§ 80.14     Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 80.14, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

In the unusual case that the debtor’s home mortgage is not protected from modification by § 1322(b)(2),1 the plan can modify the rights of the mortgage holder in the same ways as any other secured claim.2 The debtor can rewrite the mortgage contract, change the repayment period, change the interest rate, increase or decrease the monthly payment and, if the claim is undersecured, split the claim into its secured and unsecured components under § 506(a) and provide separately for each.

[2]

Finding a way around the prohibition against modification of home mortgages in § 1322(b)(2) almost always helps the debtor, but how it helps and the extent of the benefits depend on the size of the claim and the debtor’s budget. Typically, real estate-secured loans are large relative to other debts, and the secured portion—that is, the amount of the mortgage that is supported by value in the collateral—is the largest claim in the Chapter 13 case. Even if the debtor can modify the home mortgage claim, absent consent of the secured claim holder3 or surrender of the collateral,4 the debtor must do one of two things with the secured claim: either pay the present value of the secured claim in full during the life of the plan consistent with § 1325(a)(5)5 or cure the default and maintain payments during the life of the plan consistent with § 1322(b)(5).6 If a home mortgage can be modified for one of the reasons discussed above, even after claim splitting, the debtor is often stuck having either to pay a large real estate-secured claim in full during the plan or to maintain payments consistent with the original loan agreement.

[3]

If the secured portion of the mortgage balance is large, most Chapter 13 debtors will not be able to retire the debt in full through the plan; thus, curing default and maintaining payments consistent with the original loan is the only realistic alternative even if the home mortgage claim is subject to modification. The debtor cannot modify the mortgage to provide for payments that exceed the life of the plan, except to cure default(s) and maintain payments that would extend longer than the plan by contract.7

[4]

When the secured portion of the claim is small enough to be retired in full over the life of the plan and when the original terms of the loan are unfavorable to the debtor, finding a way around the protection in § 1322(b)(2) is especially advantageous to the debtor. For example, home improvement loans—for aluminum siding and the like—are often short-term loans with high interest rates that are secured by security interests in the debtor’s principal residence. If the debtor can defeat the protection from modification in § 1322(b)(2), then the debtor can pay the secured portion of the claim with lower interest over the life of the plan.

[5]

No matter how large or small the secured portion of an undersecured mortgage after claim splitting under § 506(a), if the mortgage is not protected from modification by § 1322(b)(2), the debtor can use modification of the unsecured portion of the claim to great advantage. As detailed elsewhere,8 after Nobelman v. American Savings Bank,9 it is doubtful whether a Chapter 13 debtor can discharge personal liability with respect to any part of an undersecured home mortgage protected by § 1322(b)(2) other than by full payment consistent with the mortgage contract and state law. If the mortgage is not protected from modification by § 1322(b)(2), after claim splitting under § 506(a), the debtor can deal with the unsecured portion separately and often at less than full payment. At the completion of payments under the plan, the debtor can discharge personal liability to the mortgage holder with respect to the unsecured claim—an outcome that probably is not possible after Nobelman if the claim is protected from modification by § 1322(b)(2). The larger the unsecured portion of the undersecured claim, the more advantageous modification is for the Chapter 13 debtor. If the lien on the debtor’s home is entirely unsecured and if the lien is not protected from modification, then the debtor can treat the entire debt as unsecured through the plan and discharged at the completion of payments.10

[6]

Also, when an undersecured mortgage can be bifurcated under § 506(a), the extent of the allowed secured claim will be limited by the value of the collateral, and thus the extent of the mortgage holder’s lien rights will be limited to repayment of the allowed secured claim.11 If the debtor is financially able to pay the allowed secured portion of the claim in full during the plan consistent with § 1325(a)(5), then at the completion of payments the mortgage will be discharged. Even if the debtor is only financially able to cure default and maintain payments during the life of the plan with respect to the secured portion of the undersecured mortgage,12 in the long run, the rights of the lienholder will be retired upon payment of a smaller amount than the original mortgage contract would have required.

[7]

For example, if a mortgage with a $50,000 principal balance is secured by real property worth only $30,000 and if the mortgage is subject to modification, the plan can limit the mortgage holder’s lien rights to the $30,000 value of the real property, and upon payment of $30,000 (with interest) the property will be free of the lien. If the plan proposes to cure default and maintain payments under § 1322(b)(5),13 then the postconfirmation installment payments must be applied by the mortgage holder against the lower $30,000 allowed secured claim both during the Chapter 13 case and after the completion of payments under the plan. The balance of the $30,000 allowed secured claim will not be discharged at the completion of payments under the plan,14 but the unsecured portion of the mortgage will be discharged when the debtor completes payments under the plan. After Nobelman, this outcome is not possible except when the mortgage is not protected from modification by § 1322(b)(2). Every debtor with an undersecured mortgage that can be modified is advantaged to the extent that bifurcation under § 506(a) produces an allowed secured claim that is less than the principal balance on the mortgage contract at the petition.

[8]

The pre-Nobelman case law discussing the mechanics of claim splitting of home mortgages continues to have vitality when the debtor’s home mortgage is not protected from modification by § 1322(b)(2). Several pre-Nobelman controversies about how to calculate and apply payments after claim splitting remain unresolved after Nobelman when the home mortgage is not protected from modification by § 1322(b)(2).

[9]

For example, clever debtors have argued that, after splitting under § 506(a), it is appropriate to allocate any arrearages at the petition to the unsecured portion of the mortgage. If the plan cures the default and maintains payments pursuant to § 1322(b)(5) with respect to the secured portion of the mortgage15 and if the prepetition arrearages are allocated to the unsecured claim, the debtor can cure defaults by paying the arrearages with other unsecured claims through the plan—often at substantially less than full payment. Though not agreeing why, the courts that have addressed this argument have concluded that the Code prohibits a Chapter 13 debtor from allocating prepetition arrearages to the unsecured portion of the mortgage.16 The rule seems to be that if the debtor cures default through the plan, even if the mortgage can be modified, the arrearages must be paid in full to accomplish the curing of default. However, the mortgage holder’s entitlement to interest on arrearages cured through the plan under § 1322(b)(5) may be affected by whether and to what extent the mortgage is undersecured.17 And there will be the rare case in which the allowed secured claim is paid in full before all arrearages have been cured.18

[10]

