In Mission Hen LLC v Lee, Case No. 23-4220 (9th Cir. 2023), the Ninth Circuit is considering whether the Ninth Circuit B.A.P. erred by concluding that a chapter 13 plan may modify and bifurcate an undersecured lien secured by the debtor’s principal residence pursuant to 11 U.S.C. § 1322(c)(2).
Mission Hen argues that the plan violates the anti-modification provision of § 1322(b)(2). It argues that a chapter 13 plan may not modify a lien secured only by a debtor’s principal residence, including a claim that is undersecured. While § 1322(c)(2) allows a modification of a “payment of the claim” if the final payment falls within the plan term, Mission Hen argues that the statute allows for modification of only the payment term, not the claim itself. Mission Hen also asserts that the reasoning of Nobelman v. American Savings Bank, 508 U.S. 324 (1993), prohibits the bankruptcy court from modifying anything other than the repayment terms of its claim. In Nobelman, the bankruptcy court denied confirmation of a chapter 13 plan that would have allowed the debtors to bifurcate the secured creditor’s lien on their real property into unsecured and secured claims and to make payments on only the secured portion.
The Ninth Circuit B.A.P. held “Mission Hen’s argument based on Nobelman fails. The Court’s decision was founded on statutory interpretation. About a year after the Nobelman decision, Congress amended the statute by enacting current § 1322(c)(2). Congress undoubtedly has the power to overcome the Supreme Court’s interpretation of a statute by amending the statute. Nobelman does not help us construe the amended statute. See In re Collier-Abbott, 616 B.R. 117, 122 (Bankr. E.D. Cal. 2020) (“When the Supreme Court issued its ruling in Nobelman, there was not, and there could not have been, consideration of the then yet to be enacted exception to 11 U.S.C. § 1322(b)(2) residence secured claim valuation limitation.”). …Although the Ninth Circuit has not squarely addressed whether § 1322(c)(2) permits the bifurcation and stripdown of an undersecured, soon-to-mature claim, the Fourth Circuit, Eleventh Circuit, and other courts have answered in the affirmative. … Therefore, because Mission Hen’s secured claim matures during the plan term, the plain language of § 1322(c)(2) allows the Debtors to bifurcate and cram down the Mission Hen claim. The bankruptcy court did not err in holding that Mission Hen’s claim was not protected by the anti-modification provision.”
The case will likely be scheduled for oral argument in October or November of 2024.
NCBRC and NACBA filed an amicus brief supporting the Debtor and urging the court to affirm the B.A.P.
Mission Hen v Lee Appellants Brief
Mission Hen v Lee – Appellees Brief
Mission Hen v Lee – NCBRC-NACBA Amicus Brief
