616 B.R. 117
Bankr. E.D. Cal.2020Background
- Debtor Wanda Collier-Abbott filed a motion to value the secured claim of RRA CP Opportunity Trust 2, whose only collateral is Debtor’s principal residence at 3101 Spinning Rod Way, Sacramento.
- Creditor holds a second deed of trust; Bank of New York Mellon holds the first deed (proof of claim showing first lien secured amount $312,589.38).
- The note for Creditor’s loan contains a balloon payment due April 1, 2020; bankruptcy filed March 1, 2019, so final plan payments extend past the balloon date.
- Debtor submitted a Broker Price Opinion valuing the property at $470,000 (accounting for ~$96,050 in needed repairs); Creditor submitted an appraisal valuing the property at $513,000.
- Creditor opposed valuation under §506(a), arguing §1322(b)(2) bars bifurcation of claims secured only by a principal residence; Debtor invoked the §1322(c)(2) exception for mortgages whose last payment is due before plan completion.
- Court found §1322(c)(2) applicable, accepted the $470,000 property valuation, granted the §506(a) valuation and bifurcated Creditor’s claim (secured portion valued at $157,410.62).
Issues
| Issue | Debtor's Argument | Creditor's Argument | Held |
|---|---|---|---|
| Whether a claim secured only by a principal residence may be valued under §506(a) when the loan’s last payment is due before plan end | §1322(c)(2) makes §1322(b)(2)’s anti-modification rule inapplicable; plan may treat claim under §1325(a)(5) and §506(a) valuation | §1322(b)(2) bars modification/bifurcation of residence-secured claims if any collateral value exists; Nobelman controls | Court: §1322(c)(2) applies to balloon due before plan end, permitting §506(a) valuation and bifurcation; plan treatment under §1325(a)(5) follows |
| Proper valuation of the property given conflicting expert opinions | BPO accounts for ~ $96k needed repairs and supports $470,000 value | Appraisal supports $513,000 and did not explicitly adjust for some visible damage | Court credited evidence of significant damage and adopted $470,000 valuation |
Key Cases Cited
- Zimmer v. PSB Lending Corp., 313 F.3d 1220 (9th Cir. 2002) (treats a creditor as unsecured if collateral has no value; protects entire secured claim if any collateral value exists)
- American General Finance, Inc. v. Paschen, 296 F.3d 1203 (11th Cir. 2002) (concluded §1322(c)(2) permits §506(a) valuation and bifurcation for qualifying mortgages)
- Hurlburt v. Black, 925 F.3d 154 (4th Cir. 2019) (held §1322(c)(2) authorizes modification of claims, including §506(a) stripdown, when last payment falls during plan)
- Nobelman v. American Savings Bank, 508 U.S. 324 (1993) (held §1322(b)(2) protects creditors’ rights against bifurcation absent a statutory exception)