In re: Serge Michel Boukatch and Lori Jean Boukatch , 533 B.R. 292 ( 2015 )


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  •                                                           FILED
    1                        ORDERED PUBLISHED                JUL 09 2015
    SUSAN M. SPRAUL, CLERK
    2                                                       U.S. BKCY. APP. PANEL
    OF THE NINTH CIRCUIT
    3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
    4                            OF THE NINTH CIRCUIT
    5
    6   In re:                        )     BAP No.     AZ-14-1483-KiPaJu
    )
    7   SERGE MICHEL BOUKATCH and     )     Bk. No.     2:14-bk-04721-EPB
    LORI JEAN BOUKATCH,           )
    8                                 )
    Debtors.       )
    9                                 )
    )
    10   SERGE MICHEL BOUKATCH; LORI   )
    JEAN BOUKATCH,                )
    11                                 )
    Appellants,    )
    12                                 )
    v.                            )     O P I N I O N
    13                                 )
    MIDFIRST BANK; RUSSELL A.     )
    14   BROWN, Chapter 13 Trustee,    )
    )
    15                  Appellees.     )
    ______________________________)
    16
    17                   Argued and Submitted on June 19, 2015
    at Phoenix, Arizona
    18
    Filed - July 9, 2015
    19
    Appeal from the United States Bankruptcy Court
    20                        for the District of Arizona
    21    Honorable Eddward P. Ballinger, Jr., Bankruptcy Judge, Presiding
    22
    23   Appearances:    Lawrence D. Hirsch of Parker Schwartz, PLLC, argued
    for appellants; Craig Lawrence Friedrichs argued
    24                   for appellee Chapter 13 Trustee Russell A. Brown.
    25
    26   Before:   KIRSCHER, PAPPAS and JURY, Bankruptcy Judges.
    27
    28
    1   KIRSCHER, Bankruptcy Judge:
    2
    3           Chapter 131 debtors, Serge M. Boukatch and Lori J. Boukatch
    4   (“Debtors”), appeal an order denying their motion to avoid a lien
    5   on their principal residence.2       The bankruptcy court determined
    6   that, as a matter of law, a “chapter 20”3 debtor is not entitled
    7   to avoid a wholly unsecured junior lien under §§ 506(a) and
    8   1322(b)(2) against the debtor’s principal residence when no
    9   discharge will be entered in the pending chapter 13 case.       On this
    10   issue of first impression, we REVERSE and REMAND.
    11                   I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
    12           Debtors filed a chapter 13 bankruptcy case on February 8,
    13   2011.       They valued their residence located in Phoenix, Arizona at
    14   $187,500.       Debtors identified two liens against the residence:
    15   Wells Fargo Bank NA (“Wells Fargo”) held a first lien, amounting
    16   to $228,300; and MidFirst Bank (“MidFirst”) held a second lien,
    17   amounting to $67,484.96.       The bankruptcy court converted the case
    18   to a chapter 7 case on November 21, 2012.       The chapter 7 trustee
    19   abandoned the residence, given it was burdensome and of
    20   inconsequential value to the estate.       Debtors received a chapter 7
    21   discharge on March 25, 2013.
    22           Debtors filed the instant chapter 13 bankruptcy case on
    23
    1
    24          Unless specified otherwise, all chapter, code and rule
    references are to the Bankruptcy Code, 
    11 U.S.C. §§ 101-1532
    , and
    25   the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
    26           2
    Appellee MidFirst Bank has not appeared in this appeal.
    27           3
    We understand the term “chapter 20” debtor is a chapter 13
    debtor who has received a chapter 7 discharge within the four-year
    28   time period set forth in § 1328(f) prohibiting further discharge.
    -2-
    1   April 2, 2014, less than four years after the filing of Debtors’
    2   case in which they received their chapter 7 discharge.   Debtors
    3   again valued their residence at $187,500.   In addition to Wells
    4   Fargo’s first lien for $228,300, Debtors identified MidFirst’s
    5   second, wholly unsecured junior lien for $67,484, contending that
    6   MidFirst held a lien only; their personal liability on this debt
    7   had been discharged in the prior chapter 7 case.
    8        Debtors filed an amended chapter 13 plan on June 27, 2014,
    9   which provided the following regarding MidFirst’s junior lien:
    10        LIEN STRIPPING:
    11        SECOND LIEN: The claim of MidFirst Bank was discharged
    on 3/25/13 (dkt #89) in Debtors’ Chapter 7 case (2:11-bk-
    12        03143 RJH) and this second place lien is totally
    unsecured. The property is encumbered by a first lien in
    13        favor of Wells Fargo in the amount of $228,300 and the
    fair market value of the property is $187,500. Debtors’
    14        counsel shall file a separate motion to set aside the
    MidFirst Bank lien prior to confirmation of the plan
    15        pursuant to 
    11 U.S.C. § 506
    (a) and the lien of creditor,
    MidFirst Bank shall be stripped from the property. No
    16        payments shall be made to MidFirst Bank.
