Background

• Debtor Sonja Ritter filed Chapter 7 and owned a home valued at $185,000 with a first mortgage held by Bank of America for $297,229 and a second mortgage held by PNC Bank for $42,416.
• Ritter filed a motion to avoid PNC’s junior lien under § 506, asserting the senior lien exceeded the property value, and submitted a proposed order.
• The bankruptcy court granted Ritter a discharge, closed the case, and did not rule on the motion to avoid PNC’s lien or sign the proposed order.
• Over three years later, Ritter moved to reopen the case to obtain the previously submitted order avoiding PNC’s lien; the bankruptcy court denied the motion as futile.
• The court held that, under controlling Supreme Court precedent, a Chapter 7 debtor cannot strip a wholly underwater junior mortgage lien under § 506(d); Ritter’s motion for reconsideration was also denied.
• Ritter appealed the denial of reopening and reconsideration; the BAP affirmed, concluding reopening would be futile because Caulkett and Dewsnup foreclose the requested relief.

Issues

Key Cases Cited

• Bank of America, N.A. v. Caulkett, 135 S. Ct. 1995 (2015) (Supreme Court holds Chapter 7 debtors may not void a junior mortgage lien under § 506(d) when a senior lien exceeds collateral value)
• Dewsnup v. Timm, 502 U.S. 410 (1992) (Supreme Court precedent interpreted to prohibit strip-off of wholly underwater junior liens in Chapter 7)
• Beezley v. California Land Title Co., 994 F.2d 1433 (9th Cir. 1993) (court may decline to reopen bankruptcy where relief sought is pointless)