The following is a summary of a Minnesota bankruptcy case or a case relevant to Minnesota bankruptcy law.
Minnesota Bankruptcy Case:
Bank Northwest v. Potts (In re Potts), 421 B.R. 518 (B.A.P. 8th Cir. (Mo.) 1/12/10) (Saladino, J.).
Chapter 13 Plan May Modify Secured Creditors’ Default Remedies
The Eighth Circuit BAP affirms confirmation of the debtors’ Chapter 13 plan over the objections of the over-secured mortgage creditor. Debtors borrowed from the lender with a balloon payment due in 2010. Unable to make the payment, they sought Chapter 13 relief and proposed a plan that re-amortized the over-secured loan, with a 2015 balloon payment. The plan also provided that before the lender could seek relief from stay upon a future default, the debtors would have the right to sell the non-homestead parcel to pay down the loan; the hope being that those proceeds would pay the loan in full. After a two day hearing, the bankruptcy court confirmed the plan over the lender’s objection. On appeal, the lender argued that the plan was not feasible and that it unlawfully impedes the lenders’ default remedies. The BAP rejects both arguments. The bankruptcy held the plan feasible and the lender merely disagrees. Simple disagreement over plan feasibility is not enough to establish clear error in the court’s factual finding. The lender’s argument that a plan may not alter its rights upon default is incorrect. Section 1322(b)(2) allows a Chapter 13 plan to modify the rights of holders of secured claims, and this includes a holder’s remedies upon default. No provision of the Code prohibits such modification.
Credit: The preceding was a summary of a case relevant to Minnesota bankruptcy law. The case summary was prepared by the U.S. Bankruptcy Court through Judge Robert J. Kressel & attorney Faye Knowles.