On August 20, 2025, the National Consumer Bankruptcy Rights Center (NCBRC), together with Legal Aid Chicago, filed an amicus curiae brief in the Seventh Circuit in support of debtor–appellant Bernardo Romero. The case raises a recurring and important issue for homeowners who seek Chapter 13 relief to save their homes from tax purchasers.
[Read more…] about NCBRC and Allies File Amicus Brief in Romero Appeal on Tax Purchaser Interest RatesNinth Circuit To Determine Whether Section 1322(c)(2) Allows Birfurcation of Residential Mortgage Claims
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
Mortgagee Sanctioned for Non-Compliance with Rule 3002.1(b)
The mortgage creditor’s failure to comply with notice requirements of Rule 3002.1(b) when escrow and interest rates changed during bankruptcy, led the court to determine that the debtors were current on their mortgage payments and to sanction the mortgagee. In re Kinderknecht, No. 17-12530 (Bankr. D. Kans. Jan. 18, 2023).
When the debtors filed for chapter 13 bankruptcy they were current on their mortgage with Golden Belt Bank. The lending agreement included a variable interest rate which was 5.25% at the petition date and the debtors were required to maintain an escrow account. Their amended plan committed them to paying the mortgage and related fees through the trustee.
The debtors completed their payments under the plan and the trustee filed a Final Accounting, A Notice of Completion of Plan Payments, and Notice of Final Cure Payment. The Notice of Final Cure Payment included a notification pursuant to Rule 3002.1(g) to creditors including Golden Belt Bank to file within 21 days a statement indicating whether they agreed that any claimed default had in fact been paid. Golden Belt failed to file the statement.
After the debtors received their discharge but before the case was closed, Golden Belt sent them a notice of deficiency with respect to escrow payments. Though the record was unclear the court found that “[a]t some point, presumably in July 2019, Golden Belt Bank changed the interest rate on the mortgage without informing the Court under Rule 3002.1(b). At some point, possibly in July 2021, Golden Belt Bank ran an escrow analysis and projected a needed increase to escrow payments, but again did not inform the Court, the Chapter 13 Trustee, or the Debtors under Rule 3002.1(b).”
The debtors moved the court for a determination that they were current on their mortgage and sought an order requiring Golden Belt to credit their escrow account and perform a new escrow analysis. The debtors also sought an order prohibiting Golden Belt from charging any fees related to these issues and to pay the debtors’ attorney fees.
Under Rule 3002.1(b)(1) a mortgage creditor for a debtor in bankruptcy is required to file and serve within 21 days any changes to the payment or escrow amount or to the interest rate. That and the other end-of-plan filings such as those made by the trustee in this case are intended to avoid the problem of debtors successfully completing plan payments only to find that they have incurred and defaulted on new debt while in bankruptcy.
The court found that Golden Belt failed to comply with its obligations under Rule 3002.1(b). It was unpersuaded by Golden Belt’s argument that, as a lender of a federally-related mortgage loan, it was exempt under RESPA from escrow analysis and notice requirements when the borrower is in bankruptcy. The court found the RESPA exemption did not likewise exempt the lender from its contractual and bankruptcy obligations.
The court also rejected Golden Belt’s argument that its noncompliance was harmless because it did not seek to foreclose on the property and because the debtors’ bankruptcy case was still open giving them time to pay the escrow amount. The court found “the harm Debtors are experiencing is the exact harm Rule 3002.1 was designed to avoid. Debtors have completed payments on their Chapter 13 plan. Debtors’ discharge has been entered. Golden Belt Bank had ‘numerous, obvious opportunities’ to identify the needed increase to the escrow payment at any point between June 2018 and June 2022, but failed to do so.”
As a consequence of Golden Belt’s failure to comply, the court granted the debtors’ motion for an order that their mortgage payment was current. It further sanctioned Golden Belt under Rule 3002.1(i) by ordering it to credit the deficient escrow account the amount needed to be current and to run a new escrow analysis. The court noted that its order requiring Golden Belt to credit the escrow account where Golden Belt had advanced money that should have been paid by Debtors, could be deemed inequitable. But it found “the Bankruptcy Rules are in place to instill certainty in the bankruptcy process and eliminate surprises. Golden Belt Bank did not follow those systems, and the Rules mandate this result.” Finally, the court order Golden Belt to pay the debtors’ attorney fees and not to charge any additional fees related to this action.
Silla v. Ghazvini, No. 22-1092 (BAP 9th Cir.)
