NOBELMAN V. AMERICAN SAVINGS BANK 508 U.S. 324 (1993) CASE BRIEF

NOBELMAN V. AMERICAN SAVINGS BANK

508 U.S. 324 (1993)

NATURE OF THE CASE: Nobelman (D) appealed a judgment which affirmed a denial of a Chapter 13 plan on grounds that §1322(b)(2) prohibited D from relying on §506(a) to reduce an undersecured homestead mortgage given to Bank (P) to the fair market value of the mortgaged residence and to treat the remainder of P’s claim as unsecured.

FACTS: P loaned D $68,250 for the purchase of their principal residence, a condominium. D executed an adjustable rate note payable to P and secured by a deed of trust on the residence. D sought relief under Chapter 13. D filed a proof of claim for $71,335 in principal, interest, and fees owed on the note. D's plan valued the residence at a mere $ 3,500 -- an uncontroverted valuation -- and proposed to make payments pursuant to the mortgage contract only up to that amount (plus prepetition arrearages). Relying on § 506(a) of the Bankruptcy Code, D proposed to treat the remainder of the bank's claim as unsecured. Under the plan, unsecured creditors would receive nothing. P objected to the plan as bifurcation into a secured claim for $ 23,500 and an effectively worthless unsecured claim modified P's rights as a homestead mortgagee, in violation §1322(b)(2). The Bankruptcy Court agreed and denied confirmation of the plan. The District Court and the Court of Appeals affirmed. The Supreme Court granted certiorari.

ISSUE:

RULE OF LAW:

HOLDING AND DECISION:

LEGAL ANALYSIS:

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