Fisette v. Keller (In Re Fisette)
455 B.R. 177
8th Cir. BAP2011Background
- Debtor Michael James Fisette filed a Chapter 13 plan to strip off two junior liens on his homestead when the home's value ($145,000) was less than the senior lien ($176,312).
- The property is the debtor's principal residence; senior lienholder holds a secured claim, junior liens are wholly unsecured under §506(a).
- The debtor had a recent Chapter 7 discharge within a year of filing Chapter 13, rendering him ineligible for a discharge under §1328(f)(1) (Chapter 20 scenario).
- The original plan sought to treat junior liens as unsecured and strip them; after a denial of confirmation, debtor filed an amended plan that treated juniors as secured; confirmation was granted for the amended plan.
- Bankruptcy court’s interim order denying the original plan was appealed; appellate panel reverses and remands for further proceedings consistent with this opinion.
- The court’s key question is whether a debtor may strip off wholly unsecured junior liens on a principal residence and, if so, whether such stripping is contingent on discharge in a non-discharge Chapter 13 case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a Chapter 13 debtor strip off a wholly unsecured lien on a principal residence under §1322(b)(2)? | Fisette argues §1322(b)(2) allows stripping. | Trustee and amicus contend §1322(b)(2) bars stripping if no value supports the lien. | Yes; a debtor may strip off a wholly unsecured lien on a principal residence. |
| Is the strip-off effective upon plan completion or contingent on Chapter 13 discharge in a no-discharge Chapter 20 case? | Debtor asserts it becomes effective upon plan completion. | Trustee argues discharge timing may be required. | Strip-off is effective upon completion of plan, not contingent on discharge. |
| What treatment do junior lienholders receive after strip-off if no discharge is available? | Juniors should be treated as unsecured claimants with pro rata distribution. | Plan should preserve unsecured status only if discharge occurs? | Juniors are unsecured claimants for distribution purposes; plan must treat them accordingly. |
Key Cases Cited
- Nobelman v. Am. Sav. Bank, 508 U.S. 324 (1993) (defines secured vs. unsecured status via §506(a) in determining §1322(b)(2) applicability)
- Lane v. W. Interstate Bancorp (In re Lane), 280 F.3d 663 (2002) (value controls whether lienholder is secured; if value zero, lien is unsecured)
- Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220 (2002) (clarifies §1322(b)(2) uses §506(a) to determine secured status)
- Pond v. Farm Specialist Realty (In re Fond), 252 F.3d 122 (2001) (supports stripping wholly unsecured liens when no collateral value)
- Bartee v. Tara Colony Homeowners Ass'n (In re Bartee), 212 F.3d 277 (2000) (cites Nobelman framework for antimodification reach)
- In re Mann, 249 B.R. 831 (2000) (First Circuit BAP; discusses strip off vs. strip down)