Davis v. TD Bank, N.A. (In Re Davis)
447 B.R. 738
| Bankr. D. Md. | 2011Background
- Debtors filed Chapter 13 on Sep 4, 2009; prior Chapter 7 discharge occurred on Sep 17, 2008, rendering §1328(f)(1) ineligible for discharge.
- Property is 9726 Natalie Drive, Upper Marlboro, MD 20772, FMV $270,000 (as of Dec 17, 2009).
- Encumbered by three liens: Wells Fargo (first, reference balance $275,373.59) and Bank of America (second, balance $115,138.58) with TD Bank (third, balance $117,603.31).
- TD Bank concedes its third-priority lien is wholly unsecured given senior liens exceed property value.
- TD seeks to avoid TD Bank’s lien under §506; plan proposes 60-month payments totaling $90,800, with emphasis on mortgage arrears and unsecured creditors.
- TD Bank and Trustee object to confirmation; court considers lien-stripping in no-discharge Chapter 20 context and overall good-faith plan.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether there is a per se rule against lien stripping in a Chapter 20 case. | TD Bank: lien stripping prohibited if no discharge. | Debtors: no per se prohibition; lien can be stripped under 506(a)/(d). | No per se prohibition; lien may be stripped. |
| Whether discharge eligibility is required to strip off a wholly unsecured lien. | TD Bank: discharge required to strip. | Debtors: 506(d) allows stripping regardless of discharge eligibility. | Discharge not required for lien-avoidance under 506(d). |
| Whether the Amended Plan and petition were filed in good faith under §1325(a)(3) and (7). | TD Bank/Trustee: plan/petition lack good faith. | Debtors acted in good faith and with legitimate aim to repay creditors. | Amended Plan and petition filed in good faith. |
Key Cases Cited
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (lien-stripping not limited by discharge eligibility; Chapter 20 allowed)
- First Mariner Bank v. Johnson, 411 B.R. 221 (D. Md. 2009) (post-BAPCPA authority supporting lien avoidance under 506(d))
- Bateman (In re Bateman), 515 F.3d 272 (4th Cir. 2008) (Chapter 13 may be used to reorganize despite no discharge)
- Nobelman v. American Savings Bank, 508 U.S. 324 (1993) (prohibits bifurcation of undersecured lien; context relevant to 506/1322)
- Dewsnup v. Timm, 502 U.S. 410 (1992) (no lien stripping of partially secured lien in Chapter 7)
- In re Jarvis, 390 B.R. 600 (Bankr. C.D. Ill. 2008) (no-discharge Chapter 13 cannot permanently alter rights; court distinguished here)
- In re Fenn, 428 B.R. 494 (N.D. Ill. 2010) (disagree with holding that 506(d) requires underlying claim to be disallowed for lien avoidance)
- In re Mendoza, 2010 WL 736834 (Bankr. D. Colo. 2010) (chapter 20 lien stripping considered but rejected in that case)