There is controversy in the reported decisions whether a Chapter 13 debtor can use both the power to modify in § 1322(b)(2) and the power to cure default and maintain payments under § 1322(b)(5) with respect to a debt that is not protected from modification by § 1322(b)(2).19 On the face of the statute, there is nothing in § 1322(b) to suggest that its subsections are mutually exclusive. In fact, almost every Chapter 13 plan makes use of more than one of the permissive powers in § 1322(b)—for example, the plan modifies an unsecured debt by paying it 10 percent over three years, and separately classifies the debt for less favorable treatment than (unsecured) child support. There are a fair number of reported decisions that confirm plans that reduce an unprotected home mortgage to the value of the collateral under § 506(a) and then use § 1322(b)(5) to cure default and maintain payments with respect to the (smaller) allowed secured claim.20

[11]

Other courts view §§ 1322(b)(2) and 1322(b)(5) as mutually exclusive. These courts hold that if the debtor invokes modification under § 1322(b)(2) to reduce a claim to the value of its collateral under § 506(a), the debtor must then retire the allowed secured claim in full during the three-to five-year life of the plan and cannot cure default and maintain payments under § 1322(b)(5).21

[12]

The courts refusing to allow Chapter 13 debtors to cure default and maintain payments with respect to an unprotected long-term mortgage that has been bifurcated under § 506(a) say that a modified mortgage must be paid in full within the three-to five-year limit in § 1322(d). Some of these same courts acknowledge that § 1322(b)(5) is an “exception” to the maximum plan duration in § 1322(d) because § 1322(b)(5) contemplates “maintaining payments” on long-term debt that extends beyond the completion of payments to other creditors under the plan. Other than unsatisfying references to § 1322(d), the source of the prohibition that debtors cannot use § 1322(b)(5) to maintain payments on a debt that is not protected from modification by § 1322(b)(2) is not identified in these cases.

[13]

One limitation on combining the power to modify in § 1322(b)(2) with the power to cure and maintain payments in § 1322(b)(5) that is clearly found in the statute is that the plan cannot modify the mortgage in a way that conflicts with the “maintaining payments” requirement in § 1322(b)(5). The meaning of “maintaining payments” in § 1322(b)(5) becomes critically important. From the reported decisions, maintenance of payments in § 1322(b)(5) means that the debtor must respect the interest rate and the monthly payment in the mortgage contract during the plan and after completion of payments to other creditors under the plan.22

[14]

Chapter 13 debtors sometimes become confused about the meaning of maintaining payments when a home mortgage is not protected from modification and the debtor is unable to pay the allowed secured portion in full during the three-to five-year plan. Debtors have tried to split the mortgage under § 506(a) and to then modify the allowed secured portion for payment beyond the life of the plan on terms that are different from the interest rate and monthly payment in the original contract. The courts have uniformly prohibited debtors from “re-amortizing” the allowed secured claim of an unprotected mortgage holder for payment beyond the life of the plan.23 Put another way, claim splitting under § 506(a) is not inconsistent with curing default and maintaining payments under § 1322(b)(5); changing interest rate or monthly payment is.

[15]

The calculation of payments and allocation of principal and interest with respect to mortgages that have been bifurcated under § 506(a) and provided for under § 1322(b)(5) are complicated for both debtors and creditors.24 There may be three components to the mortgage after claim splitting under § 506(a): a secured claim up to the value of the collateral; an unsecured claim for the balance of the debt; and an arrearage claim for unpaid installments. To avoid “re-amortization,” the payment required to “maintain payments” must be calculated under the original mortgage contract based on the original principal amount of the loan. However, the principal portion of the payment so calculated must be credited by the mortgage holder against the allowed secured claim after application of § 506(a). Payments by the debtor under the plan must be carefully allocated to the secured and unsecured portions of the claim, to the interest that accrues on the secured portion of the claim, and to the principal, interest and other charges that may be included in the arrearages.25 The net effect for the debtor will usually be that the regular monthly payment will retire the smaller allowed secured claim more quickly than the remaining term of the original mortgage.

[16]

For example, assume again that the principal balance of a Chapter 13 debtor’s home mortgage at the petition is $50,000; that the original contract term was 20 years; that the interest rate on the mortgage was 10 percent; and that the regular monthly payment of principal and interest (exclusive of taxes, insurance and so forth) was $483. Assume further that the value of the underlying real property is $30,000; that the debtor was (unrealistically) not in arrears at the petition; and that the mortgage is not protected from modification by § 1322(b)(2) (because the mortgage company also had a security interest in the debtor’s water bed). The Chapter 13 plan splits the mortgage into a $30,000 secured claim and a $20,000 unsecured claim. With respect to the secured claim, if the debtor is financially able, the plan could pay the $30,000 in full consistent with § 1325(a)(5).26 However, even if the plan exhausts the maximum five-year period allowed,27 the monthly payment necessary to retire $30,000 in 60 months with 10 percent interest28 would be $637 per month.29

[17]

If $637 per month is beyond the debtor’s means, in some districts the debtor can use § 1322(b)(5) to cure default through the plan (none in this example) and maintain the regular monthly payment during the plan and after completion of the plan. Mathematically, the $30,000 allowed secured claim is not “re-amortized” through the plan to determine a new monthly payment based on the reduced principal amount;30 but, for bookkeeping by the mortgage holder and for the debtor, the original amortization ($50,000 at 10 percent interest for 20 years) must be replaced with a hybrid of the contract terms and plan terms—keeping the original $483-per-month payment and the original 10 percent interest rate; but the term of payments recalculates to be approximately 88 months (the amortization of $30,000 at 10 percent interest with a monthly payment of $483).

[18]

During the first month of payments under the plan, the debtor will pay the mortgage company $483 on account of its $30,000 allowed secured claim. What portion of that $483 does the mortgage company allocate to principal and what portion to interest? Does maintaining payments under § 1322(b)(5) also require that monthly payments be allocated to principal and interest consistent with the original amortization schedule?

[19]

In the example, the amount of principal and interest contained in each $483 monthly payment based on $50,000 paid over 20 years at 10 percent will be quite different from the allocation of principal and interest if based on $30,000 paid over 20 years at 10 percent interest.

[20]

If the allocation of the $483 payment to principal and interest is based on repayment of the $30,000 allowed secured claim at 10 percent interest and a monthly payment of $483, then the first $483 regular monthly payment after confirmation is composed of $250 of interest and $233 of principal.31 The regular monthly payment ($483) would be credited first to interest ($250) and then to principal ($233), reducing the principal balance of the allowed secured claim to $29,767 at the end of the first month of the plan. (No portion of the $483 monthly payment should be allocated to the $20,000 unsecured claim of the mortgage holder.)

