OPINION
Appellant Sieglinde Zimmer, a Chapter 13 bankruptcy petitioner, filed suit against PSB Lending Corporation (“PSB Lending”) to avoid a Hen against her home. PSB Lending holds a second position deed of trust on Zimmer’s primary residence, which is entirely unsecured because the value of the first deed of trust exceeds the value of the home. The district court dismissed Zimmer’s complaint for failure to state a claim, finding that 11 U.S.C. § 1322(b)(2) prohibits avoidance of any Hen on the debtor’s primary residence, even where the Hen is wholly unsecured. We reverse, joining with the majority of other jurisdictions in holding that a wholly unsecured Henholder is not entitled to the protections of 11 U.S.C. § 1322(b)(2).
FACTUAL AND PROCEDURAL BACKGROUND
On or about October 8, 1997, Zimmer executed a promissory note for a $39,000 loan, secured by a deed of trust on Zim-mer’s residence in San Diego. Although different in form, a deed of trust is similar to a mortgage in purpose and effect. The deed of trust was assigned to PSB Lending; the outstanding loan value was $37,411.19 when Zimmer filed this case. Zimmer’s residence was already encumbered by a first deed of trust securing a loan of $123,000 that was used to purchase the property.
On December 29, 1999, Zimmer filed a petition under Chapter 13, which aUows а bankrupt debtor with regular income to restructure her debts and repay or discharge them as necessary. In her petition, she stated the value of her residence *1222 as $110,000. Because the first mortgage exceeded the value of the residence, Zim-mer listed PSB Lending’s claim for the repayment of its loan as unsecured.
On April 21, 2000, Zimmer filed an adversary complaint with the bankruptcy court seeking to avoid PSB Lending’s lien on her home. In general, Chapter 13 allows debtors to avoid liens, but there is an exception for homestead liens that attach only to the debtor’s primary residence.
See
11 U.S.C. § 1322(b)(2). Relying on our Bankruptcy Appellate Panel’s decision in
Lam v. Investors Thrift (In re Lam),
PSB Lending filed a motion to dismiss for failure to state a claim under Federal Rule of Bankruptcy Procedure 7012(b), which makes Federal Rule of Civil Procedure 12(b)(6) applicable to adversary proceedings in bankruptcy court. Concluding that it was not bound by Lam, the bankruptcy court held that PSB Lending’s claim was protected from modification under § 1322(b)(2), and granted the motion to dismiss.
After Zimmer initially filed an appeal to the Bankruptcy Appellate Panel, PSB Lending elected to transfer the appeal to the district court. In an unpublished order, the district court affirmed the bankruptcy court’s dismissal of the complaint, agreeing that liens against the debtor’s primary residence are protected from modification under § 1322(b)(2) even if the underlying claim is wholly unsecured. This appeal followed.
JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction to hear the appeal from the bankruptcy judge under 28 U.S.C. § 158(a). We have jurisdiction to hear the appeal from the district court under 28 U.S.C. § 158(d) and 28 U.S.C. § 1291.
Where a bankruptcy court has dismissed a complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), and the dismissal has been affirmed by the district court, appellate review is de novo.
Blyler v. Hemmeter (In re Hemmeter),
DISCUSSION
The district court erred in holding that a wholly unsecured lien on a primary residence may not be avoided in a Chapter 13 prоceeding. The plain language of 11 U.S.C. § 1322(b)(2) provides that antimo-dification protection is only available to holders of secured claims. PSB Lending is not the holder of a secured claim under the definitions provided in the Bankruptcy Code, and therefore its rights may be modified under § 1322(b)(2).
The Bankruptcy Code
This case turns on the interpretation and application of two provisions of the Bankruptcy Code, 11 U.S.C. § 506(a) and 11 U.S.C. § 1322(b)(2). Section 506(a) divides creditors’ claims into “secured *1223 claims” and “unsecured claims.” Although the conventional interpretation of “secured” might include any claim in which the creditor has a security interest in the debtor’s property, § 506(a) makes clear that the status of a claim depends on the valuation of the property:
An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property ... and is an unsecured claim to the extent that the value of such creditor’s interest ... is less than the amount of such allowed claim.
11 U.S.C. § 506(a). To put it more simply, a claim such as a mortgage is not a “secured claim” to the extent that it exceeds the value of the property that secures it. Under the Bankruptcy Code, “secured claim” is thus a term of art; not every claim that is secured by a lien on property will be considered a “secured claim.” Here, it is plain that PSB Lending’s claim for the repayment of its loan is an unsecured claim, because its deed of trust is junior to the first deed of trust, and the value of the loan secured by the first deed of trust is greater than the value of the house.
