Frazier v. REAL TIME RESOLUTIONS, INC.
469 B.R. 889
E.D. Cal.2012Background
- Real Time Resolutions appeals a bankruptcy court order removing the creditor's junior lien and confirming a Chapter 13 plan in a Chapter 20 case.
- Debtors filed a Chapter 13 petition on August 3, 2009, which was converted to Chapter 7 because unsecured debts exceeded Chapter 13 limits.
- Debtors received a Chapter 7 discharge on December 21, 2009, but the liens on the residence remained in rem.
- On December 30, 2009, debtors filed Chapter 13 to address two mortgage liens; BOA held senior lien and Real Time held junior lien on the residence valued at about $240,000.
- Appellant filed a proof of claim for the junior lien in January 2010; the plan valued the property at $240,000 and proposed to treat Appellant as unsecured while curing BOA's senior lien.
- Bankruptcy Court concluded the junior lien was wholly unsecured after value exhausted by senior lien and allowed lien removal under Chapter 13 despite no discharge, with plan completion to render the lien avoidance permanent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| May a Chapter 20 debtor strip a wholly unsecured junior lien without a Chapter 13 discharge? | Real Time argues lien stripping may not occur without discharge per §1328(f)(1). | Frazier argues §1322(b)(2) and 506(a)(1) allow strip-off in Chapter 20 and discharge is not required. | Lien stripping permitted without discharge. |
| Does §1322(b)(2) antimodification apply to a wholly unsecured junior lien in a Chapter 20 plan? | Real Time contends no antimodification protection applies because the claim is unsecured after 506(a)(1). | Frazier asserts antimodification may shield liens against modification of secured mortgage rights. | Antimodification does not protect wholly unsecured liens; strip-off allowed. |
| Does §1325(a)(4) best interests test or plan treatment affect the confirmation when lien stripping occurs in Chapter 20? | Real Time argues plan lacks proper treatment for unsecured claim and violates best interests. | Frazier argues plan satisfies best interests and properly treats unsecured claim; discharge not required for lien strip. | Plan satisfies §1325(a)(4); unsecured claim treated and plan confirmed. |
Key Cases Cited
- Nobelman v. American Savings Bank, 508 U.S. 324 (1993) (lien strip under §1322(b)(2) not available for partially secured residential mortgage)
- In re Lam, 211 B.R. 36 (9th Cir. BAP 1997) (antimodification not applicable where value exists; corollary to Lam and Zimmer)
- In re Zimmer, 313 F.3d 1220 (9th Cir. 2002) (antimodification applies to rights of claimants after 506(a)(1) classification)
- In re Hill, 440 B.R. 176 (Bankr. S.D. Cal. 2010) (Chapter 20 lien stripping permissible; plan must comply with Code)
- In re Tran, 431 B.R. 230 (Bankr. N.D. Cal. 2010) (lien stripping in Chapter 20 requires otherwise compliant plan)
- In re Okosisi, 451 B.R. 90 (Bankr. D. Nev. 2011) (Chapter 20 lien stripping permissible; no discharge required)
- In re Fisette, 455 B.R. 177 (8th Cir. BAP 2011) (lien stripping not contingent on Chapter 13 discharge)
- In re Gounder, 266 B.R. 879 (Bankr. E.D. Cal. 2001) (treatment of unsecured claims in Chapter 13 plan)