§ 74.12     Lien Retention before BAPCPA
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 74.12, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Absent consent of the claim holder,1 or surrender of all collateral,2 the plan must provide that the holder of each allowed secured claim retains its lien.3 Prior to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),4 this important condition was superficially satisfied by a standard provision in every Chapter 13 plan that secured claim holders retain liens after confirmation.5 In cases filed after October 17, 2005, BAPCPA requires different and more specific language with respect to lien retention to accomplish confirmation of a plan.6 Confirmation has been denied when the plan failed altogether to provide that secured claim holders retain liens.7 A plan that proposes to pay a lienholder less than the allowed amount of its secured claim or that treats a lienholder as if it is unsecured is sometimes said to fail the lien retention requirement.8

[2]

The lien retention requirement with respect to each allowed secured claim has undergone important statutory changes. Prior to BAPCPA, § 1325(a)(5)(B)(i) required simply:

(5) with respect to each allowed secured claim provided for by the plan—
. . . .
(B)(i) the plan provides that the holder of such claim retain the lien securing such claim.9

With respect to cases filed on or after October 17, 2005, BAPCPA amended § 1325(a)(5)(B)(i) to more robustly require:

(5) with respect to each allowed secured claim provided for by the plan—
. . . .
(B)(i) the plan provides that—
(I) the holder of such claim retain the lien securing such claim until the earlier of—
(aa) the payment of the underlying debt determined under nonbankruptcy law; or
(bb) discharge under section 1328; and
(II) if the case under this chapter is dismissed or converted without completion of the plan, such lien shall also be retained by such holder to the extent recognized by applicable nonbankruptcy law[.]10
[3]

After BAPCPA, it is no longer sufficient to state simply in the plan that the liens of allowed secured claim holders are retained. Debtors are best advised to track the language of amended § 1325(a)(5)(B)(i) in the plan rather than litigate any different language.11

[4]

The language of the lien retention provision of a Chapter 13 plan has always been important. Discussed in detail elsewhere,12 there is much controversy regarding the effect of confirmation on the validity and extent of liens provided for by a Chapter 13 plan.13 The requirement in § 1325(a)(5)(B)(i) that the plan provide for lien retention conspires with the vesting effect of confirmation “free and clear” of claims or interests under § 1327(c)14 to jeopardize the lien rights of all secured claim holders except as provided in the confirmed plan.15 The debtor is best positioned to argue that the confirmed plan defines the extent of liens if the plan clearly so provides.16 In pre-BAPCPA cases, a common generic plan provision for lien retention might state that “liens provided for by the plan are retained as required by 11 U.S.C. § 1325(a)(5)(B)(i) but only to the extent of the allowed amount of the secured claim determined by 11 U.S.C. § 506(a).” After BAPCPA, the plan should more specifically provide that “the holder of an allowed secured claim provided for by the plan retains its lien until the earlier of payment of the underlying debt determined under nonbankruptcy law or discharge under section 1328.”17

[5]

Prior to BAPCPA, lien retention in § 1325(a)(5)(B)(i) was sometimes interpreted to require that payments through the plan must at least equal depreciation in the value of collateral during the repayment period. Not to be confused with adequate protection before confirmation18 or with the payment of present value (interest) after confirmation,19 lien retention avoids constitutional problems only if periodic payments under the plan equal or exceed the value lost through depreciation and use of collateral by the debtor after confirmation.20 Put another way, even if the plan recites that secured claim holders retain liens, if the payments proposed by the plan are insufficient to stay ahead of depreciation, the retained liens will erode faster than the allowed secured claim is paid, contrary to the intent of § 1325(a)(5)(B)(i).

[6]

Prior to BAPCPA, it was sometimes argued that the power of a Chapter 13 debtor to modify secured claims at confirmation under § 1322(b)(2) was limited by the adequate protection requirement of 11 U.S.C. § 361. At least one court denied confirmation for lack of “adequate protection” when the plan required a secured claim holder to wait several years before receiving payments and the automobile that secured the claim would have little or no value by the time payments commenced.21

[7]

Adequate protection is more properly characterized as the cost of delay in bankruptcy cases prior to confirmation.22 Secured claim holders need not win the argument whether § 361 applies at confirmation to win the argument that modification of a secured claim pursuant to § 1322(b)(2) cannot impair the value of the creditor’s retained lien under § 1325(a)(5)(B)(i) during the period of repayment. The power to modify secured claims is limited to the extent that the debtor must propose payments that equal or exceed the depreciation in value of the collateral that secures the claim. Otherwise, the delay in payments through the plan would take value from the lien without compensating the creditor for its loss.

[8]

The 2005 amendments may have confused this debate about the relationship between lien retention and adequate protection. Detailed elsewhere,23 BAPCPA amended § 1325(a)(5)(B)(iii)(II) to provide personal property lenders (only) a statutory entitlement to “adequate protection” at confirmation:

(5) with respect to each allowed secured claim provided for by the plan—
. . . .
(B)(iii) if—
. . . .
(II) the holder of the claim is secured by personal property, the amount of such payments shall not be less than an amount sufficient to provide to the holder of such claim adequate protection during the period of the plan.24
[9]

Applying usual rules of statutory construction, the “adequate protection” referred to in new § 1325(a)(5)(B)(iii)(II) would be the same adequate protection described in § 361. Protection from depreciation during the life of the plan would seem to be the intent behind this new subsection. “Lien retention” under other subparts of § 1325(a)(5)(B) must have other content—at least with respect to personal property. Simplistically, preserving the lien after confirmation—without regard to whether plan payments or other treatment provides adequate protection—probably satisfies the lien retention requirement after BAPCPA. That new § 1325(a)(5)(B)(iii)(II) addresses only personal property could suggest that lien retention has a different meaning with respect to real property or could signal that real property lienholders cannot claim an entitlement to “adequate protection” of the traditional sort after confirmation. There is no clue in the statute or in legislative history why BAPCPA limited the new adequate protection entitlement at confirmation to personal property—now an entitlement separate from lien retention, which applies to all allowed secured claim holders.