    17   Am. Ch. 13 Plan, Dkt. no. 20 at 6.    Debtors conceded they were
    18   ineligible for a chapter 13 discharge under § 1328(f)(1).   Id.
    19   Appellee, Chapter 13 Trustee Russell A. Brown (“Trustee”), who
    20   supports Debtors on appeal, filed a motion to deny entry of
    21   discharge; the bankruptcy court granted that motion.
    22        On July 7, 2014, Debtors filed a motion to determine the
    23   value of the residence, seeking to avoid or “strip off” MidFirst’s
    24   wholly unsecured junior lien under §§ 506(a) and 1322(b)(2) (the
    25   “Lien Strip Motion”).   MidFirst did not object to Debtors’ amended
    26   chapter 13 plan or the Lien Strip Motion; Trustee did not object
    27   to the “Lien Stripping” provision in Debtors’ amended plan.
    28        On July 28, 2014, Debtors filed a Notice of No Objection as
    -3-
    1   to the Lien Strip Motion.    Despite the lack of any objection, the
    2   bankruptcy court denied the Lien Strip Motion on October 1, 2014.
    3   The bankruptcy court did not conduct a hearing.    The court’s order
    4   sets forth its limited findings and conclusions:
    5        The question presented is whether a “chapter 20” debtor
    can invoke § 506 and § 1322 to permanently strip unsecured
    6        liens, in the absence of a discharge. Under the analysis
    of Victorio v. Billingslea, 
    470 B.R. 545
     (S.D. Cal. 2012),
    7        the answer is no. For this reason, the motion is denied.
    8   Order, Dkt. no. 40.   Debtors timely filed their notice of appeal
    9   on October 7, 2014.
    10                               II. JURISDICTION
    11        The bankruptcy court had jurisdiction under 
    28 U.S.C. §§ 1334
    12   and 157(b)(2)(K).   We have jurisdiction under 
    28 U.S.C. § 158
    .
    13                                  III. ISSUE
    14        Is a “chapter 20” debtor entitled to avoid a wholly unsecured
    15   junior lien against the debtor’s principal residence when no
    16   discharge will be entered?
    17                          IV. STANDARD OF REVIEW
    18        The bankruptcy court’s conclusions of law, including its
    19   interpretation of the Bankruptcy Code, are reviewed de novo.
    20   Zurich Am. Ins. Co. v. Int’l Fibercom, Inc. (In re Int’l Fibercom,
    21   Inc.), 
    503 F.3d 933
    , 940 (9th Cir. 2007).
    22                                V. DISCUSSION
    23   A.   The Ninth Circuit Court of Appeals has a pending appeal that
    may address, in part, whether a lien may be stripped off a
    24        principal residence in the absence of a discharge.
    25        The question before us is whether a chapter 20 debtor can
    26   avoid or “strip off” a wholly unsecured junior lien against the
    27   debtor’s principal residence in the absence of a discharge.    More
    28   specifically, can a debtor, who has been discharged of personal
    -4-
    1   liability for a home mortgage debt by receiving a chapter 7
    2   discharge, modify the in rem rights of the holder of the mortgage
    3   debt by avoiding the lien through a chapter 13 plan, even though
    4   the debtor is ineligible for discharge?   The Ninth Circuit has not
    5   yet addressed this issue; however, the Circuit may consider this
    6   issue, among others, in the In re Blendheim appeal, No. 13-35354.
    7   In an earlier order which is not on appeal to the Circuit, the
    8   bankruptcy court in Blendheim held that a debtor need not be
    9   eligible for a chapter 13 discharge to file a chapter 13 plan that
    10   proposes to strip off a wholly unsecured lien from the debtor’s
    11   principal residence.   In re Blendheim,4 
    2011 WL 6779709
    , at *5
    12   (Bankr. W.D. Wash. Dec. 27, 2011).    Other facts and issues may
    13   distinguish Blendheim from the appeal before us.   The issue raised
    14   in Blendheim involves a default order disallowing a secured
    15   lender’s proof of claim and the subsequent process to avoid that
    16   lender’s first lien.   In Blendheim, the Circuit, after oral
    17   argument, requested additional briefing on whether it “should
    18   require, consistent with Dewsnup v. Timm, 
    502 U.S. 410
     (1992),
    19   that a bankruptcy court first determine that a lien is
    20   substantively invalid before voiding that lien under [] § 506(d).”
    21   Order, Ninth Circuit Court of Appeals No. 13-35354, Dkt. no. 49,
    22   Dec. 22, 2014.   The strip off of a junior wholly unsecured lien in
    23   a chapter 13 case that we address in our present appeal is far
    24   more common than the issues before the Ninth Circuit in Blendheim.
