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Modification of creditors' rights: The plan may modify the rights of secured creditors or unsecured creditors (such as by "changing the size and timing of installment payments"), except where the creditor's claim is secured solely by a security interest in real property constituting the debtor's principal residence. [B.C. §1322(b)(2)]; Grubbs v. Houston First American Savings Association, 730 F.2d 236 (5th Cir. 1984). Note that the Code defines a security interest as a lien created by an agreement. (B.C. §101(51)] Of course, any such modification must be consistent with the pertinent requirements for confirmation of a Chapter 13 plan. [B.C. §1325(a)(4), (5)]; (1) Example: Debtor owes Bank $10,000, at an interest rate of twenty-three percent, secured solely by a first mortgage on real property constituting Debtor's principal residence. Debtor files a Chapter 13 plan proposing to repay Bank at a rate of fourteen percent. The modification will not be permitted since it falls squarely within the exception. [B.C. §1322(b)(2)]; In re Rorie, 58 Bankr. 162 (Bankr. S.D. Ohio 1985); see also First National Fidelity Corp. v. Perry, 945 F.2d 61 (3d Cir. 1991)—provision to pay foreclosure judgment on debtor's home over five-year life of plan is an impermissible modification since the lien was the product of a consensual arrangement) (2) Compare: Finance Company is the holder of a claim secured by a mortgage on real property on which Debtor resides and on which there also exist two rental units that generate forty-six percent of Debtor's income. The rate of interest on the mortgage note is eighteen percent. Debtor's proposed Chapter 13 plan may modify Finance Company's rights by reducing the interest rate on the mortgage note since the claim is not secured solely by real property that is the principal residence of debtor. [B.C. §1322(b)(2);In re Ramirez, 14 Bankr. Ct. Dec. 748 (Bankr. S.D. Cal. 1986)] Confirmation, however, will depend upon whether the plan satisfies Bankruptcy Code section 1325(a)(5). Similarly, modification of a secured creditor's rights would be permitted where the creditor's security interest also includes personal properly, where the security interest is in real property that is not the debtor's principal home, or where the creditor's lien is one that was not created by agreement (e.g., in the case of a judicial lien or a statutory lien)
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