§ 145.2     In Cases Filed after October 22, 1994
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 145.2, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

The Bankruptcy Reform Act of 1994 clarified the rules for the treatment of secured claims at conversion from Chapter 13.1 In Chapter 13 cases filed after October 22, 1994, § 348(f)(1)(B) provides, “Valuations of property and of allowed secured claims in the chapter 13 case shall apply in the converted case, with allowed secured claims reduced to the extent that they have been paid in accordance with the chapter 13 plan.”2 There is no illuminating legislative history with respect to this portion of the 1994 Act.3

[2]

“Valuations of property” is a new phrase of art that is not defined by the Bankruptcy Code. Valuations of property arguably occur in Chapter 13 cases in several different ways. Property is valued by the debtor in the schedules.4 Secured creditors value property when they follow the instructions on Official Bankruptcy Form 10, the proof of claim.5 Property is valued on the motion of the debtor or of a creditor under Bankruptcy Rule 3012.6 Valuation of collateral often occurs at the confirmation hearing.7 The plan or the order confirming the plan may contain specific findings with respect to the value of property.8 Sometimes collateral is valued in a separate adversary proceeding during the Chapter 13 case.9 In Chapter 13 cases filed after October 22, 1994, “valuation of property”in any of the ways mentioned could “apply” at conversion to Chapter 7.

[3]

Notice right away the potential for inconsistent valuations of property. It is not unusual for a Chapter 13 case to contain three or more different valuations for the same property: the value stated by the debtor in the schedules may be different from the value stated by the creditor on a proof of claim, both of which may be different from the value stated in the confirmed plan or in the order confirming the plan. The collision of different values for collateral already creates problems with respect to the binding effect of confirmation under § 1327.10 Conflicting valuations during the Chapter 13 case will come back into focus at conversion to Chapter 7.

[4]

For example, in In re Davis,11 the confirmed plan provided that Arcadia was fully secured by a car. Arcadia filed a preconfirmation proof of claim for $22,939, which valued the car at $14,450. At conversion to Chapter 7, the debtor sought to redeem the car for its liquidation value of $6,265. With three potential valuations on the table, the bankruptcy court held that the confirmed plan controlled for § 348(f) purposes:

[Section] 348(f)(1)(B) requires that the valuation of an allowed secured claim in a chapter 13 case, even though made for purposes of reorganization, must be used when a debtor seeks to redeem in the converted chapter 7 case. . . . Arcadia valued its collateral at $14,450 in its proof of claim. The confirmed plan, however, stated that the amount of Arcadia’s secured claim is $22,939.00. . . . [T]he amount of the secured claim as described in the plan is the amount of Arcadia’s allowed secured claim in this chapter 7 case. . . . [T]he plan was both filed and confirmed after Arcadia filed its proof of claim. . . . [T]hat the plan valued Arcadia’s secured claim differently than the proof of claim is tantamount to a challenge to the secured claim. . . . The purpose of § 348(f)(1) is to encourage debtors to try chapter 13. . . . The unintended result in this case, however, is that the statute binds Davis to a valuation that cuts against his interests now.12
[5]

Davis illustrates that the carryover of valuations from the Chapter 13 case at conversion to Chapter 7 carries with it a valuation dilemma for debtors. The conventional wisdom is that at redemption under § 722 in a Chapter 7 case, collateral is valued at what the lienholder would receive if the property were surrendered—typically the liquidation value of the property.13 This would be true if the case began in Chapter 7. When the case begins as a Chapter 13 case and converts to Chapter 7, the valuation standard is distorted because of the Supreme Court’s decision in Associates Commercial Corp. v. Rash.14 In Rash, the Supreme Court held that “replacement value” was the standard for valuing collateral at cramdown in a Chapter 13 case.15 Replacement value will almost always be higher than liquidation value. At conversion, the lienholder takes advantage by starting from the higher replacement valuation coming out of the Chapter 13 case, reduced by payments prior to conversion. The 1994 amendment to § 348(f) thus eliminated the “having to pay twice” penalty imposed by some courts at conversion,16 but the carryover valuation of property penalizes debtors at redemption after conversion.

