Opinion
Case No. 99-10088-MVB, Contested Matter No. 99-0567
August 27, 1999
L. Darren Goldberg, Esquire, Draper Goldberg P.L.L.C., Leesburg, Va, Of Counsel for the movant
Stevan Lamout Pullman, Annandale, VA, Debtor, Pro se
MEMORANDUM OPINION AND ORDER
A hearing was held in open court on August 25, 1999, on the motion for relief from the automatic stay filed by GE Mortgage Services, Inc., in order to foreclose under a deed of trust against the debtor's residence located at 6901 Lillie Mae Way, Annandale, Virginia. The debtor, despite having been advised in open court of the hearing date, was not present. At the conclusion of the hearing, the court ruled from the bench that the automatic stay would be terminated. The purpose of this memorandum opinion and order is to set forth the essential facts and conclusions supporting the court's ruling.
The motion for relief from stay was originally filed on April 2, 1999. The preliminary hearing was initially scheduled for April 28, 1999, but was continued in open court several times. At the continued hearing held on June 28, 1999, Mr. Pullman, who is representing himself, did not appear when the matter was called, and an order was entered by Judge Martin V. B. Bostetter, Jr., of this court granting relief from the automatic stay. Mr. Pullman appeared later that morning and three days later filed a motion for reconsideration. In the interim, Judge Bostetter retired on June 30, 1999, after 40 years of service as a bankruptcy referee and bankruptcy judge. At a hearing held on July 14, 1999, Judge David H. Adams of this court granted the motion for reconsideration and directed that a new preliminary hearing be held on July 28, 1999. On that date, the matter was continued in open court to August 25, 1999.
Facts
Steven Lamont Pullman filed a voluntary petition under chapter 11 of the Bankruptcy Code in this court on January 8, 1999, and remains in possession of his estate as a debtor in possession. On May 10, 1999, he filed a proposed plan of reorganization which has not yet been confirmed.
Two proposed disclosure statements have been disapproved.
The debtor resides at 6901 Lillie Mae Way, Annandale, Virginia. The movant holds a first-lien deed of trust against the residence to secure a one-year adjustable rate promissory note dated October 20, 1994, in the original principal amount of $373,600.00. The current monthly payment amount is $3,133.16. The amount due on the note on the filing date of the chapter 11 petition was $369,714.59, and interest has continued to accrue since that date at the rate of $82.38 per day. The property is valued on the debtor's schedules at $445,000.00, and is subject to a second-lien deed of trust in favor of Green Tree Financial Servicing Corp. on which there was a balance due, on the filing date, of $74,063.06. At the time the chapter 11 petition was filed, payments on the GE Capital note were in arrears five months, and the debtor has made no payments since the filing of the petition. The debtor's plan proposes to recapitalize the loan by adding all arrearages to the principal and paying the new amount, with interest at the lender's current 5-year ARM rate, over 28 years.
Discussion
The filing of a bankruptcy petition creates an automatic stay of, among other actions, any act to enforce a prepetition lien against property of the debtor or of the bankruptcy estate or to collect a claim against the debtor that arose prepetition. 11 U.S.C. § 362(a)(4), (a)(5), and (a)(6). After notice and a hearing, however, the stay may be terminated for "cause," including, but not limited to, a lack of adequate protection of the moving party's interest in property. 11 U.S.C. § 362(d)(1).
In the present case, the amount currently due on the GE Capital deed of trust is approximately $388,579.00. Accepting, in the absence of any contrary evidence, the value of $445,000.00 shown on the debtor's schedules, GE Capital has an equity "cushion" of $56,420, or approximately 13%. This is on the low side of what most courts have found sufficient to constitute adequate protection in the absence of current payments being made. See Principal Mutual Life Ins. Co. v. Atrium Development Co. (In re Atrium Development Co.), 159 B.R. 464, 471 (Bankr. E.D. Va. 1993) (finding a 12 percent equity cushion insufficient). Were this case still in its infancy, the court might be inclined to continue the stay in effect to determine whether a viable plan could be proposed. The present case, however, has been pending for over 7 months, and the only plan proposed by the debtor during that time could not be confirmed over GE Capital's objection because the proposed treatment of its claim violates § 1123(b)(5), Bankruptcy Code, by modifying the rights of a lender secured only by a security interest in the debtor's personal residence. While a plan may properly provide for the curing of defaults that exist on the confirmation date, the plan cannot modify the interest rate, payment amount, due date, or amortization if the note is secured only by a security interest in the debtor's personal residence. Given the substantial default, the lack of current payments, the minimal equity cushion, and the failure to propose a confirmable plan after seven months in chapter 11, the court concludes that "cause" exists to terminate the automatic stay.
ORDER
For the foregoing reasons, it is
ORDERED:
1. The automatic stay arising under 11 U.S.C. § 362(a) is terminated as it affects the movant's right to enforce the lien of its deed of trust against the real property located at 6901 Lillie Mae Way, Annandale, Virginia, and more particularly described as Lot 1, WEBBWOOD SUBDIVISION, as the same appears duly dedicated, platted and recorded in Deed Book 8547, Page 1223, among the land records of Fairfax County, Virginia.
2. The clerk will mail a copy of this memorandum opinion and order to the parties listed below.