In an issue of first impression, the U.S. Court of Appeals for the Third Circuit has ruled that the Bankruptcy Code permits judges to grant a grace period for debtors to make up payment shortfalls in their installment plans to pay off debts.
The court’s ruling came in the bankruptcy matter of Paul and Beth Ann Klaas and their creditor Elizabeth Shovlin. In that case, the Klaases still owed Shovlin $1,100 after completing the agreed-upon five-year payment plan totaling $174,000. The Klaases paid the outstanding balance but Shovlin objected to the court’s decision allowing them to do so after the five-year payment period expired and argued that the late payment was invalid.