In general, Chapter 13 allows the modification of the rights of creditors, including the avoidance of liens against the debtor’s property, but protects homestead liens from modification:
[A Chapter 13 plan may] modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debt- or’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims[.]
11 U.S.C. § 1322(b)(2). Assuming that PSB Lending holds “a claim secured only by a security interest in real property that is the debtor’s principal residence,” it might qualify for protection against modificatiоn. 2 If so, its lien would survive bankruptcy and could not bé avoided by Zim-mer.
Although it seems paradoxical on its face, PSB Lending’s claim is arguably an “unsecured claim” that is also “a claim secured only by a security interest in real property that is the debtor’s principal residence.” Whether the antimodification clause of § 1322(b)(2) applies to the holder of such a claim is a question of first imрression in this Circuit. Numerous other jurisdictions, however, have addressed this question in dozens of published opinions. The position adopted by a majority of courts is that the antimodification clause does not apply to wholly unsecured homestead liens, but a substantial minority of courts has taken the contrary position.
See, e.g., Bartee v. Tara Colony Homeowners Ass’n (In re Barteе),
The Supreme Court’s decision in Nobel-man
In
Nobelman,
the Supreme Court considered the question of whether a partially-secured claim secured by a homestead lien could be bifurcated into its secured and unsecured components, and “stripped
*1224
down” to the value of the secured claim.
See id.
at 326-27,
The Supreme Court rejected this approach of bifurcation and stripping down, primarily because the debtors’ argument failed to consider the fact that § 1322(b)(2) “focuses on the modification of thе
‘rights of holders,’” id.,
not the status of claims. Although the Court found that it was proper to look to § 506(a) “for a judicial valuation of the collateral to determine the status of the [creditor’s] claim,”
id.,
because the creditor’s claim was partially secured, the creditor was “still the ‘holder’ of a ‘secured claim.’”
Id.
at 329,
The Court’s interpretation of § 1322(b)(2) is worth considering in detail. The Fifth Circuit, in the decision reviewed by
Nobelman,
had concluded that “section 1322(b)(2) appears to conflict with section 506(a),” and resolved the conflict in favor of § 1322(b)(2).
Nobleman v. Am. Sav. Bank (In re Nobleman),
Finally, the Supreme Court indicated that its interpretation was reasonable because it would be impossible to administer a bifurcated claim. There was no dispute that the secured portion of the mortgage сould not be modified, and under such circumstances there was no direction in the Bankruptcy Code as to how the terms of the mortgage could be readjusted by reducing its value to the secured portion without modifying the “rights” of the mortgage holder.
Id.
at 331-332,
The majority position
The majority position, that § 1322(b)(2) does not prohibit avoidance of liens associated with wholly unsecured claims, has been adopted by all five Courts of Appeals to consider the issue, as well as two Bankruptcy Appellate Panels.
Lane v. W. In
*1225
terstate Bancorp (In re Lane),
One оf the earliest and most influential of these cases is • our BAP’s opinion in
Lam.
The panel gave three primary reasons for its conclusion that a wholly unsecured hen may be avoided: 1) although the
Nobelman
Court focused on the rights of the creditor, the “rights” of a wholly unsecured creditor are “empty rights”; 2) in order to qualify for the antimodification protections, the creditor must first be a “holder of a secured claim”; and 3) extending antimodification protection might have the unwanted effects of inducing more filings under Chapter 11 and inducing creditors to obtain mortgages on overburdened property in order to avoid modification of their rights.
Other courts have focused primarily on the second reason cited in Lam, that a creditor that is not the holder of a secured clаim simply cannot qualify for antimodifi-cation protection. The Sixth Circuit in Lane outlines this argument in near-syllogistic fashion:
• Section 1322(b)(2) prohibits modification of the rights of a holder of a secured claim if the security consists of a lien on the debtor’s principal residence;
• Section 1322(b)(2) permits modification of the rights of an unsecured claimholder;
• Whether a lien claimant is the holder of a “secured claim” or an “unsecured claim” depends, thanks to § 506(a), on whether the claimant’s security interest has any actual “value” ...
