§ 84.2 — Calculating Plan Payments to Cure Default on Mortgages before October 22, 1994

Revised: June 2, 2004

[1]

For mortgages entered into before October 22, 1994, the amount necessary to cure default under § 1322(b)(3) and (5) is controlled by §§ 506(b), 1322(b)(2) and 1325(a)(5), as interpreted by the Supreme Court in Nobelman v. American Savings Bank1 and Rake v. Wade.2 Mortgages executed before October 22, 1994, are not affected by 11 U.S.C. § 1322(e).3

[2]

The first step is to separately identify the amount of the arrearage claim. This may not be simple. The mortgage servicer may need several weeks to come up with this number, and then the number will probably not make any sense to the debtor because it will have all sorts of added charges4 above just the missed monthly payments. Counsel has to nail down this arrearage amount either by agreement or by objection to the mortgage holder’s claim before the plan payments can be calculated. The arrearage claim is best kept separate from the ongoing monthly mortgage payment. Calculating and then accounting for the arrearage payment will be complicated enough without mixing it up with the regular mortgage payments. The default amount may accrue postpetition and postconfirmation interest at more than one rate and at rates different than the basic rate in the underlying contract. Keep the arrearage separate and provide for curing by a separate payment through the plan.

[3]

In Rake, the Supreme Court held that an oversecured mortgage holder is entitled to interest on defaults cured through a Chapter 13 plan based on §§ 506(b) and 1325(a)(5). As explained by Justice Thomas, § 506(b) applies only between the petition and confirmation or the effective date of the plan. After confirmation, interest on arrearages is an entitlement of the oversecured mortgage holder under § 1325(a)(5). The interest rate applicable under § 506(b) is not necessarily the same interest rate applicable at confirmation under § 1325(a)(5).5 Calculation of the correct arrearage claim with interest can be best accomplished if the creditor files a proof of claim that clearly indicates the amount of the arrearages separate from the principal balance of the mortgage. Official Bankruptcy Form 10 has lines and boxes for this purpose.6

[4]

Examples may help.7 Assume again a mortgage with the principal balance of $50,000 payable over 20 years with 10 percent interest. Assume the debtor defaulted prepetition on four monthly installments, that these were the first four monthly payments due under the mortgage, and that the plan proposes to cure defaults and maintain payments under § 1322(b)(5). A standard amortization of $50,000 over 20 years at 10 percent interest produces a monthly payment of $483 per month (rounded). The four installments in arrears at the petition total $1,932. This $1,932 arrearage includes unpaid principal of $267 and unpaid interest of $1,665. Assume further that the plan cures the arrearages over 24 months with 10 percent interest.

[5]

Calculation of the regular ongoing monthly payment under the mortgage is simple after Nobelman. In the example, the contract monthly mortgage payment is $483. The debtor must pay this $483 every month during the life of the plan (and thereafter) until the principal balance of the mortgage is paid in full consistent with the contract.

[6]

As discussed above,8 there are different ways to calculate the arrearage claim and the principal balance of the mortgage. Rake does not resolve how to do this calculation. In the example, at the petition, the principal balance by contract would still be $50,000 because the debtor made no payments. However, the $1,932 prepetition arrearage claim contains $267 of principal and $1,665 of interest. If the mortgage holder files separate claims—one for the $50,000 principal balance (payable at the rate of $483 per month) and a separate arrearage claim for $1,932—the mortgage holder will recover $267 of its principal balance twice—once as part of the regular payment of monthly installments and once as an element of curing default. Without discussion, this was probably the outcome in Rake because the arrears identified by the Tenth Circuit and allowed in full with interest by the Supreme Court included unpaid prepetition installments of principal and interest.

[7]

It can be argued that the mortgage holder should not be permitted to recover the principal portion of its prepetition arrearages twice; rather, the mortgage holder should reduce the principal balance in the example from $50,000 to $49,733 if it files an arrearage claim for the full $1,932 that accrued prepetition. The mortgage holder would then be entitled to receive $49,733 at the rate of $483 per month with 10 percent interest through the plan and after.

[8]

In addition, the mortgage holder would have its prepetition arrearage claim to which interest must be added consistent with Rake. This $1,932 arrearage includes $1,665 of unpaid prepetition interest. Rake allows “interest on interest” with respect to the interest portion of an arrearage claim when a Chapter 13 debtor cures default under § 1322(b)(5).9 If the mortgage was oversecured, during the period between the filing of the Chapter 13 petition and confirmation (or the effective date of the plan), interest must be added to both the principal claim and, under Rake, to the arrearage claim at the rate required by § 506(b).10 After confirmation and until the arrearage claim is paid in full through the plan,11 interest would accrue at the present value rate required by § 1325(a)(5).12

[9]

To calculate the exact payment that would be required to cure arrearages over 24 months, interest must be added to the $1,932 at the § 506(b) rate for each month between the filing and confirmation (or the effective date of the plan), and then the total must be amortized over 24 months at the interest rate applicable under § 1325(a)(5).

