VICTORIO v. Billingslea
2012 U.S. Dist. LEXIS 24292
| S.D. Cal. | 2012Background
- Appellants filed Chapter 7 in 2007, discharged on Feb 5, 2008, with IndyMac senior lien and CitiMortgage junior lien on home.
- In 2010, Victorios filed Chapter 13 listing home at $213,500 with the same liens; proposed plan paid $400/mo and sought to strip CitiMortgage’s lien.
- CitiMortgage filed an unsecured claim for $91,538.46 in 2010; the objection argued the debt was discharged in 2007.
- Bankruptcy Judge Taylor disallowed CitiMortgage’s claim; Judge Bowie later sua sponte overruled that disallowance.
- Bankruptcy Court held lien stripping not permanent in a Chapter 20 context and that plan could not pay all claims in 60 months; Victorios appealed.
- Court affirms Bankruptcy Court’s rulings: CitiMortgage claim is permitted; Chapter 20 lien stripping is available but not permanent without discharge or payment in full; plan not confirmable as proposed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Overruling CitiMortgage’s claim sua sponte was proper | Victorios | CitiMortgage | Affirmed; CitiMortgage claim allowed |
| Can a Chapter 20 debtor permanently strip an unsecured junior lien without discharge | Victorios | CitiMortgage/Trustee | Lien stripping available but not permanent without discharge or full payment |
| Disposition of a Chapter 20 case after plan completion without discharge | Victorios | CitiMortgage/Trustee | Case may close without discharge; lien stripping not permanent without discharge |
| Plan confirmability given CitiMortgage unsecured claim omission | Victorios | CitiMortgage | Plan not confirmable as proposed; CitiMortgage claim must be included |
Key Cases Cited
- Johnson v. Home State Bank, 501 U.S. 78 (U.S. 1991) (discharge extinguishes personal liability but lien survives as a claim)
- Tran, 431 B.R. 230 (N.D. Cal. 2010) (lien stripping available in Chapter 13 for wholly unsecured liens; effect under chapter 20)
- Casey, 428 B.R. 519 (Bankr.S.D. Cal. 2010) (discusses Chapter 20 absence of discharge and permanency limits)
- Okosisi, 451 B.R. 90 (Bankr. D. Nev. 2011) (creation of a purported 'fourth option' closing Chapter 13 without discharge; rejected by Victorio court)
- In re Victorio, 454 B.R. 759 (Bankr.S.D. Cal. 2011) (persuasive rejection of permanent lien stripping without discharge; confirms precedent against 'fourth option')