IN RE: HELEN ANN GILLS (2026)

(Chapter 13)

ORDER OVERRULING OBJECTION TO CONFIRMATION OF PLAN

Before the Court is the Objection to Confirmation (the “Objection”) (Doc. No. 14) filed by Toni Townsend on behalf of NewRez LLC d/b/a Shellpoint Mortgage Servicing (“NewRez”) on August 8, 2024, and the Response to the Objection (the “Response”) (Doc. No. 19) filed by Sara Rogers on behalf of the Debtor, Helen Ann Gills (the “Debtor”) on August 17, 2024. The Objection and Response were set for hearing on October 9, 2024, and continued several times at the requests of the parties until heard on December 4, 2025.

The hearing was held in Little Rock, Arkansas, with the consent of the parties. Ms. Townsend appeared on behalf of NewRez. No representatives from NewRez were present and no witnesses were called on behalf of NewRez. Ms. Rogers appeared on behalf of the Debtor, who was present but did not testify. At the conclusion of the hearing the Court took the matter under advisement. Subsequent to the hearing, on December 11, 2025, the Court requested the parties to submit briefs on the issues before the Court. NewRez's brief was due on January 12, 2026. Although the Court's staff inquired about the status of NewRez's brief several times, no brief has been submitted as of the date of this order.

For the reasons stated below, NewRez's Objection is overruled.¹

I. Jurisdiction

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1334 and 157. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L). The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.

II. Findings of Fact

The parties do not dispute most of the facts. The Debtor executed a Note in favor of FSB Mortgage Company, Inc. (“FSB”), in the original principal amount of $27,250.00 on August 3, 1992 (the “Note”). The Note was to be repaid in monthly installments of $196.16 with any remaining balance on the principal and interest being due on August 1, 2022, the date of maturity. To secure repayment of the Note, the Debtor signed a Mortgage in favor of FSB dated August 3, 1992, (the “Mortgage”) on real property located in Crittenden County, Arkansas, at 51 Windsor Road, Marion, Arkansas (the “Residence”). The Mortgage was recorded in the real estate records of Crittenden County, Arkansas, on August 4, 1992, at Book 796, Page 668. The Covenants contained in the Mortgage indicated that the Debtor intended to use the real property as her principal residence.

FSB assigned its interest in the Note and Mortgage to First Commercial Mortgage Company on October 19, 1992. First Commercial Mortgage endorsed the Note in blank and NewRez has possession of the Note. A document evidencing the assignment of the Note and Mortgage to NewRez was recorded in the real estate records in Crittenden County, Arkansas, on January 19, 2024.

On July 9, 2024, the Debtor filed her voluntary petition for relief under the provisions of Chapter 13 of the United States Bankruptcy Code. The Debtor listed the Residence as her address on the petition and listed it on her Schedule A/B as a single-family home. The Residence is the Debtor's principal residence. The value of the Residence is listed in the Debtor's schedules as $15,500.00 with the source of the value being listed as “County Assessor.” (Debtor's Sch. A/B). NewRez ² is listed as a secured creditor with a total claim amount of $33,255.00 of which $15,500.00 was listed as secured and $17,755.00 as unsecured.

The Debtor filed her Chapter 13 Plan on July 9, 2024 (the “Plan”) (Doc. No. 4). The Debtor proposes to pay $950.00 per month to the Chapter 13 Trustee for sixty months. NewRez is to receive $200.00 per month in pre- and post-confirmation adequate protection payments. In addition, its claim is treated in Section 3.4 of the Plan which provides NewRez “will be paid the lesser of the amount of the claim or the value of the collateral.” (Plan, at 3). It then values the Residence at $15,500.00 and proposes to pay this amount plus interest in the amount of 7.8% per annum in equal monthly payments of $312.80. The Plan also contains a request that the Court determine the value of the Residence. Finally, in Section 8.1 the Plan proposes:

Upon satisfaction or other discharge of the security interest in Debtor's residence located at 51 Windsor Rd., Marion, Arkansas, the mortgagee or its successor shall execute a release of its impairment of Debor's ownership interest in the same real property within thirty days of receipt of the notice of the entry of the Discharge Order.