[10]

Assume for these purposes that the 10 percent contract rate is the § 506(b) interest rate in the district and that the present value interest rate for purposes of § 1325(a)(5) is 8 percent. If confirmation occurred three months after the filing of the Chapter 13 case,13 the arrearage claim of $1,932 would be increased by three months of interest at 10 percent, producing an arrearage claim at confirmation of $1,980 (rounded).14 The plan would then have to pay this $1,980 arrearage over 24 months with 8 percent interest, a monthly payment of $90. In this example, the Chapter 13 debtor would make continuing monthly payments of $483 throughout the life of the plan and a separate payment of $90 per month for 24 months to retire the prepetition arrearages with pre- and postconfirmation interest.

[11]

Notice that the example assumes that no additional postpetition arrearage develops between the filing and confirmation of the plan. In real time, additional defaults are likely during the period just after the petition, and these additional missed payments would be added (with interest if oversecured) to the arrearage claim in many jurisdictions.15 To avoid postpetition and postconfirmation late charges,16 some trustees will add at least one additional monthly payment to the mortgage arrearage on the front end of the case. Also, if the mortgage was oversecured, the primary claim of the mortgage holder would accrue interest if provided by contract, between the filing and confirmation.17 In the example, the $50,000 (possibly $49,733) principal balance at the petition would grow to $51,250 with 10 percent (simple) interest for the three months between filing and confirmation. It is against this larger balance that the incoming streams of principal would be credited during and after the Chapter 13 case.

[12]

What if the mortgage is undersecured, but protected from modification by § 1322(b)(2)? Assume the same facts as above, except that the collateral is worth only $30,000. The regular monthly payment in the example would remain $483. The arrearage at the petition ($1,932) would not accrue preconfirmation interest under § 506(b) because § 506(b) is not applicable to an undersecured claim.18 The undersecured mortgage holder may still be entitled to postpetition, preconfirmation interest on its arrearages if the contract provides for interest on arrearages and the mortgage is protected from modification by § 1322(b)(2) and Nobelman.19

[13]

It is not clear whether Rake requires postconfirmation interest on the entire arrearage claim when the mortgage is undersecured.20 For example, a court following In re Arvelo21 would apportion the $1,932 arrearage claim on the same ratio as the percentage of the entire mortgage that is actually secured. Postconfirmation interest would then be allowed on only the “secured percentage” of the arrearage claim. The income stream to the mortgage holder would have several additional components to be allocated: the regular monthly payment of principal and interest; arrearages with postconfirmation interest; arrearages without postconfirmation interest. That part of the arrearage claim contains principal that was not paid before the petition remains a complicating factor, now compounded by being in part interest bearing after confirmation.

[14]

In the example, if 58 percent of the arrearage claim is entitled to accrue postconfirmation interest,22 then $1,116 of the arrearage claim accrues interest and $816 does not. The $1,116 might be paid in 24 months with 8 percent postconfirmation interest at the rate of $50 per month. The $816 “unsecured” portion of the arrearage might be paid in 24 installments, without interest, of $34 each. The principal portion of each $50 arrearage payment and all of each $34 arrearage payment should be credited against the $1,932 arrearage at the petition. If the mortgage holder double-dipped by including the $267 unpaid prepetition principal on both sides of its claims, then a very difficult to calculate portion of the incoming arrearage payments should also be credited to reduce principal.

[15]

In contrast, a court interpreting Rake to require interest on the entire default amount for an undersecured mortgage would not apportion the $1,932 arrearage claim. Postconfirmation interest would be allowed on the entire amount at the 8 percent rate under § 1325(a)(5). The $1,932 might be paid in 24 months with 8 percent interest at the rate of $87 per month. The principal portion of each $87 payment should be credited toward curing the $1,932 default. If the mortgage holder included the $267 unpaid prepetition principal in both its arrearage claim and its primary mortgage balance, then a small portion of each arrearage payment should also be credited against the principal balance of the mortgage (along with the principal portion of each $483 regular monthly payment).

[16]

Here is an example using an undersecured mortgage that is not protected from modification by § 1322(b)(2). Assume again that the principal debt is $50,000. Assume the collateral is worth $30,000 and the contract interest rate is 10 percent. For simplicity, assume again that the debtor was four months in default at the petition, that these were the first four payments and confirmation occurred three months after filing.

