HSBC Bank USA, National Ass'n v. Blendheim (In Re Blendheim)
803 F.3d 477
| 9th Cir. | 2015Background
- Blendheims filed Chapter 7 in 2007, received a discharge in 2009, then filed Chapter 13 the same day to address their residence lien.
- HSBC held the first-position lien on the condo, filed a claim in Chapter 13, and later had its claim disallowed after the debtors' objection.
- The disallowance occurred without timely response from HSBC, leading the bankruptcy court to void HSBC’s lien under §506(d).
- The plan confirmations 9th amended plan initially failed due to HSBC’s objections, but the court later confirmed an 11th amended plan that permanently voided HSBC’s lien upon plan completion.
- Chapter 20 debtors (Chapter 13 after a Chapter 7 discharge within four years) are ineligible for a discharge under §1328(f), but may still use lien-stripping tools.
- The issue presented was whether discharge-ineligible Chapter 20 debtors may permanently void a lien after completing a Chapter 13 plan; the court held they may.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §506(d) voids an unallowed lien when the claim is disallowed | Blendheims: lien voided since HSBC's claim was disallowed | HSBC: lien voidance not proper given discharge ineligibility | Yes; lien voided under §506(d) when claim disallowed |
| Whether Chapter 20 debtors can permanently void a lien after plan completion | Blendheims: discharge not required for permanent lien-voidance | HSBC: discharge barriers defeat permanence | Yes; Chapter 20 debtors may permanently void liens |
| Whether lien-voidance permanence requires discharge or case closure | No discharge needed, closure suffices | Discharge or dismissal needed to permanently void | No; permanence allowed without discharge; closure can suffice when plan completes |
| Whether due process was satisfied in voiding the lien | N/A | HSBC: lack of adversary-proceeding notice | Due process satisfied; notice sufficient and actual knowledge obtained |
| Whether the Chapter 13 petition was filed in good faith | Debtors acted in good faith for reorganization goals | HSBC contends bad faith due to timing and stay goals | Yes; petition filed in good faith |
Key Cases Cited
- Dewsnup v. Timm, 502 U.S. 410 (U.S. 1992) (voidance depends on whether the claim is allowed or disallowed under §506(d))
- Caulkett v. Bank of America, N.A., 135 S. Ct. 1995 (S. Ct. 2015) (reaffirmed Dewsnup interpretation of §506(d))
- In re Tarnow, 749 F.2d 464 (7th Cir. 1984) (untimely claims and lien voidance sanctions discussed)
- Victorio v. Billingslea, 470 B.R. 545 (S.D. Cal. 2012) (debtor disposes lien via plan closure; concerns about discharge necessity)
- Leavitt, 171 F.3d 1219 (9th Cir. 1999) (discussed as dictum on how a Chapter 13 case concludes; not exhaustive)