In Re Ramirez

MEMORANDUM DECISION

Marathon Home Loan Company (“Marathon” ) holds two trust deeds on real property belonging to debtor Mary Ramirez (“Ramirez”), which secure two notes in the amount of $49,000 and $12,000. Ramirez executed the notes in late 1984. Both notes mature within one year of February 7, 1986, the date Ramirez filed her Chapter 13 petition. The notes carry interest rates of 18% and 19%, respectively.

Ramirez resides on the property and derives 46% of her net income from two rental units located on it. Ramirez’ proposed plan modifies Marathon’s rights by extend ing the due dates of the notes and reducing the interest rates on them. Ramirez proposes to repay Marathon over ten years, and to reduce the interest rates on both notes to 10% per annum.

Marathon raises the objection that its claim is secured solely by property that is Ramirez’ principal residence, and therefore her proposed modification of Marathon’s rights violates 11 U.S.C. § 1322 (b)(2).

ISSUES

I. May a Chapter 13 plan modify the contractual rights of a creditor whose claim is secured by real property which is not only the debtor’s principal residence, but also generates substantial rental income for…