[17]

If the debtor is financially able to pay the $30,000 allowed secured claim in full during the life of the plan, the debtor would split the claim under § 506(a) and then, using § 1325(a)(5), pay the $30,000 allowed secured claim with interest at the confirmation rate in monthly installments. If the confirmation rate is 8 percent, in a 60-month plan, the debtor would have to pay $608 per month to pay the $30,000 allowed secured claim in full. Because the claim is undersecured, it would not be necessary to add interest to the $30,000 allowed secured claim between the filing of the petition and confirmation.

[18]

If the debtor is not able to pay $608 per month, then the plan might cure defaults and maintain payments under § 1322(b)(5). Again, the arrearage claim will be four months at $483 per month or $1,932. If 24 months is the target for curing default, and if Rake extends to require postconfirmation interest on the entire arrearage claim for an undersecured mortgage,23 then the plan would have to pay $1,932 with 8 percent interest over 24 months, a separate monthly payment of $87.

[19]

During the 60 months of the plan, the debtor would continue making monthly payments of $483. The $483 should be credited by the mortgage holder against the $30,000 allowed secured claim. This allocation is somewhat uncertain because the $483 monthly payment was determined from an amortization of $50,000 at 10 percent interest over the 20-year life expectancy of the mortgage.24 Maintaining payments under § 1322(b)(5) requires the debtor to keep the original 10 percent interest rate and the contract payment of $483 per month, but the $30,000 allowed secured claim is the new principal balance against which that $483 payment credited. The amount of principal and interest contained in each $483 payment will vary depending whether it is proper to use the original $50,000 principal balance as the basis for the amortization or the $30,000 allowed secured claim. If principal and interest are allocated according to the original amortization of $50,000 at 10 percent interest over 20 years, then the first $483 payment from the debtor will be credited $416 to interest and $67 to principal. If the allowed secured claim of $30,000 at 10 percent interest and a $483-per-month payment is the proper basis for allocation, then the first $483 payment contains $250 of interest and $233 of principal.

[20]

In addition, the arrearage payment contains principal and interest components. In this example, the entire prepetition arrearage ($1,932) is treated as part of the allowed secured claim for purposes of postconfirmation interest under Rake. Arguably, it then follows that the $1,932 is credited against the $30,000 allowed secured claim as the arrearage payments are received by the mortgage holder. In the example, the $1,932 arrearage is paid over 24 months with 8 percent interest at the rate of $87 per month. The first $87 payment contains $13 of interest and $75 of principal. That $75 should be credited against the $30,000 allowed secured claim.

[21]

If the arrearage claim for an undersecured mortgage that is not protected from modification accrues postconfirmation interest on a different formula,25 then the mortgage servicer will need special instructions to sort out the incoming payments. If the general rule holds that courts will allocate all of the arrearages to the allowed secured claim,26 even if a portion of the arrearages is not entitled to postconfirmation interest, then arrearages paid without interest probably should be credited dollar for dollar against the allowed secured claim, and the same for the principal portion of arrearages that are paid with postconfirmation interest.

[22]

If the mortgage was entered into before October 22, 1994, and is protected from modification by § 1322(b)(2), and if the last payment is due before the last payment under the plan, then the debtor’s options are more limited. There is controversy whether a Chapter 13 debtor can pay in full a mortgage that is protected from modification that cannot be managed under § 1322(b)(5) because it is not long term.27 If the debtor is in a jurisdiction that permits payment in full of a short term, protected mortgage, then the usual mathematics requires the plan to pay the entire mortgage with contract interest. Using the example above, the plan would have to pay $50,000 with 10 percent interest in the maximum of five years. This would require a monthly payment of $1,014 per month for 60 months. If the $50,000 mortgage was oversecured, protected from modification and not eligible for long term treatment under § 1322(b)(5), then the debtor would have to add three months’ interest at 10 percent to the $50,000 principal balance before calculating the 60-month amortization. The oversecured creditor would have a claim of $51,250 at confirmation, assuming a monthly accrual at 10 percent (simple interest) for three months. That $51,250 claim would then have to be retired with 10 percent interest in 60 months at a monthly payment of $1,089 per month.