[21]

If the first payment of $483 is allocated to principal and interest based on the original $50,000 mortgage, the first payment would contain $417 of interest and $66 of principal. After the first monthly payment, using this formula, the principal balance of the allowed secured claim would be $29,934, not $29,767 as calculated above. If the mortgage servicer’s computer continues to account for the debtor’s $483 monthly payments as if the principal balance was $50,000, by the end of a three-to five-year Chapter 13 plan, the discrepancy in accounting will be enormous.

[22]

There are good arguments from logic and mathematics that maintaining payments under § 1322(b)(5) does not include allocating payments to principal and interest consistent with the original mortgage balance. Instead, monthly payments that are maintained under § 1322(b)(5) should be allocated to principal and interest based on the allowed secured claim using the contract interest rate and the monthly payment amount called for by the original contract. Allocating principal and interest based on the allowed secured claim of $30,000 in the example above retires the claim with 10 percent interest in 88 months. If maintaining payments permitted the holder of the mortgage to continue to allocate principal and interest consistent with the original $50,000 mortgage balance, interest on the $30,000 allowed secured claim will be paid much faster and principal repayment will take longer than 88 months. A truly weird calculation results at some point when interest will be prepaid (or overpaid) and principal will remain. Put another way, if the mortgage holder allocates the principal and interest portions of the original contract payment as if the loan were still $50,000 and yet the principal portion is used to reduce an allowed secured claim of only $30,000, against what accrual of interest is the interest portion of each monthly payment credited? If the mortgage holder accounts for interest as if it had loaned the debtor $50,000, then there is a hidden recovery for undersecured mortgage holders when a Chapter 13 debtor maintains payments under § 1322(b)(5).

[23]

The mortgage holder must reprogram the debtor’s account to reflect a $30,000 principal balance, 10 percent interest and monthly payments of $483; but the 20-year term of the original mortgage is gone, replaced by the artificial 88 months consistent with the plan. Most home mortgage servicers don’t understand this calculation and are not prepared to trick their computers into making the proper adjustments.

[24]

Curing default, maintaining payments and allocating principal and interest become more complicated when the original contract is an adjustable rate mortgage. The example above assumes that maintenance of payments in § 1322(b)(5) means that the debtor must keep paying the regular installment of principal and interest ($483 in the example), based on an interest rate of 10 percent. But maintenance of payments probably includes the possibility that an adjustable rate mortgage changes the monthly payment periodically during the years of the plan.

[25]

The typical adjustable rate mortgage changes the base interest rate from an external formula and recalculates the monthly payment based on the then principal balance over the remaining term of the mortgage. If the Chapter 13 plan is maintaining payments under § 1322(b)(5), at the contract intervals, the interest rate and monthly payment should change through the plan. Would the new monthly payment amount be calculated based on the balance of the $30,000 allowed secured claim or based on the balance of the original $50,000 contract amount? Whichever base is correct should have been reduced to reflect payments from the debtor through the plan. But how are these reductions determined? In the example, the debtor made $483 monthly payments composed of principal and interest in proportions that vary dramatically depending on whether $50,000 or $30,000 is used as the principal amount. Which amortization table is used to calculate the new monthly payment at the time of adjustment under an adjustable rate mortgage? Could the language of the plan affect which set of numbers is used?

[26]

The mortgage holder will argue that maintenance of payments is meaningless if the stripped-down amount of the mortgage ($30,000 in the example) is used to calculate the adjusted payment. But it seems clear that even after adjustment consistent with the contract, payments from the debtor must be credited against the balance of the $30,000 allowed secured claim, notwithstanding that the first monthly payment necessary to maintain payments under § 1322(b)(5) may have been calculated using the original $50,000 principal balance. Now consider adding an arrearage to this example.

[27]

There are unresolved questions whether the allowed secured claim of the mortgage company in this example would be $30,000 or some other amount, when there is an arrearage claim. Assume that the debtor was four monthly payments in arrears ($1,932) at the petition. This $1,932 arrearage would be composed in part of unpaid principal and in part of unpaid interest under the original amortization of $50,000 at 10 percent interest over 20 years. If the four unpaid installments were the first four payments due under the original $50,000 mortgage contract, a standard 20-year amortization table indicates that the first four monthly installment payments would contain $1,665 of interest and $267 of principal. If the arrearage claim is allocated to the secured portion of the undersecured mortgage holder’s claim, the potential for “double accounting” is present if a separate arrearage claim is allowed in the full amount of $1,932—the mortgage holder would have an allowed secured claim of $30,000 and an allowed arrearage claim of $1,932, of which $267 is principal that is already allowed as part of the $30,000 claim.32

[28]

The allocation of payments problem becomes really hairy when the mortgage servicer must deal with two incoming payments from the Chapter 13 debtor—the regular monthly payment of $483 and a separate arrearage payment.33 Add one more assumption, that the $1,932 arrearage can be cured through the plan in 24 months.34 Assuming the arrearages will be entitled to the same 10 percent rate of interest,35 the $1,932 arrearage must be separately amortized over 24 months with 10 percent interest, a monthly payment of $89 per month. The mortgage holder will receive the first $89 payment on the arrearages along with the $483 payment on the $30,000 allowed secured claim. This $89 payment on the arrearages is composed of $16 of interest and $73 of principal. Mathematically, if the arrearages at the petition are considered part of the allowed secured claim, then the principal portion of this first arrearage payment ($73 in the example) must be allocated to reduce the $30,000 allowed secured claim. Thus, at the end of the first month, the mortgage servicer should reduce the balance showing on its books by $233 (the principal portion of the $483 regular monthly payment) and by $73 (the principal portion of the $89 arrearage payment). Allocating the principal portion of both the regular monthly payment and of any arrearage payment as a reduction in the principal amount of the allowed secured claim avoids double recovery of the principal portion of the arrearage claim.

[29]

As one court has recognized,36 it is conceivable that the allowed secured claim—that is, the value of the collateral securing a real estate mortgage—will be retired through the combination of arrearage payments and regular monthly payments before the arrearages have been paid in full. This would be true in the odd case in which the secured portion of a mortgage that can be modified under § 1322(b)(2) is quite small but the arrearages due at the petition were relatively large. Once the allowed secured portion of the mortgage is paid in full through a combination of arrearage payments and regular contract payments, only the unsecured portion of the mortgage remains, and it would be separately dealt with through the plan along with other unsecured claims.