[10]

It has been said that lien retention is threatened in Chapter 13 cases when the length of the plan payment period for a secured claim exceeds the reasonable life expectancy of the collateral.25 Also, lien retention is implicated when the order of payments to creditors under the plan delays or interrupts the payment of a secured claim such that the value of the collateral falls more quickly than the lienholder receives payments.26

[11]

In these situations, the secured claim holder must object to confirmation and argue that the plan fails to retain its lien as required by § 1325(a)(5)(B)(i). After BAPCPA, lenders secured by personal property would also argue that the plan fails the adequate protection requirement in new § 1325(a)(5)(B)(iii)(II).27 The lienholder cannot wait until after confirmation to challenge a plan that erodes the protection of its lien—confirmation will bind the creditor to the treatment proposed by the plan.28 Lack of “adequate protection” arguments will be barred by confirmation, and if notice of the content of the plan was sufficient, even a lienholder’s constitutional arguments will run squarely into the preclusive effect of confirmation.29

[12]

Determining whether the plan properly retains a secured claim holder’s lien requires some careful calculation by the creditor or by the Chapter 13 trustee. Particularly during the early months after confirmation when filing fees, attorney fees, other administrative expenses, priority claims and maybe mortgage arrearages are being paid through the plan, the debtor’s payments to the trustee may be mathematically insufficient to generate full monthly payments to all secured claim holders provided for under § 1325(a)(5).30 Detecting the (temporary) shortfall in advance of confirmation to form the basis for an objection to the plan requires sophisticated analysis of the proposed plan.

[13]

In some districts, the software used by the Chapter 13 trustee can generate a projected month-by-month picture of the distributions that will be available if the debtor makes on-time payments. In other jurisdictions, creditors have to do the math for themselves. Most Chapter 13 plans are tightly budgeted. Lienholders should not expect the Chapter 13 trustee to always protect them from the sometimes not-so-minor lien impairments that will occur during the early stages of many Chapter 13 plans. A timely objection to confirmation by the creditors is the only insurance that lien retention will be meaningful throughout the repayment period.

[14]

Prior to BAPCPA, there was much controversy whether a Chapter 13 plan could provide for the immediate release of liens when the allowed secured claim of a lienholder was paid in full.31 For cases filed on or after October 17, 2005, BAPCPA requires that liens be retained until discharge or payment of the underlying debt, determined under nonbankruptcy law.32 To frame this contentious pre-BAPCPA issue, assume a car lender with a $10,000 claim secured by a $6,000 car. The plan proposes to pay the $6,000 allowable secured claim with 15 percent interest at the rate of $241 per month. This proposal would retire the $6,000 allowed secured claim in 30 months. The plan also proposes to pay unsecured claim holders 50 percent, and the debtor will make payments into the plan for 36 months. The issue in cases filed prior to October 17, 2005, was: Can the plan provide that the car lender will retain its lien only until its $6,000 allowed secured claim is paid in full; or must the plan retain the car lender’s lien until the completion of all payments under the plan? This issue fractured the courts.

[15]

Prior to BAPCPA, many courts held that a lienholder was entitled to be paid only the allowed amount of its secured claim, thus the plan could release the lien as soon as the allowed secured claim was paid.33 Nearly an equal number of reported decisions concluded that secured claim holders retained liens until the debtor became entitled to a discharge at the completion of payments to all creditors, notwithstanding that the allowed secured claim was earlier paid in full.34 Of course, when the plan provided for release of a lien upon plan completion, both the debtor and the lienholder were bound.35 Direct payment of an allowed secured claim by the debtor was not interpreted by the courts to effect a release of liens at discharge.36

[16]

The pre-BAPCPA decisions allowing Chapter 13 plans to release liens upon payment of the allowed secured claim had the better of this disagreement. As explained by the bankruptcy court in In re Flowers:37

In language that is as plain as language can be, section 1322(b)(2) allows a plan to “modify the rights of holders of secured claims. . . .” . . . [S]ection 1322(b)(2), by its own words, does not limit the power to modify the rights of [a] secured creditor to “payment terms.” One of the rights of a secured creditor is the right to enforce its lien to the full extent of the contract debt. Nothing in the Code or in any Supreme Court decision excludes that right from the rights subject to modification in a chapter 13 plan. . . . We know . . . that “allowed secured claim” in section 1325(a) has the section 506(a) meaning and is the portion of the total claim equal to the value of the collateral. . . . [U]nder § 1325(a)(5)(B) . . . the only lien retained is the lien securing the secured claim; that is, the claim to the extent of the value of the collateral.38
[17]

Pre-BAPCPA decisions refusing to allow the release of liens upon payment of the allowed secured claim were fixated on § 349 of the Code and the possibility that the Chapter 13 case would be dismissed after payment of the allowed secured claim, but before the debtor became entitled to a discharge. This fear was not supported by a careful reading of § 349 and was not supported by history or good logic. BAPCPA did not amend § 349, but § 1325(a)(5)(B)(i)(II) was amended to provide that if the Chapter 13 case is dismissed or converted before completion of the plan, a lien securing an allowed secured claim must be retained “to the extent recognized by applicable nonbankruptcy law.”39

[18]

Section 349(b) provides:

(b) Unless the court, for cause, orders otherwise, a dismissal of a case . . .
(1) reinstates—
. . .
(B) any transfer avoided under section 522, 544, 545, 547, 548, 549, . . . and
(C) any lien voided under section 506(d) of this title;
(2) vacates any order, judgment, or transfer ordered, under section . . . 542, 550, or 553 . . . ; and
(3) revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title.40
[19]

