WI BANKRUPTCY COURT REJECTS DEBTOR’S ATTEMPT | Key Points

1. Wisconsin’s Eastern District bankruptcy court refused to confirm a chapter 13 plan wherein the debtor (Sean Higgins) proposed to make payments over five years to bring his deceased parents’ mortgage current while maintaining payments to the mortgagee, Matrix, during the bankruptcy proceedings. In re: Higgins, No. 23-22024-RMB, 2023 WL 8823920, at *1 (Bankr. E.D. Wis. Dec. 20, 2023).

2. Matrix objected to Higgins’ chapter 13 plan arguing that Matrix was “not a creditor to the debtor,” but rather a creditor to the deceased mortgagors. Higgins argued that Matrix’s “right to payment” and “claim against the property of the debtor” derived from Higgins’ right to distribution from his father’s probate estate which included Matrix’s mortgage which “necessarily” made the property part of Higgins’ bankruptcy estate. The court, noting that “most often” ownership in real property “involve[d] a title transfer of the property to the debtor,” disagreed with Higgins.

3. The court concluded that Higgins’ “interest in his father’s probate estate is not the same thing as an interest in the Property” and noted that Matrix’s mortgage is on the property, not the estate. Ultimately, the court found Higgins did not have an “ownership” interest in the property so Matrix did not have a claim that Higgins could include in his chapter 13 payment plan. The Court concluded that a mortgagee only has a claim under §102(2) when the debtor holds legal title to the underlying property and that a possessory or equitable interest of an heir is insufficient to confer “ownership” of the deceased’s real property to the debtor/heir.

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