[30]

There is a small wrinkle in this analysis with respect to home mortgages that are not protected from modification by § 1322(b)(2) but that can’t be managed under § 1322(b)(5) because the last payment is due before the date on which the final payment under the plan would be due. Such a “short term” mortgage, if secured only by a security interest in real property that is the debtor’s principal residence, would be protected from modification by § 1322(b)(2) in a Chapter 13 case filed before the 1994 amendments.37 After the 1994 amendments, notwithstanding the protection from modification in § 1322(b)(2), a Chapter 13 debtor can provide for the payment of a short term home mortgage “as modified pursuant to section 1325(a)(5).”38

[31]

Before and after the 1994 amendments, if the short term home mortgage is not protected from modification by § 1322(b)(2), then the plan can modify the claim in all the ordinary ways. The debtor could split the claim into its allowed secured and unsecured components and provide separately for each through the plan. The debtor could pay the allowed secured portion of the home mortgage in full during the life of the plan under § 1325(a)(5), or the debtor could cure or waive defaults and complete payment of the original contract consistent with § 1322(b)(3).39

[32]

If a home mortgage is not protected from modification by § 1322(b)(2), the Code does not seem to prohibit the debtor from modifying terms and conditions of the contract other than interest rate and monthly payment while still curing default and maintaining payments under § 1322(b)(5).40 For example, a Chapter 13 debtor might modify a use restriction in a mortgage contract that is not protected from modification by § 1322(b)(2) and then maintain payments for the duration of the contract. The interaction of § 1322(b)(2) and (b)(5) is sorely tested when curing default under § 1322(b)(2) requires the debtor to satisfy a contract term or condition that the plan also proposes to modify.41


 

1  See discussion beginning at § 80.1  In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence

 

2  See §§ 104.1 [ The Power to Modify ] § 74.11  The Power to Modify and 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations. See, e.g., Peoples First Nat’l Bank v. Haraschak (In re Haraschak), 169 B.R. 325 (Bankr. M.D. Pa. 1994) (Chapter 13 debtor can pay the matured amount of a mortgage in full with interest during the life of the plan where the mortgage was subject to modification. The power to modify in § 1322(b)(2) includes the power to strip down the mortgage to the value of the collateral, and the debtor can then pay that value with interest over the life of the plan without regard to the original maturity date.).

 

3  See § 101.2 [ Acceptance of Plan ] § 74.3  Acceptance of Plan before BAPCPA.

 

4  See § 102.1 [ Surrender or Sale of Collateral ] § 74.5  Surrender or Sale of Collateral before BAPCPA.

 

5  See § 74.1  General Rules before BAPCPA and § 74.2  General Rules Changed by BAPCPA

 

6  See § 81.1  Overview: General Rules for Saving Debtor’s HomeThere is controversy whether a Chapter 13 debtor can both modify an unprotected home mortgage under § 1322(b)(2)—for example, by bifurcating the mortgage into secured and unsecured portions—and then cure the default and maintain payments with respect to the secured portion under § 1322(b)(5). See below in this section, and see § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations.

 

7  See § 202.1 [ Payment of Claims beyond Length of Plan ] § 112.5  Payment of Claims beyond Length of Plan.

 

8  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.

 

9  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993).

 

10  See § 128.1 [ Modification of Unsecured Home Mortgage: Before and After BAPCPA ] § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA for discussion of wholly unsecured home mortgages that may be protected from modification by § 1322(b)(2).

 

11  See § 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1  Valuation, Claim Splitting and Dewsnup. See also § 358.1 [ On Liens ] § 162.3  On Liens.

 

12  The combination of modification under § 1322(b)(2) with curing default and maintaining payments under § 1322(b)(5) is discussed below in this section and in § 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations.

 

13  Not all courts have embraced the combination of modification under § 1322(b)(2) with curing default and maintaining payments under § 1322(b)(5). See below in this section, and see § 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations.

 

14  See § 351.1 [ Long-Term Debts ] § 158.7  Long-Term Debts.

 

15  See discussion beginning at § 81.1  Overview: General Rules for Saving Debtor’s Home

 

