476 B.R. 627
Bankr. D.N.M.2012Background
- Defendant/ Debtor entered into a 2009 Retail Installment Contract securing a 1997 Golden West mobile home for $40,000, with a $10,000 down payment and monthly payments totaling $504.55 including taxes/insurance and escrow.
- A New Mexico title over the mobile home listed other owners and lienholders, not Defendant, after default in 2010.
- Defendant filed Chapter 7 bankruptcy in February 2011, claimed $15,000 of equity as exempt homestead, and was discharged in April 2011; the stay was terminated as to the estate after discharge.
- Plaintiff obtained a state-court default judgment and writ of replevin in August 2011, determining Plaintiff’s ownership of the contract and foreclosing Plaintiff’s security interests.
- Defendant filed Chapter 13 in August 2011 and proposed a plan to treat the mobile home as collateral, bifurcating the claim and paying secured and unsecured portions over 60 months.
- Plaintiff filed a motion in bankruptcy seeking a declaration that the mobile home is not estate property; Defendant argued the default judgment did not terminate her interest and that the stay prevented perfection; the court ruled the mobile home became property of the estate and could be cured under the Code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the state default judgment defeat debtor’s rights in the mobile home? | Pltf contends default judgment extinguished Defendant’s rights in the mobile home. | Defendant argues default judgment had no effect on her rights because the writ was unexecuted at bankruptcy and she retained possession/title. | No; the court held the default judgment did not extinguish the debtor’s rights; the mobile home remained property of the estate to be analyzed under federal law. |
| Is the mobile home property of the bankruptcy estate under 11 U.S.C. § 541? | Pltf argues the security interest foreclosed the debtor’s rights and removed estate property. | Defendant asserts she retained title/possession outside the estate and that the stay prevented transfer efforts. | Yes; the mobile home became property of the estate under § 541 and is subject to potential cure rights. |
| Can the debtor cure defaults on a mobile home loan under 11 U.S.C. § 1322(c)(1) when used as principal residence? | Plaintiff asserts cure rights do not apply because the state foreclosed title and the debtor no longer retains rights. | Defendant argues BAPCPA protections extend to mobile homes used as principal residence, allowing cure until sale. | Held that mobile home qualifies for principal residence protections and cure can occur until sale. |
| Do collateral estoppel or res judicata bar Defendant from relitigating her interest in the mobile home in bankruptcy? | Plaintiff maintains prior state court determinations preclude re-litigation. | Defendant argues those doctrines do not bind bankruptcy issues or are inapplicable to the cure question. | Neither collateral estoppel nor res judicata apply; bankruptcy issues are distinct from state-court determinations. |
Key Cases Cited
- In re McCam, 218 B.R. 154 (10th Cir. BAP 1998) (right to cure under §1322 with redemption rights)
- In re Thompson, 894 F.2d 1227 (10th Cir. 1990) (redemption rights and cure around foreclosure)
- In re Moffett, 356 F.3d 518 (4th Cir. 2004) (UCC redemption rights protected in bankruptcy)
- In re Corey, 583 F.3d 1249 (10th Cir. 2009) (litigation history can create collateral estoppel exceptions)
- Sims, 185 B.R. 853 (Bankr. N.D. Ala. 1995) (bright-line foreclosure sale date for cure in §1322)
- Whiting Pools, Inc. v. United States, 462 U.S. 198 (1983) (broad definition of property of the estate under § 541)
- Jim Walter Homes, Inc. v. Spears (In re Thompson), 894 F.2d 1227 (10th Cir. 1990) (debtors may retain home through cure until foreclosure sale)