[23]

The twist that breaks the business calculator is the undersecured mortgage that is not protected from modification when the plan proposes to cure default and the secured portion after claim splitting is smaller than the amount of the arrearages. Starting with the example above, change the assumed value of the real estate to $5,000 and increase the prepetition arrearage to 18 payments or $8,694. To cure default under § 1322(b)(3) or (b)(5), it is uniformly held that the debtor must pay the entire $8,694 arrearage in full.28 Because the mortgage is not protected from modification, the debtor can claim split, leaving the mortgage holder with a $5,000 allowed secured claim. The $8,694 arrearage exceeds the $5,000 allowed secured claim. Extending Rake to these facts, at most the mortgage holder would be entitled to postconfirmation interest on only $5,000 of its $8,694 arrearage claim. Arguably, the $3,694 balance of the arrearage claim would have to be paid in full to accomplish a curing of default, but without interest.

[24]

But when will the debtor finish payments to the mortgage holder? It has been held that the allowed amount of the secured claim after splitting under § 506(a) is the maximum amount that the mortgage holder is entitled to recover from the debtor, including payments to cure default.29 Applied literally, the mortgage holder’s entitlement will be fully satisfied when the principal portion of the $483-per-month ongoing payments combined with the principal portion of the $5,000 (secured) arrearage payments and combined with payments (without interest) on the $3,694 unsecured portion of the arrearages equals $5,000. Precise calculation of that moment will take more than one business calculator, but it is almost assuredly before the entire $8,694 arrearage claim is paid. In this situation, it seems likely that the debtor will have to complete payment of the arrearage claim (without interest) notwithstanding the conflicting rule that the mortgage holder’s allowed secured claim is the outer boundary of its entitlement. Otherwise, the debtor has not cured defaults through the plan.

[25]

In some jurisdictions, it is the custom that the regular monthly payment is made by the debtor directly to the mortgage holder and only the arrearage claim is paid through the Chapter 13 trustee.30 It is hoped that the examples above are convincing that it is a bad idea to pay ongoing mortgage payments directly by the debtor when defaults are being cured by separate payment through the trustee. The Chapter 13 trustee is the only hope for accurate accounting for the payments to a mortgage holder when the plan cures default. The trustee can serve this function only if all the money passes through the trustee’s computer. Don’t count on reconciling the debtor’s records, the trustee’s records and the records of the nine mortgage servicers that will handle the account during the five years of the plan unless all the mortgage payments and arrearage payments came from the trustee.


 

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

 

2  508 U.S. 464, 113 S. Ct. 2187, 124 L. Ed. 2d 424 (1993). 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, 128.2 [ Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations ] § 80.14  Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations, 129.1 [ Overview: General Rules for Saving Debtor’s Home ] § 81.1  Overview: General Rules for Saving Debtor’s Home, 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994 and 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.

 

3  Discussed in § 135.1 [ Section 1322(e): Contracts after October 22, 1994 ] § 83.2  Section 1322(e): Contracts after October 22, 1994, § 1322(e) controls the amount necessary to cure defaults on home mortgages entered into after October 22, 1994. See Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 702(b)(2)(D), 108 Stat. 4106 (1994). See § 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 for discussion of calculating plan payments to cure default on mortgages entered into after October 22, 1994.

 

4  See § 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges.

 

5  See §§ 112.1 [ Interest Rate Anarchy: Present Value Before Till ] § 77.2  Interest Rate Anarchy: Present Value before Till, 112.2 [ Present Value After Till ] § 77.3  Present Value after Till and 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.

 

6  See § 272.1 [ Official Bankruptcy Form 10 and Variations ] § 131.1  Official Bankruptcy Form 410 and Variations.

 

7  Variations of this example are discussed in §§ 115.1 [ Curing Default, Waiving Default, Maintaining Payments and Combinations ] § 78.4  Curing Default, Waiving Default, Maintaining Payments and Combinations, 128.2 [ Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations ] § 80.14  Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations 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.

 

8  See §§ 128.2 [ Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations ] § 80.14  Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations and 129.1 [ Overview: General Rules for Saving Debtor’s Home ] § 81.1  Overview: General Rules for Saving Debtor’s Home.

 

9  See § 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994.

 

10  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.

 

11  Except in the unusual case when the allowed secured claim of the undersecured mortgage holder is paid in full before the arrearage claim is paid in full. 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.

 

12  See §§ 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest, 112.1 [ Interest Rate Anarchy: Present Value Before Till ] § 77.2  Interest Rate Anarchy: Present Value before Till, 112.2 [ Present Value After Till ] § 77.3  Present Value after Till and 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.

 

13  Assume Justice Thomas’s use of the alternative “confirmation or effective date of the plan” in Rake means the date of confirmation. See § 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994.

 

14  Simple interest at 10% has been added. Mortgage holders might successfully argue for compound interest under § 506(b) if provided for by the mortgage contract.

