|Chapter 13 Bankruptcy Can Force Cramdown of Home Equity Loan|
|Description||Appeals court held that under Chapter 13, bankruptcy could force the makers of a home equity loan to accept a cramdown, where the secured portion of the loan shrinks to the actual value of the equity in the home, not the amount of the entire loan.|
|Key Words||Chapter 13; Secured Loan; Cramdown|
|C A S E S U M M A R Y|
|Facts||Two years after the Paschens bought a home they borrowed $12,377 from AGF, which secured the loan with the equity in their home (a home equity loan). Soon the Paschens filed for protection from creditors under Chapter 13. They submitted a plan that proposed modifying AGF's claim into a secured part and an unsecured part; that is, to bifurcate the loan. The secured part would be $2,752, which the Paschens claim represented the actual equity in the home. This is a "cramdown" where the secured claim is "crammed down" to the value of the securing collateral. AGF opposed the move, contending that a secured loan were exempt from such procedures. The court held for the Paschens; AGF appealed.|
Affirmed. The Bankruptcy Code's antimodification provision permits Chapter 13 debtors to bifurcate undersecured, short-terms home mortgages into secured and unsecured claims. The unsecured claim is subject to a cramdown.
|Citation||In re Paschen, 296 F.3d 1203 (11th Cir., 2002)|
Back to Bankruptcy Listings
©1997-2002 SW Legal Studies in Business. All Rights Reserved.