Mission Hen, LLC v. Lee
137 F.4th 1008
9th Cir.2025Background
- Debtors Jason Lee and Janice Chen filed for Chapter 13 bankruptcy, listing their home as collateral and proposing to bifurcate Mission Hen’s junior mortgage claim into secured and unsecured portions (a "cramdown").
- The bankruptcy court valued the home higher than the debtors’ original valuation, which impacted the amount of Mission Hen’s unsecured claim and brought the debtors' unsecured debts below the Chapter 13 eligibility cap.
- The debtors amended their repayment plan several times, ultimately proposing a feasible payment schedule based in part on substantial rental support from a family member.
- Mission Hen objected on grounds of eligibility under § 109(e), plan feasibility under § 1325(a)(6), and anti-modification provisions under § 1322(b)(2).
- The bankruptcy court resolved all objections against Mission Hen, confirmed the plan, and was affirmed by the Bankruptcy Appellate Panel (BAP); Mission Hen appealed to the Ninth Circuit.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Chapter 13 eligibility (debt limit) | Debt exceeds § 109(e) limit. | New valuation brings debt below limit | Bankruptcy court valuation controls; debtors eligible. |
| Feasibility of repayment plan | Monthly income inadequate. | Rental support makes plan feasible | Plan feasible when considering lumped rental income. |
| Modification of claim under § 1322(b)(2) | Anti-modification bars cramdown. | Short-maturity exception applies | § 1322(c)(2) permits modification for short-term loans. |
Key Cases Cited
- Assocs. Com. Corp. v. Rash, 520 U.S. 953 (explains cramdown process under § 1325(a)(5) and claim valuation principles under § 506(a)).
- Nobelman v. American Savings Bank, 508 U.S. 324 (holds § 1322(b)(2) prevents bifurcation of claims secured solely by debtor's principal residence; distinguished by later statute here).
- In re Scovis, 249 F.3d 975 (addresses how unsecured portions of undersecured claims are counted for Chapter 13 eligibility).
- Matter of Pizza of Hawaii, 761 F.2d 1374 (standard for reviewing feasibility of Chapter 13 plans).
- Hurlburt v. Black, 925 F.3d 154 (recognizes that § 1322(c)(2) permits bifurcation and modification of short-term residential mortgage claims).