January 18, 2010
Washington Judge Rules that Debtor May Bifurcate Claim on her Home when it is also a Boarding Home
In re Reyes, 09-17532 (unpublished) (Bkrtcy. Wash. Dec, 2009)
Issue: Can the chapter 13 debtor here bifurcate a secured claim on property that is her residence but she also operates as a boarding home?
Judge Karen Overstreet
This chapter 13 debtor seeks to bifurcate a secured claim on real property. The five bedroom property is her home but she “has been taking in boarders since 1993.” “The boarders who live at the Property share a common kitchen and receive food and meals from Debtor as part of their rental agreement. Each boarder is entitled to a furnished room and generally three hot dinners per week. Debtor shops for the tenants’ food and makes it available in the common kitchen. She also maintains the common areas in a clean and usable fashion and otherwise helps the boarders become acclimated to the neighborhood and Seattle.” She also works full-time and the University of Washington as a lab tech. The judge believed her testimony that the loan agent knew of the use of the property when the loan was made. She also was swayed by the fact the use as a boarding home was for the past 16 years.
Judge Overstreet ruled that the loan may be bifurcated. “Any other construction of Section 1322(b)(2) would read the word “only” out of the statute. Accordingly, the Court finds that Creditor’s lien is not protected by the antimodification provision of Section 1322(b)(2).” She also ruled that the creditor did not have standing because it could not establish that it “has authority to hold the Note for the account of Creditor and of a valid chain of assignments from the original holder of the Deed of Trust to Creditor.”
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