A recent decision by the United States Bankruptcy Court for the Western District of Missouri held that a manufactured home is real property for purposes of Section 1322(b)(2) of the Bankruptcy Code. This holding prevents chapter 13 debtors from modifying a secured lender’s claim where the claim is secured by a lien on a manufactured home in Missouri that is the debtor’s primary residence.

Historically, where a secured lender’s claim was secured by a lien on a manufactured home, debtors successfully crammed down the secured lender’s claim to the value of the manufactured home, reduced the interest rate, and paid equal monthly installments in full satisfaction of the claim.

In Missouri, a mobile home had been considered in the first instance to be personal property, but could be converted to real property if certain conditions were met. Those conditions included attaching the mobile home to a permanent foundation on real estate or removing or modifying the transporting apparatus.

When bankruptcy courts would determine that the manufactured home had not been converted to real property, the debtor could propose a plan which modified the secured lender’s claim without running afoul of the anti-modification provision in Section 1322(b)(2) of the Bankruptcy Code.

That has all changed with the recent decision in In re Turner, 2014 WL 6674778 (Bankr. W.D. Mo. 2014). In Turner, it was the trustee who objected to the debtor’s treatment of a secured lender’s claim as a long term real estate mortgage under Section 1322(b)(2) of the Bankruptcy Code. The bankruptcy court found that an amendment to the Missouri statutes that became effective March 1, 2011 — Mo. Rev. Stat. § 442.015 — expressly provided that for purposes of Section 1322(b)(2) of the Bankruptcy Code, a manufactured home that is the debtor’s primary residence shall be deemed to be real property.

The bankruptcy court noted that in some contexts in bankruptcy, such as for exemption purposes, the manufactured home must be shown to be so permanently affixed to be deemed real estate. However, for purposes of the anti-modification provision in chapter 13, a manufactured home is considered under Missouri law to be real property regardless of whether it is affixed to land or treated as real property for mortgage recording and tax purposes.

Therefore, in Missouri, if the manufactured home is the debtor’s principal residence, a debtor must propose a Chapter 13 plan which does not modify the treatment of the lender’s claim.