735 F.3d 1263
11th Cir.2012Background
- McNeal filed a voluntary Chapter 7 petition and reported two mortgage liens on her home: a first-priority HSBC lien of $176,413 and a second-priority GMAC lien of $44,444, with FMV of $141,416.
- McNeal sought to strip off GMAC’s second lien under 11 U.S.C. § 506(a) and (d), arguing the junior lien was wholly unsecured since the senior lien exceeded value.
- The bankruptcy court denied the motion, concluding 506(d) does not permit stripping off a wholly unsecured lien; the district court affirmed.
- The Eleventh Circuit reviews the bankruptcy court’s decision de novo on legal questions, and the controlling issue is whether a wholly unsecured allowed claim under 506(a) can be voided under 506(d).
- The court ultimately holds that GMAC’s lien is voidable under 506(d) and reverses/remands for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 506(d) allows stripping off a wholly unsecured lien in Chapter 7. | McNeal argues the wholly unsecured GMAC lien is void under 506(d). | GMAC contends 506(d) does not permit stripping off in this context, citing Dewsnup’s reasoning. | Yes; the lien is voidable and remand for proceedings. |
Key Cases Cited
- Folendore v. United States Small Bus. Admin., 862 F.2d 1537 (11th Cir. 1989) (held that an allowed but wholly unsecured claim is voidable under 506(d))
- Dewsnup v. Timm, 112 S. Ct. 773 (1992) (strip down differs from strip off; not clearly on point for this case)
- Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th Cir. 2001) (supports preclusion of strip off for wholly unsecured lien in some circuits)
- Talbert v. City Mortg. Serv., 344 F.3d 555 (6th Cir. 2003) (addresses principles related to 506(d) in similar contexts)
- Laskin v. First Nat’l Bank of Keystone, 222 B.R. 872 (B.A.P. 9th Cir. 1998) (bankruptcy appellate panel decision recognizing 506(d) voids wholly unsecured liens)