UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

FRANKFORT DIVISION

IN RE:

JAMES KARSNER MURPHY

TERESA B. MURPHY

DEBTORS CASE NO. 87-00085

CHAPTER 12

MEMORANDUM OPINION

This matter is before the Court on the Motion to Dismiss of creditor Farmers Home Administration ("FmHA"), filed herein on March 8, 1993. FmHA contends that there has been material default by the debtors with respect to a term of their confirmed plan. The debtors filed a Response on April 5, 1993. The debtors futher filed a Motion for Order Permitting Time to Modify Plan and for Order Allowing Additional Time to Cure Arrearage on April 20, 1993. FmHA filed its Response to that Motion on April 26, 1993. In response to an Order of this Court entered on May 5, 1993, the trustee filed his Amended Report of Chapter 12 Plan Payments Received and Distributed on May 27, 1993. The debtors filed a Supplement to Record by Debtors of Intent to Cure Arrearage on June 3, 1993.

The debtors' confirmed plan calls for annual payments of $3,721.77 on FmHA's secured claim. The plan defines its effective date as February 1, 1989. Each plan year therefore begins on February 1 and ends on January 31 of the year following. FmHA's first payment was due by January 31, 1990; the second by January 31, 1991; and so on until the fifth and final payment by January 31, 1994.

According to FmHA's Motion, it had received four payments, $700.00 on February 12, 1990; $2571.77 on March 26, 1990; $3,271.77 on April 25, 1991; and $2,625.77 on June 4, 1992, for a total of $9,169.31. It calculated its total arrearage at $5,817.77. FmHA contends that it never received a full annual payment and that the payments were consistently late.

The trustee's Amended Report shows the same total paid to FmHA through February 1993, but adds $5,220.00 applied out of $5,800.00 paid, apparently between that time and the time the Amended Report was filed on May 27, 1993. The total paid to date to FmHA is therefore $14,389.31. If the debtors had made the full yearly payments to FmHA under the plan, they would have paid a total of $14,887.08 by January 31, 1993. At this point there is therefore a discrepancy of less than $500.00 in the total to have been paid by this time.

While the debtors have not kept to the schedule of the plan either in amounts paid per plan year nor times of payment, the Court cannot agree with FmHA, in light of the trustee's Amended Report, that the debtors are in "material default" although the present small deficiency should be made up immediately. It is therefore the opinion of this Court that FmHA's Motion to Dismiss should be overruled. An order in conformity with this opinion will be entered separately.

Dated:

By the Court -

________________________________

Judge

Copies to:

Debtors

John C. Ryan, Esq.

David E. Middleton, Esq.

Trustee