• If a claimant’s lien on the debtor’s homestead has no value at all ... the claimant holds an “unsecured claim” and the claimant’s contractual rights are subject to modification by the plan.
The minority position
The minority . position holds that § 1322(b)(2) prohibits the avoidance of any homestead lien, regardless of whether the claim is secured or unsecured. Perhaps the lead case in the minority camp is
American General Finance, Inc. v. Dickerson,
*1226
The court in
Dickerson I
found that “the emphasis in the statute [§ 1322] is on the fact that a lien exists on the property, not the value of such property,”
The opinion in
Dickerson I
attempts to defeat the majority position’s plain-language interpretation of § 1322(b)(2) by pointing to the Supreme Court’s interpretation of “claims” in the antimodification clause.
Dickerson I,
We find ourselves in partial agreement with Dickerson I, but in greater agreement with the majority position. As Dickerson I notes, the language “claim secured only by a security interest in real property” does encompass all such claims, secured or unsecured. We agree that, in this case, PSB Lending may well be the holder of a “claim secured only by a security interest in real property that is the debtor’s home.” Nonetheless, because PSB Lending is still not a “holder of a secured claim,” it cannot qualify for anti-modification protection.
The analysis in
Dickerson I
ignores the order in which the Supreme Court proceeded in
Nobelman.
First, the Court determined that it was proper to engage in the § 506(a) valuation process.
The minority position attempts to jump forward to the last step in this analysis— determining what is entitled to protection from modification — without considering whether the creditor even qualifies for such protection in the first place. While it is clear that the term “claim secured only by” in the antimodification clausе is not limited to “secured claims,” it is equally clear that “holders of secured claims” does refer to the term of art as defined by § 506(a). The
Nobelman
Court recognized this when it pointed out that Congress used a different phrase in the anti-modification clause “rather than
repeating
the term of art ‘secured claim.’”
Id.
at
*1227
331,
While Dickerson I is correct in noting that the majority position places great emphasis on the valuation process, this emphasis is compelled by Nobelman and the statutory scheme:
The courts in the minority too easily dismiss the role of a § 506(a) valuation. The Nobelman Court stated that, “By virtue of its mortgage contract with petitioners, the bank is indisputably the holder of a claim secured by a lien on petitioners’ home.”508 U.S. at 328 ,113 S.Ct. at 2110 . In the very next sentence, the Supreme Court found that it was correct for a Chapter 13 debtor, in the context of a homestead lien, to seek a § 506(a) valuation. Id. Further, the Court stated that in this context, the valuation should be used to “determine the status of the [creditor’s] secured claim.” Id. These statements refute the analysis of courts that find a valuation to be irrelevant. In a § 1322(b)(2) plan, a valuation cannot be both irrelevant and necessary to determine the status of a homestead lien.... Therefore, the Supreme Court’s acceptance of a § 506(a) valuation in the context of § 1322(b)(2) must control.
Johnson v. Asset Mgmt. Group, LLC,
Finally, it is worth noting that the concerns expressed by the . Supreme Court in
Nobelman
are largely absent here. Because PSB Lending’s lien may be avoided entirely, and its lien rights abrogated аs to its entire unsecured claim, we need not consider the dilemma of how to modify an unsecured component without affecting the creditor’s rights with respect to the secured component. Furthermore, although Justice Stevens recognized a congressional policy in favor of promoting home lending, we join other courts in interpreting this as applying to first or purchase-money mortgages.
See Lam,
CONCLUSION
We conclude that the district court erred in holding that a wholly unsecured lien is protected by the antimоdification clause of § 1322(b)(2). We reverse the decision of the district court and remand for proceedings consistent with this opinion.
REVERSED and REMANDED.
Notes
.
In re Lam.
was appealed to this Court, but the appeal was dismissed on other grounds without consideration of the merits of the Bankruptcy Appellate Panel’s holding.
See
. Zimmer argues that PSB Lending's claim is not, in fact, secured only by real property, but also includеs personal property as security. In light of our conclusion that PSB Lending does not qualify as a holder of a secured claim, we need not reach the issue of whether its security interest attaches only to real property.
. We also note with concern that several bankruptcy courts in this circuit, including the bankruptcy court in this case, have criticized and refused to follow the BAP's holding of
Lam,
adhering instead to the minority position.
E.g., In re Enriquez,
. Because we conclude that the rights of a wholly unsecured creditor need not be protected under § 1322(b)(2), we need not consider the
Lam
panel's determination that such rights are “empty rights."
See