In re Bullard
475 B.R. 304
Bankr. D. Mass.2012Background
- Debtor filed Chapter 13 on December 14, 2010; Hyde Park Savings Bank held a mortgage on 318 Union St, Randolph, MA securing a note of $387,000 with a June 1, 2035 maturity.
- Hyde Park filed a proof of claim on June 17, 2011 for $346,006.54, with no pre-petition arrears indicated.
- The Debtor’s January 7, 2012 Third Amended Plan bifurcated Hyde Park’s claim into secured and unsecured components and proposed to pay the secured portion over the life of the plan and the unsecured portion as with other unsecured claims (about 5.26% dividend).
- The Plan directed payments on the secured portion to be made directly by the Debtor, not through the trustee, while the unsecured portion would receive a small dividend.
- Hyde Park objected on February 16, 2012; a hearing followed, and the court sustained the Objection, requiring amendment to the plan within 30 days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a hybrid plan bifurcating a secured claim and paying the secured part beyond five years is permissible. | Hyde Park argues that §1322(b)(2) and §1322(b)(5) are mutually exclusive and hybrid plans violate the five-year limit. | Debtor contends §1322(b)(5) independently permits maintenance of payments on the secured portion beyond five years. | Mutually exclusive; plan cannot extend beyond five years. |
| Whether §1322(b)(2) modification and §1322(b)(5) maintenance can be reconciled in a single plan. | Hyde Park asserts bifurcation modification under §1322(b)(2) cannot be paired with long-term maintenance under §1322(b)(5). | Debtor argues both provisions may operate together in a hybrid plan as applied in some courts. | §1322(b)(2) and §1322(b)(5) are incompatible in a single confirmed plan. |
| Whether Nobelman requires that bifurcation of a claim is a modification of the creditor’s rights under §1322(b)(2). | Hyde Park relies on Nobelman to treat bifurcation as modification of rights. | Debtor disputes the Nobelman interpretation, advocating bifurcation can be supported by §1322(b)(5). | Nobelman controls; bifurcation is a modification of rights and not compatible with long-term payments under the plan. |
Key Cases Cited
- Nobelman v. American Savs. Bank, 508 U.S. 324 (1993) (bifurcation involves modification of rights under §1322(b)(2))
- In re McGregor, 172 B.R. 718 (1994) (hybrid plan origins; bifurcation not allowed under §1322(b)(2) unless other mechanics)
- In re Murphy, 175 B.R. 134 (1994) (treatment of modified secured claims in Chapter 13)
- Lomas Mortg., Inc. v. Louis, 82 F.3d 1 (1st Cir. 1996) (statutory interpretation in mortgage bifurcation context)
- TRW Inc. v. Andrews, 534 U.S. 19 (2001) (focus on valuation and treatment of secured claims under plan)