In this old Bankruptcy Code case, U.S. Supreme Court held that a Chapter 13 debtor must pay interest toward the arrearages owing on an oversecured residential mortgage.

In this case, debtors’ Chapter 13 plan proposed to repay all future payments due on the mortgage note and cure the default on the mortgage by paying off the arrearage without interest.

The U.S. Supreme Court ruled that Sections 506(b), 1322(b)(2) and 1325 (a)(5) effectively combine to require debtors to pay interest on mortgage arrearages and prohibit debtors from modifying the rights of home mortgage lenders. Rake et al. v. Wade (U.S. Sup. Ct., Case No. 92-621).