited deposit to the arrearage the debtors owed on the mortgage, thus reducing the arrearage to be paid under the plan. The creditor objected to this treatment. The court concluded that while the debtor did not have a legal right to compel this result, the contract itself dictated that this payment be applied to the periodic payments of principal and interest as they came due - in other words, to the arrearage. The debtors’ motion was granted.

Statute/Rule References:
11 U.S.C. § 1322(c)(1) -- Plan Payment

Key Terms:
Plan Payment