In Re Golash
MEMORANDUM and ORDER of COURT
The matter before the Court is the Objection to Confirmation of Chapter 13 Plan (“Objection”) filed by Dollar Bank, FSB, (“Dollar Bank”). Through its Objection, Dollar Bank argues that the Debtor’s Chapter 13 Plan dated October 29, 2009 (the “Plan”) cannot be confirmed as it seeks to modify the contractual interest rate of a mоrtgage Dollar Bank holds on the Debtor’s principal residence, (the “Mortgage”).
After examining the undisputed fаcts, this Court is not persuaded by Dollar Bank’s argument. Bankruptcy Code § 1322(b)(2), known as the “antimodification” provision, prohibits a Debtor from modifying a claim secured by a debtor’s principal residence. 11 U.S.C. § 1322(b)(2). However, sectiоn 1322(c)(2) creates an exception to this provision, if the last payment under the mortgage agreement is due before the final payment under the plan. 11 U.S.C. § 1322(c)(2).
A proposed claim modification pursuant to sеction 1322(c)(2) must comply with the requirements of section 1325(a)(5) of the Bankruptcy Code. 11 U.S.C. § 1322(c)(2). Section 1325(a)(5) requires, that absent the
As long as the requirements of section 1325(a)(5)(B) are met, claims subject to modification may be restruсtured “at an interest rate more favorable to the debtor than the rate on the original note.”
In re Joyner,
No. 08-05647-8-JRL,
The undisрuted record clearly indicates the case at bar is one of the rare instances where the sеction 1322(c)(2) exception to the anti-modification provision applies. First, the parties do not dispute the Mortgage will mature prior to the due date for the final payment under the Debtor’s proposed sixty (60) month Plan. (See Dkt. # 17, ¶ 4). Second, at the contested hearing, counsel for the Debtor agreed to modify the proposed Plan to pay the present value of Dollar Bank’s claim, $12,061.39. (See Audio Recording of Hearing Held, Courtroom D, April 7, 2010, (10:10-10:11 AM)). Third, the Debtor’s proposed Plan allows for monthly payments in equal amounts. 1 (See id. at (10:18-10:19 AM)). Therefore, as the rеquirements of section 1325(a)(5)(B) are satisfied, and the Debt- or’s Mortgage will mature prior to the due date for thе last payment under the proposed Plan, the Mortgage interest rate is modifiable.
To determine the аppropriate rate of interest that should apply, this Court will join several others within the Third Circuit and utilize the “formula approach” adopted by the Supreme Court in
Till v. SCS Credit Corp.,
In
Till
the plurality opinion of four Justices held the appropriate method of calculating interest оn a loan subject to § 1325(a) should be determined by adding a “risk adjustment” figure to the national prime rate.
Till,
At the contested hearing, Debtor’s counsel submitted that the current prime rate was 3.25%. (See Audio Recording of Hearing Held, Courtroom D, April 7, 2010, (10:10-10:12 AM)). Debtor’s counsel also proffered the risk of default was quite low, as the Debtor wаs substantially current on her payments to the Chapter 13 Trustee and the proposed Plan would be funded by autоmatic withdrawals from the Debtor’s bank account. See id. Following this proffer, Dollar Bank did not present any evidence to indicate the risk adjustment figure should be increased, insisting only that the “anti-modification” provision of 1322(b)(2) aрplied as the Mortgage was held on the Debtor’s principal residence. When provided an opрortunity by the Court, both parties opted to forgo a further Till hearing as a result of the nominal amount in dispute. 2 See id.
Given the Supreme Court’s decision in Till places the burden of proof on the creditor to increase the risk adjustment figure, and no evidence was offered, this Court will accept the Debtor’s proposed interest rate of 6%. 3
WHEREFORE, this 12th day of April, 2010, the Court hereby ORDERS, ADJUDGES and DECREES Dollar Bank’s Objection to confirmation of the Debtor’s Plan is OVERRULED.
SO ORDERED.
Notes
. To accommodate for the difference between the present value оf Dollar Bank's claim, ($12,061.39), and the reduced amount listed in the proposed Plan, ($11,579.00), the Debt- or agreed to an $18 рer month increase in the Plan payment. (See Audio Recording of Hearing Held, Courtroom D, April 7, 2010, (10:18-10:19 AM)).
. Counsel for Dollar Bаnk proffered that a 1.99% difference in interest on an outstanding balance of $12,061.39 would only result in a differencе of $679.40 over the life of the Plan. (See Audio Recording of Hearing Held, Courtroom D, April 7, 2010, (10:10-10:11 AM)).
. The Court also notes Dollar Bank conceded that, in the event this Court found the interest rate was modifiable, 6% would be an acceptable rate. (See Audio Recording of Hearing Held, Courtroom D, April 7, 2010, (10:14-10:16 AM)).