Alice Weller Riedel

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 10-32031DM
ALICE WELLER RIEDEL, 	)
) Chapter 13
Debtor. 	)
___________________________________)
MEMORANDUM DECISION ON OBJECTION TO CLAIM
I. 	Introduction 1
On August 30, 2010, Wells Fargo Bank, N.A. (“Bank”) filed a
proof of secured claim (“Claim”) in the amount of $530,251.60.
The Claim was based upon an Adjustable Rate Mortgage Note (“Note”)
in the principal amount of $474,344 executed by Alice F. Weller,
the former name of the above-named debtor (“Debtor”). 	The Claim
included arrearages in the sum of $31,974.60, 2 including twelve
delinquent pre-petition payments totaling $26,796.84; the balance
of the arrearages consisted of pre- and post-petition attorneys
fees and costs, late charges and an escrow shortage. 	The Claim
also referred to an interest rate of 7.3%, explaining in a
1The following discussion constitutes the court's findings of
fact and conclusions of law. 	Fed. R. Bankr. P. 7052(a).
2The Claim reflects a principal balance of $486,945.95. 	The
reason for the difference between that amount and the amount in
the Note is not known to the court but is not material to the
issue being decided.
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Signed and Filed: December 21, 2010
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
December 22, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-32031 Doc# 28 Filed: 12/21/10 Entered: 12/22/10 09:38:54 Page 1 of 4

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footnote that the interest rate is adjustable pursuant to the
terms of the Note.
Debtor filed a Chapter 13 Plan-First Amended (“Plan”) on July
2, 2010, using this court’s Model Chapter 13 Plan (Effective
1/1/09). 	The court confirmed the Plan on August 16, 2010.
In Paragraph 4C of the Plan Debtor listed post-petition
payments on the secured debt owed to Bank in the amount of
$2,219.20, the same amount the Claim reflected as being owed on
eleven of the twelve pre-petition delinquent payments. 	Nothing
was stated regarding interest. 	Paragraph 4D of the Plan stated
that as to pre-petition debt, the “Defaulted Debt” was $27,826,
with an interest rate of 6.472%, which the court understands to
have been the original interest rate of the Note.
On November 12, 2010, Debtor objected to the Claim,
contending that by virtue of the confirmed Plan Bank was bound to
pre-petition arrearages in the amount of $27,826 at an interest
rate of 6.472%, relying primarily on the recent Supreme Court
case, United Student Aid Fund v. Espinosa __ U.S. __ (2010).
Bank submitted an opposition and Debtor submitted a reply;
the matter was argued to the court on December 17. 	For the
reasons explained below, the Bank will overrule the objections and
allow the Claim as filed.
II. 	Discussion
The Espinosa case involved the finality of an order
confirming a plan that purported to discharge interest on a
student loan without the filing of an adversary proceeding or a
specific determination of undue hardship. 	As correctly argued by
Debtor, the Supreme Court rejected the complaining creditor’s
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Case: 10-32031 Doc# 28 Filed: 12/21/10 Entered: 12/22/10 09:38:54 Page 2 of 4

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arguments and upheld the finality of the confirmation order. 	It
explained that the creditor’s remedy was to have objected to the
plan confirmation.
In the present case it is true that Bank could have objected
to confirmation, contending that the amount of the pre-petition
defaults or the pre-petition interest rate, each as set forth in
paragraph 4D, was incorrect. 	It could have also challenged the
amount of post-petition payments, $2,219.20. 	It did neither.
Based upon Bank’s silence, Debtor contends that the Defaulted
Debt is locked-in in the amount of $27,826 and the interest rate
on the pre-petition debt is 6.472%. 	The irony of Debtor’s
position, however, is that the Defaulted Debt arrearages that she
listed are in fact greater than those asserted by Bank, namely
$26,796.84. 	As noted above, the additional $5,177.78, is not part
of pre-petition monthly defaults, but rather consists of related
charges, fees and costs. 	Since the Plan does not address or
purport to disallow any of those amounts, the finality of the
order confirming the Plan cannot prevent the Bank from asserting
arrearages in the Claim.
As to post-petition payments, Espinosa does require that the
monthly amount be as provided in the Plan, namely $2,219,
notwithstanding the adjustable payments as of July 1, increasing
to $2,385.54. 	But this is a hollow victory for Debtor because
nothing other than paragraph 4C of the Plan purports to alter
Bank’s rights. 	Because Bank is not subject to cramdown under
Bankruptcy Code § 1322(b)(2), even if Debtor fully performs under
the Plan she will not be able to avoid payment of the full amount
owed to Bank. 	This is because Paragraph 4 states that “Secured
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Case: 10-32031 Doc# 28 Filed: 12/21/10 Entered: 12/22/10 09:38:54 Page 3 of 4

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Creditors will retain their liens until their allowed secured
claims have been paid in full.” 	Bank’s allowed secured claim is
as noted above, and after Debtor completes her payment of the pre-
petition arrearages (for which the interest rate of 6.472% is a
historical fact that is not subject to change), the post-petition
interest is subject to change by virtue of the terms of the Note
even if monthly payments are made based on the Plan. 	Nothing in
the Plan changes it, so the additional unpaid interest will
continue to accrue.
In other words, the only provision in the Plan that alters
the Debtor’s obligations is Paragraph 4C showing the amount of the
monthly payment to be made on a post-petition basis. 	To the
extent that the Note’s interest rate adjusts, and other charges
such as attorney’s fees, late charges, etc., remain unpaid, they
will have to be paid before the Debtor fully discharges the
secured claim against her property.
III. 	Conclusion
Bank’s counsel should submit a form of order that overrules
Debtor’s objections to the Claim for the reasons stated in this
Memorandum Decision, but provides that the post-petition payments
under the Plan will continue in the amount of $2,219.20 until the
full amount of the Bank’s Claim has been paid.
**END OF MEMORANDUM DECISION**
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Case: 10-32031 Doc# 28 Filed: 12/21/10 Entered: 12/22/10 09:38:54 Page 4 of 4