Eastern Savings Bank v. LaFata, No. 05-2510. In this bankruptcy case, the First deals with the issue of whether, “the Bankruptcy Code's protection of mortgage lenders [in 11 U.S.C. § 1322(b)(2)] against modification of claims secured by a principal residence applies when the residence in fact lies mostly on a lot abutting the mortgaged property.” The facts of the case read like a law school hypothetical, with everyone (including, it seems the court) making mistakes and building homes on two plots of land.
The statute reads:
[A Chapter 13 plan may] modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.
Read on!
The First figures that because, in this case, a party actually “resides” “mostly on adjacent property” the way to resolve the question here is to figure out what it means to “reside.” After referring to older caselaw which tracks the legislative history and policy of this provision, the court concludes that “the anti-modification provisions of § 1322(b)(2) will not apply if the debtor's principal residence only encroaches on the mortgaged property.”
A procedural issue, regarding the Bank’s claim that “...it did not receive adequate notice of an intent to value the collateral.” After acknowledging that “there is some split of authority, with courts in this circuit and others holding that the filing of a Chapter 13 plan is sufficient notice of an intent to strip down and revalue collateral, and no separate motion or hearing is required...” the First looks at the record and points out that counsel for the bank knew what was going on.
Likewise, the claim that the Bankruptcy Court improperly required the Bank, as an objector to the Chapter 13 plan to meet some burden of proof fails, because the First points out that even though debtors have to prove their ability to satisfy claims from a particular income stream, everyone with a claim obviously has to prove it, too.
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