    25        Two other Circuit Courts of Appeals and two Bankruptcy
    26
    27        4
    Sometimes “Blendheim” is spelled with a “d” and sometimes
    without (“Blenheim,” as it is on Westlaw), but the correct
    28   spelling is with a “d.”
    -5-
    1   Appellate Panels have considered the issue before us, each holding
    2   that such liens may be stripped, regardless of the debtor’s
    3   eligibility for a discharge.   See Wells Fargo Bank, N.A. v.
    4   Scantling (In re Scantling), 
    754 F.3d 1323
    , 1325 (11th Cir. 2014),
    5   abrogating In re Gerardin, 
    447 B.R. 342
     (Bankr. S.D. Fla. 2011)
    6   (holding that chapter 20 debtors could not permanently strip off
    7   wholly unsecured junior liens) and In re Quiros-Amy, 
    456 B.R. 140
    8   (Bankr. S.D. Fla. 2011) (same)); Branigan v. Davis (In re Davis),
    9   
    716 F.3d 331
    , 337-38 (4th Cir. 2013); In re Cain, 
    513 B.R. 316
    ,
    10   322 (6th Cir. BAP 2014); Fisette v. Keller (In re Fisette), 455
    
    11 B.R. 177
    , 186-87 (8th Cir. BAP 2011).   As we explain below, we
    12   agree that a chapter 20 debtor can strip off a wholly unsecured
    13   junior lien against the debtor’s principal residence in the
    14   absence of a discharge.
    15   B.   Lien stripping in a typical chapter 13 case.
    16        In a chapter 13 case in which the debtor is eligible for
    17   discharge, §§ 506(a) and 1322(b) enable the debtor to strip off a
    18   wholly unsecured lien against the debtor’s principal residence.
    19   Zimmer v. PSB Lending Corp. (In re Zimmer), 
    313 F.3d 1220
     (9th
    20   Cir. 2002).   The lien strip procedure in a chapter 13 case is a
    21   two-step process.   
    Id. at 1226-27
     (following Nobelman v. Am. Sav.
    22   Bank (In re Nobelman), 
    508 U.S. 324
    , 328-29 (1993) (court must
    23   first engage in the § 506(a) valuation process before determining
    24   the claim’s status for purposes of § 1322(b)(2))).   Section
    25   506(a),5 which is applied first, provides a valuation procedure
    26
    5
    27          Section 506(a)(1) provides, in relevant part, that an
    allowed claim of a creditor secured by a lien on property in which
    28                                                        (continued...)
    -6-
    1   and bifurcates creditors’ claims into “secured claims” and
    2   “unsecured claims.”     Id. at 1222-23.   “‘Secured claim’ is a term
    3   of art within the Bankruptcy Code, and means something different
    4   than it does for a creditor to have a security interest or lien
    5   outside of bankruptcy.”     In re Okosisi, 
    451 B.R. 90
    , 93 (Bankr. D.
    
    6 Nev. 2011
    ).    Whether a creditor who has a security interest in the
    7   debtor’s property is considered a “secured” creditor under the
    8   Bankruptcy Code depends upon the valuation of the property.       In re
    9   Zimmer, 
    313 F.3d at
    1223 (citing § 506(a)).      A claim is not a
    10   “secured claim” to the extent that it exceeds the value of the
    11   property that secures it.     Id.
    12        Section 1322(b)(2)6 allows chapter 13 debtors to modify the
    13   rights of creditors holding both secured and unsecured claims.
    14   See § 1322(b)(2) (directing that a chapter 13 plan may “modify the
    15   rights of holders of secured claims . . . or of holders of
    16   unsecured claims”).     But, a chapter 13 debtor may not modify the
    17   rights of “holders of secured claims” who only hold a security
    18   interest in real property that is the debtor’s principal
    19   residence.    Id.   This subsection is commonly known as the
    20   “antimodification” provision.       “However, the antimodification
    21
    5
    22         (...continued)
    the estate has an interest is a secured claim to the extent of the
    23   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
    24   of such creditor’s interest is less than the amount of such
    allowed claim.
    25
    6
    Section 1322(b)(2) provides that a chapter 13 plan may
    26   “modify the rights of holders of secured claims, other than a
    claim secured only by a security interest in real property that is
    27   the debtor’s principal residence, or of holders of unsecured
    claims, or leave unaffected the rights of holders of any class of
    28   claims.”
    -7-
    1   protection of [§] 1322(b)(2) only operates to benefit creditors
    2   who may be classified as secured creditors after operation of
    3   [§] 506(a).”   In re Okosisi, 
    451 B.R. at
    93 (citing In re Zimmer,
    4   
    313 F.3d at 1226
    ) (emphasis in original); Frazier v. Real Time
    5   Resolutions, Inc. (In re Frazier), 
    469 B.R. 889
    , 898 (E.D. Cal.