The pre-BAPCPA cases delaying lien release until discharge cite either § 349(b)(1)(C) or § 349(b)(3) as statutory proof that Congress did not intend lien release when the allowed secured claim was paid in full. As explained with precision and careful historical analysis by the bankruptcy court in In re Castro,41 § 506(d) (in § 349(b)(1)(C)) is not implicated when a Chapter 13 plan limited lien retention to the allowable amount of the secured claim:

[Section] 1325 specifically requires the lienholder only to “retain the lien securing such claim,” and the reference of “such claim” is to the “allowed secured claim” identified in the opening phrase of § 1325(a)(5). The term of art “allowed secured claim” is defined by § 506(a) and is thereby limited “to the extent of the value of such creditor’s interest in the estate’s interest” in the collateral securing the claim. Nothing in the language of § 1325(a)(5) requires the lienholder to retain a lien securing the entire allowed claim, which is what GMAC’s reading would require. . . . The plan provision . . . does not purport to grant the Debtor[s] a discharge . . . . [I]t merely provides that GMAC’s lien shall then be released. The Debtors remain liable for the full remaining balance of GMAC’s allowed claim . . . . Because lien stripping was permitted in Chapters IX, X, XI, XII and XIII of the Act, the same conclusion should apply under the Code absent “some discussion in the legislative history” “to effect a major change in pre-Code practice.” . . . [Sections] 506(a) and (d) should be read consistently in cases under Chapter 13, which means that § 1325(a)(5)’s requirement for retention of the lien until payment of the allowed secured claim requires only the payment of the amount determined pursuant to § 506(a). Nothing requires retention of the lien after the secured debt is satisfied. Even if there is a conversion to Chapter 7 after all required lien payments have been made, this result is not contrary to [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992),] because the lien, as modified, has been fully satisfied in the Chapter 13 case, and therefore no lien remains to be “avoided” in the Chapter 7 case. . . . [Section] 349 only restores liens avoided under § 506(d). It therefore has no bearing where § 506(a) was used to bifurcate the claim, § 1322 was used to modify the lien to secure[ ] only the allowed secured claim as so determined, and the plan payments and § 1325(a) were then used to satisfy the modified lien, not to avoid it. . . . If there is a dismissal or conversion to Chapter 7 prior to the completion of the plan by the Debtors, there is a loss of the in personam benefit of the discharge under § 1328. Consequently, the Debtors will remain liable for the full balance of the debt to GMAC, and GMAC will have already received the present value of its collateral. That puts GMAC in the same economic position as if it repossessed and foreclosed on its collateral upon default. Indeed, GMAC would then be in a better position than if the Debtors had simply redeemed the car pursuant to § 722. . . . [F]or GMAC to receive the full value of its collateral and still retain a lien to secure the unsecured portion of its debt would be to give GMAC a windfall compared to other unsecured debts. It would give GMAC’s unsecured claim preferential treatment that is not enjoyed by other unsecured claims, because GMAC’s unsecured claim would remain secured by a contingent or springing lien, effective upon conversion. This is prohibited by § 1322(a)(3), which requires all claims in the same class to have the same “treatment.” And it creates the anomaly that if the debtor paid the full[y] secured claim through the Chapter 13 plan, then converted to Chapter 7 and sought to redeem the vehicle pursuant to § 722, the debtor would have to pay the value of the collateral twice. . . . [T]he result GMAC argues for would be better than a § 1111(b) electing creditor can get in a Chapter 11 case, because GMAC retains its unsecured claim under the plan. The absence of a § 1111(b) provision in Chapter 13 indicates Congress did not intend secured creditors to retain their liens to the full amount of the debt, following a modification of the lien to equal the value of the collateral and payment of the present value of such amount through a plan.42
[20]

The argument in the pre-BAPCPA cases from § 349(b)(3) strayed even further afield. Section 349(b)(3) deals with the vesting of property of the estate, not with the reinstatement of liens that have been paid in full through the confirmed plan.

[21]

Section 1327(b) and (c) provide that confirmation vests all property of the estate in the debtor “free and clear” of any claim or interest of any creditor provided for by the plan.43 At dismissal in a typical Chapter 13 case, revesting property of the estate under § 349(b)(3) vests property in the debtor and out of the Chapter 13 estate. Any lien on property of the estate that was retained by the plan consistent with §§ 1325(a)(5) and 1327(b) and (c) is not affected by § 349(b)(3)—the lien was not property of the estate at the petition—it was property of the lienholder. In other words, it is the collateral (not liens) that started out vested in the debtor, became property of the estate at the petition,44 and revested in the debtor at confirmation under § 1327(b) (unless the plan or order of confirmation provided otherwise),45 and under § 1322(b)(9) that same property may have been vested “in the debtor or in any other entity” as provided in the confirmed plan.46

[22]

Revesting property of the estate in the entity “in which such property was vested immediately before the commencement of the case” under § 349(b)(3) tells us nothing about the effect of dismissal on liens that were limited, stripped or paid in full during the Chapter 13 case before dismissal. Other subsections of § 349(b) deal specifically with the effect of dismissal on liens, but nowhere is there a cross-reference in § 349(b) to the valuation of collateral under § 506(a) or to the confirmation requirement for lien retention in § 1325(a)(5)(B)(i). No provision of § 349 purports to undo the “free and clear” effect of confirmation of a Chapter 13 plan under § 1327(c).

