Can a Chapter 13 Plan Vest Property To a Lienholder?

You want to file chapter 13 and you can't afford your house payments. You also want to move out of the house and be not responsible for the maintenance and the HOA fees on it. But you are worried on how long it will take for the mortgagor to take title to your property. Is there a way that Chapter 13 can help? One Bankruptcy Court in Oregon seems to think there is a way.

In re Watt, 520 B.R. 834 (Bankr.D.Or. Oct 15, 2014) is about debtors who wanted to surrender their house to the mortgagor. However, there were HOA fees that were ongoing and the Debtors didn't want to be responsible for them. Their Mortgagor also filed a motion for relief from stay on the Debtors' house. So the Debtors filed an amended chapter 13 plan that vested title of the real estate into the Mortgagor. The Mortgagor objected stating it did not need to accept the title to the house. The Debtors argued that 11 USC 1322(b)(9) allows them to vest title to the Mortgagor. The Court agreed with the Debtors that they can vest title to the Mortgagor upon confirmation of the plan. The Court's analogy for this was:

"BONY Mellon resists taking title and surrender but yet seeks relief from the automatic stay to foreclose at an undeterminative date with no commitment to moving forward. BONY Mellon did not offer to waive tis security and be treated as an unsecured creditor. It reminds me of the old adage of the dog in the manger. The dog cannot eat the hay but refuses to let the horse or the cow eat it either. BONY Mellon would rather sit on the hay. This creates a stalemate. This hurts more than the Debtors who have ongoing HOA obligations they cannot afford"

So the question becomes will this work in Ohio? Can Debtors in Ohio, especially Debtors living in rundown homes in inner city neighborhoods in Cleveland, Akron, Youngstown, Canton, New Philadelphia vest title into the Mortgagor in order to be relieved of their ongoing responsibility for the maintenance of the houses? We don't know yet. I haven't seen a case like this yet in Ohio. But if the Courts here in Ohio would follow the same legal analysis as the Oregon Court, than certainly the title can be vested.

To find out more on how we at Hausen Law, LLC can help you, feel free to contact us. We have offices in Akron, Canton, Wooster, and New Philadlephia.

Submitted on July 14, 2015