In In re Smith, the Third Circuit reminded consumer bankruptcy practitioners of the wrath of res judicata. The debtor owned an encumbered rental property with an assignment of rents to her mortgage lender. The debtor’s proposed chapter 13 plan included a cramdown of the mortgage lender’s claim that reduced the secured portion of the claim from $150,000 to $95,000 — the value of the collateral. The plan further provided that the payment of rents would pay down the secured portion of the lender’s claim.

The lender objected to the $95,000 cramdown value, the application of rents to the secured portion of its claim, and feasibility. After the bankruptcy court sided with the debtor and held that the rents could pay down the secured portion of the lender’s claim, the lender agreed to the $95,000 cramdown value and abandoned its feasibility objections. The bankruptcy court confirmed the plan.