1

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF FLORIDA
www.flsb.uscourts.gov
In re: Luis L. Ramirez Case No. 13-20891-AJ C
Chapter 13
Debtor /
DEBTORS RESPONSE TO CREDITOR LANSDOWNE MORTGAGE LLCS
OBJECTION TO CONFIRMATION
The Debtor files his response to Creditor Lansdowne Mortgage LLCs (the Creditor)
Objection to Confirmation [D.E. 61] as follows:
Brief Background
The Creditor filed its proof of claim for a first priority residential mortgage secured by a
duplex which is both the Debtors home and rental property [Claim No. 3-1]. The Debtor filed
an objection to the proof of claim [D.E. 28] to which the Creditor filed a response [D.E. 45]. The
Debtor also filed a motion to value [D.E. 14] to which the Creditor filed an opposition [D.E. 35].
The parties agree the property value is $100,000 [D.E. 56].
The remaining issue for the Court is whether the Debtor can modify the mortgage with a
plan that contains a balloon payment in the final month. The Debtor contends he may modify the
mortgage because it is secured by real property which is not solely his primary residence and he
will be able to obtain a refinance with the significant equity available at the end of the plan. The
Creditor objects for two reasons. First, the Creditor maintains that the mortgage cannot be
crammed down because of the antimodification provision of 1322(b)(2). Specifically, the
Creditor asserts that it primarily viewed the mortgage transaction as providing the Debtor with a
residence and, as such, the mortgage cannot be modified. Second, the Creditor objects to the
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 1 of 6
2

balloon payment in month 60 of the plan as unfeasible. Specifically, the Creditor is concerned
that the Debtor could dismiss the case in month 59 and completely thwart the Creditor.
Because the mortgage is subject to modification and the plan is feasible, the Court should
overrule the Creditors objections and confirm the plan.
A. Legal Standard to Determine Whether a Mortgage Cramdown is Prohibited by
1322(b)(2)s Anti-Modification Provision
A totality of the circumstances test, analyzing the facts of each case, is used to determine
whether a cramdown is permissible. In re Zaldivar, 441 B.R. 389, 390 (Bankr. S.D. Fla. 2011)
(internal citations omitted). Specifically, the Court looks to the predominant character of the
mortgage transaction:
If the transaction was predominantly viewed by the parties as a loan
transaction to provide the borrower with a residence, then the
antimodification provision will apply. If, on the other hand, the
transaction was viewed by the parties as predominantly a commercial loan
transaction, then stripdown will be available.
Id.
As a preliminary matter, the Creditor is not arguing that modification of a mortgage
secured by a duplex is impermissible per se. The cases permitting modification of multiunit-
properties are legion. See Zaldivar at n.1 (collecting cases). The Debtor here occupies one unit
and rents out the other unit [D.E. 41 (First Amended Schedule I)], thus, the mortgage subject to
modification. The Creditor asserts, instead, is that in this specific case modification is
impermissible because it predominantly viewed the transaction as providing the Debtor with a
residence.
The Creditors argument, however, is belied by the express terms of the mortgage.
Section F of the 1-4 Family Rider and Assignment of Rents to the mortgage deletes the borrower
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 2 of 6
3

occupancy provision of the mortgage, a copy of which is attached as Exhibit A. It defies logic to
suggest that the Creditor intended the mortgage to provide the Borrower with a residence when
there is no owner-residency requirement. This Court previously held that the predominant
character of a mortgage cannot be viewed as providing the Debtor with a residence where, as
here, the Debtor is not required to reside in the property:
Because the Debtor is not required by the mortgage documents to occupy
the property at all, the predominant character of this transaction cannot be
predominantly viewed by the parties as a loan transaction to provide the
borrower with a residence.
Id. (internal citation omitted). The Creditor has not provided any evidence to support its
conclusory argument that it predominantly viewed the transaction as providing the Debtor with a
residence.
1
While the Debtor resides in one unit, he rents out the other unit to a tenant as an
investment property from which he earns rental income. Accordingly, the Court should overrule
the Creditors objection and hold that modification is permissible.
B. Legal Standard on the Feasibility of Balloon Payments
The Bankruptcy Code neither makes provisions for nor precludes the use of balloon
payments in Chapter 13 cases. In re Hendricks, 250 B.R. 415, 421 (Bankr. M.D. Fla. 2000)
(internal citations omitted). Whether a balloon payment will be permitted is left to the sound
discretion of the Court under the circumstances of each case. In re McClaflin, 13 B.R. 530,
533 (Bankr. N.D. Ill. 1981). Courts consider numerous factors, including the future earning
capacity and disposable income of the debtor, whether the plan provides for the payment of

