Background

• Debtor and North Shore Bank entered a HELOC up to $119,500 with a March 15, 2009 maturity and an automatic extension provision; the Debtor granted the Bank a second mortgage on his residence to secure the obligation.
• Debtor filed Chapter 13 on April 26, 2012 with a plan valuing the Bank’s secured claim at $11,800 and proposing to pay that amount over 60 months at 4.25%, treating the remainder as unsecured.
• Bank objects to confirmation, arguing the entire $117,088.52 claim must be paid in full or the Debtor’s valuation is too low (Bank valued property at $256,600; plan valuation at $181,500 with first mortgage of $169,700).
• Code § 1322(b)(2) permits modification of secured claims except those secured only by real property that is the debtor’s principal residence; § 1322(c)(2) allows bifurcation when the last payment on the original schedule is due before the final plan payment.
• Debtor argues § 1322(c)(2) applies because the Agreement’s original maturity date is March 15, 2009 and the original schedule ends before the plan’s final payment; Bank contends the extension means the last payment is not before the plan’s end.
• Court holds the last payment on the original schedule occurred before the plan’s final payment and allows bifurcation of the Bank’s claim; extension does not alter the original schedule.

Issues

Key Cases Cited

• In re Witt, 113 F.3d 508 (4th Cir. 1997) (recognizes § 1322(c)(2) ambiguity and endorses bifurcation of a short-term undersecured mortgage)
• In re Eubanks, 219 B.R. 468 (6th Cir. BAP 1998) (rejects Witt’s interpretation and supports bifurcation under § 1322(c)(2))
• In re Bagne, 219 B.R. 272 (Bankr.E.D. Cal. 1998) (explains protection for home mortgages; distinct from conventional interest-rate modifications)
• In re Anderson, 458 B.R. 494 (Bankr.E.D. Wis. 2011) (notes § 1322(c)(2) scope and original date concept under mortgage extensions)