The U.S. Court of Appeals for the Sixth Circuit, sitting in Cincinnati, recently held that a U.S. Bankruptcy Court’s decision to modify a loan between mobile home owners Christopher and Tina Reinhardt and Vanderbilt Mortgage and Finance Inc. was in accordance with the law, despite the mortgage company’s objection. The issue centered on the question of whether the Reinhardts’ mobile home constituted real property, according to the appellate decision. Were it to be considered real property, the modification, known as a ‘cramdown,’ could not be completed. The lower court cited 11 U.S.C. 1322(b)(2), which permits a bankruptcy court to modify secured creditors’ rights with respect to any claim ‘other than a claim secured only by a security interest in real property that is the debtor’s principal residence,’ and found that although debtors’ mobile home qualified as the debtor’s principal residence, a modification was still permissible because the mobile home did not constitute real property.  A ‘cramdown’ – a reduction of the secured balance due on a home mortgage loan ordered by a bankruptcy court – was therefore permissible. The court may reduce the balance of the secured claim to the current appraised value of the home, which in the Reinhardts’ case was $15,000 while the amount of the claim in excess of the current property’s value – nearly $30,000 – becomes an unsecured claim.  ‘Because Ohio state law is clear that debtors’ mobile home is not real property, the bankruptcy court correctly held that it could modify Vanderbilt’s secured claim on the mobile home under 1322(b)(2), despite Vanderbilt’s secured interest on both the mobile home and the real property beneath it,’ 6th Circuit Court of Appeals Judge Eric Clay wrote for the 3-0 court.As noted above, the outcome of this case turned in large part upon Ohio law.  Property laws can vary significantly from state to state; anyone considering bankruptcy under similar circumstances should obtain the advice of a local bankruptcy attorney, in order to assess whether this decision would be applicable in their jurisdiction.-Drew Broaddus