Business Law

Mortgage Corp. of the South v. Bozeman (In re Bozeman), 57 F.4th 895 (11th Cir Jan. 10, 2023)

The following is a case update written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.), analyzing a recent decision of interest:


In a chapter 13 case which pitted the antimodification provisions of § 1322(b)(2) of the Bankruptcy Code against the preclusive finality of a confirmed plan under § 1327(a), the Eleventh Circuit Court of Appeals (the Court) determined that the statutory mandate pertaining to antimodification prevails.  Mortgage Corp. of the South v. Bozeman (In re Bozeman), 57 F.4th 895 (11th Cir Jan. 10, 2023).

To view the opinion, click here.


When Debtor Judith Bozeman (Debtor) filed her chapter 13 case, she owed approximately $17,400 on her home mortgage to Mortgage Corp. of the South (MCS), with an arrearage of approximately $6800.  MCS filed a proof of claim in the first week of her case which explicitly listed only the arrearage, not the full amount of the debt.  Debtor filed a chapter 13 plan (the Plan) which proposed to pay $454 per month to MCS for 58 months, which would pay the entire debt with interest over the course of the Plan.  Using the local plan form, she put the MCS debt in the “secured claims paid through the [P]lan” class rather than the “cure-and-maintain” class, under which she would pay only the arrearage through the plan while maintaining current payments outside the Plan.  The bankruptcy court described the Plan as a full-payment plan, meaning that it provided for payment of the full balance of the debt through the plan and the entire debt would be considered fully paid when Debtor completed payments on her Plan.

MCS did not object to the Plan, nor did it amend its proof of claim which stated only the arrearage due.  Standard terms of the Plan provided that a creditor must file a proof of claim to be paid through the Plan.  At the confirmation hearing, the chapter 13 trustee (Trustee) summarized the payments to MCS, which would be sufficient to pay the full balance due as acknowledged by Debtor.  The bankruptcy court confirmed the Plan in January 2017.  In May 2019, the Trustee filed a notice that Debtor had completed her payments under the Plan.  The Notice of Final Cure reflected that Debtor had paid $6800, the amount of the proof of claim, in full, which the Trustee characterized as the entire mortgage debt.  MCS immediately objected that the entire mortgage debt had not been paid and moved to terminate the automatic stay, which was granted. 

Three months later, Debtor filed a motion to release the MCS lien since the Plan provided for full payment and she had paid MCS everything it asked for in its proof of claim.  MCS objected, raising several issues, including the antimodification provision of § 1322(b)(2), which states that a chapter 13 debtor may not modify the rights of the holder of a claim secured only by her primary residence.  MCS also argued that Debtor had not paid $454 per month for 58 months as the Plan stated, as well as asserting the long-standing principle that liens pass through bankruptcy unaffected.  Finally, MCS cited Eleventh Circuit authority in In re Bateman, 331 F. 3d 821, 822 (11th Cir. 2003) that “a secured creditor’s claim for mortgage arrearage survives the confirmed plan to the extent it is not satisfied in full by payments under the plan, or otherwise satisfied.”  Debtor countered that MCS had received what it bargained for and that the Supreme Court decision in United Student Aid Funds, Inc. v Espinosa, 559 U.S. 260 (2010) foreclosed MCS’s challenge to the Plan based on the alleged improper confirmation of the Plan.

The bankruptcy court granted Debtor’s motion and extinguished MCS’s lien as paid in full.  The district court affirmed.  On further appeal, the Court reversed.


The Court first addressed how the Plan had unlawfully purported to modify MCS’s rights as the mortgage holder on the primary residence of Debtor.  Section 1322(b) provides that a “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.”  In plain language, this provision prohibits Debtor’s Plan from modifying MCS’s rights. The Court noted the statute does not use the term claims, but rather “rights,” which are defined under state law.  One of those rights here was the opportunity to enforce its mortgage by foreclosure on the collateral if Debtor defaulted.  Since the Plan and subsequent bankruptcy court order extinguishing the lien purported to deprive MCS of its right to foreclose when not paid in full, the Plan was counter to the antimodification provisions of the statute, as well as Bateman and other circuit precedent.  Although the bankruptcy court characterized the Plan as a full payment plan, it had not “paid in full” at the end of the stream of payments.  This outcome occurred because MCS filed a claim for only the arrearage, but it was undisputed that the principal balance was not paid.  Therefore, the Plan in reality effected a modification, which is forbidden by statute and precedent.

