§ 80.7 — Mobile Homes
Revised: June 1, 2004
Several courts have considered whether the prohibition against modification in § 1322(b)(2) applies to claims secured by mobile homes or manufactured housing. These courts have sometimes looked to state law to determine whether a lien on a mobile home is a security interest in real property or a security interest in personal property. State law varies on this issue, and the cases are fact-bound. The nature of the security interest may depend on whether the mobile home remains mobile or whether it has been sufficiently joined to the earth to become real property.
Under North Carolina law, a mobile home is personal property, and the prohibition against modification in § 1322(b)(2) is not available.1 Under Oklahoma law and Montana law, a mobile home is personal property, and a mobile home mortgage can be modified unless the mobile home is affixed to a particular parcel of real estate.2 Under Tennessee law, a Chapter 13 debtor cannot modify a loan secured by a mobile home that is affixed to realty because the mobile home becomes real property once permanently connected to the land.3 A mobile home on a 10-acre lot in Vermont with “a detached concrete pad, a drilled well and an outhouse” is a principal residence for § 1322(b)(2) purposes notwithstanding that the debtor lacks electric service, potable water or a septic system.4 Applying New York law, the Bankruptcy Appellate Panel for the Second Circuit concluded that a mobile home was personalty for purposes of § 1322(b)(2) notwithstanding that New York law permitted a homestead exemption in the mobile home.5 A mobile home loan in Texas is not protected from modification because a mobile home is not regarded as residential real estate under Texas law.6 Applying Missouri law, one bankruptcy court found that a mobile home “totally encased in a permanent exoskeleton of wood” such that “it is impossible to tell that there is a trailer involved at all” was real property and the debt it secured was protected from modification.7
These cases suggest strategies for debtors with mobile homes. Protection from modification will probably turn on how well the mobile home is connected to the ground. Counsel might be tempted to suggest that the debtor put the wheels back on the frame before filing the Chapter 13 case. Creditor’s counsel should consider taking pictures before the home becomes suddenly mobile.
The creditor with a security interest in real property that does not have a security interest in the mobile home that sits on that property may be unprotected from modification in a Chapter 13 case. In In re Johnson,8 the bank had a mortgage on real property, and the debtor hauled a mobile home onto the property. The mobile home was not affixed to the land, and the bank did not have a security interest in the mobile home. The bankruptcy court held that the bank was not protected from modification by § 1322(b)(2):
[T]he Debtors’ mobile home is their principal residence which is personal property under Alabama law. . . . [T]he Debtors live in the mobile home which is personal property . . . . The land upon which the mobile home sits is separate from the mobile home and does not constitute the Debtors’ residence. As Regions Bank does not have a security interest in the Debtors’ residence, they are not protected by the antimodification provision and their rights may be modified under a Chapter 13 Plan.9
1 Homeowners Funding Co. v. Skinner, 129 B.R. 60 (E.D.N.C. 1991).
2 In re Plaster, 101 B.R. 696 (Bankr. E.D. Okla. 1989). Accord In re Stratton, 248 B.R. 177, 180–81 (Bankr. D. Mont. 2000) (Applying Montana law, mobile home that is not affixed to real property is personal property that is not protected from modification by § 1322(b)(2). “[T]he retail installment contract granted Greenpoint a security interest in the mobile home and other goods under the Uniform Commercial Code—Secured Transactions, not under mortgage law . . . . In Montana, ‘real property’ is defined as land, that which is affixed, incidental, appurtenant to land, or that which is immovable by law. . . . Donna owns no real property. . . . [T]he mobile home sits in a mobile home court, where it is not attached to real property. The yoke remains attached to it. . . . The clause ‘that is the debtor’s principal residence’ is nothing more or less than a clause modifying ‘real property.’ Without real property, the modifying clause is of no independent legal effect.”).
3 In re Owens, 36 B.R. 661 (Bankr. M.D. Tenn. 1984).
4 In re Donahue, 221 B.R. 105, 108 (Bankr. D. Vt. 1998) (“We find the manner in which the Debtor lives inconsequential. A home is a home, whether primitive or luxurious, and it is not our place to impose lifestyle standards on anyone.”), rev’d, 232 B.R. 610, 615 (D. Vt. 1999) (Denial of confirmation and relief from the stay were “predicated on a clearly erroneous factual finding” that the 10-acre lot and mobile home retained by the debtor was the debtor’s principal residence. “No evidence was introduced at the hearing regarding the primary residence issue. Rather, Judge Conrad relied upon arguments of counsel. . . . It is unclear to the Court whether Donahue’s mobile home constituted his primary residence. On remand, a full evidentiary hearing should be conducted to address this issue.”).
5 Green Tree Credit Corp. v. Thompson (In re Thompson), 217 B.R. 375 (B.A.P. 2d Cir. 1998).
6 In re Thurston, 73 B.R. 138 (Bankr. N.D. Tex. 1987).
7 In re Carter, 116 B.R. 156 (Bankr. W.D. Mo. 1990).
8 269 B.R. 246, 249 (Bankr. M.D. Ala. 2001).
9 269 B.R. at 249.