ALASKA HOUSING FINANCE           )
CORPORATION, FEDERAL NATIONAL    )
MORTGAGE ASSOCIATION, and        )
NATIONAL BANK OF ALASKA,         )
                                 )
      Creditor-Appellants,       )
                                 )
VS.                              )        Case No. A90-0070 Civil
                                 )        Appeal from Bankruptcy No.
DALE C. FERGUSON and BARBARA     )        A89-01132 Ch. 13. 
J. FERGUSON, d/b/a [as to        )
Barbara J. FERGUSON]             )
RENT-A-STORK,                    )
                                 )
      Debtors-Appellees.         )
_________________________________)								 

Alaska Housing Finance Corporation, Federal National Mortgage Association, and the National Bank of Alaska ("Creditors") appeal from the Bankruptcy Court's confirmation of the Fergusons' Second Amended Chapter 13 Plan ("Plan") for the adjustment of their debts. Creditors organize their objections into three basic categories. First, Creditors contend that the Bankruptcy Court erred in denying the Creditors motion for relief from the stay. Second, Creditors contend that the Bankruptcy Court erred in its factual determination that the Plan was feasible and that it was proposed in good faith. Finally, the Creditors contend that the Bankruptcy Court erred in confirming a Plan which contained certain provisions to which the Creditors object.

      3 ABR 2  The Creditors' first objection, that the Bankruptcy Court erred in denying relief from the stay, is without merit. For the reasons stated in Lomas Mortgage USA v. Fischer, 136 B.R. 819 (D. Alaska 1992), this court has concluded that the automatic stay in Chapter 13 actions will be lifted only for cause. The "lack of equity" test set forth in 11 U.S.C. § 362(d)(2)(1988) is inapplicable in Chapter 13 cases.

The Creditors have not demonstrated that the Bankruptcy Court abused its discretion in refusing to lift the automatic stay for cause under 11 U.S.C. § 362(d)(I).¹ The Creditors' argument that the Bankruptcy Court erred in not requiring the Fergusons to seek alternative, cheaper housing is without merit. The Creditors assert that the Fergusons are unable to fund their Plan, and that cheaper housing is therefore necessary to the success of the Plan. The Bankruptcy Court was in a better position than this court to consider whether the Fergusons could make the required payments on their home. This court is not persuaded that the Bankruptcy Court's factual finding that the Fergusons were able to make the payments is clearly erroneous. See Transcript of January 23, 1990, Confirmation Hearing, R.A. No. 54, at 63-64.² This court similarly affirms the Bankruptcy Court's finding that the Plan was feasible as not clearly erroneous.

      3 ABR 3  The Creditors' second contention, that the Bankruptcy Court erred in finding that the Plan was proposed in good faith, is impossible to evaluate on this record, however. The case is remanded to the Bankruptcy Court for further proceedings not inconsistent with this court's order in Lomas Mortgage USA v. Fischer, 136 B.R. 819 (D. Alaska 1992).

The Creditors raise a number of objections to particular provisions of the Plan, which this court shall address for the guidance of the Bankruptcy Court. First, they object that the Bankruptcy Court awarded $5,300 in accumulated withheld mortgage payments from Creditors to the trustee for distribution to the unsecured creditors. Second, they object that the Plan was not modified to provide for the possibility that the Fergusons' eldest daughter might return to Oregon, with a consequent reduction in household expenses and an increase in disposable income capable of being devoted to the plan. Third, they object to the modification of their rights in the residence as violative of 11 U.S.C. § 1322(b)(2), and they attempt to distinguish the decision of the Ninth Circuit in In re Houghnd, 886 F.2d 1182 (9th Cir. 1989), which this court has previously characterized as controlling. See Fischer, 136 B.R. at 823 n.3. Fourth, the Creditors object that the Bankruptcy Court did not defer the reduction in their secured lien on the Fergusons' residence until the successful completion of the Plan. Fifth, the Creditors object to the Bankruptcy Court's refusal to rule that the Creditors' claim should be paid in full from the possible sale of the collateral during the Plan period. Sixth, the Creditors object that the Plan does not either pay off the secured claim over the life of the Plan or, in the alternative, cure the defaults on the secured portion of the claim which occurred before and after filing but before confirmation. Seventh, the Creditors object that the Plan does not make explicit the manner in which the Trustee is to distribute the disposable income to the unsecured creditors.

      3 ABR 4  Finally, the Creditors object that the Plan does not require the debtors' minor children to contribute their permanent fund dividends to the household's disposable income.

Creditors' first objection, that the Bankruptcy Court erred in not applying the accumulated withheld mortgage payments, totalling about $5,300, to the curing of the defaults, is closely related to its sixth objection, that the Plan does not either pay off the secured claim over the life of the Plan or, in the alternative, cure the defaults on the secured portion of the claim which occurred before and after filing but before confirmation. Both of these objections involve the interrelationship between 11 U.S.C. § 1322 (b)(5)(plan may provide for curing of defaults on long-term debt in order to avoid foreclosure at conclusion of the plan), and 11 U.S.C. § 1328(a)(1) (discharge does not include debts "provided for under section 1322(b)(5)").

