U.S. Bankruptcy Judge David R. Jones, one of our local bankruptcy judges here in Houston ruled  that you can "cramdown" or pay only the value of a house, even if it is homestead, if it is a reverse mortgage and had "matured" or come due in full within the 5 years term of the Chapter 13 plan. In Re Domingue, Bankr. Court, SD Texas 2012

What had happened is that the debtor had inherited a house, with a reverse mortgage on it. A reverse mortgage is not due during the original mortgagor's lifetime, but he had died. His heir was the debtor and now the reverse mortgage was due in full, and there was over $50,000 owed on it. But the house was only worth $15,000. So the debtor proposed to pay just the $15,000 during the chapter 13 plan, with some interest, with the other part of the $50,000 total claim to be paid only a small percentage, as an unsecured claim.

U.S. Bankruptcy Judge David Jones ruled that that was OK, and confirmed the plan. In chapter 13, a debtor usually cannot modify a mortgage loan on his or her principal residence. But there is an exception, if the mortgage comes due in full during the plan. Here, because it was a reverse mortgage, it came due when the original mortgagor died, so the mortgage could be modified.

J Thomas Black
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Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization
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