[6]

The phrase “shall apply” in § 348(f)(1)(B) probably means that valuation during the Chapter 13 case is binding on creditors and on the debtor in the Chapter 7 case after conversion. If “shall apply” means binding, then appreciation or depreciation in property after valuation during the Chapter 13 case will not be considered at conversion in cases filed after October 22, 1994.

[7]

The separate reference to “valuations . . . of allowed secured claims” in § 348(f)(1)(B) must be given content. Valuing an allowed secured claim would ordinarily include valuing the collateral that secures the claim to determine the extent to which it is an allowable secured claim under § 506(a).17 To avoid redundancy, new § 348(f)(1)(B) could be interpreted to say that the amount of secured claims allowed during a Chapter 13 case shall apply at conversion without regard to whether the underlying collateral was actually valued during the Chapter 13 case.

[8]

For example, in some districts it is customary for the trustee to file a motion to allow claims soon after the claims bar date in each Chapter 13 case.18 Unless contested during the Chapter 13 case, the amount of a secured claim allowed by such a motion shall apply at conversion to Chapter 7. Chapter 13 plans and confirmation orders often are quite specific with respect to the allowed amount of secured claims. Section 348(f)(1)(B) gives such provisions the same effect on secured claims at conversion as an order after a contested claim objection. In other words, if the plan or the order of confirmation fixes the allowed amount of a secured claim, that amount is binding at conversion whether based on the valuation of property, on negotiation with a creditor or on simply the absence of opposition to confirmation of the plan.

[9]

In the absence of a confirmation order or any other finding of value, it is arguable that the value of collateral stated on a proof of claim could be the valuation of an allowed secured claim for purposes of § 348(f)(1)(B) at conversion. Although not without controversy, many courts have held that the value of collateral stated on a proof of claim is entitled to the evidentiary presumption in Bankruptcy Rule 3001(f).19 In the absence of a contrary confirmation order or order allowing claims, the value stated on the proof of claim filed by the holder of an allowed secured claim could carry over to the Chapter 7 case under § 348(f)(1)(B).

[10]

Section 348(f)(1)(B) further provides that allowed secured claims shall be “reduced to the extent that they have been paid in accordance with the Chapter 13 plan.”20 This provision seems clear: payments pursuant to the plan reduce the allowed amount of secured claims in the Chapter 7 case after conversion. The modifying phrase “in accordance with the Chapter 13 plan” presupposes that the debtor has filed a plan.21 It does not obviously require that the plan be confirmed, though payments to secured claim holders typically commence after confirmation.22 Adequate protection payments to a secured claim holder before confirmation23 may or may not be “in accordance with the Chapter 13 plan,” perhaps depending on the wording of the plan and the terms of the adequate protection order. If the debtor pays the allowed amount of a secured claim in full during the Chapter 13 case, § 348(f)(1)(B) says the allowed secured claim is reduced to zero in the Chapter 7 case at conversion.

[11]

The predicate for redemption of personal property subject to a lien under § 722 is that the debtor must pay “the amount of the allowed secured claim.”24 If the allowed secured claim was fully paid during the Chapter 13 case, § 348(f)(1)(B) works in concert with § 722 to entitle the debtor to redeem personal property without further payment at conversion to Chapter 7.25 If the allowed secured claim was paid in part during the Chapter 13 case, then the allowed secured claim is reduced by payments in accordance with the plan, and redemption under § 722 is available at the reduced amount.26 When the confirmed plan said that a lienholder was “fully secured,” at conversion the debtor must pay the entire balance shown on the creditor’s proof of claim—without regard to the actual value of the car—to redeem in the Chapter 7 case.27 The 1994 amendments to § 348(f)(1)(B) overrule decisions like Liberty National Bank & Trust Co. v. Burba (In re Burba)28 for Chapter 13 cases filed after October 22, 1994.29

[12]

Similarly, at conversion from Chapter 13 to Chapter 7, § 348(f) dictates that the value of collateral and the amount of secured claims during the Chapter 13 case will control the Chapter 7 trustee’s exercise of discretion whether to abandon property.30 Put another way, after a good-faith conversion, appreciation in the value of collateral during the Chapter 13 case would not be considered when the Chapter 7 trustee calculates whether there is equity for creditors. On the other hand, § 348(f)(1)(B) reduces the allowed amounts of secured claims to reflect payments during the Chapter 13 case—with the opposite effect on the interests of unsecured creditors in the Chapter 7 case after conversion.