(Plan, at 5). The balance of NewRez's claim not paid as a secured claim is treated as a nonpriority unsecured claim. This class is scheduled to receive a prorata dividend from funds remaining after all other classes of claims have been paid.

NewRez filed a proof of claim on September 17, 2024, in the amount of $36,104.20 (the “Claim”). Its Claim is secured only by the Residence. The space for providing the value of the property was left blank and no other valuation information is listed elsewhere in the proof of claim. The amount of NewRez's Claim results in the Plan proposing to pay $15,500.00 as a secured claim and $20,604.20 as a nonpriority unsecured claim.

At the hearing Kim Hollowell, the Crittenden County Assessor (“Assessor”), testified on behalf of the Debtor. She has been the Crittenden County Assessor for ten years and testified that according to the July 2024 Residential Property Record Card, the Residence has a value of $15,500.00. This value is used by the Assessor to determine the amount of real estate taxes due. The Assessor does not value property for resale purposes. The Debtor's valuation in the Schedules was based on the Assessor's valuation. No other evidence was introduced on the value of the Residence.

III. Arguments

NewRez argues that its Claim is secured only by the Debtor's principal residence and the Plan may not modify the terms of the Note and Mortgage under the anti-modification provisions of 11 U.S.C. § 1322(b)(2). It argues, alternatively, that if the Court does allow bifurcation of its Claim, the value of the Residence is greater than the value proposed to be paid by the Debtor in her Plan. The Debtor argues that her treatment of NewRez's Claim is permissible under an exception to the anti-modification provisions found in 11 U.S.C. § 1322(c)(2), and the value of the Residence is the correct value for the secured portion of NewRez's Claim.

IV. Discussion

The narrow issue before the Court is whether the exception to the anti-modification provision of Section 1322(c)(2) allows the Debtor to modify the rights of NewRez's Claim and bifurcate the Claim as the Debtor has proposed to do in her Plan. Section 1322(b)(2) provides:

(b) Subject to subsections (a) and (c) of this section, the plan may—

․

(2) 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, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims[.]

11 U.S.C. § 1322(b)(2). Section 1322(c)(2) provides an exception to this provision and states:

(c) Notwithstanding subsection (b)(2) and applicable nonbankruptcy law—

․

(2) in a case in which the last payment on the original payment schedule for a claim secured only by a security interest in real property that is the debtor's principal residence is due before the date on which the final payment under the plan is due, the plan may provide for the payment of the claim as modified pursuant to [S]ection 1325(a)(5) of this title.

11 U.S.C. § 1322(c)(2). If modification under 11 U.S.C. § 1322(c)(2) is allowed, the relevant portion of Section 1325(a)(5) provides:

(a) [T]he court shall confirm a plan if—

(5) with respect to each allowed secured claim provided for by the plan—

․

(B) (ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; and

(iii) if—

(I) property to be distributed pursuant to this subsection is in the form of periodic payments, such payments shall be in equal monthly amounts[.]

11 U.S.C. § 1325(a)(5)(B)(ii)–(iii).

NewRez, as the objecting creditor, bears the burden of proof on its objection to confirmation. In re Gatlin, 357 B.R. 519, 521 (Bankr. W.D. Ark. 2006) (citing In re Smith, 286 B.R. 104, 106 (Bankr. W.D. Ark. 2002)).

NewRez's objection to confirmation of the Plan is that it violates the anti-modification provision of Section 1322(b)(2). Indeed, the plain language of Section 1322(b)(2) does provide that a debtor may “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,” but Section 1322(c)(2) just as clearly provides an exception to this anti-modification provision where the final payment for the debt secured by the real property became due before the date the final payment under the plan is due. 11 U.S.C. § 1322(b)(2), (c)(2); In re Young, 199 B.R. 643, 646 (Bankr. E.D. Tenn. 1996) (holding that a “plain reading” of Section 1322(c)(2) allows for such modification) (citations omitted).

