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In re Shepherd

February 6, 2008


The opinion of the court was delivered by: Thomas W. Phillips United States District Judge



Debtor Anneda Shepherd appeals from two orders entered by the Honorable Richard Stair, Jr., United States Bankruptcy Judge. Debtor first appeals the Order of Judge Stair interpreting 11 U.S.C. § 101(13A)(A) as prohibiting her from modifying the secured claim of appellee EMC Mortgage Corporation under 11 U.S.C. § 1322(b)(2), and accordingly appeals the Order of Judge Stair entering her amended Chapter 13 plan to conform with his previous Order. Debtor timely appealed, and for the reasons that follows, this court reverses.


The parties having stipulated to the following facts [Doc. 1, Attach. 11], they are not in dispute. Debtor Anneda Shepherd purchased a 1997 Buccaneer Clipper Mobile Home for use as her principal residence. The mobile home was purchased under an installment contract for $38,856.85, financed at a rate of 9.750% APR over 360 months, with a security interest in the mobile home. Subsequent to her purchase, the installment contract was assigned to United Companies Funding, Inc. Appellee EMC Mortgage Corporation ("EMC") now holds the contract.

On June 20, 2006, Shepherd filed for bankruptcy under Chapter 13 of the Bankruptcy Code. Her Chapter 13 plan provided that appellee's claim, arising under her mortgage obligation of the mobile home, would be "crammed down" and paid as secured only to the extent of the value of the mobile home. "Cramming down" is "a bankruptcy term used when a plan is confirmed over a claim holder's objection." Tidewater Fin. Co. v. Curry, 347 B.R. 596, 599 n.1 (B.A.P. 6th Cir. 2006). EMC originally filed an objection to debtor's plan under 11 U.S.C. § 1324, but subsequently amended its objection under 11 U.S.C. § 101(13A)(A), arguing that the definition of "debtor's principal residence" provided therein prevented debtor from modifying EMC's secured claim under the anti-modification provision of 11 U.S.C. § 1322(b)(2).

In a Memorandum and separate Order dated November 3, 2006, Judge Stair concluded that § 101(13A)(A) extends the anti-modification provision of § 1322(b)(2) to a debtor's principal residence that is not real property. Pursuant to this Order, debtor amended her Chapter 13 plan such that EMC's secured claim was unaffected. On January 23, 2007, Judge Stair entered an Order approving the debtor's amended plan. Debtor now appeals the Order interpreting § 101(13A)(A) as broadening the anti-modification provision of § 1322(b)(2) and the Order entering her Chapter 13 plan as amended in conformity therewith.


This court has appellate jurisdiction over judgments of the bankruptcy court pursuant to 28 U.S.C. § 158 (2006). "On appeal from the judgment of the bankruptcy court, a district court reviews the bankruptcy court's findings of fact under the clearly erroneous standard but reviews de novo the bankruptcy court's conclusions of law." Nicholson v. Isaacman, 26 F.3d 629, 631 (6th Cir. 1994); accord Stamper v. United States, 360 F.3d 551, 557 (6th Cir. 2004).


As the parties jointly stipulated to the facts, Judge Stair did not make any independent findings of fact. Accordingly, this court reviews only the legal conclusions under a de novo standard.

A. Section 101(13A)(A) and Its Effect on § 1322(b)(2)

The Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), enacted in 2005 and effective as of October 17, 2005, defines a "debtor's principal residence" as "a residential structure, including incidental property, without regard to whether that structure is attached to real property." 11 U.S.C. § 101(13A)(A) (2006). This definition "includes an individual condominium or cooperative unit, a mobile or manufactured home, or trailer." Id. § 101(13A)(B). Section 1322(b)(2) in turn allows a plan under Chapter 13 to "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." Id. § 1322(b)(2). The exception to modification is commonly known as the anti-modification provision. As "debtor's principal residence" was previously undefined by statute, the enactment of § 101(13A)(A) has raised the issue of whether the definition extends the anti-modification provision of § 1322(b)(2) to claims, such as that of appellee, where the structure is the debtor's principal residence but not real property. Here, the parties do not dispute that the mobile home is located on real property in which the debtor has no ownership interest and against which EMC has no perfected lien.

Judge Stair ruled that the definition of "debtor's principal residence" in 11 U.S.C. § 101(13A)(A) served to broaden the anti-modification provision of § 1322(b)(2). Utilizing common principles of statutory construction, Judge Stair concluded that a literal application of § 101(13A)(A) to § 1322(b)(2) was inherently inconsistent. In his analysis, Judge Stair substituted the verbatim definition of "debtor's principal residence" for that term as used in § 1322(b)(2).This, according to Judge Stair, resulted in the "absurd" proposition that "a debtor may not modify the claims of a creditor holding a security interest in the debtor's residential structure, including a condominium, cooperative, mobile home, or trailer, irrespective of whether it is attached to the real property, but only if the security interest includes the real property." [Doc. 1, Attach. 15, at 9]. After searching the legislative history, he concluded that the definition extended the application of the anti-modification provision to structures such as ...

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