[13]

This odd outcome is mandated by a straightforward reading of § 348(f)(1). As discussed above,31 under § 348(f)(1)(A) at good-faith conversion, appreciation in the value of property is not captured for the Chapter 7 estate because it did not exist at the Chapter 13 petition. Under § 348(f)(1)(B), payments to an allowed secured claim holder during the Chapter 13 case reduce the allowed amount of the secured claim at conversion to Chapter 7. The question then becomes, does the “equity” created by payments during the Chapter 13 case become property of the Chapter 7 estate at conversion? One bankruptcy court concluded that § 348(f)(1)(A) excluded appreciation from the Chapter 7 estate at conversion, but equity attributable to principal payments during the Chapter 13 case was not protected by § 348.32

[14]

When the allowed secured claim is paid in full before conversion, lienholders had best beware that § 348(f) will preclude repossession after conversion. In In re James,33 the confirmed plan valued Americredit’s allowed secured claim, and distributions under the plan fully paid the secured portion. After conversion to Chapter 7, Americredit repossessed the debtor’s car to collect the (unsecured) balance of its debt. The bankruptcy court found a violation of the discharge injunction:

With the secured claim having been paid in full, Americredit’s seizure of the automobile can only be seen as an act to collect an unsecured obligation that was discharged in chapter 7. . . . Following the direction of section 348(f), this court finds that Americredit’s secured claim was fully satisfied and that its seizure of the automobile could not constitute an act of lien enforcement. . . . Here, the confirmed chapter 13 plan . . . bifurcated the claim of Americredit into secured and unsecured components. . . . Having modified the lien pursuant to the confirmed plan in chapter 13, this court turns to section 506(d) . . . as a standard of its consequences. That standard holds that when a creditor’s only remaining claim is other than an allowed secured claim, that creditor’s lien is void. . . . Americredit has violated the discharge injunction of 11 U.S.C. § 524(a)(2) . . . . [A]ppropriate damages should include the costs and expenses which Ms. James has incurred . . . legal services . . . the cost of alternative transportation.34
[15]

The 1994 amendments to § 348(f) impact Dewsnup v. Timm35 and the use of § 506(d) in Chapter 13 cases filed after October 22, 1994. 11 U.S.C. § 506(d) provides, “To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless . . . .”36 The “Dewsnup effect” at conversion from Chapter 13 to Chapter 7—discussed by the Sixth Circuit in Burba37—would seem to be precluded by amended § 348(f)(1)(B). To the extent an allowed secured claim is reduced during the Chapter 13 case, that allowed secured claim is also reduced by § 348(f)(1)(B) for all purposes after conversion, including lien voiding under § 506(d).

[16]

Imagine a Chapter 13 debtor with an undersecured mortgage on real property that is not protected from modification by § 1322(b)(2).38 Assume the debt is $25,000 and there is only $10,000 of value to secure the claim. If an order valuing the collateral was entered during the Chapter 13 case or if the confirmed plan specified that the allowed secured claim was $10,000, § 348(f)(1)(B) mandates that determination “shall apply” at conversion to Chapter 7.

[17]

In the Chapter 7 case, the debtor would assert together or in the alternative that the property is redeemed from the lien by payment of $10,000 and, under § 506(d), the lien is void to the extent of the $15,000 that is “not an allowed secured claim.” The Supreme Court rejected this argument in Dewsnup—a Chapter 7 case filed before the 1994 Act. Section 348(f)(1)(B) requires that the allowed secured claim in § 506(d) be the $10,000 allowed secured claim determined during the Chapter 13 case—an outcome contrary to Dewsnup. The Supreme Court’s sleight of hand in Dewsnup with respect to the meaning of “allowed secured claim” is precluded by § 348(f)(1)(B) at conversion of a Chapter 13 case filed after October 22, 1994.

