476 B.R. 468
Bankr. D. Md.2012Background
- Debtors filed a Chapter 13 case after a prior Chapter 7 discharge in 2009, creating a Chapter 20 scenario.
- Real Time asserted a secured claim based on a second deed of trust; debtors argued the lien was stripped and the unsecured portion discharged.
- Order Avoiding Lien (Oct. 12, 2011) stripped Real Time’s wholly unsecured lien effective after plan payments concluded.
- Debtors’ plan was confirmed Dec. 20, 2011; Real Time’s proof of claim was opposed as neither secured nor unsecured under the discharge.
- Real Time relied on Johnson v. Home State Bank to argue it retained an in rem lien with a claim subject to distribution in Chapter 13.
- Court questions whether a stripped lien in a Chapter 20 case creates an allowable unsecured claim for distributions when the debtor previously discharged in Chapter 7.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Real Time has an unsecured claim in Chapter 13 after lien stripping. | Real Time: in rem rights survive as a claim in Chapter 13. | Debtors: no unsecured claim exists; discharge and lien avoidance eradicate in personam and in rem rights. | No allowable unsecured claim for Real Time. |
| Whether the Order Avoiding Lien creates an unsecured claim for distributions. | Real Time relies on Johnson to treat stripped lien as unsecured claim. | Order lacks generic language enabling unsecured-claim treatment under the plan. | Order does not constitute an unsecured-claim allowance. |
| Whether Johnson v. Home State Bank applies to a wholly unsecured lien stripped in a Chapter 20 case. | Johnson supports an in rem-based claim treated as unsecured in plan. | Johnson addressed in rem rights with recourse; here Real Time’s rights are extinguished by discharge and lien avoidance. | Johnson does not apply to create an unsecured claim here. |
Key Cases Cited
- Johnson v. Home State Bank, 501 U.S. 78 (Supreme Court, 1991) (in rem rights may survive a discharge in certain contexts; insufficient here to create unsecured claim)
- In re Davis, 447 B.R. 738 (Bankr.D.Md.2011) (good faith Chap. 20 plans; unresolved issues in Chapter 20)
- In re Scantling, 465 B.R. 671 (Bankr.M.D.Fla.2012) (wholly unsecured mortgage lien may be stripped in Chap. 20 context)
- In re Okosisi, 451 B.R. 90 (Bankr.D.Nev.2011) (disallowed reliance on nonrecourse to unsecured claim post-lien avoidance)
- In re Hill, 440 B.R. 176 (Bankr.S.D. Cal.2010) (discusses treatment of nonrecourse debt in context of Chapter 11)