In Re Frazier
448 B.R. 803
| Bankr. E.D. Cal. | 2011Background
- Frazier and spouse filed Chapter 13 after a Chapter 7 discharge in 2009; Bank of America holds a senior lien on the Illinois Avenue Property and Real Time holds a junior lien.
- The Illinois Avenue Property value is contested; Debtors allege $240,000 value, Bank of America lien exceeds property value.
- Real Time objects to valuation and to confirmability, arguing both secured and unsecured portions must be paid in full if discharge limits apply.
- The court must determine 11 U.S.C. § 506(a) valuation of Real Time’s claim to resolve the Chapter 13 plan’s feasibility and confirmability.
- Prepetition debts include a $16,417 IRS claim and a $4,500 car loan; Debtors propose to cure arrearage and fund plan through a 60-month payment plan totaling about $164,580.
- Chapter 20 concepts and post-petition lien-stripping are addressed in light of BAPCPA amendments and Ninth Circuit authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Real Time holds a secured claim under §506(a). | Real Time argues bifurcation creates secured and unsecured portions. | Debtors contend no secured portion exists given value is $0. | Real Time has no secured claim; value is $0. |
| Whether plan confirmation can proceed without discharging Real Time’s lien. | Real Time contends discharge is necessary to strip lien. | Lien strip via §506(a) valuation may occur without Chapter 13 discharge. | Plan may be confirmed; discharge not required for §506(a) valuation. |
| Whether the Illinois Avenue Property has value sufficient to secure Bank of America and extinguish Real Time’s lien. | Debtors assert value supports senior lender’s claim exhausting value. | Real Time offered no competing value; Debtors’ value accepted. | Property valued at $240,000; BoA lien exhausting value; Real Time value $0. |
| Whether the debtor's Chapter 13 plan is proposed in good faith under §1325(a)(3). | Debtors show real reorganization and arrearage cure; plan substantial. | Real Time argues pre-petition discharge signals bad faith. | Plan proposed in good faith and confirmed. |
| Impact of BAPCPA amendments on lien-stripping and discharge requirements. | §1325(a)(5) requires allowed secured claim; value-based. | Discharge not prerequisite for valuation; anti-modification intact. | BAPCPA amendments do not require discharge for lien-strip effectiveness. |
Key Cases Cited
- In re Zimmer, 313 F.3d 1220 (9th Cir. 2002) (value in collateral determines secured status; anti-modification if value exists)
- Nobelman v. American Savings Bank, 508 U.S. 324 (U.S. 1993) (§1322(b)(2) limits modification rights for liens on home; need secured claim value)
- Dewsnup v. Timm, 502 U.S. 410 (U.S. 1992) (discharge does not affect a lien; §506(d) cannot avoid lien in Chapter 7)
- In re Veteran Street Co., 144 F.3d 1288 (9th Cir. 1998) (valuation under §506(a) used for purposes of plan; not automatically discharged)
- In re Akram, 259 B.R. 371 (Bankr. C.D. Cal. 2001) (discussed lien-strip and discharge timing in context of 506(a))
- In re Warren, 89 B.R. 87 (B.A.P. 9th Cir. 1988) (consideration of good faith factors in §1325(a)(3))