[18]

Section 348(f)(1)(B) is thus clearly implicated when a Chapter 13 debtor strips off a wholly unsecured lien on a homestead and then converts to Chapter 7. Discussed in detail elsewhere,39 it is now the law of several circuits that a Chapter 13 debtor can strip off a wholly unsecured lien on a personal residence notwithstanding Nobelman v. American Savings Bank40 and the antimodification provision of § 1322(b)(2). Stripping off a wholly unsecured lien on a homestead is fundamentally the same as declaring that there is no value to secure a lien on a car or on a water bed for purposes of § 348(f)(1)(B)—the valuation of property and determination of the allowed secured claim “shall apply” at conversion to Chapter 7. There is no allowed secured claim left after stripping off a wholly unsecured lien.

[19]

Predicting that this outcome will be unpalatable to the appellate courts, it will be interesting to see how the circuits that permit stripping a wholly unsecured lien on a homestead will preclude the deadly logical outcome that the lien is gone after conversion to Chapter 7. In Crain v. PSB Lending Corp. (In re Crain),41 the bankruptcy court forewarned a cold reception for the Chapter 13 debtor who voided an unsecured lien then converted to Chapter 7 to accomplish the outcome forbidden by the Supreme Court in Dewsnup:

If a lien is voided pursuant to § 506(d) in a chapter 13 case and the debtor then either inadvertently or intentionally converts the case to one under chapter 7 and receives a discharge, the lien is still void and the unsecured debt discharged. 11 U.S.C. § 348, which governs conversion of bankruptcy cases from one chapter to another, does not contain any language that addresses voided liens. 11 U.S.C. § 349 reinstates a voided lien only to the extent the case is dismissed.
        Thus, under [Lam v. Investors Thrift (In re Lam),] 211 B.R. 36 (B.A.P. 9th Cir. 1997), appeal dismissed for failure to prosecute, 192 F.3d 1309 (9th Cir. 1999),] a chapter 13 debtor could confirm a plan, void a fully unsecured lien, convert her case to one under chapter 7, discharge the now unsecured claim and never consummate the treatment of the trust deed holder’s claim proposed in the debtor’s chapter 13 plan. Such a result is not only fundamentally unfair, but it also contravenes the holding of Dewsnup through some procedural sleight-of-hand.42
[20]

There is irony in characterizing the voiding of a wholly unsecured lien as “fundamentally unfair.” Surely this is not an economic statement that a lienholder with no collateral is entitled to something more than the nothing that it has. The cases above are clear that a debtor can redeem property after conversion from Chapter 13 to Chapter 7 at the reduced amount of the allowed secured claim determined under § 348(f)(1)(B). If the allowed secured claim started out at zero dollars or was reduced to zero dollars by payments during the Chapter 13 case, the impact of § 348(f)(1)(B) is exactly the same: the debtor can redeem the collateral from the lien for zero dollars after conversion.

[21]

When the Supreme Court started down the crooked road in Dewsnup, there was no § 348(f)(1)(B). Congress changed the rules in 1994, and stripping off a wholly unsecured lien on a homestead will test the plain language of § 348(f)(1)(B). If intellectual honesty prevails, Congress has mandated that a result different from Dewsnup is available when debtors attempt a Chapter 13 case, then convert to Chapter 7. If this is fundamentally unfair, it is up to Congress to put the wheels back on this car.

[22]

There is a lack of parallelism between § 348(f)(1)(B) and other parts of § 348. Subsections 348(f)(1)(A) and (f)(2) redefine the content of the estate at conversion in Chapter 13 cases filed after October 22, 1994.43 If the debtor converts in bad faith, property of the estate will be different under § 348(f)(2) than at good-faith conversion under § 348(f)(1)(A). There is no similar “penalty” under § 348(f)(1)(B). The valuations of property and of allowed secured claims shall apply in the converted case, and allowed secured claims are reduced to the extent that they were paid in accordance with the Chapter 13 plan, notwithstanding that property of the estate in the converted case varies with the faith of the debtor.