 

15  See § 131.1 [ Postpetition Defaults ] § 82.2  Postpetition Defaults.

 

16  See § 138.1 [ Late Charges, Attorneys' Fees, Costs and Other Charges ] § 83.6  Late Charges, Attorneys' Fees, Costs and Other Charges.

 

17  See §§ 116.1 [ Oversecured Claim Holders ] § 78.5  Oversecured Claim Holders and 134.1 [ In General: Rake and Contracts before October 22, 1994 ] § 83.1  In General: Rake and Contracts before October 22, 1994.

 

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

 

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

 

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

 

21  176 B.R. 349 (Bankr. D.N.J. 1995). See § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default.

 

22  Applying In re Arvelo, 176 B.R. 349 (Bankr. D.N.J. 1995), $30,000 (secured portion) divided by $51,932 ($50,000 (principal) plus $1,932 (arrearage)), is 58%.

 

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

 

24  See § 128.2 [ Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations ] § 80.14  Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations.

 

25  See above in this section, and see § 137.1 [ Undersecured Mortgage and Interest to Cure Default ] § 83.5  Undersecured Mortgage and Interest to Cure Default. See, e.g., In re Arvelo, 176 B.R. 349 (Bankr. D.N.J. 1995).

 

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

 

27  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.

 

28  See § 129.1 [ Overview: General Rules for Saving Debtor’s Home ] § 81.1  Overview: General Rules for Saving Debtor’s Home.

 

29  See In re DaCosta, 204 B.R. 1, 4–5 (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. Debtors could modify mortgage because of an assignment of rents clause and other indicia of a commercial transaction. Debtors argued that “the portion of the secured claim which is attributable to prepetition principal . . . and which will be paid through the Plan along with the other components of the arrearage, should be excluded from the principal balance for purposes of amortizing the Note and calculating the Debtors’ monthly payments pursuant to 11 U.S.C. § 1322(b)(5). . . . [I]f the Bank is allowed to calculate the payments due based on the entire principal balance, both secured and unsecured, ‘it will ultimately recover interest over and above what it is entitled to recover, namely interest on the principal portion of the unsecured claim.’” Court disagreed: “Debtors are attempting to do what this Court proscribed . . .  namely to make monthly payments in a sum equal to the new principal amount of the Bank’s claim amortized over the life of the plan and beyond, rather than the regular monthly payment. Accordingly, the Court reiterates ‘[t]he allowed amount of the secured portion of the mortgage claim after claim splitting under § 506(a) remains the maximum amount that the mortgage holder is entitled to recover on account of the payments by the debtor, including the arrearage payments.’ . . . In other words, 11 U.S.C. § 1325(a)(5)(B)(ii) protects against the consequences the Debtors foresee.”); Brown v. Shorewood Fin., Inc. (In re Brown), 175 B.R. 129, 132 n.6, 133–34 (Bankr. D. Mass. 1994) (When 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. “[I]n order to achieve confirmation of a plan treating long-term secured debt that is bifurcated under section 506(a), the Debtors must either pay the allowed amount of the secured claim in full within the plan term, . . . or cure the mortgage default, maintain regular mortgage payments during the plan term and, thereafter, pay the secured portion of the claim during such further period as is necessary to retire the secured debt. . . . All of the courts that have published decisions addressing the issue have concluded that debtors who bifurcate debt into secured and unsecured portions must pay prepetition mortgage arrearages in full to accomplish a curing of a default in the mortgage and to trigger the option of maintaining payments after the plan term under section 1322(b)(5). . . . Once an undersecured claim is bifurcated into secured and unsecured portion, the debtor, in order to have the option of making payments over the long-term, must cure the arrearages in full during the life of the plan. Like the requirement of curing a default in order to assume an executory contract under section 365 . . . the arrearage cure is a separate and distinct condition of the debtor’s ability to maintain payments under the mortgage. . . . ‘The allowed amount of the secured portion of the mortgage claim after splitting under § 506(a) remains the maximum amount that the mortgage holder is entitled to recover on account of the payments by the debtor, including the arrearage payments. When the sum of the principal portion of the regular monthly payments and the principal portion of the arrearage payments totals the allowed amount of the secured portion of the claim, the secured claim will be paid in full.’ . . . This comports with section 506(a) and (d) which provides that the lien is valid to the extent of the value of the collateral. . . . Allocation of the principal portion of the arrearage payment to the secured portion of the claim gives the secured party the benefit of its bargain and no more.”).

 

30  See §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 103.2 [ Direct Payment of Secured Claims by Debtor ] § 74.8  Direct Payment of Secured Claims by Debtor before BAPCPA and 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee.