In August of 1992 the Fifth Circuit Court of Appeals, in its decision in Nobleman v. American Savings Bank (In re Nobleman), interpreted § 1322(b)(2) of the Code as prohibiting the bifurcation of a claim secured only by a lien against a debtor's principal residence. This decision is contrary to the position taken previously by the Courts of Appeals for the Second, Third, Ninth and Tenth Circuits on the same question. On December 7, 1992 the Supreme Court granted a petition for certiorari, filed by the debtor in Nobleman, to resolve the split now existing among the courts of appeals. Accordingly, the resolution of this question by Congress or by the Supreme Court is imminent and creates a dramatic pause for the bankruptcy bar.
This article looks critically at the debate as it has been waged in the courts, and how it might be resolved by the Supreme Court or through legislative amendment. The question to be considered is which side of the debate is more correct in its interpretation of § 1322(b)(2). The answer is found in the language of the provision, the legislative history, congressional intent, and the fundamental principles of bankruptcy law. Past proposals for legislative amendment are also considered in terms of how they support or slight the basic equitable principles embodied in our bankruptcy law, and whether this proposed resolution represents a fair and reasonable extension of bankruptcy protection, or an inequitable preference for the home mortgage industry.
Veryl Victoria Miles, The Bifurcation of Undersecured Residential Mortgages Under Sec. 1322(b)(2) of the Bankruptcy Code: The Final Resolution, 67 AM. BANKR. L.J. 207 (1993).