Timothy Branigan v. Bryan Davis
716 F.3d 331
| 4th Cir. | 2013Background
- Trustee Branigan challenges bankruptcy court confirmation orders that strip off junior liens on debtors' residences in Chapter 13 cases filed within four years of a Chapter 7 discharge.
- Debtors sought to strip valueless liens and use Chapter 13 to cure mortgage arrears, with the Davises’ and Moore’s cases discussed as leading instances.
- BAPCPA 2005 amended the Code to tilt advantage toward creditors, prompting questions whether it bars lien-stripping in Chapter 20 cases.
- Chapter 13 allows modification of secured and unsecured claims under 1322(b)(2) and uses 506(a) to value collateral to determine secured status.
- Supreme Court precedents like Nobelman and Dewsnup frame limits on lien modification, while lower courts split on Chapter 20 outcomes.
- The court holds that valueless liens may be stripped in Chapter 20 proceedings, and that completion of a Chapter 13 plan can render such orders permanent even without a discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does BAPCPA bar lien-stripping in Chapter 20 cases? | Trustee argues BAPCPA creates per se prohibition against lien-stripping in Chapter 20. | Debtors contend BAPCPA preserves the Chapter 13 framework, allowing lien-stripping where liens have no value. | No per se bar; lien-stripping permitted in Chapter 20. |
| How does valuation under 506(a) interact with 1325(a)(5) in valueless liens? | Trustee relies on 1325(a)(5) applying to allowed secured claims despite 506(a) valuation. | Debtors argue lien is unsecured after 506(a) valuation and 1325(a)(5) does not apply to unsecured claims. | Valueless liens become unsecured under 506(a); 1325(a)(5) does not restrict stripping. |
| Does Nobelman prevent stripping of valueless liens in Chapter 20? | Trustee cites Nobelman to suggest protections for secured claims prevent stripping. | Debtors argue Nobelman permits stripping of wholly unsecured (valueless) liens because protections do not apply to in rem rights. | Nobelman does not bar stripping of valueless liens in Chapter 20. |
Key Cases Cited
- Nobelman v. American Savings Bank, 508 U.S. 324 (Supreme Court, 1993) (valuation under 506(a) does not adjust secured status where 1322(b)(2) protections apply)
- Dewsnup v. Timm, 502 U.S. 410 (Supreme Court, 1992) (5050(d) and 506 interplay; cannot strip down a lien that is fully allowed)
- Bateman v. Branigan, 515 F.3d 272 (4th Cir., 2008) (Chapter 13 protections exist without discharge; can pursue plan goals)
- Zimmer v. PSB Lending Corp. (In re Zimmer), 313 F.3d 1220 (9th Cir., 2002) (allows stripping of valueless liens in Chapter 13)
- Lane v. Western Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir., 2002) (valuation and modification framework permits lien-stripping)
- Pond v. Farm Specialist Realty (In re Pond), 252 F.3d 122 (2d Cir., 2001) (valueless lien stripping cited in favorable circuits)
- Tanner v. FirstPlus Fin. (In re Tanner), 217 F.3d 1357 (11th Cir., 2000) (strip off authority in Chapter 13 contexts)
- Bartee v. Tara Colony Homeowners Ass’n (In re Bartee), 212 F.3d 277 (5th Cir., 2000) (early recognition of lien-stripping in Chapter 13)
- McDonald v. Master Fin. (In re McDonald), 205 F.3d 606 (3d Cir., 2000) (chapter 13 lien-stripping jurisprudence)
- Johnson v. Home State Bank, 501 U.S. 78 (Supreme Court, 1991) (discharge affects in personam liability; lien survives in rem)