16  See Sapos v. Provident Inst. of Sav. in the Town of Boston, 967 F.2d 918 (3d Cir. 1992) (If the Chapter 13 debtor bifurcates a home mortgage and proposes to deal with the remaining secured claim under § 1322(b)(5), the debtor must pay the arrearages in full within a reasonable time and continue to make the monthly payments in accordance with the original terms of the note “until the principal has been paid in an amount equal to the value of the property established under § 506(a).” Debtor’s plan fails this test because debtor does not propose to pay the arrearage separately and in addition to payment of the full amount of the mortgage holder’s allowed secured claim. Debtor must pay arrearage claim of $11,188.12 and also pay $17,000 in unpaid principal to satisfy § 1322(b)(5), notwithstanding that the underlying real property is worth only $17,000.); In re Clark, 133 B.R. 123, 125 (Bankr. N.D. Ill. 1991) (Even if claim splitting of a home mortgage is permitted by § 1322(b)(2), under § 1322(b)(5), debtors must cure any default that existed at the petition. Mortgage company filed a proof of claim for principal due of $39,725.87 and an arrearage claim of $6,725.05 for a total claim of $46,450.92. Value of the debtors’ home was $40,000. Debtors proposed to pay $274.13 toward the arrearage (the difference between $40,000 and $39,725.87) as a secured claim and to pay 10% of the remaining $6,450.92 arrearage as an unsecured claim. Debtors would then pay the $39,725.87 mortgage over the original term at its contract amount. Debtors’ proposal fails to pay the $6,725.05 arrearage and thus does not constitute a curing of default under § 1322(b)(5). “Even if the debtors could strip down the claim, they must pay the complete arrearage, or else the default would not be cured. If the debtors’ plan would not cure the default by paying it in full within a reasonable time, they cannot avail themselves of § 1322(b)(5) to keep their old mortgage.”); Cole v. Cenlar Fed. Sav. Bank (In re Cole), 122 B.R. 943 (Bankr. E.D. Pa. 1991) (Applying Wilson v. Commonwealth Mortgage Corp., 895 F.2d 123 (3d Cir. 1990), § 1322(b)(2) does not preclude bifurcation of a home mortgage into its secured and unsecured portions pursuant to § 506(a). However, once a debtor has chosen to cure arrearages, § 1322(b)(5) requires that it be done by curing all defaults in a reasonable time and maintaining current payments through the plan. The debtor cannot modify the loan terms through revision of amortization tables nor can the debtor deduct the unsecured portion of the mortgage from the arrearages in calculating the amount necessary to cure defaults. Section 1322(b)(3)—which allows the debtor to cure or waive any default—is only applicable in situations not within the scope of § 1322(b)(5), thus § 1322(b)(3) applies to claims based upon obligations on which the last payment is due before the final payment is due under the plan. When the debtor chooses to cure arrearages on a claim that has a last payment after the last payment due under the plan, only § 1322(b)(5) is available, and, after bifurcation, the debtor cannot otherwise alter the repayment terms or avoid full payment of the arrearages during the life of the plan.); In re Honett, 116 B.R. 495 (Bankr. E.D. Tex. 1990) (The good-faith requirement of § 1325(a)(3) and the curing of default provisions of § 1322(b)(5) require that the debtor pay mortgage arrearages in full notwithstanding bifurcation under § 506(a).); In re Hyden, 112 B.R. 431, 433 (Bankr. W.D. Okla. 1990) (Section 1322(b)(2) does not prevent the bifurcation of a home mortgage claim under § 506(a), but § 1322(b)(5) protects the creditor at least to the extent that the arrearages must be cured in a reasonable time, the interest rate must remain the same as in the underlying documents, and the payment amount required by the mortgage must be unmodified. Notwithstanding discharge in a prior Chapter 7 case, the arrearage on the debtors’ mortgage must be cured within a reasonable time. Payments attributable to the arrearages “would be credited first to accrued interest, at the contract rate, with the balance credited against the principal balance. The principal balance would be the amount of the allowed secured claim of the mortgage holder, and would be determined pursuant to § 506(a). . . . The regular monthly payments would also be credited first to interest and then to principal as required by the underlying documents. The lien would be extinguished when the amounts credited to principal aggregate the amount of the allowed secured claim, whether or not the arrearages have been ‘cured’ in their entirety at that time.”); In re Hayes, 111 B.R. 924, 927 (Bankr. D. Or. 1990) (Applying Hougland v. Lomas & Nettleton Co. (In re Hougland), 886 F.2d 1182 (9th Cir. 1989), although the debtor is permitted to split the home mortgage into secured and unsecured portions, § 1322(b)(2) prohibits the debtor from altering the interest rate, the monthly payment, or any other term of the mortgage. The debtor cannot allocate postpetition defaults to the unsecured portion of the claim and thus avoid curing the default under § 1322(b)(5). When the mortgage debt is $96,000 and the value of the debtor’s home is $72,000, the $72,000 must be treated as principal as of the date of the petition, and “[e]ach postpetition payment received by the creditor, whether a payment to cure a default or a regular monthly payment called for by the agreement, would first be applied to accrued interest on the $72,000 starting from the petition date.”).

 

17  See § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default.

 

18  See below in this section, and see § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default.

 

19  This issue was discussed briefly in § 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations with respect to claims secured by property other than a debtor’s principal residence.

 

