In re Sapp, Bankruptcy No. 2-81-00423.

• Citation: 11 BR 188
• Decision Date: 14 April 1981
• Docket Number: Bankruptcy No. 2-81-00423.
• Parties: In re Paul Joseph SAPP, Evelyn Louise Sapp, Debtors.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Southern District of Ohio

11 B.R. 188 (1981)

In re Paul Joseph SAPP, Evelyn Louise Sapp, Debtors.

Bankruptcy No. 2-81-00423.

United States Bankruptcy Court, S.D. Ohio, E.D.

April 14, 1981.

Stephen R. Buchenroth, Columbus, Ohio, for Eagle Sav. Ass'n Mitchel D. Cohen, Columbus, Ohio, for debtors.

Frank Pees, Trustee.

ORDER ON OBJECTION TO CONFIRMATION OF PLAN

R.J. SIDMAN, Bankruptcy Judge.

Eagle Savings Association, a creditor holding a secured claim against the debtors in this Chapter 13 case, has filed an objection to confirmation of the proposed plan. The grounds asserted for objection and the Court's disposition of them are as follows:

1. THE PLAN DOES NOT PROVIDE FOR THE CURING OF THE DEFAULT IN THE NOTE AND MORTGAGE OF EAGLE SAVINGS ASSOCIATION AS REQUIRED BY SECTION 1322(b)(5) OF THE BANKRUPTCY CODE.

Eagle Savings Association ("Eagle") elected, prior to the filing of the Chapter 13 petition herein, to accelerate the indebtedness of the debtors under a provision of the promissory note executed by the debtors that reads:

"If default be made in the payment of any installment under this note, and if such default is not made good prior to the date of the next such installment, the entire principal sum and accrued interest shall at once become due and payable without notice at the option of the holder of this note."

The debtors were in substantial default under the payment obligation of the note at the time acceleration was declared. The ability of Eagle to continue to use the acceleration clause to thwart the debtors' efforts to rehabilitate themselves financially and to cure pre-petition default on a number of their debt obligations is circumscribed by the provisions of § 1322(b)(3) & (5) of the Bankruptcy Code. Those statutory provisions have been interpreted by this Court in the case of In re Soderlund, 3 C.B.C.2d 255, 7 B.R. 44 (Bkrtcy.S.D.Ohio 1980), which stated:

". . . it would appear that subsections (3) and (5) of § 1322(b) may be used serially to, first of all, provide for the curing of a pre-petition default and secondly to provide for the maintenance of current payments during the life of the plan while arrearages are cured within a reasonable time. Since both the provisions of § 1322(b)(3) and § 1322(b)(5) indicate that a plan may provide for the curing of any default, it is immaterial that a pre-petition acceleration clause may have been invoked by a creditor. The debtor has the choice, under the clear authority of § 1322(b)(3) of the Code, of providing in his plan for the curing of such pre-petition default and reinstating the terms of the mortgage." In re Soderlund, supra, 3 C.B.C.2d at 256.

As this Court has further said in In re Rogers, No. 2-80-04701 (S.D.Ohio, February 5, 1981) (unreported):

"In fact, `deceleration\' is a primary object of the provisions of § 1322(b)(5). Congressional intent on this subject appears to be consistent from the original proposal of reformed bankruptcy legislation by the Bankruptcy Commission in 1973 through the date of the enactment of the Bankruptcy Reform Act of 1978. Further, invocation of the provisions of the right to cure default (or `decelerate\') is granted notwithstanding the prohibition against modification of residential real estate debt as specified in § 1322(b)(2) of the Code. The debtor has properly and appropriately invoked his statutory remedies in this regard." In re Rogers, supra.

The debtors in this case seek to "decelerate" the pre-petition acceleration. That right is clearly granted to the debtors in the Bankruptcy Code, and thus the first ground for objection to the debtors' plan is hereby overruled.

2. SECTION 1322(b)(5) OF THE BANKRUPTCY CODE IS NOT AVAILABLE TO THE DEBTOR WITH REGARD TO THE NOTE AND MORTGAGE OF EAGLE BECAUSE THE LAST PAYMENT ON SAID NOTE AND MORTGAGE IS NOT DUE AFTER THE DATE ON WHICH THE FINAL PAYMENT UNDER THE PLAN IS DUE.

For the same reasons delineated above, Eagle's assertion that the last payment due Eagle does not extend beyond the term of the plan is inappropriate and without merit. Upon appropriate reinstatement (or "deceleration"), the last payment due Eagle does extend beyond the term of the plan and thus is properly treated under the provisions of § 1322(b)(5) of the Bankruptcy Code.

3. THE PLAN MODIFIES THE RIGHTS OF EAGLE IN VIOLATION OF SECTION 1322(b)(2) OF THE BANKRUPTCY CODE.

The right provided to these debtors under the provisions of § 1322(b)(5) of the Bankruptcy Code is granted notwithstanding the prohibition on modification contained in § 1322(b)(2) of the Bankruptcy Code. In light of this Court's ruling on the ability of the debtors to "decelerate" the mortgage obligation owed Eagle, Eagle's objection to confirmation based upon the provisions of § 1322(b)(2)...