In re Cain
513 B.R. 316
6th Cir. BAP2014Background
- Debtor Andrea M. Cain, after a Chapter 7 discharge in 2008, filed Chapter 13 to address auto loan, taxes, mortgage cure, and to avoid a wholly unsecured second mortgage.
- Her amended Chapter 13 plan (2008) provided for avoiding Amerifirst and other liens deemed wholly unsecured under 11 U.S.C. §§ 506(a), 1322(b)(2), 1325(a)(5)(B).
- Plan confirmed September 18, 2008; Debtor had received a Chapter 7 discharge within the preceding four years, making her ineligible for discharge in Chapter 13 under §1328(f)(1).
- After completing plan payments, the Chapter 13 Trustee moved to dismiss without discharge; no discharge was entered in 2013.
- Debtor moved (May 17, 2013) to avoid Amerifirst’s lien on her residence; property valued ~$100,800; first mortgage ~$106,306.38; Amerifirst lien ~-$9,415.28.
- Bankruptcy Court denied the motion on August 9, 2013, ruling that lien stripping under §506(d) was unavailable and that the lien would remain until discharge or debt payment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Chapter 20 debtor may strip a wholly unsecured lien on a primary residence in a Chapter 13 filed within four years of a Chapter 7 discharge. | Cain argues lien is unsecured under §506(a) and should be stripped per Lane and related authorities. | Amerifirst argues lien remains secured under §1322(b)(2) and §1325(a)(5) because the debtor cannot obtain discharge. | Chapter 20 debtor may strip a wholly unsecured lien. |
| Whether the bankruptcy court was bound by the confirmed plan in lien-avoidance analysis. | Plan language supports permanent lien avoidance for unsecured liens. | Court should follow plan terms; plan restrictions may bind outcomes. | Panel declines to address binding effect of the confirmed plan. |
Key Cases Cited
- Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993) (determines secured/unsecured classification governs modification rights)
- Lane v. Western Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir. 2002) (unsecured status under §506(a) allows non-modification of lien under §1322(b)(2))
- In re Jennings, 454 B.R. 252 (Bankr.N.D. Ga. 2011) (three approaches to Chapter 20 lien stripping; third approach endorsed by some courts)
- In re Fisette, 455 B.R. 177 (Bankr. 8th Cir. BAP 2011) (lien stripping may proceed in Chapter 20 without discharge eligibility)
- In re Wong, 488 B.R. 537 (Bankr. E.D.N.Y. 2013) (unsecured status under §506(a) permits §1322(b) treatment; discharge not required)