This court has previously declined to express an opinion on the propriety of allocating mortgage arrearages caused by defaults to the unsecured portion of an undersecured claim bifurcated pursuant to In re Hougland, 886 F.2d 1182 (9th Cir. 1989). See Lomas Mortgage USA v. Roberts, 137 B.R. 343 (D. Alaska 1992), Cf. In re Sessions, 128 B.R. 147, 151 (Bankr. E.D. Tex. 1991) (arrearages on long-term debt may not be summarily disallowed, nor allocated to the unsecured portion of the claim).

In Roberts, this court cautioned that if the arrearages may not be allocated to the dischargeable unsecured portion of the undersecured claim, then failure to provide for the curing of the default may have certain implications for the ability of the mortgagor to foreclose on the property at the conclusion of the Plan.

      3 ABR 5  The question is squarely presented by the instant case. The issue has been addressed by the Chief Judge of this District in a recent decision. See Order at Docket No. 12 in Goldome Realty Credit Corp. v. Perron, A91-0287 Civil (D. Alaska 1992). In that case, Judge Holland held that a debtor who takes advantage of the long-term debt provisions of 11 U.S.C. § 1322(b)(5) must cure all arrearages within a reasonable time. Although federal judges within a district are not bound by each other's rulings, Starbuck v. City and County of San Francisco, 556 F.2d 450, 457 n.13 (9th Cir. 1977), the court is persuaded by Judge Holland's treatment of the issue. See Goldome, A 91-0287 at 7 & n.10 (citing In re Cole, 122 B.R. 943, 950 (Bankr. E.D. Pa. 1991) ("once a debtor has chosen to cure arrearages in a Chapter 13 plan [to prevent foreclosure], § 1322(b)(5) requires that it be done in a certain way, i.e. by curing all defaults in a reasonable time while maintaining current payments")); In re Scott, 121 B.R. 605, 608 (Bankr. E.D. Okla. 1990)("If a debtor desires to extend a creditor's payment beyond the term of the Plan, the only avenue available is to cure any default due under the Plan and resume the payments under the original mortgage"); In re Honett, 116 B.R. 495 (Bankr. E.D. Tex. 1990); In re Hyden, 112 B.R. 431 (Bankr. W.D. Okla. 1990); In re Hayes, 111 B.R. 924 (Bankr. D. Or. 1990); In re Bradley, 109 B.R. 182 (Bankr. E.D. Va. 1990)). It was error for the Bankruptcy Court to allocate the reserved mortgage payments to the unsecured creditors, as these arrearages must be cured if the debtors are to retain their home at the conclusion of the Plan.

The Creditors' second objection is that the Bankruptcy Court erred in not ruling on a modification of the Plan contingent upon the possibility of the debtors' eldest daughter returning to Oregon, making more money available to the creditors by reducing familial living       3 ABR 6  expenses. The Bankruptcy Court implicitly found that the daughter is currently a member of the household. If the situation changes, the creditors may seek modification of the plan under 11 U.S.C. § 1329(a); see also In re Moseley, 74 B.R. 791,799 (Bankr. C.D. Cal. 1987). They have adequately preserved the issue. Cf. In re Stage, 79 B.R. 487, 488 (Bankr. S.D. Cal. 1987).

The Creditors' third objection is that the plan impermissibly modified the creditors' rights in the debtors' principal residence. The Creditors are unsuccessful in their attempts to distinguish In re Hougland, 886 F.2d 1182 (9th Cir. 1989).

The Creditors' fourth objection is that the Bankruptcy Court prematurely stripped down their lien on the debtors' residence. The creditors are adequately protected from the debtors' failure to maintain payments by the prospect of the reinstatement of the lien after dismissal of the case under 11 U.S.C. § 1307(c)(6) (material default of debtor). The stripping down of the lien must occur at the valuation hearing in order for the Hougland bifurcation into secured and unsecured portions. And this bifurcation is clearly necessary in turn if there is to be any distribution to the unsecured portion of the bifurcated claim.

The creditors' fifth objection is that the Bankruptcy Court has not provided for the contingency of the debtors' sale of their home during the life of the Plan. This contingency apparently has not come to pass. If it should do so, the Creditors may seek modification of the plan under 11 U.S.C. § 1329(a); see also In re Moseley, 74 B.R. 791,799 (Bankr. C.D. Cal. 1987). They have adequately preserved the issue. Cf. In re Stage, 79 B.R. 487, 488 (Bankr. S.D. Cal. 1987).

      3 ABR 7  The Creditors object that the Plan does not require the debtors' minor children to contribute their Permanent Fund dividends to the household's disposable income. The Bankruptcy Court found that the household does not treat the Permanent Fund dividends as household income and this finding was not clearly erroneous.

The Creditors object that the Plan does not make explicit the manner in which the Trustee is to distribute the disposable income to the unsecured creditors. The debtors construe the Plan as providing for a pro rata distribution. The Plan does not require such a pro rata distribution in so many terms. However, the Creditors have not shown adequate grounds to justify their fear that the general direction to the Trustee to pay unsecured claims is unworkable. On remand, if the Creditors can establish that the Plan has left too much discretion to the Trustee to distribute the funds, then the Bankruptcy Court shall calculate each unsecured Creditor's share and specifically direct the Trustee to make such disbursements.

IT IS THEREFORE ORDERED:

That the case is remanded to the Bankruptcy Court for further proceedings consistent with this Order and that in In re Fischer, 136 B.R. 819 (D. Alaska 1992).

DATED at Anchorage, Alaska this 29 day of September, 1992.



Honorable James K. Singleton, Jr.
United States District Court Judge