In Re Waterman
447 B.R. 324
Bankr.D. Colo.2011Background
- Debtor Waterman filed a prior Chapter 7 case (No. 09-10457-SBB) and received a discharge in 2009 for liabilities, including a second deed of trust on his residence.
- In the current case, Waterman filed a Chapter 13 petition on October 11, 2010, proposing to cure first-mortgage arrearages and strip the second lien as wholly unsecured.
- The creditor First National Bank did not object to the § 506 determination, but the Standing Chapter 13 Trustee objected to plan confirmation on lien-stripping grounds.
- The court had to decide whether a Chapter 13 debtor may strip a wholly unsecured second lien on a principal residence after a discharge in a prior Chapter 7 within four years.
- Judge Brooks reviewed Mendoza as persuasive but ultimately found support for allowing lien-stripping in this nondischargeable Chapter 13 context, and granted the plan in part.
- The court granted the § 506 determination that the residence is fully unsecured and confirmed the Amended Chapter 13 Plan (Docket #48), over the Trustee’s objection.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a Chapter 13 debtor may strip a wholly unsecured second lien after a prior Chapter 7 discharge within four years. | Waterman asserts § 506 allows stripping despite discharge timing. | Trustee argues Mendoza bars stripping when discharge occurred within four years. | Yes; lien stripping permitted if plan otherwise confirmable. |
Key Cases Cited
- In re Tran, 431 B.R. 230 (Bankr. N.D. Cal. 2010) (supports lien stripping eligibility independent of discharge status)
- In re Hill, 440 B.R. 176 (Bankr. S.D. Cal. 2010) (aligns with Tran on non-condition of discharge for stripping)
- In re Jarvis, 390 B.R. 600 (Bankr. C.D. Ill. 2008) (cites limits on discharge-related restrictions to stripping)
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (supports the plain language approach and non-exclusion of serial filings)