[23]

One outcome of this lack of parallelism in § 348(f) is that even when the Chapter 7 estate is enhanced by, for example, postpetition acquisitions or appreciation of property because conversion was in bad faith,44 the extent of secured claims in the Chapter 7 case will be determined by valuations during the Chapter 13 case under § 348(f)(1)(B). Unsecured claim holders may benefit from a larger estate in a bad-faith conversion, but the allowed secured claims of lienholders will remain tied to the Chapter 13 case. Even a debtor who converts in bad faith is entitled to reduce allowed secured claims to the extent of payments in accordance with the Chapter 13 plan. This may help the debtor with respect to redemption after conversion, but it will hurt the debtor when the reduced allowed secured claim attracts the Chapter 7 trustee’s attention.

[24]

Not involving § 348(f), one (unpublished) conversion case deserves mention for its unusual conclusion based on common facts. In In re McClamrock,45 the confirmed plan provided $155 a month to Ford Motor Credit on account of its lien on the debtor’s car. The debtor converted to Chapter 7 and after conversion continued to pay FMCC $155 per month. At some point a “bankruptcy specialist” at FMCC sent a letter stating that the debtor could make voluntary payments of $155 per month notwithstanding discharge of personal liability in the Chapter 7 case. Based on this course of conduct, the bankruptcy court found a contract modification under the Uniform Commercial Code and FMCC was bound by its $155 per month deal with the debtor.

[25]

McClamrock is the case that debtors’ counsel will need someday when a lienholder accepts payments after conversion but then threatens repossession if the debtor will not “reaffirm” at some substantially larger amount.


 

1  The 1994 amendments to § 348(f)(1)(B) apply at conversion to “another chapter under this title,” not just at conversions to Chapter 7. See § 146.1  Standing, Procedure and Grounds for Conversion to Chapter 11§ 146.2  Strategic Considerations: Costs and Benefits of Conversion to Chapter 11 (conversion to Chapter 11), § 146.3  Incentives to Convert to Chapter 11 after BAPCPA§ 147.1  Standing, Procedure and Strategic Considerations (conversion to Chapter 12) and § 147.2  Incentives to Convert to Chapter 12 after BAPCPA.

 

2  11 U.S.C. § 348(f)(1)(B), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 311, 108 Stat. 4106 (1994).

 

3  Contrast the discussion by Congressman Brooks of the redefinition of the estate at conversion in § 348(f)(1)(A) and (f)(2), quoted in § 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994.

 

4  See §§ 35.2 [ Schedule A—Real Property ] § 36.8  Schedule A—Real Property, 35.3 [ Schedule B—Personal Property ] § 36.9  Schedule B—Personal Property and 35.5 [ Schedule D—Secured Claims ] § 36.11  Schedule D—Secured Claims.

 

5  See § 131.1  Official Bankruptcy Form 410 and Variations and § 131.2  Official Form 410 after BAPCPA.

 

6  See § 67.3 [ Preconfirmation Valuation Disputes ] § 57.6  Preconfirmation Valuation Disputes.

 

7  See discussion beginning at § 76.1  Valuation, Claim Splitting and Dewsnup.

 

8  See discussion beginning at § 120.1  11 U.S.C. § 1327: Overview.

 

9  See § 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

10  See § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors§ 120.5  Effects of Confirmation after BAPCPA and § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation.

 

11  300 B.R. 898 (Bankr. N.D. Ill. 2003).

 

12  300 B.R. at 900–02.

 

13  See, e.g., Triad Fin. Corp. v. Weathington (In re Weathington), 254 B.R. 895 (B.A.P. 6th Cir. 2000) (For redemption purposes under § 722, a debtor may redeem collateral by paying the secured creditor the liquidation value of the collateral. After Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997), the bankruptcy court decisions addressing the valuation of collateral in the context of a Chapter 7 redemption have recognized that the use and disposition of collateral in the Chapter 7 redemption context is [sic] quite different from the Chapter 13 cramdown context. . . . [T]he economic realities [are] different when a debtor redeems property in Chapter 7 by paying off the creditor, as opposed to the disposition in Chapter 13 in which a debtor continues making payments to the creditor over time and the creditor incurs the dual risks of both loss of payment and loss of value as the collateral deteriorates over time.”). Accord In re Podnar, 307 B.R. 667 (Bankr. W.D. Mo. 2003); Zell v. Chevy Chase Bank (In re Zell), 284 B.R. 569 (Bankr. D. Md. 2002); In re Ballard, 258 B.R. 707 (Bankr. W.D. Tenn. 2001). But see In re Smith, 307 B.R. 912 (Bankr. N.D. Ill. 2004) (Disagreeing with nearly every published opinion and finding Associates Commercial Corp. v. Rash, 520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997), to “reject[] any different valuation standard pertaining to § 506(a) under different circumstances. . . . Rash did not allow for a flexible opening to use a different valuation standard in Chapter 7 cases. As the dissent in Rash correctly observed, it was an opinion applicable to § 506(a) in any Bankruptcy Code Chapter, and thus gave an advantage to all secured bankruptcy creditors. . . . Rash’s replacement value (or retail value as the recognized valuation books use that term) will apply to redemptions in Chapter 7 under § 722.”).