20  Federal Nat’l Mortgage Ass’n v. Ferreira (In re Ferreira), 223 B.R. 258, 261–62 (D.R.I. 1998) (Plan can bifurcate mortgage secured by rental property that is not protected from modification by § 1322(b)(2) and then cure default and maintain payments with respect to the secured portion of that bifurcated claim under § 1322(b)(5). “FNMA argues that subsection (b)(5) is inapplicable to the secured portion of a claim that is bifurcated pursuant to subsection (b)(2) because the two subsections cannot be utilized in tandem. There are several flaws in that argument. First, it is at odds with the plain language of the statute. Subsections (b)(1)–(10) list the provisions that may be included in a plan and connects them with the conjunctive ‘and’ thereby indicating that a plan may include provisions of the kind referred to in any two or more of those subsections, including (b)(2) and (b)(5). . . . [S]ubsection (b)(5) permits a plan to provide for curing defaults and maintaining payments ‘on any unsecured claim or secured claim.’ . . . [T]he secured portion of an under-secured claim is a secured claim within the meaning of subsection (b)(5). . . . [T]he ‘notwithstanding’ clause could be interpreted merely as authorizing cure and maintenance with respect to claims secured by an interest in the debtor’s principal residence despite the fact that subsection (b)(2), otherwise, would prohibit modification of such claims. . . . [A]s a practical matter, FNMA’s interpretation of the statute would prevent under-secured debtors from obtaining relief under either subsection (b)(2) or (b)(5). . . . [S]ubsections (b)(2) and (b)(5) are not mutually exclusive and a Chapter 13 plan may include a provision for curing default and maintaining payments with respect to the secured portion of an under-secured claim that has been bifurcated pursuant to subsection (b)(2) and § 506(a).”); Enewally v. Washington Mut. Bank (In re Enewally), 276 B.R. 643, 647–52 (Bankr. C.D. Cal. 2002) (Because mortgage on income-producing property is not protected from modification by § 1322(b)(2), debtor can combine the bifurcation remedy in § 506(a) with the curing default and maintaining payments remedy in § 1322(b)(5). “In this case, none of the collateral at issue is the debtors’ principal residence. Thus, the property is not protected by the antimodification exception in § 1322(b)(2). . . . The five-year limitation does not apply to a ‘cure and maintain’ plan, because § 1322(b)(5) makes an explicit exception for such plan provisions. . . . If the chapter 13 debtor proposes to reduce the monthly payments to the secured creditor, the loan must be paid in full over the life of the plan (which may not exceed five years). . . . In consequence, a chapter 13 debtor may not invoke both a modification of a secured creditor’s claim under § 1322(b)(2) and the right to ‘cure and maintain’ over the life of the original loan as authorized under § 1322(b)(5). . . . The second typical strategy to deal with an undersecured creditor that is not secured by the debtor’s principal residence is to invoke § 1322(b)(5) and § 506(a) to reduce the length of the mortgage, while maintaining the contractual monthly payments (and ordinarily the contractual interest rate) until the secured debt (but not the unsecured portion) is paid in full. . . . [T]his strategy is not limited by the 5-year limit on the length of a chapter 13 plan. This strategy relies on § 1322(b)(5) which explicitly permits a ‘cure and maintain’ plan provision to apply to a debt whose final payment comes due after the final payment under the plan. . . . [T]he debtors . . . propose to continue to make exactly the same monthly payments to WAMU as are provided in the original agreement (at the original interest rate) until the secured debt is paid in full. The debtors only propose to shorten the term of the loan to reflect the reduction in the secured claim under § 506(a). . . . When the debtors’ payments reach this amount, plus accrued interest at the contractual rate and any other applicable charges, the loan will be paid in full.”), rev’d in part, No. SA CV 02-459-GLT (C.D. Cal. Nov. 26, 2002); In re DaCosta, 204 B.R. 1 (Bankr. D. Mass. 1996) (Applying In re Murphy, 175 B.R. 134 (Bankr. D. Mass. 1994), and In re Brown, 175 B.R. 129 (Bankr. D. Mass. 1994), undersecured mortgage that can be modified that is paid through the plan under § 1322(b)(5) is not “re-amortized” based on the reduced allowed secured claim; rather, the allowed secured claim is the value of the collateral, and the regular monthly payment under the original mortgage is maintained and credited against that smaller amount.); In re Kheng, 202 B.R. 538, 539 (Bankr. D.R.I. 1996) (Chapter 13 debtor can strip down home mortgage to value of collateral by curing default and maintaining payments under § 1322(b)(5) consistent with the original mortgage contract. Allied was owed $96,793 secured by mortgage on the debtors’ principal residence. Value of the property was $75,000, and plan stripped down Allied’s secured claim to that amount. Plan proposed to cure default and to maintain contract payments for the life of the note, a period that extended beyond the term of the plan. Although not altogether clear, it appears that the mortgage was protected from modification by § 1322(b)(2). “Here, the Debtors are not seeking to modify their secured obligation. The Khengs propose to pay Allied’s secured claim under the same term and at the same interest rate as provided for in the note and mortgage. Judge Queenan would have approved a similar scenario in In re McGregor, 172 B.R. 718 (Bankr. D. Mass. 1994). ‘It is true that [Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993)] holds a proposal of payments pursuant to bifurcation constitute [sic] modification of the “rights” of the holder of the secured claim within the meaning of section 1322(b)(2). Presumably, if only subsection (b)(2) were applicable, the payments would have to be completed within five years. But subsection (b)(5) provides independent support for such a plan. Subsection (b)(5) does not require the plan proponent to avoid modification of the “rights” of the secured claim holder. Its command is complied with so long as payments are maintained on the “secured claim.” The amount of the secured claim is determined by valuation pursuant to section 506(a). This wording avoids the fine distinction made in Nobelman, [sic] based on the wording of subsection (b)(2), between modification of the “rights” of a secured claim holder and modification of the “secured claim.” Subsection (b)(5), moreover, provides that its provisions control “notwithstanding paragraph (2) of this subsection.”’”); Tavella v. Golden Nat’l Mortgage Co. (In re Tavella), 191 B.R. 637 (Bankr. E.D. Pa. 1996) (Mortgages on four properties that are not the debtor’s principal residence can be modified, but debtor must choose to either pay the balances in full with interest during the life of the plan under § 1325(a)(5) or cure defaults and maintain payments consistent with the mortgage contracts under § 1322(b)(5). If debtor reduced mortgage holder’s secured claim through bifurcation, debtor can then use § 1322(b)(5) to cure default and maintain payments with respect to the smaller allowed secured claim.); In re Pruett, 178 B.R. 7 (Bankr. N.D. Ala. 1995) (Adopting In re McGregor, 172 B.R. 718 (Bankr. D. Mass. 1994), when mortgage can be modified, debtor can cure default and maintain payments under § 1322(b)(5) in a manner that will require payments to the mortgage holder on the allowed secured portion of its claim after completion of payments to other creditors under the plan.); In re Murphy, 175 B.R. 134 (Bankr. D. Mass. 1994) (Chapter 13 debtor can bifurcate an unprotected undersecured mortgage holder and take advantage of § 1322(b)(5) by maintaining payments on the secured claim as computed in accordance with § 506(a).); Brown v. Shorewood Fin., Inc. (In re Brown), 175 B.R. 129 (Bankr. D. Mass. 1994) (Where mortgage is not protected from modification by § 1322(b)(2), after bifurcation, if the debtors cure defaults under § 1322(b)(5), the regular mortgage payments and the arrearage payments are properly credited against the allowed amount of the secured portion of the mortgage.); In re McGregor, 172 B.R. 718 (Bankr. D. Mass. 1994) (Mortgage that can be modified because it is secured by a four-unit, income-producing apartment building can be managed through the plan if the debtor maintains the original contract payment and interest rates during the life of the plan and completes payment of the contract after completion of payments under the plan.).

 

21  See In re Stivender, 301 B.R. 498, 500 (Bankr. S.D. Ohio 2003) (Debtor cannot modify undersecured mortgage on two-family residence under § 1322(b)(2) and then cure and maintain regular payments under § 1322(b)(5). Mortgage on two-family residence was not protected from modification by § 1322(b)(2). Plan proposed to strip off unsecured portion then cure default and maintain payments with respect to remaining allowed secured claim. “[I]f a debtor attempts to invoke the strip and pay provision of § 1322(b)(2), the debtor must comply with the five year limitation period of § 1322(d) and § 1325(a)(5)(B). . . . [T]he invocation of § 1322(b)(5)’s cure and maintain provision does not change the fact that § 1322(b)(2)’s strip and pay provision is subject to the five year limitation of § 1322(d).”); In re Koper, 284 B.R. 747, 750–54 (Bankr. D. Conn. 2002) (Chapter 13 debtor cannot stack bifurcation under § 1322(b)(2) and § 506(a) with curing default and maintaining payments under § 1322(b)(5) notwithstanding that liens on investment property are not protected from modification. Stipulated value of investment properties was less than mortgages. Plan proposed to bifurcate mortgage liens. Plan would pay arrearages in full as a secured claim with interest and maintain regular contract payments “outside the plan.” “The composite effect of the [plan] will be to satisfy the subject mortgage claims in full some time after the expiration of the term of the Plan, but well before their contractual terminus date. . . . [I]f a Chapter 13 debtor chooses to modify the rights of a mortgagee by bifurcating its claim into secured and unsecured components pursuant to Section 506(a), his Chapter 13 plan must provide for the present value of the secured component of that claim to be fully paid to the mortgagee within the five-year (or less) term of the plan. . . . Alternatively, a debtor can thwart mortgage foreclosure by opting not to modify a mortgagee’s claim through bifurcation, but instead, by proposing to ‘cure and maintain’ the mortgage debt. He accomplishes this by curing a pre-petition payment default, i.e., an arrearage, within the plan’s maximum five-year term . . . and maintaining current mortgage payments outside the plan. In other words, he can cure the mortgage default by treating the arrearage alone, while opting not to provide for the underlying mortgage claim in the plan . . . . By its terms, Section 1322(b)(5) does not provide any license for modification of secured claims, through bifurcation or otherwise. . . . Bifurcation can only occur under the modification license of subsection (b)(2). Consequently, a Hybrid Plan’s treatment of mortgage claims is necessarily premised upon subsections (b)(2) and (b)(5). . . . [A]ny attempt to modify a claim pursuant to subsection (b)(2) requires compliance with the plan distribution time limitations of Section 1322(d). . . . Even if Section 1322(b)(5) could be construed to permit the modification inherent in bifurcation, it would not change this Court’s analysis since subsection (b)(5), like subsection (b)(2), is subject to the five-year plan limitation of subsection (d).”), stay pending appeal denied, 286 B.R. 492 (Bankr. D. Conn. 2002); In re Legowski, 167 B.R. 711 (Bankr. D. Mass. 1994) (Court suggests that even where mortgage is not protected from modification by § 1322(b)(2), the debtor cannot use § 1322(b)(5) because if the debtor modifies the mortgage holder’s claim by splitting under § 506(a), then §§ 1322(c) and 1325(a)(5) require that the allowed secured claim be paid in full during the maximum five-year life of the plan.).