    6   2012) (citing In re Zimmer) aff’g 
    448 B.R. 803
     (Bankr. E.D. Cal.
    7   2011).
    8          If, after applying § 506(a), the creditor’s claim is
    9   determined to be “secured,” which includes partially secured
    10   claims (i.e., undersecured claims), the creditor is still the
    11   “holder of a secured claim” and the debtor is unable to reduce or
    12   “strip down” the undersecured claim to the principal residence’s
    13   fair market value.   See In re Nobelman, 
    508 U.S. at 329-332
    ; In re
    14   Okosisi, 
    451 B.R. at 93
    .    However, if “the claim is determined to
    15   be wholly unsecured, the rights of the ‘creditor holding only an
    16   unsecured claim may be modified under § 1322(b)(2),’ and the
    17   creditor’s lien may be avoided, notwithstanding the
    18   antimodification protection provided for in [§] 1322(b)(2).”
    19   In re Okosisi, 
    451 B.R. at 93-94
     (quoting In re Zimmer, 
    313 F.3d 20
       at 1227); Lam v. Investors Thrift (In re Lam), 
    211 B.R. 36
    , 40
    21   (9th Cir. BAP 1997) (antimodification provision protecting a loan
    22   secured by an interest in debtor’s principal residence does not
    23   apply if no value exists to which the security interest can
    24   attach).
    25          The question, therefore, becomes whether a chapter 20 debtor
    26   is entitled to strip off such liens when no chapter 13 discharge
    27   will be entered.   Courts across the nation are split on the issue.
    28   ////
    -8-
    1   C.   Split of authority on lien stripping in chapter 20 cases.
    2        The Bankruptcy Code allows debtors to file chapter 20 cases.
    3   Johnson v. Home State Bank, 
    501 U.S. 78
    , 87 (1991).      The Supreme
    4   Court held in Johnson that nothing in the Code forecloses the
    5   benefit of chapter 13 reorganization to a debtor who previously
    6   has filed for chapter 7 relief.    
    Id.
        Before BAPCPA, chapter 20
    7   debtors could obtain a chapter 13 discharge after having received
    8   a discharge in chapter 7 without restriction.      The Bankruptcy
    9   Abuse Prevention and Consumer Protection Act (“BAPCPA”) enacted in
    10   2005 imposed a restriction by adding § 1328(f), which states that
    11   a court cannot grant debtors a discharge in a chapter 13 case
    12   filed within four years of the filing of a case wherein a
    13   discharge was granted in chapter 7.      § 1328(f)(1).
    14        As stated earlier, the two Circuit Courts and two Bankruptcy
    15   Appellate Panels that have addressed this issue have held that a
    16   chapter 20 debtor may strip a wholly unsecured junior lien in the
    17   absence of a discharge.   This is one of three approaches courts
    18   have adopted.   See In re Jennings, 
    454 B.R. 252
    , 256-57 (Bankr.
    19   N.D. Ga. 2011).
    20        1.   The first approach
    21        Courts utilizing the first approach hold that stripping off
    22   wholly unsecured liens in chapter 20 cases is not permissible
    23   because it amounts to a “de facto discharge,” which is prohibited
    24   by § 1328(f).   Lindskog v. M & I Bank FSB (In re Lindskog), 451
    
    25 B.R. 863
    , 865-66 (Bankr. E.D. Wis. 2011) (permitting chapter 20
    26   debtor to strip off lien would create an “end run” around
    27   § 1328(f)), aff’d, 
    480 B.R. 916
     (E.D. Wis. 2012); In re Fenn, 428
    
    28 B.R. 494
    , 500 (Bankr. N.D. Ill. 2010) (allowing permanent strip
    -9-
    1   off of junior mortgage lien after chapter 20 debtor completes plan
    2   “results in a de facto discharge”); In re Mendoza, 
    2010 WL 736834
    ,
    3   at *4 (Bankr. D. Colo. Jan. 21, 2010) (allowing avoidance of
    4   second mortgage lien through subsequent chapter 13 filing would be
    5   tantamount to granting debtor a discharge as to that debt and
    6   would render § 1328(f) inoperable), abrogated by Zeman v. Waterman
    7   (In re Waterman), 
    469 B.R. 334
     (D. Colo. 2012); In re Winitzky,
    8   
    2009 WL 9139891
    , at *3 (Bankr. C.D. Cal. May 7, 2009) (“a lien
    9   strip would allow a debtor to simply do indirectly what the
    10   Supreme Court has ruled he may not do directly”); Blosser v. KLC
    11   Fin., Inc. (In re Blosser), 
    2009 WL 1064455
    , at *1 (Bankr. E.D.
