Kleibrink v. Kleibrink (In re Kleibrink)

Summarized by Peter Ruggero , Ruggero Law Firm PC
15 years 5 months ago

Citation:

U.S. Court of Appeals for the Fifth Circuit, 07-11190, Opinion, Sept. 21, 2010

Tag(s):

5th Circuit

Ruling:

Secured creditor's lien on property was not extinguished by claim objection or discharge in prior bankruptcy. Secured creditors are entitled to due process, and an adversary proceeding is ordinarily required under the Bankruptcy Rules to extinguish a lien.

Procedural context:

Appeal from district court's affirmance of bankruptcy court's ruling on motion for relief from stay that secured creditor holds enforceable security interest in property of debtor notwithstanding prior bankruptcy discharge.

Facts:

In prior bankruptcy case, Debtor objected to creditor Mid State Trust VII's ("Mid State") security interest. The claim objection did not seek disallowance of Mid State's claim but rather sought to allow Mid State's claim in a zero amount. Debtor's confirmed plan of reorganization provided that Mid State would retain its security interest. Subsequently, Mid State attempted to foreclose on debtor's encumbered property. Debtor filed bankruptcy again to avoid foreclosure. Debtor argued that his discharge from prior bankruptcy extinguished Mid State's security interest. Bankruptcy court ruled that prior bankruptcy proceedings did not extinguish Mid State's security interest. District court affirmed. Fifth Circuit affirmed and concluded that Mid State did not receive sufficient due process. A proceeding to determine the validity, priority, or extent of a lien or other interest in property is governed under Part VII of the Bankruptcy Rules that provides procedural safeguards.

Judge(s):

Davis, Stewart, Dennis (per curiam)

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