August 14, 2018

by Louise Johnson, Ronald Scott, Reginald Corley
Scott & Corley, P.A – USFN Member (South Carolina)

For the District of South Carolina, Chief Bankruptcy Judge Duncan and Senior Bankruptcy Judge Waites have joined together in issuing a new Operating Order regarding conduit procedures in Chapter 13 cases (Operating Order 18-03) (New Order), effective August 1, 2018.

It is likely that the New Order will result in a significant increase in the number of conduit plans filed in Chapter 13 cases in South Carolina. Previously, conduit plans were required only under certain, limited circumstances. Pursuant to the New Order, however, all Chapter 13 plans that address claims secured by the debtor’s principal residence (not other real property) must be filed as conduit plans unless one of the following conditions/circumstances exists.

Exceptions to conduit plan requirement:

• Motion to value or surrender said property;
• Payment in full of the secured claim on primary residence over life of the plan;
• Non-filing co-debtor will pay secured claim on primary residence in full directly to the creditor;
• Plan requests loss mitigation/mortgage modification;
• Loan is current at time of petition/conversion;
• Debtor’s delinquency is less than 30 days; or
• Good cause exists (such as agreement to dismiss with prejudice if the debtor fails to make direct payment).

Note that the New Order maintains the court’s provision from its prior Operating Order, which states that the Chapter 13 trustee will not disburse funds to the mortgage creditor under a conduit plan unless, and until, the mortgage creditor has filed a compliant proof of claim.

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