Type: Amicus
Date: July 25, 2022
Description: Interest rate on arrears
Result: Pending
Interest Rate on Tax Debts
Illinois Property Tax law provides an interest rate of 18% for tax debts where the debtor does not intend to redeem the property, even where the debt is owned by a tax purchaser at the time of the debtor’s chapter 13 petition. In re Drake, No. 21-4903 (Bankr. N.D. Ill. Feb. 23, 2022).
The debtor failed to pay Illinois property taxes on her real property, and Integrity Investment Fund, LLC, purchased the tax debt (“Sold Taxes”). Over the next few years, the debtor failed to pay the property taxes, and Integrity, in accordance with its rights as the tax debt purchaser, paid the taxes (“Subsequent Taxes”) and added the amount to the debt. The debtor did not redeem the property by paying the delinquent tax debt as permitted by Illinois law. Instead, she filed for Chapter 13 bankruptcy and proposed a plan under which she would pay off the debt of $30,711 at a 0.5% interest rate. Integrity objected to confirmation of the plan, arguing, in part, that the appropriate interest rate was 18% for the tax debts. The debtor objected to Integrity’s claim. [Read more…] about Interest Rate on Tax Debts
Debtor May Pay Car Loan Outside Plan at 15% Interest Rate
The bankruptcy court did not abuse its discretion in confirming, over the trustee’s objection, a plan under which the Chapter 13 debtor would pay her car loan outside the plan at the contractual interest rate of 15%. McDonald v. Chambers (In re Chambers), No. 19-10421 (E.D. Mich. Feb. 26, 2020).
The debtor had three loans with Dort Federal Credit Union (DFCU): a car loan, a credit card balance of approximately $1,500, and a cash loan of $1,000. She and DFCU compromised the two non-car loans to $2,00,0, which she proposed to pay through her plan. In addition, DFCU consented to her proposal to pay the car loan outside the plan at the 15% contractual interest rate. The trustee objected because the interest rate exceeded the “prime plus” rate sanctioned in Till v. SCS Credit Corp., 541 U.S. 465 (2004), and would result in the car creditor receiving more than other unsecured creditors. The bankruptcy court confirmed the plan, and the trustee appealed. [Read more…] about Debtor May Pay Car Loan Outside Plan at 15% Interest Rate
State Law Applicable Solely to Bankruptcy Is Not Non-Bankruptcy Law
A state statutory interest rate hike applicable only in bankruptcy is not “nonbankruptcy law” for purposes of establishing the interest rate under section 511(a). Metropolitan Gov’t of Nashville v. Corrin (In re Bratt), No. 16-5719 (6th Cir. Feb. 23, 2017). [Read more…] about State Law Applicable Solely to Bankruptcy Is Not Non-Bankruptcy Law
Debtor may not modify default interest rate.
A “cure and maintain” plan permits deceleration of the loan but does not allow a debtor to return to the pre-default interest rate. Anderson v. Hancock (In re Hancock), No. 15-1505 (4th Cir. April 27, 2016).
The Andersons purchased residential property from the Hancocks, financed in the amount of $255,000 by the sellers. The Andersons signed a thirty-year note agreeing to pay $1,368.90 per month, including interest payments at 5%. In the event of a default, the note provided that the interest rate would increase to 7%. The note also entitled the Hancocks to accelerate the loan. When the Andersons defaulted on the loan, the Hancocks imposed the default interest rate, notified the Andersons of acceleration of the loan, and instituted foreclosure. The debtors filed Chapter 13 bankruptcy proposing to cure the arrears and maintain payments at the 5% interest rate through the life of the plan. The Hancocks objected to the plan on two bases. First, they argued that the calculation of arrears was too low because it was based on the pre-default interest rate. Second, they maintained that all future payments on the loan should be at the 7% interest rate. [Read more…] about Debtor may not modify default interest rate.
Differing Interest Rates for Cure and Maintain
The terms of the underlying lending agreement dictated the interest rate applicable to the debtors’ cure and maintain provision in their Chapter 13 plan. In re Anderson, No. 14-690 (E.D. N.C. April 6, 2015). [Read more…] about Differing Interest Rates for Cure and Maintain
Default Interest Rate Inequitable
The lender’s default interest rate was inequitable under both sections 502(b) and 506(b) where, among other factors, the lender was oversecured, ran no realistic risk of loss, and was more financially sophisticated than the debtors. In re Parker, No. 12-03128 (Bankr. E.D. N.C. Nov. 19, 2014). [Read more…] about Default Interest Rate Inequitable