[23]

These are not idle omissions from § 349(b). Reading § 349(b)(1)(C) or 349(b)(3) to prohibit the release of liens when the allowed secured claim is paid in full made a nonsense of other subsections of § 349(b). For example, § 349(b)(1)(B) reinstates at dismissal transfers avoided under §§ 522, 547, 548 and 549. The logic of cases refusing to release liens upon payment of allowed secured claims would compel the holding that preferences are not recoverable during a Chapter 13 case because the debtor might dismiss the case and the preferential transfer would be restored by § 349(b)(1)(B). Likewise, for fraudulent conveyances and unlawful postpetition seizures or transfers—all would be beyond recovery in a Chapter 13 case until after the completion of payments and discharge. The same would be true for the voiding of nonpossessory, nonpurchase money security interests under § 522(f).47 If the possibility that dismissal would reinstate a transfer voided under § 522(f) is an absolute defense to a § 522(f) action in a Chapter 13 case, then the multitude of decisions—including many from U.S. courts of appeals—allowing lien avoidance in Chapter 13 cases are all wrongly decided.48

[24]

Pre-BAPCPA statutory interpretation, logic and history all support the conclusion that lien retention extends only to the payment of the allowed secured claim after confirmation in a Chapter 13 case. It has to be admitted that neither statutory interpretation, history nor logic stunted the growth of contrary case law. That BAPCPA amended § 1325(a)(5)(B)(i) to preclude the release of liens until full payment of the underlying debt or discharge is a testament to the strength of the pre-BAPCPA cases that allowed liens to be released upon payment of the allowed secured claim.49

[25]

The BAPCPA changes to lien retention in § 1325(a)(5) punctuate that this issue was not likely to go away because it was part of the greater controversy over the effect of confirmation on liens.50 Before BAPCPA, the debtor’s best position was to clearly provide in the plan that liens were retained only until completion of payment of the allowed secured claim.51 Lienholders had to object to confirmation or risk being bound to release liens consistent with the confirmed plan.52 Secured claim holders were forced to insist on a specific provision for lien retention until completion of all payments under the plan and entitlement to discharge. That position is now codified in § 1325(a)(5)(B)(i).53 Confirmation of a plan with no provision or with an ambiguous provision for lien retention is an invitation for litigation before and after BAPCPA.54

[26]

That the plan provides for retention of liens consistent with § 1325(a)(5)(B)(i) will not guarantee payment of a secured claim holder after confirmation. To be entitled to payments after confirmation, the lienholder must file a timely proof of claim and must have an allowed secured claim.55

[27]

Perhaps more importantly, the new provision for lien retention until the “earlier” of payment in full of the underlying debt or discharge does not require the plan to pay an allowed secured claim in full. To the contrary: § 1325(a)(5)(B)(i) deals with lien retention, not with the amount of payment to which an allowed secured claim holder may be otherwise entitled. With the exception of debt secured only by the debtor’s principal residence,56 and, after BAPCPA, claims that fall within the “hanging sentence” at the end of § 1325(a),57 a Chapter 13 plan can modify an allowed secured claim by cramdown and payment of the present value of the collateral.58 After BAPCPA, the plan simply cannot also release the lien at the completion of payment of the allowed secured claim in advance of discharge unless the plan has also paid the underlying debt determined under nonbankruptcy law. The special problems of lien retention when the debtor is not eligible for a discharge are dealt with elsewhere.59


 

1  See §§ 101.2 [ Acceptance of Plan ] § 74.3  Acceptance of Plan before BAPCPA and 445.1 [ Acceptance of Plan ] § 74.4  Acceptance of Plan after BAPCPA.

 

2  See §§ 102.1 [ Surrender or Sale of Collateral ] § 74.5  Surrender or Sale of Collateral before BAPCPA and 446.1 [ Surrender of Collateral ] § 74.6  Surrender, Sale, Vesting in Lienholder and Payment with Property after BAPCPA.

 

3  11 U.S.C. § 1325(a)(5)(B)(i).

 

4  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

5  See, e.g., In re Ibarra, 235 B.R. 204, 212 (Bankr. D.P.R. June 18, 1999) (Lamoutte) (“The Amended Plan expressly provides that ‘Creditors having secured claims will retain their liens. . . .’ Hence, Debtor’s Amended Plan complies with [the first requirement in § 1325(a)(5)(B)].”).

 

6  See below in this section, and see § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

7  IRS v. Stewart (In re Stewart), 172 B.R. 14 (W.D. Va. Aug. 16, 1994) (Williams) (Bankruptcy court erred in confirming plan “subject to resolution of the IRS’s objections” where the IRS filed a proof of claim listing part of its claim as secured, no objection was filed to the claim, but the plan treated the IRS as wholly unsecured. Section 1325(a)(5) is mandatory. Plan is not confirmable because it did not provide that the IRS would retain its lien or that the debtor would surrender the collateral.); In re Danastorg, 382 B.R. 585 (Bankr. D. Mass. Feb. 22, 2008) (Feeney) (Although prepetition condominium fees may be dischargeable, statutory lien that condominium possesses under Massachusetts law is retained and must be provided for in plan.); In re Sarkese, 189 B.R. 531, 536 (Bankr. M.D. Fla. Dec. 4, 1995) (Proctor) (The plan must provide that mortgage holder retains its lien consistent with §§ 1322(c)(2) and 1325(a)(5). “[T]he debtors’ proposed Chapter 13 plan has not provided for the retention of a lien by McWilliams securing the claim until the plan is paid off. The debtors’ Chapter 13 plan must be modified so that McWilliams retains a lien securing the deferred cash payments under the plan to the extent of the allowed secured claim until debtors have paid their final payment due under their Chapter 13 plan.”); In re Kennedy, 177 B.R. 967 (Bankr. S.D. Ala. Jan. 26, 1995) (Mahoney) (Plan cannot be confirmed because it failed to specify that secured claim holder would retain its lien pending payment of the present value of its collateral.); In re Litton, 36 B.R. 660 (Bankr. M.D. Tenn. Jan. 16, 1984) (Paine) (Court denies confirmation where plan failed to provide that secured creditor would retain its lien on a note held as collateral.). Accord In re Hink, 81 B.R. 489 (Bankr. W.D. Ark. Apr. 13, 1987) (Fussell).

