Fisette v. Keller (In re Fisette)

11-6012 (B.A.P. 8th Cir. August 29, 2011)
Reversed and Remanded. First, section 1322(b)(2) does not bar a Chapter 13 debtor from "stripping off" a wholly unsecured lien on his principal residence. The first step of the analysis is to determine if the creditor is the holder of a secured claim under section 506(a). If the creditor's claim is at least partially secured after the application of section 506(a), then section 1322(b)(2) applies and the lien cannot be "stripped down". If the creditor's claim is wholly unsecured after application of section 506(a), then the lien may be "stripped off". Second, a wholly unsecured lien can be "stripped off" even if the debtor is not eligible for a Chapter 13 discharge. The "strip off" of a wholly unsecured lien on a debtor's principal residence is effective upon completion of the debtor's obligations under his plan, and it is not contingent on his receipt of a Chapter 13 discharge.
Procedural context:
Appeal from the bankruptcy court's order confirming a modified Chapter 13 plan, over the debtor's objection.
The debtor was ineligible for a Chapter 13 discharge under section 1328(f) because he had filed a Chapter 7 bankruptcy case within one year before filing a Chapter 13 case. The debtor listed a homestead on his bankruptcy schedules and also listed creditors holding senior, second, and third liens on the property. The debtor's originally filed Chapter 13 plan treated the senior lienholder as secured, but sought to avoid the second and third lienholders because, based upon the valuation of the property, the second and third lienholders were wholly unsecured under section 506(a). The bankruptcy court denied confirmation of the plan because it violated the antimodification provisions of section 1322(b)(2). The debtor sought leave to appeal the interlocutory order denying confirmation of the plan, but the request was denied by the bankruptcy court. The debtor filed an amended Chapter 13 plan that preserved the liens of the senior, second, and third lienholders to the property. The amended plan was confirmed over the debtor's objection and the debtor appealed.
Schermer, Venters, and Nail

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