Opinion
Case No. 02-19019
August 8, 2003
ORDER DENYING CONFIRMATION
This matter is before the Court on creditor Bank.One, N.A.'s objection to confirmation (Docs. 36, 43) and the Debtor's response (Docs. 44, 46). A hearing was held on July 15, 2003.
The issue before the Court is whether the Debtor may use both the "strip and pay" provision of 11 U.S.C. § 1322(b)(2)and the "cure and maintain" provision of 11 U.S.C. § 1322(b)(5) with respect to a single creditor. Bank One contends that the Debtor's plan violates the five year requirement embodied in U.S.C. § 1322(d) and 11 U.S.C. § 1325(a)(5)(B).
11 U.S.C. § 1322(d) states that a plan may not provide for payments over a period of time of inore than five years. 11 U.S.C. § 1325(a)(2)(B) states that the value of property to be distributed under the plan must not be less than the full amount of the allowed claim.
This is a case of first impression for this district.
Bank One has a mortgage on the Debtor's two-family residence with an outstanding principal balance due of $134,083 and a prepetition arrearage of $10,316. The last payment is due on the mortgage in September, 2016. The Debtor values the property at $90,000. The Debtor proposes to bifurcate Bank One's claim into a secured claim of $90,000, with the balance being unsecured. The Debtor would continue to make his regular mortgage payments directly to Bank One. These regular mortgage payments would continue beyond the length of the five year plan. The unsecured portion would be paid as a general unsecured claim at 1%. The Debtor would cure the prepetition arrearage of $10,316 by plan payments to be administered by the Chapter 13 Trustee.
The antimodification provision of 11 U.S.C. § 1322(b)(2) does not protect a mortgage secured by a multi-family structure in which only one unit is used as the debtor's residence. E.g., In y e Kimball, 247 B.R. 35 (Bankr. W.D.N.Y. 2000).
The parties have stipulated that valuation, if necessary, would be determined at a future hearing. For purposes of this decision, the Court will assume that the value of the property is $90,000 and, therefore, that Bank One is undersecured.
There is relatively little caselaw on this issue. At first blush, In re Enewally, 276 B.R. 643 (Bankr. C.D. Calif. 2002), appears to support the Debtor's position. However, the debtor in that case was current on his mortgage, therefore, the debtor did not attempt to directly invoke both § 1322(b)(2) and 6 1322@)(5) as is the Debtor in the present case. Moreover, in the course of its analysis, the court in In re EnewaZZy acknowledged that a chapter 13 debtor cannot invoke both the modification of a secured creditor's rights under 6 1322(b)(2) and the cure and maintain provision under § 1322(b) (5). 276 B.R. at 65 1.
There are additional cases which hold that a debtor may take advarilage of either the strip and pay provision of § 1322(b)(2)or the cure and maintain provision of § 1322(b)(5), but not both. See In re Hussain, 250 B.R. 502, 507 (Bankr. D. N.J. 2000) (citations omitted). This is because unlike § 1322(b)(5)'s cure and maintain provision, which necessarily presupposes maintenance payments extending beyond the length of the plan, 1322(b)(2)'sstrip and pay provision contains no such language. See id.; see cf: In re Kopor, 284 B.R. 747 (Bark. D. Conn. 2002) (holding that both § 1322(b)(2) and § 1322(b)(5) are subject to the five year limitation of § 1322(d)). Thus, if 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)@). In other words, the 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 the present case, since the Debtor has invoked the strip and pay provision of § 1322(b)(2), he is bound by the five year limitation period. And since the Debtor's payments on the stripped down, $90,000 secured claim would extend beyond a five year period, the proposed plan may not be confirmed.
For the above reasons, we hereby GRANT Bank One's objection to confirmation.
The Debtor shall have 20 days from the entry date of this order in which to file an amended plan.
A hearing on valuation, if any, shall be scheduled upon the written request of Bank One.
IT IS SO ORDERED.