 

8  See In re Dunning, 281 B.R. 22 (Bankr. S.D. Ala. Jan. 14, 1999) (Mahoney) (Plan failed lien retention requirement in § 1325(a)(5) when debtor treated car lender as unsecured based on mistaken contention that prepetition judgment on the note was an election of remedies that eliminated the lien.); In re Vincente, 257 B.R. 168, 182 (Bankr. E.D. Pa. Jan. 3, 2001) (Sigmund) (Plan that would limit lienholder to maximum claim of $25,000 based on finding that claim secured by rents is not protected from modification by § 1322(b)(2) does not satisfy the lien retention requirement when adversary proceeding pending for more than a year will determine extent of secured claim and bankruptcy court has rejected debtor’s argument in other reported decisions. Amended plan contained a finding that mortgage holder’s claim could be modified under § 1322(b)(2) and, after modification, that the allowed secured claim would not exceed $25,000. In a pending adversary proceeding, debtor sought to strip down the lien and raised other defenses to the amount of the mortgage claim. “Debtor’s syllogism is as follows: Since Debtor has objected to Advanta’s secured claim, Advanta does not have an allowed claim and its objection to the Debtor’s plan on the basis of its failure to pay the full amount of the secured claim must fail. Whether Advanta is the holder of an allowed secured claim will be determined in the yet to be tried adversary case. The Debtor offers no authority for his analytical framework. Debtor simply fails to explain how that post-confirmation adjudication supports my finding that Advanta is retaining its lien and the value of the property it is receiving is not less than the amount of its secured claim.”).

 

9  11 U.S.C. § 1325(a)(5)(B)(i), prior to amendment by BAPCPA.

 

10  11 U.S.C. § 1325(a)(5)(B)(i), as amended by BAPCPA.

 

11  See § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

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

 

13  See, e.g., De Jesus Rivera v. GECC of P.R. (In re De Jesus Rivera), Nos. 00-00801 GAC, 04-00165, 2006 WL 3898296, at *3 (Bankr. D.P.R. Feb. 24, 2006) (unpublished) (Carlo) (General rule that liens pass through bankruptcy is qualified; if they “are brought into the bankruptcy proceedings and dealt with there,” especially if underlying “debt is provided for in the plan and is paid in full,” lien does not survive, citing In re Penrod, 50 F.3d 459, 563 (7th Cir. Mar. 22, 1995) (Posner, Rovner, Moran).); In re Meyers, No. 06-11348-SSM, 2007 WL 4119071 (Bankr. E.D. Va. Nov. 16, 2007) (unpublished) (Mitchell) (Although County is bound by confirmed plan that improperly treated its claim as unsecured, debtor does not dispute that Virginia law gives County lien for property taxes; plan does not extinguish County’s statutory lien because extinguishment requires adversary proceeding under Cen-Pen Corp. v. Hanson, 58 F.3d 89 (4th Cir. June 22, 1995) (Wilkinson, Hamilton, Heaney).).

 

14  See § 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

15  See Jiminez v. NYCTL 1996-1 Trust (In re Jiminez), Nos. 98-4471 (JMP), 04-03149 (JMP), 2008 WL 2026147, at *4 (Bankr. S.D.N.Y. May 9, 2008) (unpublished) (Peck) (“[T]he survival of lien rights depends on whether the chapter 13 plan contains a provision allowing the holder to retain its lien after confirmation.”).

 

16  See, e.g., In re Woods, 257 B.R. 876, 878 (Bankr. W.D. Tenn. Dec. 14, 2000) (Brown) (At destruction of car after confirmation when insurance carrier tendered loss proceeds to the debtor, generic plan provision that car lender “retain lien” is not sufficient to permit the debtor to use the insurance proceeds to buy a new car. “[T]his Court is persuaded to adopt the view that, absent mandatory release language in the confirmed plan, the Chapter 13 debtor may not obtain an order over the lien creditor’s objection that would require the lien creditor to release its lien prior to the debtor’s Chapter 13 discharge.”). See also In re Messick, No. 03-72700, 2005 WL 2205728 (Bankr. C.D. Ill. Aug. 1, 2005) (unpublished) (Lessen) (In pre-BAPCPA case, when debtor completed payments on secured portion of crammed-down vehicle claim, lender must turn over title, but sanctions were not justified; legal position of lender was not frivolous when neither plan nor confirmation order specifically required release of lien upon completion of payments on the secured portion of the claim.)

 

17  See § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

18  See §§ 48.1 [ Adequate Protection of Lienholders prior to Confirmation ] § 47.1  Adequate Protection of Lienholders before Confirmation and 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA.

 

19  See § 111.1 [ “Value, As of the Effective Date of the Plan” Means Interest ] § 77.1  “Value, As of the Effective Date of the Plan” Means Interest and 112.2 [ Present Value After Till ] § 77.3  Present Value after Till.

 

20  See In re Cook, 205 B.R. 437, 442–43 (Bankr. N.D. Fla. Jan. 29, 1997) (Killian) (Denies confirmation of plans that would pay attorney fees in advance of car lender because depreciation would exceed car payments during early months. “[A] court’s finding, by a preponderance of the evidence, that a debtor will be able to make all payments called for under a plan is not sufficient to vitiate Fifth Amendment concerns regarding takings and just compensation. . . . [T]he Bankruptcy Code does not require attorney’s fees to be paid in full prior to payments to creditors, it simply requires that they be paid before or contemporaneously with payments to creditors. . . . [A] plan can not be confirmed over objection unless it provides that, upon confirmation, each secured creditor will receive a payment at least equal to the amount of depreciation over the relevant time period. A plan which does not include such treatment does not provide that the secured creditor retains its lien pursuant to Section 1325(a)(5)(B)(i). If this cannot be accomplished while also allowing attorney’s fees to be paid in full before commencement of payments to secured creditors, the debtor will be faced with a choice between paying attorney’s fees over a longer period of time under the plan on the one hand, and dismissal or conversion on the other.”).

