Opinion
Nos. B2 75-2590 and B2 75-2591
February 9, 1979
Wage Earners Plans — Failure to Make Payments — Request for Discharge
The court may, upon the Chapter XIII debtors' request, grant a discharge under Section 661 of the Bankruptcy Act, if there are no objections by creditors, no assets owned by the debtors that would be available to unsecured creditors in liquidation, and the debtors have undergone such hardship as to merit the "compassionate construction" of Section 661.
The Chapter XIII debtors filed an application with the court, pursuant to Rule 13-404(b) of the Rules of Bankruptcy Procedure, seeking a discharge under Section 661. Following notice to creditors, no objections to the discharge were filed nor did any creditors appear at the hearing on the application. The debtors had failed to pay 37% of the payments due to the Chapter XIII trustee during the period of the confirmed plan. Such failure was explained by the debtors as having been caused by the declining health of Mr. Reichley and his inability to hold any employment outside of the home. He is an invalid subsisting on a government pension. Also, Mrs. Reichley is not well and is no longer able to provide the main source of the family's income. The debtors are responsible for an adopted granddaughter. For these reasons, the debtors can no longer afford the monthly plan payments and requested the discharge so that they could devote all of their current income and assets to maintain "their present minimal standard of living." Their assets consist of a liened automobile, household goods and personal effects which are partially liened, and a checking account.
The granting of a Section 661 discharge is entirely discretionary with the court. The court is influenced, at least in part, "by the sum total of the evidentiary support offered by the debtors on the question of whether or not the failure to complete payments was due to circumstances for which the debtors could not be justify held accountable." A discharge was granted under Section 661 because of the absence of creditor objection, the fact that no assets owned by the debtors would be available to unsecured creditors should the court require an adjudication in bankruptcy before considering issuance of any discharge, and because the debtors in this case "clearly merit the compassionate construction of § 661 and the granting of the hardship discharge." See Sec. 661 at ¶ 3778 and Sec. 1328(b) at ¶ 13,206, and Rule 13-404(b) at ¶ 20,974.