In re Hynson

• Decision Date: 29 July 1986
• Docket Number: Bankruptcy No. 85-06622.
• Citation: 66 BR 246
• Parties: In re Ida HYNSON, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

66 B.R. 246 (1986)

In re Ida HYNSON, Debtor.

Bankruptcy No. 85-06622.

United States Bankruptcy Court, D. New Jersey.

July 29, 1986.

David P. Daniels, Camden, N.J., for debtor.

Robert M. Wood, Manasquan, N.J., Standing Trustee.

William M.E. Powers, Jr., Medford, N.J., for Norwest Financial New Jersey, Inc., Numerica Financial Services, Inc. and The New York Guardian Mortgagee Corp.

Alvin D. Miller, Cherry Hill, N.J., for Fidelity Bond and Mortg. Corp. and Fleet Real Estate Funding Corp.

Zucker, Goldberg, Becker & Ackerman by Michael S. Ackerman, Maplewood, N.J., for Commonwealth Eastern Mortg. Corp.

John D. Wilson, Camden, N.J., for Fidelity Bond and Mortg. Corp.

Williams, Caliri, Miller & Otley by Jeffrey W. Pompeo, Wayne, N.J., for Anchor Sav. Bank and Anchor Mortg. Services, Inc.

William S. Halsch, Deputy U.S. Atty., for U.S. Acting through the Farmers Home Admin., U.S. Dept. of Agriculture.

ROSEMARY GAMBARDELLA, Bankruptcy Judge.

The matter before this court involves the confirmation of the Chapter 13 plan proposed by the debtor, Ida Hynson. By her plan, the debtor proposes to modify the interest of Norwest Financial New Jersey, Inc. (Norwest Financial), the holder of a second mortgage on the debtor's residence which is located at 125 N. 26th Street, Camden, New Jersey. For the reasons set forth in the opinion to follow, this court denies the confirmation of the debtor's plan. This decision is based upon the court's finding that the plan violates the provisions of 11 U.S.C. § 1322(b)(2) in that it impermissibly modifies the rights of a holder of a secured claim, whose claim is secured only by a security interest in real property that is the debtor's principal residence.¹

The relevant facts of this case are as follows. On December 12, 1985, the debtor filed a voluntary petition under Chapter 13 of the Bankruptcy Code. On that same date, the debtor filed a Chapter 13 plan which provided for monthly payments of $160.00 to be made by the debtor to the Standing Trustee² for a period of forty-eight months. The plan provided that Marathon Mortgage Corporation, the holder of a first mortgage on the debtor's residence, would receive the sum of $1,016.00 which was estimated to be the amount necessary to cure the defaults under its mortgage through December 1985. The plan also provided for regular monthly payments to be made by the debtor to Marathon Mortgage Corporation outside of the Chapter 13 plan. The Chapter 13 plan further provided that Norwest Financial, the holder of the second mortgage on the debtor's real property would receive no dividends pursuant to 11 U.S.C. § 1325(a)(5)(B)(i) and (ii). The debtor asserted in her plan and in her bankruptcy schedules that the property has a present market value of $23,000.00, and that the first mortgage on the property and the cost of sale exceed the property's value. Therefore, the debtor concludes that the second mortgage is unsecured and void under 11 U.S.C. § 506(a) and (d).³ The balance of the Chapter 13 plan provided for payment of $3,485.00 to Howard Savings Bank, the holder of a security interest in a 1979 Lincoln Versailles. Of the aforesaid sum of $3,485.00, $3,000.00 represented the debtor's estimate of the value of the vehicle and $485.00 represented interest pursuant to the cram-down provision of 11 U.S.C. § 1325(a)(5)(B)(i) and (ii). The Chapter 13 plan also provided for payment to the City of Camden in the sum of $180.00 on account of sewer charges, and for a 10% dividend to be paid to unsecured creditors.

At the confirmation hearing conducted before this court on March 19, 1986, counsel for the debtor stipulated that Norwest Financial is the holder of a claim secured only by a security interest in real estate that is the debtor's principal residence.

This court is faced with the interplay of several statutory provisions of the Bankruptcy Reform Act of 1978, as amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984 (Bankruptcy Code). Section 506 of the Bankruptcy Code provides:

(a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor\'s interest in the estate\'s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor\'s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor\'s interest.

(b) To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.

(c) The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless —

(1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or

(2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.

With regard to a Chapter 13 plan's treatment of holders of secured claims, 11 U.S.C. § 1322(b) of the Bankruptcy Code provides:

(b) Subject to subsections (a) and (c) of this section, the plan may —

(1) designate a class or classes of unsecured claims, as provided in section 1122 of this title, but may not discriminate unfairly against any class so designated; however, such plan may treat claims for a consumer debt of the debtor if an individual is liable on such consumer debt with the debtor differently than other unsecured claims;

(2) 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;

(3) provide for the curing or waiving of any default;

(4) provide for payments on any unsecured claim to be made concurrently with payments on any secured claim or any other unsecured claim;

(5) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due;

(6) provide for the payment of all or any part of any claim allowed under section 1305 of this title;

(7) subject to section 365 of this title, provide for the assumption, rejection, or assignment of any executory contract or unexpired lease of the debtor not previously rejected under such section;

(8) provide for the payment of all or part of a claim against the debtor from property of the estate or property of the debtor;

(9) provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity; and

(10) include any other appropriate provision not inconsistent with this title.

Title 11 U.S.C. § 1325 also provides in relevant part:

(a) Except as provided in subsection (b), the court shall confirm a plan if —

(5) with respect to each allowed secured claim provided for by the plan —

(A) the holder of such claim has accepted the plan;

(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and

(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; or

(C) the debtor surrenders the property securing such claim to such holder.

It is clear that 11 U.S.C. § 506 establishes the extent to which a claim is a "secured claim" for bankruptcy purposes. Whether a claim is a "secured claim" is dependent upon the value of the collateral. If the value of the collateral is greater than the amount of the debt, the claim is oversecured. Pursuant to 11 U.S.C. § 506(b), holders of oversecured claims may recover out of the collateral, postpetition interest and reasonable fees, charges and costs provided for in the contract which is the basis of the claim. See, In re Simpkins, 16 B.R. 956, 965 (Bkrtcy.E.D.Tenn.1982).

On the other hand, 11 U.S.C. § 1322(b)(2) provides that a Chapter 13 plan may not modify the right of the holder of a claim which is secured only by a security interest in real property that is the debtor's principal residence.

In reconciling these two statutory sections, it must be noted that 11 U.S.C. § 506 is a provision of general applicability in cases under Chapters 7, 11 and 13 of the Bankruptcy Code. See, 11 U.S.C. § 103(a). On the other hand, 11 U.S.C. § 1322 applies only in cases under Chapter 13. See, 11 U.S.C. § 103(h). This court accepts the tenet of statutory construction which provides that regardless of the inclusiveness of the general language of a statute, it does not apply or prevail over matters specifically dealt with in another part of the same enactment. See, Maiatico v. United States, 302 F.2d 880, 886 (D.C.Cir.1962); In re Brown, 329 F.Supp. 422, 425 (S.D.Iowa 1971). Accordingly, while courts have recognized the general applicability of 11 U.S.C. § 506 in bankruptcy cases, its applicability has been limited where more specific statutory...