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Abstract: Last May, in Lee v. U.S. Bank, the Eleventh Circuit split with the First and Third Circuits on the question of when real property is subject to the Bankruptcy Code’s anti-modification rules. Circuit splits sometimes receive a great deal of attention; this particular split, however, did not seem to generate quite so much commentary, at least initially. This may be due to the highly technical nature of courts’ analysis of the anti-modification provisions; after all, much of the majority and dissent’s disagreement in the Eleventh Circuit rested on conflicting interpretations of the word “is.” Or, it may be due to the fact that the Eleventh Circuit’s decision was the first at the circuit-level to address this anti-modification question in some time; the First and Third Circuits’ decisions date back 28 and 18 years, respectively.
Despite the relative lack of commentary on the Eleventh Circuit’s decision, this Bankruptcy Law Letter posits that the decision, and the potential trend it represents, raise issues worth exploring. I will begin by walking through the state of the anti-modification analysis prior to Lee, examining the statutory anti-modification rules, their legislative history, and the case law interpreting them. I’ll then examine and critique the Eleventh Circuit’s ruling in Lee and provide some thoughts about where anti-modification analysis ought to go from here. The issues surrounding the Code’s anti-modification provisions speak to the desirability of chapter 11 and chapter 13 bankruptcy for debtors, and their resolution will impact the Code’s ultimate balance between debtors and creditors.
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