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Chapter 13
Modification of Creditors rights
Modification of creditors' rights: The plan may modify the rights of secured creditors or unsecured creditors (such as by "changing the size and timing of installment payments"), except where the creditor's claim is secured solely by a security interest in real property constituting the debtor's principal residence. Bankruptcy Code §1322(b)(2); Grubbs v. Houston First American Savings Association, 730 F.2d 236 (5th Cir. 1984). Note that the Code defines a security interest as a lien created by an agreement. Bankruptcy Code §101(51). Of course, any such modification must be consistent with the pertinent requirements for confirmation of a Chapter 13 plan. Bankruptcy Code §1325(a)(4), (5);Example
1. The Bankruptcy Debtor owes Bank $10,000, at an interest rate of twenty-three percent, secured solely by a first mortgage on real property constituting Debtor's principal residence. Debtor files a Chapter 13 plan proposing to repay Bank at a rate of fourteen percent. The modification will not be permitted since it falls squarely within the exception. Bankruptcy Code §I322(b)(2); In re Rorie, 58 Bankruptcy Reporter 162 (Bankruptcy. S.D. Ohio 1985); see also First National Fidelity Corp. v. Perry, 945 F.2d 61 (3d Cir. 1991)—provision to pay foreclosure judgment on the bankruptcy debtor's home over five-year life of plan is an impermissible modification since the lien was the product of a consensual arrangement)(2) Compare: Finance Company is the holder of a claim secured by a mortgage on real property on which the bankruptcy Debtor resides and on which there also exist two rental units that generate forty-six percent of Debtor's income. The rate of interest on the mortgage note is eighteen percent. Debtor's proposed Chapter 13 plan may modify Finance Company's rights by reducing the interest rate on the mortgage note since the claim is not secured solely by real property that is the principal residence of debtor. Bankruptcy Code §1322(b)(2); In re Ramirez, 14 Bankruptcy Court Dec. 748 (Bankruptcy Southern District of California 1986) Confirmation, however, will depend upon whether the plan satisfies Bankruptcy Code section 1325(a)(5)
Similarly, modification of a secured creditor's rights would be permitted where the creditor's security interest also includes personal properly, where the security interest is in real property that is not the bankruptcy debtor's principal home, or where the creditor's lien is one that was not created by agreement (e.g., in the case of a judicial lien or a statutory lien)
Bifurcation of Home Mortgage
Bifurcation of home mortgage: Although not all bankruptcy courts agree, the prevailing view at the appellate level is that the unsecured portion of an under-secured mortgage can be modified, since the mortgage is bifurcated Bankruptcy Code §506(a), and only the secured claim is protected by section 1322 (b)(2). In re- Hart, 923 F.2d 1410 (10th Cir. 1991).
Cure or Waiver of Default
Cure or waiver of default: The plan may cure or waive any default. Bankruptcy Code §1322(b)(3).Vista, California
Vista is a city in San Diego County, California. As of the 2000 census, the city had a total population of 89,857. It was incorporated January 28, 1963.
Kathleen Shaputis' book 50 Fabulous Places to Raise Your Family, 3rd Ed. 2006 lists Vista as the seventh best place in the United States for family life, based on factors such as jobs and business opportunities, education, climate, and cost-of-living.
The Pacific Bankruptcy Center assists the residents of Vista, California in filing for relief under the United States bankruptcy code. We are a debt relief agency
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