Can You Keep Your Home? Chapter 13 Plans & Mortgage Cramdowns in California

Introduction — Can Chapter 13 help you keep your California home?

If you're behind on mortgage payments or hold a second or junior loan, Chapter 13 can sometimes be a way to keep your house while reorganizing debts. But the law draws important lines: in most cases a debtor cannot use a Chapter 13 "cramdown" to reduce a mortgage secured only by the debtor's principal residence. That general rule was established by the U.S. Supreme Court and remains a baseline for Chapter 13 planning.

This article explains (1) what a cramdown is, (2) the principal exceptions that matter in California — including a significant Ninth Circuit decision addressing short‑term home loans — and (3) practical steps California homeowners can take during a Chapter 13 case to protect the home. Read on for plain‑English explanations, examples, and next steps for Los Angeles debtors and their attorneys.

How cramdowns work — the technical picture

In Chapter 13 a "cramdown" generally means the court values the collateral, treats the creditor as secured only up to that value, and treats the rest as unsecured — lowering what must be paid as secured debt. The statutory valuation rule is in 11 U.S.C. § 506, which is the foundation for bifurcating (splitting) a claim into a secured portion and an unsecured portion. In practice, cramdowns are commonly used for vehicles and non‑residential real estate.

But the Bankruptcy Code places a specific restriction on modifying claims "secured only by a security interest in real property that is the debtor's principal residence" — a limitation interpreted by the Supreme Court to prevent ordinary cramdowns of a primary mortgage. That decision continues to control the general rule: you usually cannot use § 506 valuation to strip down a primary residence mortgage as part of a Chapter 13 plan.

Exception — short‑term or maturing loans: Recently, the Ninth Circuit clarified an important exception in 11 U.S.C. § 1322(c)(2). When a mortgage (often a junior or short‑term loan) matures during the Chapter 13 plan period, § 1322(c)(2) may permit bifurcation or other modification of that claim despite the anti‑modification language. The Ninth Circuit's 2025 opinion in Mission Hen v. Lee explains that § 1322(c)(2) can allow a debtor to treat a loan that will be paid off during the plan differently from a long‑term primary mortgage — potentially enabling a cramdown for that limited class of loans. This is a circuit‑level development that materially affects strategy for California filers.

Practical tools in Chapter 13 for keeping your home (California focus)

Even when a full cramdown of a primary mortgage is not available, Chapter 13 offers tools that frequently allow homeowners to stop foreclosure and keep their residence:

• Cure‑and‑maintain (§1322(b)(5)): Chapter 13 plans can cure prepetition arrearages over the life of the plan while the debtor continues regular contractual payments. Courts have recognized that creditors may be entitled to certain interest on arrearages, but the cure‑and‑maintain structure is a primary method to stop foreclosure and catch up past‑due amounts.
• Valuation / bifurcation of non‑residence or junior liens: Investment properties, second homes, and some junior liens (especially short‑term loans that mature within the plan) may be bifurcated under §506 and treated as partly unsecured. The Mission Hen decision highlights that short‑term home loans that mature in plan may be crammable in some circumstances.
• Administrative protection and notice rules: If your plan provides the trustee or you will make the contractual mortgage payments, special bankruptcy rules require mortgage holders to provide timely notices of payment changes, escrow adjustments, or other changes affecting the loan during the case — see Bankruptcy Rule 3002.1. Those notice obligations help debtors monitor payment changes and avoid surprise defaults.

Because cramdowns of principal residences remain prospect‑sensitive and fact‑specific, plan feasibility (ability to make payments), accurate valuation, and careful timing matter. The availability of a cramdown or bifurcation often depends on: the loan's maturity date, whether the claim is truly "secured only" by the residence, the home's market value, and whether the debtor's disposable income can fund the plan period (which may not exceed five years).

Actionable next steps — what to do if you want to keep your home

If you're a California homeowner thinking about Chapter 13, take these concrete steps:

1. Gather loan paperwork: current mortgage note(s), payoff demands, junior lien documents, escrow statements, and recent broker or appraiser CMA (comparative market analysis).
2. Check loan maturity dates: determine whether any junior mortgage matures during the expected 3–5 year plan — that timing can be critical under §1322(c)(2). Consider whether recent case law in the Ninth Circuit could affect your claim.
3. Build a plan budget: calculate plan payments that cure arrears (if using §1322(b)(5)) while maintaining current monthly payments and meeting trustee and unsecured creditor treatment requirements.
4. Request valuation motions early: a Rule 3012 valuation motion or contested confirmation hearing can set the secured amount for a claim and make cramdown or bifurcation possible where allowed.
5. Keep an eye on mortgage notices: mortgage servicers must file notices when payments change in Chapter 13 cases — review any Rule 3002.1 notices and alert counsel immediately if the servicer claims changed amounts.
6. Consult an experienced California bankruptcy attorney: because outcomes depend on valuation, local practice, and evolving case law, get legal advice tailored to your facts — especially if you have short‑term or high‑cost junior loans that might qualify for the §1322(c)(2) exception.

If you are facing an imminent sale or foreclosure, file quickly and ask your attorney about emergency relief (stay motions, tolling deadlines, or temporary injunctions). Timing and paperwork matter: a properly structured Chapter 13 plan can cure arrears and keep you in your home even where a direct cramdown is unavailable.

Conclusion — realistic expectations and professional help

Short answer: in most cases you cannot cram down a mortgage on your principal residence, but Chapter 13 still offers powerful tools — cure‑and‑maintain plans, lien bifurcation for non‑residential liens, and (in limited situations) modification of short‑term loans that mature during the plan. Recent Ninth Circuit authority has expanded possibilities for debtors with maturing junior loans, so the precise answer depends on loan terms, timing, and valuation.

Because California procedure and local court practice affect outcomes, speak with a Los Angeles‑area Chapter 13 attorney as soon as possible to review your loan documents and map a plan that fits your household budget. If you want, we can prepare a checklist of documents to bring to your first attorney meeting or point you to local LA bankruptcy self‑help clinics and trustee resources.