SW Legal studies in Business

Mobile Home Subject to Cramdown as Principal Residence of Party in Bankruptcy
Description

Appeals court held that while a mobile home and a parcel of land were categorized as personal and real property and subject to separate secured interests, in practice the home and land were the principal residence of the bankrupt, so both were subject to a cramdown plan reducing the secured interest to the appraised value.

Topic Bankruptcy
Key Words

Chapter 13; Cramdown; Mobile Home

C A S E   S U M M A R Y
Facts

Debtors (Reinhardt) bought three acres of land and a mobile home that was placed on the land. The land and the home were financed separately. The finance contract for the mobile home stated that it is personal property, not real property, and that it is not a part of real estate. Four years later, the debtors filed for Chapter 13 bankruptcy. They listed the mobile home as personal property valued at $12,000 and listed the land as real property worth $3,000. The secured claim on the land and on the mobile home, loans both made by creditor Vanderbilt Mortgage, were for about $40,000. Debtors sought a cramdown of Vanderbilt’s claim to $15,000, the current value of the land and the home to be paid in monthly installments. Vanderbilt objected to the plan, contending that a cramdown could not apply to personal property such as a mobile home. The bankruptcy court overruled the objection and approved the plan. Vanderbilt appealed.

Decision

Affirmed. A cramdown is a reduction of the secured valance due on a home mortgage loan ordered by a bankruptcy court, reducing the valance of the secured claim to the current appraised value of the home, while the amount of the claim in excess of the current property’s value becomes an unsecured claim. The Bankruptcy Code defines a debtor’s principal residence to include mobile homes, without regard to whether the home was attached to real property. Just as Ohio’s property tax code treats both the land and the home as a residence for property tax purposes, federal bankruptcy law treats the land and the home as the debtor’s residence and does not separate them into different categories.

Citation

Reinhardt v. Vanderbilt Mortgage and Finance, 563 F.3d 558 (6th Cir., 2009)

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