    12   Wis. Apr. 15, 2009) (“[A]llowing a debtor to file Chapter 7,
    13   discharge all dischargeable debts and then immediately file
    14   Chapter 13 to strip off a second mortgage lien would not be much
    15   different than simply avoiding the mortgage lien in the Chapter 7
    16   itself.   But Chapter 7 debtors are not allowed to use § 506 to
    17   avoid liens.”).
    18        To support their position that the Code prohibits lien
    19   stripping in chapter 20 cases, these courts rely on an
    20   interpretation of Dewsnup v. Timm, 
    502 U.S. 410
    , 417 (1992),7
    21   which ended the practice of stripping undersecured consensual
    22   liens in chapter 7 cases using § 506(d), and on the discharge
    23
    7
    On June 1, 2015, the Supreme Court extended Dewsnup in
    24   chapter 7 cases to wholly unsecured junior liens in Bank of
    America, N.A. v. Caulkett, 
    135 S. Ct. 1995
     (2015). Nobelman
    25   “addressed the interaction between the meaning of the term
    ‘secured claim’ in § 506(a) and an entirely separate provision,
    26   § 1322(b). Nobelman offers no guidance on the question presented
    in these [chapter 7] cases because the Court in Dewsnup already
    27   declined to apply the definition in § 506(a) to the phrase
    ‘secured claim’ in § 506(d).” Caulkett, 
    135 S. Ct. at
    2000
    28   (citation omitted).
    -10-
    1   requirement in § 1325(a)(5).         In re Cain, 513 B.R. at 320; In re
    2   Frazier, 
    469 B.R. at 895
    .       The argument continues that
    3   § 1325(a)(5)(B)(i)8 requires a chapter 13 plan to provide that the
    4   holder of a secured claim retain the lien securing the claim until
    5   either the underlying debt is paid or a discharge is entered
    6   pursuant to § 1328.       In re Fenn, 428 B.R. at 500.   See also In re
    7   Jarvis, 
    390 B.R. 600
    , 605-06 (Bankr. C.D. Ill. 2008).         If the
    8   debtor is not eligible for a chapter 13 discharge due to a
    9   previous chapter 7 discharge, the lien strip cannot occur, because
    10   the “strip off/avoidance occurs at discharge.”         In re Fenn, 428
    11   B.R. at 500; accord In re Jarvis, 
    390 B.R. at 607
    .        In other
    12   words, these courts hold that a chapter 20 lien strip is not
    13   allowed because a chapter 13 discharge is required to strip the
    14   lien.
    15           2.     The second approach
    16           Courts adopting the second approach allow chapter 20 lien
    17
    8
    Section 1325(a)(5) provides in part that
    18
    with respect to each allowed secured claim provided
    19                  for by the plan —
    20                  (A) the holder of such claim has accepted the plan; [or]
    21                  (B) (i) the plan provides that —
    22                       (I) the holder of such claim retain the lien
    securing such claim until the earlier of —
    23
    (aa) the payment of the underlying debt
    24                            determined under nonbankruptcy law; or
    25                            (bb) discharge under section 1328; and
    26                       (II) if the case under this chapter is
    dismissed or converted without completion of
    27                       the plan, such lien shall also be retained by
    such holder to the extent recognized by
    28                       applicable nonbankruptcy law[.]
    -11-
    1   stripping but hold that the parties’ prebankruptcy rights are
    2   reinstated by operation of law after the plan has been consummated
    3   absent discharge or payment in full; therefore, the lien avoidance
    4   can never be permanent.   In re Victorio, 
    454 B.R. 759
    , 781 (Bankr.
    5   S.D. Cal. 2011) (chapter 20 debtor cannot permanently avoid a
    6   wholly unsecured junior lien without discharge or paying it in
    7   full during the course of chapter 13 plan), aff’d sub nom.
    8   Victorio v. Billingslea, 
    470 B.R. 545
     (S.D. Cal. 2012); Grandstaff
    9   v. Casey (In re Casey), 
    428 B.R. 519
     (Bankr. S.D. Cal. 2010)
    10   (same); In re Jarvis, 
    390 B.R. at 605-06
     (discharge is a necessary
    11   prerequisite to permanency of lien avoidance); In re Trujillo,
    12   
    2010 WL 4669095
    , at *2 (Bankr. M.D. Fla. Nov. 10, 2010) (absent a
    13   discharge any modifications to creditor’s rights are not permanent
    14   and have no binding effect once plan ends), aff’d sub nom.
    15   Trujillo v. BAC Home Loan Servicing, L.P. (In re Trujillo), 2012
    
    16 WL 8883694
     (M.D. Fla. Aug. 10, 2012), abrogated by In re
    17   Scantling, supra; In re Lilly, 
    378 B.R. 232
    , 236 (Bankr. C.D. Ill.
