Mission Hen, LLC v. Lee

I. Background

Debtors filed a petition for Chapter 13 bankruptcy on January 26, 2022. They scheduled their residence (“Property”) as their sole collateral and listed its current value as $1,045,000. Debtors scheduled a first mortgage for $952,510.26 as a secured claim. That claim is not at issue in this appeal. They scheduled a second mortgage for $465,670.41, held by appellee Mission Hen, as a partially secured claim. The secured portion of Mission Hen’s claim was listed as $92,489.74. The unsecured portion was listed as $373,180.17. The proper treatment of Mission Hen’s claim is at issue in this appeal. Chapter 13 authorizes debtors to “cram down” partially secured debt to its secured portion and to pay only the amount of that “allowed secured claim.” Assocs. Com. Corp. v. Rash, 520 U.S. 953, 956–57 (1997); see 11 U.S.C. § 1325(a)(5)(B). “The value of the allowed secured claim is governed by § 506(a) of the Code.” Rash, 520 U.S. at 957.

MISSION HEN, LLC V. LEE

Section 506(a) provides that the value of personal property securing a claim “shall be determined based on the replacement value of such property as of the date of the filing of the…