Notwithstanding this seemingly straight-forward conclusion, the Court still had to address whether the confirmed plan which caused this outcome could be challenged after the Espinosa decision.  In Espinosa the Supreme Court was confronted with the situation where a debtor’s plan had provided that a student loan would be deemed paid in full after paying only the principal, not the accrued interest, which would then be discharged upon plan completion.  The student loan creditor had not objected to the plan, which was confirmed and completed, with the creditor receiving regular payments throughout.  Ten years after plan confirmation and six years after the interest had been discharged, the creditor woke up and sought relief from the plan terms, utilizing Federal Rule of Civil Procedure 60(b)(4), asserting the confirmation order was void because it was directly contrary to the provisions of the Bankruptcy Code which made student loans, including interest, nondischargeable.  The Supreme Court rejected that argument, concluding that a Rule 60(b)(4) motion was not a substitute for an untimely appeal.

In allowing MCS’s challenge to the effect of the confirmed plan here, the Court distinguished Espinosa as speaking only to Rule 60(b) motions and also on its facts.  Whereas in Espinosa the creditor had never objected to anything that occurred in the bankruptcy proceeding until it filed its belated Rule 60 motion, here MCS had opposed Debtor’s motion to extinguish the lien. It was the appeal of that order, not the confirmation order, which led to the case before the Court.  Therefore, the Court was not dealing with a collateral attack as asserted in Espinosa, an attempt to have a long-ago confirmation order deemed void as contrary to statute.  Rather, it was considering a timely appeal of the order extinguishing the mortgage, a ruling that was indubitably contrary to the antimodification provisions of § 1322(b)(2).

The final issue the Court had to address was the effect of the preclusive effect of a confirmed plan as provided in § 1327(a), which states “[t]he provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.”   After highlighting MCS’s errors in not objecting to confirmation or recognizing that it was being paid only its arrearage, not full payment as the Plan provided, the Court fell back on the tried-and-true principle that “secured liens survive bankruptcy proceedings.”  Since MCS’s lien was not avoided during the case, it remained enforceable after discharge.  Therefore, the order extinguishing the lien was erroneous.


My first reaction to this decision is “where has finality and the preclusive effect of a confirmed plan under § 1327(a) gone?”  My second reaction was “what happened to the lessons of Espinosa?”  Didn’t Espinosa make all bankruptcy courts gate-keepers, alerted to preventing confirmation of plans which defy statutory mandates, even without objections?  After all, the Supreme Court basically said that if statutory errors are not caught timely, the orders which enforce those errors will survive challenge. 

Candidly, I do recognize a distinction here.  Debtor’s Plan, on its own terms, purported to pay the entire mortgage balance to MCS.  The confirmation order was not flawed. It was just the Plan’s execution that made it come up short, leading to payment only of the arrearage sum in the claim.  Nor was the Plan completion, since it paid the claim filed.  I am baffled by what happened when MCS objected to the Notice of Final Cure.  It would appear that the bankruptcy court did not rule on that objection, because instead MCS sought relief from the stay.  However, then the bankruptcy court extinguished the lien, despite objection, which was the pertinent error.  The saving grace is that order was timely appealed and we arrived at this opinion, which exalts the antimodification clause over all other errors underlying this appeal.  Because of the disconnect between what the Plan said would happen and what did, not giving plan confirmation preclusive effect makes sense.  And, when one compares the belated but spirited objections of MCS compared to the student loan creditor that dozed off for ten years, distinguishing Espinosa on these facts was also warranted.

This review was written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, C.D. CA., Ret.), a member of the ad hoc group. Thomson Reuters holds the copyright to these materials and has permitted the Insolvency Law Committee to reprint them. This material may not be further transmitted without the consent of Thomson Reuters.

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