 

21  In re Johnson, 63 B.R. 550 (Bankr. D. Colo. July 31, 1986) (Matheson) (Adequate protection requirement applies before and after confirmation. Court denies confirmation of Chapter 13 plan in which secured claim holder will not receive payments for three and one-half years after confirmation on the ground that the plan fails to provide adequate protection for the creditor’s interest in an automobile that will have little or no value three and one-half years after confirmation.). See also In re Brown, 319 B.R. 898, 901–03 (Bankr. M.D. Ga. Aug. 27, 2004) (Walker) (While not adopting the notion that lien retention in § 1325(a)(5) includes “adequate protection” of a creditor’s lien, court reaches approximately the same result by holding that the feasibility requirement in § 1325(a)(6) is failed when payment in full of attorney fees prior to payment of a car lender will delay the car lender’s receipt of payments until 10 months after the case is filed and the court would likely have to grant the car lender relief from the stay after confirmation, thereby putting the plan in jeopardy. “[A]dequate protection is not a stated requirement of confirmation. . . . Debtor will not be allowed to propose a plan that withholds payments to ALM for almost a year while Debtor continues to benefit from the use of ALM’s depreciating collateral and when the accumulation of preconfirmation payments does not amount to enough to pay attorney fees proposed for payment in full at confirmation. When one or more additional months of debtor payments are required to fully fund the attorney fees claim, the creditor secured by a depreciating asset such as the automobile in this case is likely to be irreparably harmed. If stay relief is granted, the chances of Debtor being able to make all payments under the plan are slim. . . . [T]he Court will grant ALM’s objection to confirmation and dismiss this case.”).

 

22  See United Sav. Ass’n of Tex. v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 108 S. Ct. 626, 98 L. Ed. 2d 740 (Jan. 20, 1988); In re Cason, 190 B.R. 917, 932 (Bankr. N.D. Ala. Dec. 14, 1995) (Sledge) (“[A]dequate protection should no longer accrue post confirmation. . . . The confirmation order precludes creditors from seeking adequate protection post confirmation. . . . After the confirmation, the claimholder’s rights are defined and set out in the plan.”). See §§ 48.1 [ Adequate Protection of Lienholders prior to Confirmation ] § 47.1  Adequate Protection of Lienholders before Confirmation, 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA and 449.1 [ “Adequate Protection” after Confirmation ] § 74.15  “Adequate Protection” after Confirmation after BAPCPA.

 

23  See §§ 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA and 449.1 [ “Adequate Protection” after Confirmation ] § 74.15  “Adequate Protection” after Confirmation after BAPCPA.

 

24  11 U.S.C. § 1325(a)(5)(B)(iii)(II), as amended by BAPCPA, discussed in §§ 426.1 [ Adequate Protection Rights before Confirmation ] § 57.3  Preconfirmation Adequate Protection Rights after BAPCPA and 449.1 [ “Adequate Protection” after Confirmation ] § 74.15  “Adequate Protection” after Confirmation after BAPCPA.

 

25  See In re Kennedy, 177 B.R. 967 (Bankr. S.D. Ala. Jan. 26, 1995) (Mahoney) (Car lender’s objection that payment through the plan will extend over a longer period than the “loan life” of the 1987 Mercury Marquis is rejected because the creditor’s representative testified that the car would have a “loan value” until September of 1996 and the secured claim would be paid in full through the plan by approximately that date.); In re Johnson, 63 B.R. 550 (Bankr. D. Colo. July 31, 1986) (Matheson) (Court denies confirmation of Chapter 13 plan in which secured claim holder will not receive payments for three and one-half years after confirmation on the ground that the plan fails to provide adequate protection of the creditor’s interest in an automobile that will have little or no value three and one-half years after confirmation.).

 

26  See §§ 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA and 501.1 [ Order of Payments to Creditors ] § 113.8  Order of Payments to Creditors after BAPCPA. See, e.g., In re Cook, 205 B.R. 437, 442–43 (Bankr. N.D. Fla. Jan. 29, 1997) (Killian) (Court denies confirmation of plan that would pay attorney fees in advance of car lender because depreciation would exceed car payments during early months. “[A] plan can not be confirmed over objection unless it provides that, upon confirmation, each secured creditor will receive a payment at least equal to the amount of depreciation over the relevant time period. A plan which does not include such treatment does not provide that the secured creditor retains its lien pursuant to Section 1325(a)(5)(B)(i).”). Compare In re Moses, 293 B.R. 711, 717–18 (Bankr. E.D. Mich. June 5, 2003) (Shefferly) (Plan satisfies § 1325(a)(5)(B) notwithstanding that car lender will experience a one-month delay in distributions because attorney fees will be first paid from available funds. With respect to the holding of In re Cook, 205 B.R. 437 (Bankr. N.D. Fla. Jan. 29, 1997) (Killian), that “‘as a rule, a plan can not be confirmed . . . unless it provides that . . . each secured creditor will receive a payment at least equal to amount of depreciation over the relevant time period’. . . [t]his Court is not willing to accept this holding ‘as a rule.’ Although this analysis may have merit in a case such as [In re Johnson, 63 B.R. 550 (Bankr. D. Colo. July 31, 1986) (Matheson)], with the three-and-a-half year delay in payments, it cannot be said to hold true in the case sub judice where DaimlerChrysler is waiting only one month for distributions to begin. The depreciation occurring in that month cannot have rendered the lien valueless. . . . [T]he better reasoned decisions are those that do not find a requirement for additional adequate protection post-confirmation where the debtor’s chapter 13 plan complies with § 1325(a)(5)(B). There simply is no provision in the Bankruptcy Code that imposes any such requirement in § 1325.”); In re Dews, 191 B.R. 86, 92 (Bankr. E.D. Va. Oct. 25, 1995) (Adams) (Debtor not required to make periodic adequate protection payments to car lender notwithstanding that lender will wait eight months after confirmation before it receives distributions because plan pays mortgage arrearages and priority attorney fees before car lender and notwithstanding evidence that the car will depreciate in excess of $200 per month. “Unlike [In re Johnson, 63 B.R. 550 (Bankr. D. Colo. July 31, 1986) (Matheson)] the eight months of depreciation in this case will not leave Chrysler with collateral that has little or no value. If that were the case, then a different result might follow. . . . [T]he payments for depreciation that Chrysler seeks would give it more than the value of its collateral. Furthermore, it should be pointed out that Chrysler is adequately protected under the terms of the proposed plan, because its allowed secured claim will be paid in full, with interest. The timing of the valuation also serves to protect Chrysler as it will get an amount equal to the value set as of the date of the filing of the Chapter 13 plan. . . . If the debtors in this case are forced to pay over $200.00 per month to Chrysler to compensate it for depreciation of the vehicle, then it is entirely likely that a Chapter 13 will not be possible. . . . As both parties have pointed out, it is always possible in a case such as this that the debtor will pay off the mortgage arrears and then file Chapter 7, leaving the creditor with significantly depreciated collateral. However, as in life, all risks can not be eliminated under the Bankruptcy Code.”). See also In re Brown, 319 B.R. 898 (Bankr. M.D. Ga. Aug. 27, 2004) (Walker) (Plan that pays attorney fees in full before payments to car lender fails feasibility test for confirmation because resulting 10-month delay in payments to car lender would be grounds for relief from the stay after confirmation, putting the entire plan in jeopardy.).

