JERRY A. FUNK, Bankruptcy Judge.
This case came before the Court upon Bank of America's (the "Bank") Motion for Relief from the Automatic Stay with Respect to 200
On January 21, 2013, the Debtor borrowed the principal amount of $540,000.00 from the Bank (the "Sampson Loan") (Bank's Ex. 1). The Sampson Loan was secured by a mortgage on real property and a home located at 5188 200
The Sampson Loan matured by its own terms on June 21, 2015. (Bank's Ex. 1). In November 2015, the Bank filed a foreclosure complaint against the Debtor and the Guarantors as to the Property. (Debtor's Ex. 1). The parties entered into a forbearance agreement, which expired in May 2017.
On January 15, 2018 (the "Petition Date"), the Debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Along with the voluntary petition, the Debtor filed his bankruptcy schedules. On Schedules A and D, the Debtor stated that the value of the Property is $496,423.00. (Bank's Ex. 2). The Debtor also scheduled over $24,000.00 of claims of the Suwanee County Tax Collector for 2015-2017 property taxes secured by the Property. (Bank's Ex. 2).
As of the Petition Date, the Debtor owed the Bank $633,105.02 on account of the Sampson Loan, comprised of principal of $540,000.00 and interest of $93,152.02. This amount does not include late fees, attorney's fees, and costs. Neither the Debtor nor the Guarantors made any payments on the Sampson Loan between its June 21, 2015 maturity date and the Petition Date.
On March 28, 2018, the Debtor filed a Plan of Reorganization (the "Plan"), which proposes that CMS Professional Staffing, Inc., the Debtor's wholly owned company, and CMS Professional Transport, Inc., a company in which the Debtor has 75% ownership, will make a monthly payment of $2,300.00 to the Bank for 60 months. (Bank's Ex. 2). Any outstanding principal balance, fees, charges, or other amounts due will be paid in full by the Debtor within 61 months of the confirmation date. (Bank's Ex. 2). The plan proposes an interest rate of 4%. (Bank's Ex. 2).
At the trial on the Motion the Debtor testified that he obtained the $496,423.00 value, which he listed on his schedules, from the Suwannee County Property Appraiser's website but does not know what the value of the Property is. The Debtor testified that he personally believes the Property is worth $2 million dollars based upon the time and money he spent on the Property over the course of ten years but recognizes that his opinion is biased. The Bank did not offer any independent evidence of value but indicated in its proof of claim, which was filed on March 6, 2018, that "[t]he current value of the [Property] is unknown, but a 2016 appraisal reflected a value of $680,000." In the Motion, which was also filed on March 6, 2018, the Bank indicated it "does not know the current value of the Property but, based on a 2016 appraisal, believes the value may be in excess of $650,000.00." The Bank indicated in its trial brief that the amount owed to it, exclusive of legal fees and costs, as of the May 24, 2018 trial date was $649,711.98.
The Bank seeks relief from the automatic stay under 11 U.S.C. §§ 362(d)(1) and (d)(2), which respectively provide:
11 U.S.C. § 362(d). Because the Bankruptcy Code does not define cause, the determination of whether to grant relief from the stay based on cause is a discretionary one which is made on a case by case basis.
The Bank argues that cause exists to lift the automatic stay because the Plan is not confirmable as it seeks to modify the Bank's claim with respect to the Sampson Loan, which claim is secured solely by the Bank's security interest in the Property. That is, it attempts to "cure" arrearages on a first mortgage secured only by the Debtor's principal residence, which matured pre-petition. The Debtor argues that the Plan does not propose to modify the terms of the Sampson Loan, such as reducing the principal balance due, changing the interest rate, or stripping the Bank of its rights. Instead, he argues the Plan merely seeks to maintain regular payments and cure the arrearage within sixty months.
Section § 1123(b)(5) of the Bankruptcy Code provides as follows: "(b) Subject to subsection (a) of this section, a plan may—(5) 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. . . ." 11 U.S.C. 1123(b)(5). Section 1123(b)(5) prevents individual Chapter 11 debtors from modifying the rights of holders of secured claims secured only by a security interest in the debtor's principal residence. Section 1123(b)(5) does not affect the right of an individual Chapter 11 debtor to cure a pre-petition residential mortgage arrearage through a Chapter 11 plan, while remaining current on post-petition payments.
Attorney Kathleen L. DiSanto is directed to serve a copy of these Findings of Fact and Conclusions of Law on interested parties and file a proof of service within 3 days of entry of the Order.
ORDERED.