 

14  520 U.S. 953, 117 S. Ct. 1879, 138 L. Ed. 2d 148 (1997).

 

15  See § 76.5  Rash and Valuation and § 76.7  Valuation after BAPCPA.

 

16  See § 319.1 [ In Cases Filed before October 22, 1994 ] § 145.1  In Cases Filed before October 22, 1994.

 

17  See discussion beginning at § 76.1  Valuation, Claim Splitting and Dewsnup.

 

18  See § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

19  See § 287.1 [ Timing, Procedure and Evidence Presumption ] § 135.1  Timing, Procedure and Evidence Presumption.

 

20  11 U.S.C. § 348(f)(1)(B), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 311, 108 Stat. 4106 (1994).

 

21  See §§ 36.2 [ Plan ] § 36.24  Plan and 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan.

 

22  See 11 U.S.C. § 1326(a)(2). See also § 239.1 [ What to Do If Creditor Is Not Receiving Payments ] § 123.1  What to Do If Creditor Is Not Receiving Payments.

 

23  See § 47.1  Adequate Protection of Lienholders before Confirmation and § 47.2  Preconfirmation Adequate Protection after BAPCPA.

 

24  11 U.S.C. § 722.

 

25  In re Archie, 240 B.R. 425, 429 (Bankr. S.D. Ala. 1999) (At conversion to Chapter 7, debtors can redeem car at the balance due on the allowed secured claim—here, for zero dollars. “According to § 348(f)(1)(B), the amount of an ‘allowed secured claim’ in a case converted to chapter 7 is the same as the amount of the claim established in the preconversion chapter 13 case. Section 722 explicitly permits redemption by payment to the lien holder [of] the amount of the ‘allowed secured claim.’ The final clause in § 348(f)(1)(B) reduces the ‘allowed secured claim’ in converted chapter 7 cases by amounts paid toward such claim during the preconversion chapter 13 case. Therefore, the amount necessary to redeem pursuant to § 722 is reduced by the amount paid toward the ‘allowed secured claim’ during the preconversion chapter 13 case.”).

 

26  See In re Dean, 281 B.R. 912 (Bankr. W.D. Tenn. 2002) (At conversion from Chapter 13 to Chapter 7, debtor can redeem car at balance remaining on the secured portion of car lender’s bifurcated claim.); In re Rodgers, 273 B.R. 186, 191–94 (Bankr. C.D. Ill. 2002) (After conversion from Chapter 13 to Chapter 7, debtor can redeem a car for the unpaid balance of the secured claim notwithstanding failure to perform the statement of intention within 45 days pursuant to § 521(2)(B). Confirmed plan provided that FMCC would be “paid $13,850 plus interest for a total of $14,382.” Two and one-half years after confirmation, the debtors converted to Chapter 7. During the Chapter 13, FMCC received $13,485.27. After conversion, debtors filed statement of intention to reaffirm the debt. No reaffirmation agreement was filed. After FMCC moved for relief from the stay, debtors moved to redeem. “[A] failure by a debtor to timely state an intention to redeem and perform that intention within the forty-five day period mandated by Section 521(2)(B) does not result in the loss of the right to redeem. . . . The language of Section 348(f)(1)(B) is clear and unambiguous. . . . [W]here a creditor’s secured claim is determined in a Chapter 13 case that subsequently converts to Chapter 7, in order to redeem under Section 722, the debtor need only pay the remaining Chapter 13 claim balance, regardless of the collateral’s current value. . . . The confirmed plan . . . does not provide that interest will accrue on the unpaid balance of FMCC’s secured claim . . . . It simply provides that, over the course of the plan, FMCC will be paid a total of $14,382.00, inclusive of interest. Therefore, the computation contemplated by Section 348(f)(1)(B) is performed simply by subtracting $13,485.27, the total payments paid to FMCC by the Chapter 13 Trustee, from $14,382.00, the amount of the allowed secured claim with interest.”).

