06 B 02169

Prior to the petition date, the debtor’s non-filing spouse obtained title to property for which he executed a note secured by a mortgage which included an anti-modification provision. He later transferred title to his wife who did not assume the payment obligations of the note or the mortgage. A default on the mortgage note ensued and the wife filed this chapter 13 case seeking to pay the arrears in her reorganization plan. Mortgagee filed a motion to lift the automatic stay citing the debtor’s lack of privity of contract. The court held that because of United States Supreme Court precedent which defines "claim" to include obligations for which a debtor has no personal liability, only in rem liability, the debtor’s interest in the property could be included in a chapter 13 plan. The court also held that inclusion of the debt in the debtor’s plan did not impermissibly modify the lender’s rights under § 1322(b)(2) but instead provided extra protection as it gives the lender an additional person from whom to seek satisfaction of the underlying obligation. The court noted that Illinois law may dictate that a creditor-debtor relationship exists between the debtor and Mortgagee based upon the Illinois Family Expense Act and under an Illinois Supreme Court case that held that a lender's acceptance of an interim grantee's payments makes the grantee the primary obligor on a debt.