 

22  See In re DaCosta, 204 B.R. 1 (Bankr. D. Mass. 1996) (When the debtors modify an undersecured mortgage by claim splitting and then cure the defaults and maintain payments under § 1322(b)(5), the loan is not “re-amortized” based on the reduced allowed secured claim; rather, the allowed secured claim is the value of the collateral, and the regular monthly payment under the original mortgage is maintained and credited against that smaller amount.); In re Kheng, 202 B.R. 538 (Bankr. D.R.I. 1996) (The debtor’s proposal to pay a mortgage after claim splitting at the same interest rate and the same monthly payment maintains payments on the secured claim as required by § 1322(b)(5).); Tavella v. Golden Nat’l Mortgage Co. (In re Tavella), 191 B.R. 637, 640–41 (Bankr. E.D. Pa. 1996) (“Under § 1322(b)(5), all of the provisions of a note or contract remain in full force and effect. . . . A change in the monthly payment does not constitute the ‘maintenance of payments’ for these purposes. . . . [T]he proposed reduction of the mortgage rate of interest constitutes an impermissible change in monthly payments.”); In re Javarone, 181 B.R. 151, 154 (Bankr. N.D.N.Y. 1995) (Section 1322(b)(5) requires that the debtor “cure[] a default or arrearage during the plan and simultaneously compl[y] with the normal payment schedule as prescribed under the original agreement with the creditor.”); In re Pruett, 178 B.R. 7, 9 (Bankr. N.D. Ala. 1995) (“[T]he debtor may nevertheless take advantage of § 1322(b)(5) by keeping the same ten and one-half percent contract rate and making the same payments of principal and interest called for by the note during the life of the plan and during such further period of time as is necessary to have the total principal payments equal the amount of the secured claim as valued by the court. This would be a ‘maintenance of payments’ and the payments would be maintained on the ‘secured claim’ as that claim is computed in accordance with § 506(a).”); In re Murphy, 175 B.R. 134, 137 (Bankr. D. Mass. 1994) (“‘A change in the monthly payments hardly constitutes “maintenance of payments.” The phrase connotes an absence of change. If the payments are changed, sections 1322(c) and 1325(a)(5) both require that they be completed over the life of the plan, which cannot exceed five years. The Debtor may nevertheless take advantage of 1322(b)(5) by keeping the same . . . contract rate and making the same payments of principal and interest called for by the note during the life of the plan and during such further period of time as is necessary to have the total principal payments equal the amount of the secured claim as valued by this court. There would then be “maintenance of payments.” And those payments would be maintained on the secured claim as that claim is computed in accordance with section 506(a).’”); Brown v. Shorewood Fin., Inc. (In re Brown), 175 B.R. 129 (Bankr. D. Mass. 1994) (Where mortgage is not protected from modification by § 1322(b)(2), after bifurcation, debtors can cure defaults and maintain payments under § 1322(b)(5) by making the regular mortgage payments and arrearage payments, both of which are then properly credited against the allowed amount of the secured portion of the mortgage as determined under § 506(a).); In re McGregor, 172 B.R. 718 (Bankr. D. Mass. 1994) (Where mortgage can be modified, if debtor elects to cure defaults and maintain payments under § 1322(b)(5), the debtor can maintain the original contract payment and interest rate during the life of the plan and complete payment of the contract after the completion of payments to other creditors under the plan.); In re Hyden, 112 B.R. 431 (Bankr. W.D. Okla. 1990) (Where § 1322(b)(2) does not prevent bifurcation of a home mortgage under § 506(a), § 1322(b)(5) does protect the creditor at least to the extent that the interest rate must remain the same as in the underlying documents and the payment amount required by the mortgage must be unmodified.).

 