 

27  In re Davis, 300 B.R. 898 (Bankr. N.D. Ill. 2003) (“Fully secured” valuation in confirmed plan controls redemption after conversion notwithstanding that liquidation value of car would be less; preconfirmation proof of claim for $22,939, which valued the car at $14,450, requires the debtor to pay the full amount of the secured claim, $22,939, to redeem after conversion.).

 

28  No. 93-6479, 1994 WL 709314 (6th Cir. Nov. 10, 1994) (Table decision at 42 F.3d 1388). See § 319.1 [ In Cases Filed before October 22, 1994 ] § 145.1  In Cases Filed before October 22, 1994.

 

29  See, e.g., In re Dean, 281 B.R. 912, 914–15 (Bankr. W.D. Tenn. 2002) (Section 348(f) “expressly overrules the [Liberty National Bank & Trust Co. of Louisville v. Burba (In re Burba), 42 F.3d 1388 (6th Cir. 1994),] court’s finding that the redemption value is determined independent of the value given to the collateral in the chapter 13 setting.”).

 

30  See In re Slack, 290 B.R. 282, 287 (Bankr. D.N.J. 2003) (At conversion after confirmation, the amount of secured claims on the Chapter 13 trustee’s final report controls whether Chapter 7 trustee has appropriately exercised discretion to abandon real property. “The chapter 7 trustee has, also, appropriately referred to the chapter 13 trustee’s final report for the balance due on the secured tax lien claims held by Capital Asset and RTL Trust. Under § 348(f)(1)(B) allowed secured claims in the chapter 13 case apply in the chapter 7 case, reduced to the extent paid under the chapter 13 plan. . . . [However, t]he proofs of claim submitted by Capital Asset and RTL Trust included post-petition interest for the 60 months of the Slacks’ proposed chapter 13 plan. Since the chapter 13 case failed before the 60 months expired, the balance due on the chapter 13 trustee’s final report includes some unearned interest. . . . [R]educing the balances due to Capital Asset and RTL Trust for unearned interest would lower the secured claims by less than $5,000—not enough to alter the chapter 7 trustee’s conclusion to abandon.”).

 

31  See § 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994.

 

32  In re Wegner, 243 B.R. 731 (Bankr. D. Neb. 2000). See § 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994 for further discussion of Wegner.

 

33  285 B.R. 114 (Bankr. W.D.N.Y. 2002).

 

34  285 B.R. at 117–18.

 

35  502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992).

 

36  11 U.S.C. § 506(d). The exceptions are not relevant for these purposes.

 

37  See § 319.1 [ In Cases Filed before October 22, 1994 ] § 145.1  In Cases Filed before October 22, 1994. See also § 105.1 [ Valuation, Claim Splitting and Dewsnup ] § 76.1  Valuation, Claim Splitting and Dewsnup.

 

38  See discussion beginning at § 80.1  In General: Claims That Are Not Secured Only by Security Interest in Real Property That Is the Debtor’s Principal Residence.

 

39  See § 80.13  Modification of Unsecured Home Mortgage: Before and After BAPCPA and § 80.15  Unsecured Home Mortgages after BAPCPA.

 

40  508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993).

 

41  243 B.R. 75 (Bankr. C.D. Cal. 1999).