    18   2007) (“Where a debtor does not receive a discharge, however, any
    19   modifications to a creditor’s rights imposed in the plan are not
    20   permanent and have no binding effect once the term of the plan
    21   ends.”).   In this bankruptcy case, the bankruptcy court adopted
    22   this approach, relying on Victorio.
    23        These courts posit that chapter 13 cases can end in only one
    24   of three ways:   conversion, dismissal or discharge.   This is true
    25   whether it be pre- or post-BAPCPA.     See In re Victorio, 
    454 B.R. 26
       at 775, 778 (citing Leavitt v. Soto (In re Leavitt), 
    171 F.3d 27
       1219, 1223 (9th Cir. 1999)); In re Casey, 
    428 B.R. at 522-23
    .
    28   They further point out that actions taken to avoid a lien are
    -12-
    1   undone if the case is dismissed or converted prior to the
    2   successful completion of all plan payments.      The argument
    3   continues that because the debtor is ineligible for a chapter 13
    4   discharge, the only way to make the lien avoidance “permanent” is
    5   by paying the debt in full during the course of the chapter 13
    6   plan.    See § 1325(a)(5)(B)(i)(I)(aa), (bb).    Thus, without
    7   discharge, the only way to conclude the case is dismissal or
    8   conversion, either of which reinstates the avoided lien.        See
    9   §§ 1325(a)(5)(B)(i)(II), 348(f)(1)(C)(I).
    10           The bankruptcy court in In re Victorio rejected the notion
    11   that § 1328(f), added by BAPCPA, created what courts have referred
    12   to as the “fourth option” for permanency of lien avoidance:        the
    13   completion of all plan payments and closing the case without
    14   discharge.     454 B.R. at 775-76, 778-80 (discussing In re Okosisi
    15   and the “court-invented ‘fourth option’”); Victorio, 
    470 B.R. at
    16   555-56 (district court rejecting the fourth option as a
    17   “fallacy”).
    18           3.   The third approach
    19           Courts adopting the third approach allow chapter 20 lien
    20   stripping “because nothing in the Bankruptcy Code prevents it.”
    21   In re Jennings, 
    454 B.R. at 257
    .     These courts contend the
    22   mechanism that voids the lien is plan completion and that chapter
    23   20 cases end in administrative closing rather than dismissal.
    24   Section 350(a) provides:     “After an estate is fully administered
    25   and the court has discharged the trustee, the court shall close
    26   the case.”     Rule 5009(a) provides:    “If in a . . . chapter 13 case
    27   the trustee has filed a final report and final account and has
    28   certified that the estate has been fully administered, . . . ,
    -13-
    1   there shall be a presumption that the estate has been fully
    2   administered.”    As discharge is not available in a chapter 20 case
    3   pursuant to § 1328(f), after the debtor completes all payments and
    4   complies with the terms of the confirmed plan, the bankruptcy case
    5   will be closed without entry of a discharge.    See In re Okosisi,
    6   
    451 B.R. at 99
    .   Given closure and not dismissal after plan
    7   completion, “the code sections that reverse any lien avoidance
    8   actions contained within a chapter 13 plan upon conversion or
    9   dismissal are not implicated, and, thus, do not act to prevent the
    10   permanence of the lien avoidance.   Once a debtor successfully
    11   completes all plan payments . . . , the provisions of the plan
    12   become permanent, and the lien avoidance is, similarly,
    13   permanent.”   
    Id. at 100
     (citations omitted).
    14        A confirmed plan is binding on the debtor and the creditor
    15   and vests all property of the estate in the debtor “free and clear
    16   of any claim or interest of any creditor provided for by the
    17   plan.”   § 1327(c).   Provided the confirmed plan remains in effect,
    18   avoided liens remain avoided, as the plan is binding and through
    19   “res judicata precludes a creditor from bringing a collateral
    20   attack of that order.”   In re Okosisi, 
    451 B.R. at 100
    .    Only
    21   revocation of the confirmed plan or case conversion or dismissal
    22   can undo the res judicata effect of a confirmed plan.   
    Id.
        If all
    23   confirmed plan payments are made and plan terms are satisfied,
    24   confirmation of the plan will not be revoked and the case will not
    25   be converted or dismissed; the case will be closed leaving the res
    26   judicata effect of the order confirming the plan in place.     
    Id.
