482 B.R. 35
Bankr. D. Mass.2012Background
- Debtors Bruce K. Fortin and Rebecca A. Fortin filed Chapter 13 petitions; cases are jointly administered.
- Residential Mortgage Trust 2008-R1 (RMT) holds a first mortgage on the Hill Street property and opposes confirmation.
- Value of the Hill Street property for § 506 purposes is $185,000; RMT’s claim is $183,707.41 secured and $95,758.70 unsecured.
- As of petition, RMT was owed $279,466.11, including $62,860.81 pre-petition arrearage.
- Debtors proposed to pay $75,268.18 to the trustee over five years, with a balloon payment and no dividend to unsecured creditors, including RMT's unsecured portion.
- Plan and stipulations contemplate paying RMT the secured portion ($183,707.41) through a combination of arrearage and direct payments, with 8% interest; unsecured portion would receive nothing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Can a plan modify a secured claim under §1322(b)(2) and also cure/maintain under §1322(b)(5) for the same claim? | RMT argues bifurcation under §506(a) followed by (b)(5) cure exceeds consent. | Fortins contend hybrid plan allowed to combine (b)(2) and (b)(5) for the same claim. | Not allowed; hybrid plan for same claim is impermissible. |
| Is a balloon payment beyond the five-year plan term permissible under §1322(d) when curing/maintaining under §1322(b)(5)? | RMT asserts 5-year limit cannot be exceeded. | Fortins rely on (b)(5) as curing/maintaining while case pending. | Balloon payments beyond five years not permitted; plan must have equal payments within five years. |
| How must pre-petition arrearages be treated when bifurcating a claim under §506(a)? | Arrearage treated as separate unsecured/priority component. | Arrearage folded into the secured component as part of the modification. | Arrearage rolled into the secured claim; not kept as a separate component. |
Key Cases Cited
- Woolsey v. Citibank, N.A. (In re Woolsey), 696 F.3d 1266 (10th Cir. 2012) (defines secured claim as value-based; supports bifurcation limits under §506(a) and §1322(b) principles)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (limits lien-stripping in chapter 7; supports need for alternate authority in 13)
- Nobelman v. American Savings Bank, 508 U.S. 324 (1993) (holds anti-modification clause in §1322(b)(2) applies to homestead mortgages in 13)
- In re Flynn, 402 B.R. 437 (1st Cir. BAP 2009) (cites five-year plan limit and equal payments in 13 cram-down context)
- In re Bullard, 475 B.R. 304 (Bankr.D. Mass. 2012) (discusses hybrid plans in district court context)
- In re McGregor, 172 B.R. 718 (Bankr. D. Mass. 1994) (early Massachusetts discussion of hybrid plans)