485 B.R. 841
Bankr. N.D. Ohio2013Background
- Note dated August 29, 2005 for $103,989 secured by Open-End Mortgage on real property and Consumer Security Agreement on a manufactured home; title lists Northern Hancock as first lien.
- Real property at 15499 State Route 45, East Liverpool, OH 43920 and a 2006 Colony Maplewood manufactured home are pledged as security; note references both collateral interests.
- Debtors filed Chapter 13 petition on February 24, 2012; Northern Hancock filed a proof of claim (Claim 6) for $106,350.32; Debtors list Northern Hancock as holder of a second mortgage against the real property.
- Debtors’ Amended Plan proposes bifurcating Northern Hancock’s claim into secured ($50,000) and unsecured ($47,349) and paying through the plan over 60 months.
- Northern Hancock objects to confirmation, arguing the plan cannot modify its rights under §1322(b)(2) and that the note matured prepetition; adversary proceeding seeks determination of extent and value under §506.
- Court denies Northern Hancock’s Motion for Summary Judgment and allows bifurcation and payment under §1322(b)(2).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1322(b)(2) permits modification of a claim secured by real property and personal property when the debt matured prepetition. | Debtors may modify since claim is not secured solely by principal residence. | Modification is prohibited where the claim is secured by real property used as principal residence (anti-modification rule). | Yes; modification permitted under §1322(b)(2). |
Key Cases Cited
- In re Escue, 184 B.R. 287 (Bankr.M.D.Tenn.1995) (modification allowed where claim not solely secured by residence real property)
- In re Sennhenn, 80 B.R. 89 (Bankr.N.D.Ohio 1987) (balloon payment maturity does not bar modification when not limited to principal residence)
- In re Bosteder, 59 B.R. 878 (Bankr.S.D.Ohio 1986) (§1322(b)(2) excludes only claims secured solely by residence real property from modification)
- In re Harris, 147 B.R. 17 (Bankr.N.D.Ohio 1992) (creditors with mortgage on residence generally protected from modification; distinguishable facts)
- In re Johnson, 75 B.R. 927 (Bankr.N.D.Ohio 1987) (cases noting modification limitations under §1322(b)(2) for certain real-property-only securities)
- Seidel v. Larson (In re Seidel), 752 F.2d 1382 (9th Cir. 1985) (creditors with mixed security interests may be modified under §1322(b)(2))