23  See § 202.1 [ Payment of Claims beyond Length of Plan ] § 112.5  Payment of Claims beyond Length of Plan. See, e.g., In re Hussain, 250 B.R. 502, 507–11 (Bankr. D.N.J. 2000) (Debtor cannot cure default under § 1322(b)(5) on real property that is not protected from modification and modify the debt under § 1322(b)(2) for payment over a term that exceeds the length of the plan. Debtor had several mortgages on rental property. Plan proposed to cure default on some mortgages and to extend the maturity for periods ranging from 8 years to 30 years after confirmation. “The Bankruptcy Code does not authorize a chapter 13 debtor to cure defaults and simultaneously modify secured claims. Instead, the Code permits a chapter 13 debtor to propose a plan that utilizes one or the other of these options. . . . A bankruptcy court cannot confirm a chapter 13 plan that attempts to both cure and modify secured claims at the same time. . . . [A]ny secured claims modified by a debtor under § 1322(b)(2) must be satisfied in full before the final payment under the chapter 13 plan. . . . [A] chapter 13 debtor cannot modify a claim under a chapter 13 plan and then argue that the claim is being paid outside the plan. Any attempt by a debtor to modify a claim pursuant to § 1322(b)(2), requires compliance with the statutory limitations of § 1322(d). . . . [Section] 1322(d) ‘requires that the repayment of any claim modified pursuant to Code § 1322(b)(2) must be completed within three years, unless the Court, for cause, approves a five year plan.’ . . . Debtor’s attempt to confirm a plan that impermissively modifies various real estate secured claims to extend maturity for twenty to thirty years is clearly contrary to authority. The bankruptcy court in In re Pruett, 178 B.R. 7, 9 (Bankr. N.D. Ala. 1995), held that the chapter 13 debtor had two viable options with respect to treatment of real estate secured claims in chapter 13, the debtor could ‘retain the same interest rate and make the same payments of principal and interest called for by the original note during the life of the plan and during such further period of time as necessary to pay in full the secured claim as valued by the court. Alternatively, the debtor may change the interest rate and the amount of the monthly payments, but if he does so, the amount of the allowed secured claim must be paid within the five year period.’ . . . [I]f a chapter 13 debtor chooses to employ the Code’s ‘cure and maintenance’ provision, the three to five year limitation on plan payments of § 1322(d) has no application because § 1322(b)(5) specifically permits payments on a secured claim beyond the final payment under the plan. However, as a tradeoff, besides allowing a debtor to cure prepetition defaults, all other terms and provisions from the original mortgage contract are reinstated and must remain unchanged. . . . Any proposed change in the contractual rate of interest and/or extension of payments beyond the original maturity date, similar to what has been proposed by Debtor, does not constitute ‘maintenance of payments.’ Courts have concluded that ‘[a] change in the amount of the monthly payments hardly constitutes ‘maintenance of payments.’ The phrase connotes an absence of change. If the payments are changed, sections 1322(c) [now § 1322(d)] and 1325(a)(5) both require that the [payments] be completed over the life of the plan, which cannot exceed five years.’ In re McGregor, 172 B.R. 718, 721 (Bankr. D. Mass. 1994).” One of the debtor’s mortgages matured prepetition. Without discussion of § 1322(c)(2), “[i]n the instant case, Debtor’s mortgage with LaSalle matured pre-petition. Therefore, Debtor cannot cure this mortgage, however, he may modify the secured claim pursuant to § 1322(b)(2) and pay the allowed claim in full through his chapter 13 plan. The ‘cure and maintenance’ option is not available to Debtor because the last payment on LaSalle’s loan was due before the first payment under his chapter 13 plan.”); In re DaCosta, 204 B.R. 1 (Bankr. D. Mass. 1996) (Applying In re Murphy, 175 B.R. 134 (Bankr. D. Mass. 1994), and In re Brown, 175 B.R. 129 (Bankr. D. Mass. 1994), undersecured mortgage that can be modified that is paid through the plan under § 1322(b)(5) is not “re-amortized” based on the reduced allowed secured claim; rather, the allowed secured claim is the value of the collateral, and the regular monthly payment under the original mortgage is maintained and credited against that smaller amount.); In re Javarone, 181 B.R. 151 (Bankr. N.D.N.Y. 1995) (Re-amortization of mortgage on commercial property over 10 years is prohibited because § 1322(d) requires repayment within the three- to five-year maximum duration of the plan unless the debtor has the consent of the mortgage holder or cures defaults under § 1322(b)(5).).

 

24  See also §§ 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations, 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994, 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default, 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

25  These calculations with more complicated examples of arrearage payments to cure default are discussed in §§ 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

26  See § 114.1 [ Calculating Payments to Secured Claim Holders ] § 78.2  Calculating Payments to Secured Claim Holders.

 

27  See § 201.1 [ Cause for Extension beyond Three Years ] § 112.4  Cause for Extension beyond Three Years.

 

28  We will assume that the 10% contract rate in the example would be the rate at confirmation for § 1325(a)(5) purposes; this assumption is not necessarily true to life. See § 112.1 [ Interest Rate Anarchy: Present Value Before Till ] § 77.2  Interest Rate Anarchy: Present Value before Till.

 

29  Using a business calculator, this is the monthly payment necessary to amortize $30,000 over 60 months with 10% interest.

 

30  See also §§ 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

31  A business calculator produced these numbers based on the amortization of $30,000 at 10% interest and a level monthly payment of $483. If curing default and maintaining payments under § 1322(b)(5) also requires maintaining the original amortization based on $50,000, 10% interest, 20 years and a monthly payment of $483, then the allocation of each monthly payment to principal and interest will be different. See below in this section, and see §§ 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

32  This problem will be addressed again in the context of the allowance of interest on arrearages that are cured through the Chapter 13 plan. See §§ 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994 and 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default.

 

33  See §§ 140.1 [ Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 ] § 84.2  Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994 and 141.1 [ Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994 ] § 84.3  Calculating Plan Payments to Cure Default on Mortgages after October 22, 1994.

 

34  The acceptable period for curing home mortgage defaults through a Chapter 13 plan is discussed in § 133.1 [ Reasonable Time to Cure Defaults ] § 82.4  Reasonable Time to Cure Defaults.

 

35  See § 136.1 [ Rate of Interest to Cure Default: Contracts before October 22, 1994 ] § 83.3  Rate of Interest to Cure Default: Contracts before October 22, 1994. Do you even want to ask whether the interest rate on the arrearage changes when the base payment adjusts under an adjustable rate mortgage?

 

36  In re Hyden, 112 B.R. 431 (Bankr. W.D. Okla. 1990). See § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default.

 

37  See § 142.1 [ Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994 ] § 85.1  Demand, Matured and Balloon Loans; “Short-Term” Mortgages before October 22, 1994.

 

38  11 U.S.C. § 1322(c)(2), discussed in § 143.1 [ Demand, Matured and Balloon Loans; “Short-Term” Mortgages after October 22, 1994 ] § 85.2  Demand, Matured and Balloon Loans; “Short-Term” Mortgages after October 22, 1994.

 

39  See § 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations.

 

40  See § 82.1  Prepetition Defaults—When is Property “Sold” at Foreclosure?§ 82.2  Postpetition Defaults and § 82.3  Nonmonetary Defaults for a discussion of what defaults can be cured, including nonmonetary defaults./p>

 

41  A due-on-sale clause, for example, for a debtor who acquired property subject to a mortgage that is not protected from modification by § 1322(b)(2). See § 132.1 [ Nonmonetary Defaults ] § 82.3  Nonmonetary Defaults.