UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
DON PRESTON CASE NO. 96-71172
MEMORANDUM OPINION AND ORDER
This matter is before the Court for confirmation of the debtors= Chapter 13 plan. An objection to that plan has been filed by Oakwood Acceptance Corporation (AOakwood@), a secured creditor in the proceeding. Oakwood claims that it is entitled to the protections afforded by 11 U.S.C. '1322(b)(2) in that it claims it has a claim secured only by a security interest in real property that is the debtors= principal residence and the debtors may not, therefore, modify its rights in this Chapter 13 proceeding.
The debtors became indebted to Oakwood when they purchased a 1997 Oakwood mobile home from a dealer and Oakwood agreed to finance the transaction. Pursuant to the terms of the transaction, the debtors granted Oakwood a mortgage lien against a lot on which the mobile home was placed, and also executed a security agreement in favor of Oakwood which was to be perfected by the filing of a UCC-1 form as required by Kentucky law. However, while the mortgage lien against the real property was timely recorded, the UCC-1 lien form was not timely filed in order to perfect the interest of Oakwood in the mobile home by notation of the lien on the certificate of title. Kentucky law requires that in order for a lien to be perfected where the collateral is a mobile home, that lien must be noted on the title document for the mobile home. KRS 186A.190, In re Langhorne, Case No. 91-60647, Adversary Proceeding No. 93-6027 (Bkrtcy.E.D.Ky 1994);In re Johnny Raines, Case No. 89-01606 (Bkrtcy.E.D.Ky 1990). The net result of this transaction is that Oakwood has a lien against the land but the lien against the mobile home itself may be avoided by the trustee and preserved for the benefit of creditors.
The debtors contend that Oakwood is not entitled to the protection afforded by 11 U.S.C. '1322(b)(2).
The mobile home involved was attached to real property and, while it is necessary to annotate a lien on the title to the mobile home in order to perfect the lien as to the mobile home itself, the requirement that a lien against the principal residence of the debtors be recorded in more than one place (in order to perfect as to the entire property) does not take the transaction outside of the parameters of 11 U.S.C. '1322(b)(2). Clearly, the lot and mobile home constitute the principal residence of the debtors in this matter.
The next question becomes whether or not the failure to perfect as to the mobile home has any effect upon the protection afforded by 11 U.S.C. '1322(b)(2). The net result of the failure to perfect as to the mobile home is simply that the creditor Oakwood has a lien only against the lot and the trustee succeeds to Oakwood=s improperly perfected lien against the mobile home. An argument might be made that when this mobile home is affixed to the lot, it becomes part of the real property and the mortgage lien against the lot itself also becomes a lien against the mobile home. However, in light of the unequivocal nature of KRS 186A.190 and the Court=s previous opinions in Langhorne and Raines, it appears that Oakwood is perfected in their lien only as to the lot itself. It also appears, however, that the lot is part of the principal residence of the debtors and therefore the holder of the lien, having only a lien against the lot which is part of the principal residence of the debtors, is entitled to the protections afforded by 11 U.S.C. '1322(b)(2).
The debtors have filed their first amended chapter 13 plan in this matter listing the value of the collateral held by Oakwood as $16,000 and propose to pay them that sum plus interest at the rate of 12% as part of the plan. In light of the Court=s conclusion above that the debtors may not modify the rights of Oakwood, it is hereby
ORDERED that the objection by Oakwood Acceptance Corporation to confirmation of debtors= plan herein, as amended, is SUSTAINED, and confirmation is hereby denied.
Dated this ______ day of August, 1997.
BY THE COURT
Brian P. Conaty, Esq.
Sidney N. White, Esq.
Lon Johnson, Esq.