628 B.R. 509
Bankr. N.D. Miss.2021Background
- Debtor Michael Leon Brock filed a Chapter 11 case and listed a mortgage serviced by Select Portfolio Servicing (SPS) as a secured claim, with his principal residence as the only collateral.
- Brock's proposed plan would resume regular monthly mortgage payments and add any missed payments during the bankruptcy to the end of the loan, thereby extending the loan maturity.
- U.S. Bank (through SPS as servicer) objected to confirmation, arguing the plan impermissibly modifies the bank's rights in violation of the Bankruptcy Code.
- The core legal dispute centers on whether a Chapter 11 plan may extend the maturity of a home mortgage secured solely by the debtor's principal residence.
- The Bankruptcy Court concluded that 11 U.S.C. § 1123(b)(5) bars modification of such claims in Chapter 11 and that the Chapter 13 exception (11 U.S.C. § 1322(c)(2)) does not apply in Chapter 11.
- The court sustained the objection and ordered Brock to file an amended plan within 21 days or face dismissal.
Issues
| Issue | U.S. Bank's Argument | Brock's Argument | Held |
|---|---|---|---|
| Whether a Chapter 11 plan may extend the maturity of a mortgage secured only by the debtor's principal residence by adding missed payments to the loan end. | §1123(b)(5) forbids modifying rights of a claim secured only by the debtor's principal residence; extension is a prohibited modification. | Debtor says he may cure arrearages by adding missed payments to the end of the loan (akin to §1322(c)(2) in Chapter 13). | Court held §1123(b)(5) bars the modification; Chapter 13's §1322(c)(2) exception does not apply in Chapter 11. Plan cannot extend the loan maturity; objection sustained. |
Key Cases Cited
- Nobelman v. American Sav. Bank, 508 U.S. 324 (mortgagee's contractual right to payments over fixed term is protected under Bankruptcy Code)
- Andrus v. Glover Const. Co., 446 U.S. 608 (statutory-interpretation presumption about deliberate congressional omissions)
- Rodriguez v. United States, 480 U.S. 522 (reading of congressional inclusion/exclusion principles)
- In re Lennington, 288 B.R. 802 (Bankr. C.D. Ill. 2003) (allowing cure by installment payments under a Chapter 11 plan — contrasting view)
- In re Clay, 204 B.R. 786 (Bankr. N.D. Ala. 1996) (holding Chapter 11 cannot use Chapter 13 exception to extend mortgage term)
- In re Haake, 483 B.R. 524 (Bankr. W.D. Wis. 2012) (same)
- In re Crump, 529 B.R. 106 (Bankr. D.S.C. 2015) (same)