§ 80.1     In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 80.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The exception to modification of secured claims in § 1322(b)(2) is focused to protect claims that are secured “only by a security interest in real property that is the debtor’s principal residence.1 Courts have strictly construed this exception to limit its protection to purely consensual home mortgages when the creditor has taken no other security and the real estate has no use other than the debtor’s principal residence.2

[2]

After Nobelman v. American Savings Bank,3 debtors’ counsel must review mortgage contracts with increased scrutiny for provisions that forfeit the protection from modification in § 1322(b)(2). In Nobelman, the Supreme Court held that § 1322(b)(2) prohibits splitting an undersecured home mortgage into its secured and unsecured components for purposes of confirmation.4 To reach this conclusion, the Supreme Court read § 1322(b)(2) broadly to prohibit modification of the contract or state law rights of the holder of a claim that is secured only by a security interest in real property that is the debtor’s principal residence. To avoid this broad prohibition on modification, debtors’ counsel must microscopically examine the mortgage contract. If the claim is secured by a lien that is not a “security interest” or if the creditor has collateral that is not real property or that is not the debtor’s principal residence, then the protection from modification in § 1322(b)(2) is not available and the debtor can modify the creditor’s rights, subject only to the usual rules for the treatment of secured claims.5

[3]

The protection from modification for home mortgages in § 1322(b)(2) was not amended by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA).6 However, other BAPCPA amendments to the Code impact the reach of § 1322(b)(2) and complicate its application. For example, BAPCPA enacted a new § 101(27B) that defined “incidental property” in a manner that affects the meaning of “principal residence” in § 1322(b)(2)—particularly with respect to mobile and manufactured homes.7 BAPCPA changed the rules for lien retention with respect to allowed secured claims at confirmation under § 1325(a)(5), which impacts the question whether wholly unsecured liens can be “stripped off” without violating the protection from modification in § 1322(b)(2).8 Also, the new limitation on successive discharges in § 1328(f) has given some courts fits with respect to whether lien stripping of a mortgage that is not protected from modification by § 1322(b)(2) is available when the debtor is not eligible for discharge in the current Chapter 13 case.9 Exceptions to the protection from modification in § 1322(b)(2) and the effects of BAPCPA on those exceptions are discussed in the sections that follow.


 

1  11 U.S.C. § 1322(b)(2) (emphasis added).

 

2  See  discussion beginning at § 80.2  Statutory Liens and Judgment Liens, Including Foreclosure Judgments.

 

3  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (June 1, 1993).

 

4  See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

5  See discussion beginning at § 80.2  Statutory Liens and Judgment Liens, Including Foreclosure Judgments.

 

6  Pub. L. No. 109-8, 119 Stat. 23 (2005). See § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

7  See 11 U.S.C. § 101(27B), discussed in § 123.1 [ Mobile Homes ] § 80.7  Mobile Homes.

 

8  See 11 U.S.C. § 1325(a)(5)(B)(i), discussed in §§ 104.2 [ Lien Retention ] § 74.12  Lien Retention before BAPCPA, 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA, 128.3 [ Unsecured Home Mortgages after BAPCPA ] § 80.15  Unsecured Home Mortgages after BAPCPA and 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

9  See 11 U.S.C. § 1328(f), discussed in § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA, 128.3 [ Unsecured Home Mortgages after BAPCPA ] § 80.15  Unsecured Home Mortgages after BAPCPA and 543.1 [ New Limitations on Successive Discharges ] § 156.2  Limitations on Successive Discharges.