 

42  243 B.R. at 84. Accord In re Marante, No. 02-13969-BKC-AJC, 2003 WL 21361675, at *1 (Bankr. S.D. Fla. Apr. 16, 2003) (unpublished) (After conversion to Chapter 7, bankruptcy court refuses debtor’s “motion for recordable order avoiding lien” when confirmed Chapter 13 plan stripped off wholly unsecured mortgage lien. “Debtor’s confirmed Chapter 13 plan . . . states that U.S. Bank is totally unsecured and the lien will be avoided. . . . A creditor should not be bound by a Chapter 13 plan when the Debtors have failed to comply with it themselves. . . . The general purpose of § 348(f) was to equalize the treatment a debtor would receive under a Chapter 13 case that converted to a Chapter 7 case with the treatment the debtor would receive if he filed a Chapter 7 originally. . . . It would be unfair for this Court to avoid U.S. Bank’s lien if no payment of the value of the underlying collateral was made prior to the completion of the Chapter 13. . . . The Debtors cannot claim the particular benefits of lien stripping in a Chapter 13 case when they have not themselves complied with the provisions of their own plan. Allowing the Debtors in this case to proceed in a Chapter 13 for only a year and then convert the case to Chapter 7 and demand to retain the benefits of Chapter 13 (specifically the ability to lien strip) in the converted case is unjust and contrary to the Bankruptcy Code.”); In re Pearson, 214 B.R. 156, 164–66 (Bankr. N.D. Ohio 1997) (After conversion to Chapter 7, IRS is not required to release its lien on the debtor’s property notwithstanding confirmation of a plan that recited that the IRS’s lien was “totally unsecured” and notwithstanding a stipulation during the Chapter 13 case that the IRS’s proof of claim was “an allowed unsecured nonpriority claim herein.” “This Court holds that the debtors cannot claim the particular benefits of lien stripping in a Chapter 13 case when they have not themselves complied with the provisions of their own plan. Allowing the Debtors in this case to file under Chapter 13, remain in Chapter 13 for just nine months, then convert the case to Chapter 7 and demand to retain the benefits of Chapter 13 in the converted case, works an injustice to the provisions of the Bankruptcy Code as well as the Supreme Court’s holding in [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992)]. . . . The general purpose of § 348(f) was to equalize the treatment a debtor would receive under a Chapter 13 case that converted to a Chapter 7 case with the treatment the debtor would receive if he filed a Chapter 7 originally. . . . [I]f this Court were to allow the Debtors to have the IRS lien removed, the Debtors would be in a better position than if they had filed a Chapter 7 initially. Indeed, this would appear to be true anytime a debtor is allowed to strip a lien and then convert to a Chapter 7, if the underlying secured claim is not one subject to redemption under § 722. . . . Accordingly, this Court holds that liens may be removed under the doctrine of lien stripping prior to the completion of the Chapter 13 plan only when they would be subject to redemption in Chapter 7 cases. For liens other than those which can be the [sic] subject to redemption in Chapter 7, the debtor must wait until he has complied with the provisions of his own plan before he may force a creditor to have a lien removed.”). See also In re Abruzzo, 249 B.R. 78 (Bankr. E.D. Pa. 2000) (After conversion from Chapter 13 to Chapter 7 and on remand from the district court, see Nos. 99-14011DWS & 99-6499, 2000 WL 420635 (E.D. Pa. Apr. 10, 2000), because mortgage is partially secured in the debtor’s 50% interest in real property, the bankruptcy court need not reach the question whether a Chapter 7 debtor can strip off a wholly unsecured mortgage after McDonald v. Master Financial, Inc. (In re McDonald), 205 F.3d 606 (3d Cir. 2000), cert. denied, 531 U.S. 822, 121 S. Ct. 66, 148 L. Ed. 2d 31 (2000). Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992), resolved that a Chapter 7 debtor cannot strip off the unsecured portion of an undersecured mortgage; but McDonald raises the question whether a Chapter 7 debtor can strip off a wholly unsecured mortgage because McDonald interprets Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (1993), to permit a Chapter 13 debtor to strip off a wholly unsecured mortgage notwithstanding § 1322(b)(2).).

 

43  See § 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994.

 

44  See § 316.1 [ In Cases Filed after October 22, 1994 ] § 143.2  In Cases Filed after October 22, 1994.

 

45  No. 03-59006 C-7W, 2003 WL 21730519 (Bankr. M.D.N.C. July 21, 2003) (unpublished).