529 B.R. 106
Bankr. D.S.C.2015Background
- Crump filed a chapter 11 case on September 3, 2014, with a parcel at 940 Joe Rivers Rd, Charleston, SC valued at $800,000 and encumbered by Ameris Bank’s first mortgage.
- Ameris Bank filed a proof of claim for $1,846,408 on January 8, 2015; originally secured by Joe Rivers Rd and a second lien on Broughton Rd, which was released in July 2010.
- The Broughton Rd lien release left Ameris Bank with a claim secured solely by Crump's principal residence.
- Crump proposed Class 2 treatment to cure Ameris Bank’s loan, with $1,260,000 secured claim, $6,385 monthly payments for 48 months, and then payoff of the remaining balance, with foreclosure rights preserved.
- Ameris Bank objected, contending the plan improperly modifies a claim secured by the debtor’s principal residence, and the court held a preliminary confirmation hearing and continued argued briefing.
- The court sustained Ameris Bank’s objection and denied confirmation, concluding the proposed treatment is a modification prohibited by § 1123(b)(5).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ameris Bank’s claim is subject to modification under § 1123(b)(5). | Crump argues the lien includes other collateral or that modification is not required. | Ameris Bank asserts the claim is secured solely by the debtor’s principal residence, making it subject to § 1123(b)(5) modification. | Ameris Bank’s claim is secured solely by the principal residence and is subject to modification under § 1123(b)(5). |
| Whether the proposed treatment is a modification or a cure. | Crump contends the plan cures or waives default, not modify. | Ameris Bank contends the plan extends payments and alters terms, constituting a modification. | The proposed treatment is a modification, not a cure. |
Key Cases Cited
- In re Abdelgadir, 455 B.R. 896 (9th Cir. BAP 2011) (anti-modification provision applies when secured by principal residence)
- In re Larios, 259 B.R. 675 (Bankr.N.D.Ill. 2001) (security interest breadth affects modifiability)
- In re Scarborough, 461 F.3d 406 (3d Cir. 2006) (multifaceted collateral may be modifiable)
- In re Litton, 330 F.3d 636 (4th Cir. 2003) (distinguishes cure vs modification in chapter 13)
- In re Clay, 204 B.R. 786 (Bankr.N.D. Ala. 1996) (chapter 11 context for reinstating mature home loans)
- In re Haake, 483 B.R. 524 (Bankr.W.D. Wis. 2012) (chapter 11 treatment of matured home loans)
- In re Proctor, 494 B.R. 833 (Bankr.E.D.N.C. 2013) (risk considerations for collateral with multiple liens)
- Travelers Cas. & Sur. Co. v. Pac. Gas & Elec. Co., 549 U.S. 443 (Supreme Court 2007) (claim definition and state-law interpretation in bankruptcy)
- Walters v. Metro. Educ. Enters., Inc., 519 U.S. 202 (Supreme Court 1997) (statutes should have operative words given their intended effect)