NewRez is correct that its claim is secured only by the Debtor's principal residence, invoking the anti-modification clause of Section 1322(b)(2). NewRez, however, ignores the plain language of Section 1322(c)(2) that provides an exception to Section 1322(b)(2) in cases, such as the one before the Court, where the final payment on the claim became due before the final payment date under the Plan. Here, the evidence is clear that the original date of maturity on the Note was August 1, 2022, a date prior to the date the bankruptcy petition was filed, and certainly a date that is before the final payment is due under the Plan. For these reasons, the Court finds that under Section 1322(c)(2) the Debtor is allowed to modify NewRez's rights in its secured claim.

Next NewRez argues that, if modification of its claim is allowed, the value of the Residence proposed in the Plan is insufficient to pay the secured portion of its Claim. As stated above, any modification of NewRez's claim must meet the confirmation requirements of Section 1325(a)(5)(B)(ii)–(iii). This section requires the value of the payments to be paid under the Plan, as of the effective date of the Plan, to be equal to or greater than the amount of NewRez's allowed secured claim. 11 U.S.C. § 1325(a)(5)(B)(ii)–(iii). Section 506(a) applies to determine the amount of NewRez's allowed secured claim and provides:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest ․ is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property ․ and is an unsecured claim to the extent that the value of such creditor's interest ․ is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.

11 U.S.C. § 506(a)(1).

The Assessor testified that according to the July 2024 Residential Property Record Card maintained by the Crittenden County Assessor, the Residence has a value of $15,500.00. This value is used by the Assessor to determine the amount of real estate taxes due. The Debtor valued the Residence in her Schedule A/B and in her Plan at $15,500.00 based on the Assessor's value. No valuation evidence was introduced by NewRez. NewRez's proof of claim left the space for providing the value of the property blank and no valuation information is listed elsewhere in its proof of claim. Although NewRez argues the value is greater than $15,500.00, it called no witnesses and introduced no evidence to rebut the Debtor's valuation. In addition, while NewRez took issue with the Assessor's value, counsel for NewRez did not introduce any evidence from which the Court could find that the value of the Residence should be higher than the Assessor's value used in the Plan.

For all the reasons stated, the Court finds the value of the Residence has been established to be $15,500.00 for purposes of confirmation of the Debtor's Plan. Therefore, NewRez is determined to have a secured claim in the amount of $15,500.00, and the remaining balance of its Claim is determined to be a nonpriority unsecured claim. Young, 199 B.R. at 649 (holding that a “claim secured by property of the estate is deemed an allowed secured claim only to the extent of the value of the collateral on which the lien is fixed; to the extent the amount of the claim exceeds the value of the collateral, it is unsecured”). The Debtor's treatment of NewRez's allowed secured claim in the Plan satisfies the requirements of Section 1325(a)(5)(B).

V. Conclusion

For the foregoing reasons, the Court finds that NewRez LLC d/b/a Shellpoint Mortgage Servicing has a secured claim of $15,500.00 and an unsecured claim in the amount of any remaining balance of its Claim. The Court also finds that the Debtor's Plan properly treats NewRez LLC d/b/a Shellpoint Mortgage Servicing's Claim and, therefore, the Objection to Confirmation filed by NewRez LLC d/b/a Shellpoint Mortgage Servicing is OVERRULED.

IT IS SO ORDERED.

FOOTNOTES

1.   The Court finds NewRez's failure to submit a brief as requested by the Court is, alone, a sufficient basis to overrule NewRez's Objection.

2.   NewRez does business as Shellpoint Mortgage Servicing. The Debtor refers to Shellpoint Mortgage Servicing as the creditor. For ease of reading and clarity, the Court will refer to the objecting creditor as NewRez throughout this order.

Phyllis M. Jones United States Bankruptcy Judge