Atkins v. Bank of America, N.A. (In re Atkins)
497 B.R. 568
Bankr. D. Minn.2013Background
- Debtors filed Chapter 13 on Sept. 30, 2009, owning a homestead in Anoka County, MN, encumbered by a first mortgage (First Magnus) and a junior mortgage now held by Bank of New York Mellon/serviced by BAC/Bank of America.
- Debtors’ confirmed Chapter 13 plan (Nov. 20, 2009) treated the second-priority mortgage as unsecured and reserved the right to request lien stripping at or near discharge; no objections were filed to the plan.
- Debtors completed plan payments and received a discharge (Mar. 18, 2013); case closed May 9, 2013; case was reopened May 24, 2013 to file this adversary proceeding to value the property and avoid the junior lien.
- Debtors sought a §506(a) valuation of the homestead at $92,000 and a court order avoiding/releasing the junior mortgage; the defendants did not answer; plaintiffs served defendants and engaged in communications with defendant representatives.
- At confirmation time (2009) Minnesota bankruptcy practice generally did not permit post-confirmation avoidance of liens on a debtor’s principal residence, but later BAP decisions and a local rule allowed such relief and used the language “release.”
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May court grant lien-avoidance relief when the confirmed plan (2009) treated the junior lien as unsecured even though Minnesota practice then barred residential lien stripping? | Plan language and confirmation bind the parties; Espinosa requires enforcement of confirmed plans absent jurisdictional/due-process defects. | No answer; underlying position at the time of confirmation was that such avoidance was not permitted in Minnesota practice. | Court: Enforcement of confirmed plan is permissible under Espinosa; no jurisdictional/due-process defects; requested relief may be granted. |
| May court determine petition-date value of the property (§506(a)) now (plaintiff requests $92,000)? | Debtors ask the court to value the property at $92,000 to establish unsecured status. | No answer contesting value. | Court: Denied as moot — confirmed plan treating the claim as unsecured is res judicata; court will not relitigate valuation. |
| What form of relief should be entered — lien "struck," "satisfied," or "released"? | Debtors requested avoiding/satisfying the junior lien per plan reservation at completion. | No answer. | Court: Follows Local Rule 3012-1(f) terminology and orders that the junior mortgage lien is released. |
Key Cases Cited
- United Student Aid Funds, Inc. v. Espinosa, 559 U.S. 260 (confirmed plan must be enforced absent jurisdictional or due-process defects)
- In re Parmenter, 527 F.3d 606 (res judicata effect of confirmed plan binds parties on valuation/treatment issues)
- In re Fisette, 455 B.R. 177 (BAP decision recognizing lien-avoidance on principal residence and prompting local rule procedure)