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May 25, 2008

6th Circuit BAP Rules that Anti-Modification of Loan on Residence is Unchanged by the Addition to the Code of a Definition of "Principle Residence"

Davis v. Green Tree Servicing, LLC (In re Davis)  ---- B.R. ----, 2008 WL 1733396 (6th Cir. BAP,  April, 2008)

Issue:   Does the addition of a definition of “principle residence” in the Bankruptcy Code, Section 101(13A), change the analysis when the debtor attempts to modify a debt secured by the debtor’s principle residence in his chapter 13 plan?             

Holding:      No, a modification of a secured debt is only prohibited if the collateral is both real property and the debtor’s principle residence, irrespective of the new definition of principle residence.   

Judge Marilyn Shea-Stonum

This chapter 13 debtor had a loan secured by both real property and a mobile home.  The plan proposed to bifurcate the secured debt paying only the secured portion in full.  The bankruptcy court refused to confirm the plan based on the anti-modification provision in § 1322(b)(2) which states that “a debtor’s plan may ‘modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence.’”  There was no finding by the court that the mobile home was real property.  The creditor argued that the addition to the code of a definition of “principle residence” in Section 101(13A) negated the need for the court to find that the debtor’s residence was real property, i.e., the court need only find that the lien is secured by the debtor’s residence.  The Bankruptcy Court agreed and refused to confirm the plan. 

The 6th Circuit BAP reversed.  The plan language of 1322(b)(2) requires the court to find that the collateral is both, 1) real property and 2) the debtor’s principle residence, before the anti-modification applies.   Here there was no finding whether or not the mobile home was real property and therefore the matter is remanded. 

May 25, 2008 in Other Circuit Briefs | Permalink

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Posted by: Modification of Loan | Mar 4, 2009 2:46:18 AM

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