Wells Fargo Bank v. Scantling (In re Scantling)

Wells Fargo Bank, N.A. v. Scantling (In re Scantling), Case No. 13-10558 (11th Cir. June 18, 2014).
The Court found that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 does not prohibit a debtor from stripping off a wholly unsecured junior mortgage in a Chapter 20 case.
Procedural context:
Appeal from the bankruptcy court for the Middle District of Florida, Tampa Division, determining that strip off of a wholly unsecured mortgage is permissible in Chapter 20 cases through the interplay of 11 U.S.C. Section 506(a) and 1322(b)(2).
In November 2009, the Debtor filed for relief under Chapter 7 of the Bankruptcy Code. The debtor received her discharge in March 2010. In January 2011, the debtor filed for relief under Chapter 13 of the Bankruptcy Code and sought to determine the secured status of the second and third mortgages held by Wells Fargo on her principal residence. The total of the Bank's mortgages was in excess of $200,000.00. The Bank valued the residence at approximately $118,000.00. The debtor thereafter sought a determination that the junior liens were void and the Bank opposed the request. The Bankruptcy Court accepted the Bank's value and determined that Chapter 20 cases were permissible under the Code and that a debor in a Chapter 13 case could strip off a wholly unsecured mortgage on the debtor's principal residence through use of Sections 506 and 1322(b)(2). Section 1325(a)(5) did not come into play and a debtor's ineligibility for a discharge is irrelevant for strip off purposes in a Chapter 20 case.
Tjoflat, Moore and Schlesinger

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