    27        In other words, under this approach, the propriety of a lien
    28   strip is not dependent upon discharge.   See, e.g., In re
    -14-
    1   Scantling, 754 F.3d at 1329-30 (chapter 20 debtors can permanently
    2   strip off wholly unsecured junior liens; ineligibility for a
    3   discharge is “irrelevant”); In re Davis, 716 F.3d at 337-38 (Code
    4   allows chapter 20 debtors to strip off wholly unsecured junior
    5   liens; eligibility for discharge is “not determinative”); In re
    6   Cain, 513 B.R. at 322 (holding same and reasoning that the wholly
    7   unsecured status of the creditor’s claim, rather that the debtor’s
    8   eligibility for a discharge, is determinative); In re Waterman,
    9   469 B.R. at 339-40 (same); In re Frazier, 
    469 B.R. at
    895-96
    10   (same); In re Fisette, 455 B.R. at 186-87 (same); In re Fair, 450
    
    11 B.R. 853
    , 857-58 (E.D. Wis. 2011) (nothing in the Code ties the
    12   modification of an unsecured lien to obtaining a discharge under
    13   chapter 13); In re Blendheim, 
    2011 WL 6779709
    , at *5 (same); In re
    14   Jennings, 
    454 B.R. at 257
    ; In re Okosisi, 
    451 B.R. at 103
     (holding
    15   same and reasoning that lien avoidance under In re Zimmer is
    16   independent of the granting of a discharge, and the permanence of
    17   such avoidance is assured by § 1327); In re Hill, 
    440 B.R. 176
    ,
    18   181-82 (Bankr. S.D. Cal. 2010) (chapter 20 lien strips are
    19   permitted absent discharge so long as plan otherwise complies with
    20   Code requirements); In re Tran, 
    431 B.R. 230
    , 235 (Bankr. N.D.
    
    21 Cal. 2010
    ), aff’d, 
    814 F. Supp. 2d 946
     (N.D. Cal. 2011).
    22   D.   The bankruptcy court erred in denying the Lien Strip Motion
    on the basis that Debtors were not eligible for a chapter 13
    23        discharge.
    24        We join the “growing consensus of courts” that have followed
    25   the third approach and hold that nothing in the Code prevents
    26   chapter 20 debtors from stripping a wholly unsecured junior lien
    27   against the debtor’s principal residence, notwithstanding their
    28   lack of eligibility for a chapter 13 discharge.   This approach is
    -15-
    1   consistent with Nobelman and Zimmer, because it starts by
    2   determining the status of the claim under § 506(a).   See In re
    3   Scantling, 754 F.3d at 1326-27, 1329 (citing Nobelman and Tanner
    4   v. FirstPlus Fin., Inc, (In re Tanner), 
    217 F.3d 1357
     (11th Cir.
    5   2000), the Eleventh Circuit’s equivalent to Zimmer); In re Davis,
    6   716 F.3d at 338 (citing Nobelman to hold that § 506(a) valuation
    7   must be done first to determine claim’s status before analyzing
    8   whether § 1322(b)(2) bars its modification); In re Cain, 
    513 B.R. 9
       at 322 (citing Nobelman and Lane v. W. Interstate Bancorp (In re
    10   Lane), 
    280 F.3d 663
    , 669 (6th Cir. 2002), the Sixth Circuit’s
    11   equivalent to Zimmer, to hold that by failing to first determine
    12   the proper classification of the creditor’s claim under § 506(a),
    13   the bankruptcy court disregarded the “road map” set forth in
    14   Nobelman and Lane).
    15        No one disputes that under § 506(a) MidFirst’s lien has no
    16   value because the senior lien held by Wells Fargo exceeds the
    17   value of the property by approximately $40,000.   Consequently,
    18   Nobelman and Zimmer dictate that MidFirst’s claim is “unsecured”
    19   under § 506(a).   See In re Zimmer, 
    313 F.3d at 1223
     (for creditor
    20   to have a “secured claim” there must be value for the creditor’s
    21   interest in the collateral).   Therefore, MidFirst holds only an
    22   “unsecured claim” for purposes of § 1322(b)(2); the claim is not
    23   subject to its antimodification protections.   See § 1322(b)(2)
    24   (protecting holders of “secured claims” secured only by a security
    25   in a debtor’s principal residence).
    26        Contrary to those courts adopting the second approach,
    27   because MidFirst’s claim is unsecured, we determine § 1325(a)(5)
    28   (protecting the holder of a secured claim until the debt is paid
    -16-
    1   or the debtor is discharged) does not apply.   This is because
    2   wholly unsecured liens are not “allowed secured claims” as the
    3   opening language to that section specifies.    See In re Scantling,
    4   754 F.3d at 1329-30 (§ 1325(a)(5) does not involve unsecured
    5   claims and debtor’s ineligibility for a discharge is “irrelevant”
    6   for lien strip in chapter 20 case); In re Davis, 716 F.3d at 338
    7   (“Because the liens in these cases have no value, they are wholly
    8   unsecured claims, which leaves no role in the analysis for section
    9   1325(a)(5).”); In re Cain, 513 B.R. at 322 (same); In re Frazier,
    10   469 B.R. at 898 n.10 (“Section 1325(a)(5) has no applicability to
    11   unsecured allowed claims, which are separately governed by the
    12   confirmation requirements of § 1325(a)(4).”); In re Fisette, 455
    13   B.R. at 186 (the requirements of § 1325(a)(5) apply only to an
    14   “allowed secured claim,” not a claim which has been classified
    15   unsecured via § 506(a)) (emphasis in original); In re Okosisi, 451
    16   B.R. at 97 (for § 1325(a)(5) to apply, the claim would first have
    17   to be classified as “an allowed secured claim” within the meaning
    18   of § 1325(a)(5)); In re Hill, 
    440 B.R. at 183
    .