1
The Debtor propounded his First Request for Production of Documents and First Set of
Interrogatories on October 17, 2013, seeking the factual basis for the Creditors contention that it
predominantly viewed the transaction as providing the Debtor with a residence. As of this
writing, the Debtor has not received any discovery responses which are due the day before the
next confirmation hearing scheduled for November 19, 2013.
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 3 of 6
4

interest to the secured creditor over the life of the plan, and whether the plan provides for
substantial payments to the secured creditor which will significantly reduce the debt and enhance
the prospects for refinancing at the end of the plan. In re Fantasia, 211 B.R. 420, 423-24
(B.A.P. 1st Cir. 1997).
Where there is a concern of potential abuse by the debtor dismissing in the final month
and filing another Chapter 13 to satisfy the balloon payment, courts have required debtors to
prove by credible and definite evidence an ability to make the balloon payment when making a
feasibility determination. In re Crotty, 11 B.R. 507, 511-12 (Bankr. N.D. Texas 1981)
(explaining that credible and definite evidence is required because of the potential for abuse by
the Chapter 13 debtor who could dismiss before the balloon payment is due and refile to repay
the balloon payment). In determining whether the plan is proposed in good faith, as opposed to
whether the plan is feasible, courts have also sought reasonable certainty of the ability to pay a
balloon payment. In re Harrison, 203 B.R. 253, 256 (Bankr. E.D. Va. 1996) (denying
confirmation where the debtor filed a Chapter 13 bankruptcy to address child support arrearages
two months after obtaining a Chapter 7 discharge).
In Hendricks, the court found the Debtor failed to provide definite and credible evidence
of an ability to pay the balloon payment where, inter alia, the debtor proposed a plan with zero
payments to the unsecured creditors, had no stream of future income (she was unemployed), she
had not provided evidence her spouse (a co-owner to the property) would consent to a future
mortgage and the debtor had the ability to dismiss the Chapter 13 before the balloon payment
was due and file another Chapter 13 payment to satisfy the balloon payment. Id. at 421-22.
None of these factors are present here where the Debtor is gainfully employed, making payments
to his unsecured creditors and does not require the consent of his spouse to encumber the home
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 4 of 6
5

with a mortgage as he is the sole record title owner. The plan also provides for interest to the
Creditor over the life of the plan. Fantasia at 423-24. More importantly, the threat of abuse is
not present here because this is a cramdown. The Debtor cannot simply dismiss and refile to
satisfy the balloon payment. If he is unable to make the balloon payment through a refinancing,
the bankruptcy will be dismissed and the crammed down value of $100,000 (upon which the
balloon payment is based) will no longer apply.
The Debtor proposes to pay nearly half the value during the life of the plan, a factor
strongly weighing in favor of permitting the balloon payment. Id. There will be significant
equity in the home at the end of 5 years such that refinancing is reasonably certain. In re Vause,
No. 6:09-bk-06224-ABB, 2010 WL 1204534, at *2 (Bankr. M.D. Fla. March 16, 2010)
(overruling creditors objection to Chapter 13 plan cramming down a duplex with a balloon
payment of $69,113 in month 60). Courts have observed that unless the real estate market
suffers a collapse, there is no reason to believe the value of the [lenders] security will fall. In
re McClaflin, 13 B.R. 530, 533 (Bankr. N.D. Ill. 1981) (noting that [r]efinancing the balloon in
5 years is uncertain, but possible); see also SPCP Group, LLC v. Cypress Creek Assisted Living
Residence, Inc., 434 B.R. 650, 657 (M.D. Fla. 2010) (holding that the bankruptcy court did not
err in finding the Chapter 11 plan with a balloon payment feasible and noting that based on the
evidence presented, the debtor should be able to refinance at the time the balloon comes due, if
unable to cover the payment). The real estate market in South Florida is improving as
evidenced by the fact that the Miami-Dade Property Appraiser valued this property at $39,735.00
on the date of filing. J ust a couple months later, the Creditors appraisal valued the property
value was $100,000. Even assuming the countys value was low, this is still a substantial
increase.
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 5 of 6
6

Permitting the Debtor to structure his plan with affordable payments for the next five
years and the opportunity to refinance in month 60 using the equity in his home is consistent
with the Congressional intent to provide Chapter 13 debtors with flexibility in structuring their
plans . . . [t]he policy behind Chapter 13 is to encourage individuals to pay their debts as opposed
to simply obtaining a discharge under Chapter 7. We recognize this statutory goal and seek to
preserve it. In re Ferguson, 134 B.R. 689, 695 (Bankr. S.D. Fla. 1991) (addressing the payment
of priority claims under 1322(a)(2)). Moreover, the Debtors home is necessary for an
effective reorganization. [M]ost courts have held that in a Chapter 13 case, a debtors home is
necessary for an effective reorganization. In re Ramos, 357 B.R. 669, 672 (Bankr. S.D. Fla.
2006) (internal citations omitted). Accordingly, the Court should overrule the Creditors
objection to confirmation based on feasibility.
Respectfully submitted,
LEGAL SERVICES OF GREATER MIAMI, INC.
By /s/________________________
J acqueline C. Ledon, Esq., Attorney for Debtor
3000 Biscayne Boulevard, Suite 500
Miami, FL 33137
Telephone: (305) 438-2401
Facsimile (305) 573-5800
Florida Bar No. 002719
Case 13-20891-AJC Doc 64 Filed 11/14/13 Page 6 of 6