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
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
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
CFPB Takes Action Against Deferred-Interest Medical Credit Card
Following closely on the heels of the CFPB’s recent action against pay day lender Cash America, the CFPB has taken action against medical credit card company, CareCredit. CareCredit, a subsidiary of GE Capital Retail Bank, offers medical credit cards through over 175,000 offices of health care providers such as dentists and vision care professionals. In a consent order issued on December 10th, the CFPB ordered CareCredit to refund up to $34.1 million to more than one million patients who were deceptively enrolled for the medical credit card. [Read more…] about CFPB Takes Action Against Deferred-Interest Medical Credit Card
Contract Interest Rate Only Through Confirmation
In First United Security Bank v. Garner, No. 11-10465 (11th Cir. Nov. 30, 2011) the court found that, under section 506(b), FUSB, an over-secured creditor, was entitled to receive post-petition interest at the contact rate of 10.5% until confirmation at which time the interest rate would drop to 4.25% as determined under the standard set forth in Till v. SCS Credit Corp., 541 U.S. 465 (2004). In so holding, the court relied on the Supreme Court’s statement in Rake v. Wade, 508 U.S. 464 (1993), that the temporal aspect of section 506(b) applies only from the date of filing to confirmation. The court additionally noted that the Second and Ninth Circuits have interpreted section 506(b) and the “cram-down” provision of section 1325(a)(5)(B)(ii) as allowing accrual of interest at the contract rate to continue only through confirmation.