Source: https://www.massachusetts-injurylawyerblog.com/bankruptcy-cram-downs/
Timestamp: 2019-04-18 20:41:37+00:00

Document:
The effect of the cram down statutes for Chapter 11 and Chapter 13 are essentially the same. Where Chapter 11 and 13 part Chapter company, however, is on the issue of plan longevity. A Chapter 11 debtor may propose a reorganization plan that takes as many years to consummate as he can convince his creditors and the court to accept.
Bankruptcy Code § 1322(d), on the other hand, imposes an absolute time limit on the term of any Chapter 13 plan—five years. This means that while a Chapter 13 debtor may restructure a secured claim using § 1322(b)(2) “the plan may not provide for payment over a period that is longer than 5 years.” Bankruptcy Code § 1322(d)(1). And because § 1325(a)(5)(B)(iii)(I) requires payment in equal monthly amounts, the debtor cannot skirt the five year time limit by proposing a balloon payment at the end of the five year term, absent the acceptance of the plan by the secured creditor under § 1325(a)(5)(A). In re: Fortin, Case Nos. 11-41991-MSH, 11-43774-MSH, Page 9 (Bankr.D.Mass. October 31, 2017), quoting Flynn v. Bankowski (In re Flynn), 402 B.R. 437, 443 (B.A. P. 1st Cir. 2009); Hamilton v. Wells Fargo Bank, N.A. (In re Hamilton), 401 BR 539, 543 (B.A. P. 1st Cir. 2009).
Pursuant to the “cram down” statutes, a claim may be deemed secured only to the extent of the value of the equity of the secured property. In re Mann, 249 B.R. 831, 833 (2000). Further, if the value of property is insufficient to cover the value of a senior secured lien, a Chapter 11 or 13 plan may treat junior mortgages as wholly unsecured and voids or “strips off” that lien, i.e., converts the entire debt into an unsecured claim. Id. At 832.
The distinction between a “cram down” and a “strip off” of a lien is significant in the context of the applicability of the statutes to a lien secured by the debtor’s principal residence.
A “cram down” of a lien secured by the debtor’s principal residence is barred by section 1322(b)(2) in a Chapter 13 proceeding and by 1123(b)(5) in a Chapter 11 proceeding. See Nobleman v. American Sav. Bank, 508 U.S. 324, 332 (1993).
First Circuit have held that a secured lien on the debtor’s principal residence for which there is no practical collateral value may be “stripped off” in compliance with the bankruptcy code. See generally In re Mann, 249 B.R. 831 (2000). However there is no clear cut absolute right; and an effort to strip off of a secured lien on a primary residence may prevent plan approval.

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