    19        To remain true to the holding of In re Zimmer, MidFirst’s
    20   unsecured claim cannot logically be treated differently under
    21   § 1325 than it is treated under § 1322.   In re Hill, 
    440 B.R. at
    22   183 (citing United States v. Snyder, 
    343 F.3d 1171
    , 1179 (9th Cir.
    23   2003) which held that a creditor who did not hold a secured claim
    24   under § 506(a) had no right to other benefits of “secured status
    25   in the bankruptcy proceeding”).    Under In re Zimmer, the wholly
    26   unsecured status of MidFirst’s claim, rather than Debtors’
    27   eligibility for a discharge, is determinative.   BAPCPA did not
    28   change this outcome.   In re Okosisi, 
    451 B.R. at 103
    .
    -17-
    1           Moreover, we also disagree with the view that a lien strip in
    2   a “no discharge” chapter 20 case amounts to a “de facto”
    3   discharge.     In rejecting this view, one court stated:
    4           Simply put, stripping off a lien is not the same thing as
    being discharged from personal liability for the debt
    5           underlying that lien. As the Supreme Court has explained,
    a bankruptcy discharge “extinguishes only one mode of
    6           enforcing a claim — namely, an action against the debtor
    in personam — while leaving intact another — namely, an
    7           action against the debtor in rem.” Johnson v. Home State
    Bank, 
    501 U.S. 78
    , 84 (1991). Thus, a discharge releases
    8           a debtor from in personam liability, whereas a strip off
    affects a creditor’s ability to proceed against the debtor
    9           in rem. Fisette, 455 B.R. at 187 n.9.
    10   In re Waterman, 
    469 B.R. at 340
    .     By seeking to strip off a wholly
    11   unsecured junior lien, Debtors seek to do just that:       avoid the
    12   lien.     They do not seek a discharge.   In re Fisette, 455 B.R. at
    13   186-87.     See In re Fair, 450 B.R. at 857 (“Congress did not intend
    14   to prevent lien stripping through § 1328(f)(1), and it is
    15   inaccurate to characterize lien stripping as a de facto discharge
    16   under the bankruptcy code.”); In re Okosisi, 
    451 B.R. at
    101
    17   (§ 1328(f) only prohibits discharge and court would not read any
    18   further restrictions into the Code); In re Hill, 
    440 B.R. at
    182
    19   (“Since the [creditor’s] debt was already discharged, or changed
    20   to non-recourse status in the Chapter 7 case, a second discharge
    21   for the Debtors in this Chapter 13 case would be redundant.”).
    22   The discharge imposes a statutory injunction preventing the
    23   creditor from enforcing the discharged debt against the debtor
    24   personally or against specified assets; it does not release the
    25   lien from the debtor’s property.     In re Frazier, 
    448 B.R. at
    809
    26   (citing Johnson, 
    501 U.S. 78
    ).
    27           We conclude that § 1328(f)(1) does not prevent Debtors’
    28   ability to strip off MidFirst’s wholly unsecured junior lien in
    -18-
    1   their chapter 13 plan, because nothing in the Bankruptcy Code
    2   prevents chapter 20 debtors from stripping such liens off their
    3   principal residence under §§ 506(a)(1) and 1322(b)(2).   We further
    4   conclude that plan completion is the appropriate end to Debtors’
    5   chapter 20 case.   Unlike a typical chapter 13 case, the lien
    6   avoidance will become permanent not upon a discharge, but rather
    7   upon completion of all payments as required under the plan.     In re
    8   Davis, 716 F.3d at 338; In re Frazier, 
    469 B.R. at 900
    ; In re
    9   Blendheim, 
    2011 WL 6779709
    , at *6; In re Okosisi, 
    451 B.R. at
    99-
    10   100; In re Frazier, 
    448 B.R. at 810
    ; In re Tran, 
    431 B.R. at 235
    .
    11        We conclude that the bankruptcy court erred when it denied
    12   the Lien Strip Motion on the basis that Debtors were not eligible
    13   for a chapter 13 discharge.
    14                              VI. CONCLUSION
    15        For the foregoing reasons, we REVERSE the decision of the
    16   bankruptcy court and REMAND for further proceedings consistent
    17   with this opinion.
    18
    19
    20
    21
    22
    23
    24
    25
    26
    27
    28
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