 

27  See § 449.1 [ “Adequate Protection” after Confirmation ] § 74.15  “Adequate Protection” after Confirmation after BAPCPA.

 

28  See 11 U.S.C. § 1327(a), discussed in § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors.

 

29  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors. But 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 and 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For.

 

30  See §§ 204.2 [ Order of Payments to Creditors ] § 113.7  Order of Payments to Creditors before BAPCPA, 239.1 [ What to Do If Creditor Is Not Receiving Payments ] § 123.1  What to Do If Creditor Is Not Receiving Payments and 501.1 [ Order of Payments to Creditors ] § 113.8  Order of Payments to Creditors after BAPCPA.

 

31  See also § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

32  See 11 U.S.C. § 1325(a)(5)(B)(i)(I), discussed in § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

33  See Bank One, Chicago, NA v. Flowers (In re Flowers), 183 B.R. 509, 514–18 (N.D. Ill. June 30, 1995) (Barliant) (“[Section] 506(d) has a different effect in Chapter 13 reorganizations than that mandated by the Supreme Court’s [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992)] decision in Chapter 7 liquidations. . . . Following § 506(a) treatment, § 506(d) seemingly acts to void any lien against a debtor that is not an “allowed secured claim.” . . . [T]he Dewsnup decision in no manner dictated that its statutory construction and textual analysis of § 506(d) should extend beyond Chapter 7 of the Bankruptcy Code. . . . In this case, Creditor’s claim is secured by Debtor’s car, not Debtor’s principal residence, and § 1322(b)(2) therefore permits Debtor’s Chapter 13 payment plan to modify the ‘rights’ of Creditor’s secured claim. . . . [T]he language of § 1325(a) is connected with the language of § 506(a) and only requires that Chapter 13 creditors retain an enforceable lien on the ‘allowed secured claim,’ as described by 506(a). In other words, § 1325(a) only requires that Chapter 13 creditors retain an enforceable lien in an amount equal to the value of the collateral or security interest. . . . [T]his court interprets § 1325(a)(5)(B) to mean that a bankruptcy court must confirm a Chapter 13 debtor’s payment plan if such plan provides that the holders of allowed secured claims (in the § 506(a) sense) retain the liens securing such allowed secured claims and if the value of the property distributed under the plan is equal to the value of such allowed secured claims.”); Ford Motor Credit Co. v. Lee (In re Lee), 162 B.R. 217 (D. Minn. Dec. 21, 1993) (MacLaughlin) (Nobelman v. American Savings Bank, 508 U.S. 324, 113 S. Ct. 2106, 124 L. Ed. 2d 228 (June 1, 1993) does not prevent confirmation of a Chapter 13 plan that splits an undersecured car lender’s claim into a secured and unsecured claim and provides that the car will vest in the debtor free and clear of any lien upon completion of payment of the secured portion of the claim. Nobelman limited the power of modification in § 1322(b)(2) only with respect to a debtor’s principal residence. Chapter 13 debtors can strip down the undersecured portion of an automobile lender’s lien.); In re Rheaume, 296 B.R. 313 (Bankr. D. Vt. Aug. 5, 2003) (Brown) (Plan can release undersecured lien upon payment of the allowed secured portion of the debt so long as there is clear and conspicuous notice of the lien-releasing language.); In re Castro, 285 B.R. 703, 705 (Bankr. D. Ariz. Nov. 14, 2002) (Haines) (Plan can release undersecured lien when allowed secured portion of claim is paid. “Section 1322(b)(2) provides that a Chapter 13 plan may ‘modify the rights of holders of secured claims.’ . . . This section ‘provides the authorization necessary for chapter 13 plans to release liens upon full payment of the secured portion of a debt.’”); In re Gray, 285 B.R. 379, 389 (Bankr. N.D. Tex. Nov. 14, 2002) (Lynn) (“Considering the specific language of sections 1322(b)(10), 1325(a)(1) and 1327, the court concludes a provision requiring release of liens upon payment of collateral value is a permissible term in a chapter 13 plan. . . . [B]efore discharge, a debtor may use section 363 of the Bankruptcy Code to dispose of a creditor’s collateral for which full payment has been made under the plan. If such a result may be accomplished post-confirmation and pre-discharge pursuant to section 363, there is no logical reason to prohibit a debtor from anticipating it in the plan.”); In re Townsend, 256 B.R. 881, 882–84 (Bankr. N.D. Ill. Jan. 5, 2001) (Schmetterer) (Decided by the same bankruptcy judge who wrote In re Hernandez, 162 B.R. 160 (Bankr. N.D. Ill. Dec. 29, 1993) (Schmetterer), rev’d, 175 B.R. 962 (N.D. Ill. Dec. 13, 1994) (Nordberg), undersecured car lien can be released at the completion of payment of the allowed secured claim. Plan provided “‘upon completion of payment of the secured portion of any claim, the property securing such claim shall vest in the debtor free and clear of any lien, claim or interest of the secured creditor.’” GMAC objected to confirmation because its $15,639 claim was secured by a car valued at $10,500. “The issue here is whether the term ‘allowed secured claim’ should be read in Code § 1325(a)(5) to mean the value of the collateral (as the term is defined in 506(a)), or the amount of the entire indebtedness (as [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992)] held as to property involved in that case that ‘allowed secured claim’ was defined in 506(d)). . . . [M]ost courts in the Northern District of Illinois have taken the position that ‘allowed secured claim’ in § 1325(a)(5) should agree with the meaning of the term in § 506(a). . . . This position will now be followed because Code § 1322(b) provides that Chapter 13 plans may ‘modify the rights of holders of secured claims.’ This section ‘provides the authorization necessary for Chapter 13 plans to release liens upon full payment of the secured portion of a debt.’ . . . . The purpose of Code § 1325(a)(5) also supports this conclusion.”); In re Shorter, 237 B.R. 443, 445, 446–47 (Bankr. N.D. Ill. Aug. 17, 1999) (Lefkow) (Confirms plan over car lender’s objection that releases lien upon payment of secured portion of claim. “Without the statutory cram down requirement, all property of the estate would revest in the debtor upon confirmation of the debtor’s plan, potentially eliminating existing liens upon confirmation. . . . Nothing in § 1325, however, mandates how long a secured creditor must retain its lien to fulfill this purpose. . . . [Section] 506(a) bifurcates undersecured claims into secured and unsecured portions. As a result, ‘ “the only lien retained is the lien securing the secured claim; that is, the claim to the extent of the value of the collateral.”’ . . . The purpose of the § 1325 cram down provision is fulfilled upon full payment of the secured portion of the debt. To require that the lien be retained after full payment of the secured portion of a debt serves a different purpose, to secure the remaining unsecured portion of the claim, which is an expansion of secured creditors’ rights that is not found in the Code. . . . [T]he interest in affording debtors a fresh start outweighs the potential for abuse of the system. . . . [Section] 349 is only intended to restore parties to their prebankruptcy positions ‘as far as practicable.’ . . . [T]hat section contains no provisions that would undo any modification of creditors’ rights made pursuant to § 1322(b). . . . To require the lien to remain intact thereafter would seemingly provide FMCC with a windfall to the detriment of other unsecured creditors in the event of dismissal . . . . [S]uch a scenario would be contrary to the outcome intended under § 348(f)(1)(B).”); In re Johnson, 213 B.R. 552, 554–57 (Bankr. N.D. Ill. Oct. 21, 1997) (Squires) (Confirms plan that requires release of car lien at completion of payment of secured portion of undersecured claim. “The ability to strip a creditors’ undersecured lien, via § 1322(b)(2), from its collateral is similar, but not exactly identical, to the plan provision at bar which requires the lien to be released only when the Bank’s secured component of its claim is paid in full, but not its unsecured component. . . . [Section] 506(d) is really not implicated in the instant plan provision . . . . [T]he principal statutory provisions relied on are §§ 1322(b)(2) and 1325(a)(5). There is no ‘voiding’ of the lien under § 506(d), but rather, a plan providing for satisfaction and payment of the secured component of the Bank’s clam after which the Bank shall release the lien as paid. This is a distinction with a real difference. Because the [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992)] case prohibits use of § 506(d) to strip liens in Chapter 7 cases, the real issue here is whether the Debtors can compel the Bank to release the lien on the Vehicle’s title once the secured component has been paid in full via §§ 1322(b)(2) and 1325(a)(5).” Acknowledging the conflicting opinions, “[t]he Court concludes that the better view is that espoused in the line of cases which rely on §§ 1325(a)(5)(B) and 1322(b)(2) [to] allow a debtor to obtain a release of the lien upon payment in full of the secured portion of the debt even if prior to the completion of the plan. . . . Section 1322(b)(2) does not limit the power to modify the rights of secured creditors to ‘payment terms.’ . . . ‘[U]nder § 1325(a)(5)(B) . . . the only lien retained is the lien securing the secured claim; that is, the claim to the extent of the value of the collateral.’ . . . If a creditor were to retain the lien after such claim was paid, it would be securing a different claim, and there is no language in the Code which would support this result. . . . [T]he Vehicle title should not be properly held ‘hostage’ to secure the creditor’s remaining unsecured claim after bifurcation under § 506(a) has occurred and the secured portion of the claim has been paid in full. . . . [Section] 349(b) neither mentions nor attempts to undo what modifications to a creditor’s claim may have previously occurred in a bankruptcy case under §§ 506(a), 1322(b)(2) or 1325(a)(5)(B).”); In re Nicewonger, 192 B.R. 886, 887–90 (Bankr. N.D. Ohio Feb. 28, 1996) (Shea-Stonum) (Plan can require undersecured car lender to surrender title and cancel its lien upon payment of allowed secured portion of its claim. Bank’s undersecured claim was bifurcated under § 506(a) into a secured claim of $5,900 and an unsecured claim of $2,892.87. Plan provided unsecured claims will be paid 28% and that “upon receipt of full payment of its allowed, secured claim, NCB shall release its lien on the travel trailer and shall return all title documents to the Debtors with cancellation of its lien noted thereon.” Recognizing a split of authority, “this Court agrees with the cases that hold that the holder of a secured claim can be required to release its lien upon receiving payment through the chapter 13 plan of the value of its interest in estate property that is not surrendered. . . . Section 1322(b)(2) of the Bankruptcy Code clearly states that a chapter 13 plan may ‘modify the rights of holders of secured claims.’ . . . [T]he holder of an undersecured claim has been accorded due process upon the receipt of the present value of its collateral through plan payments and can be required to release its lien prior to the payment of any dividend provided by the chapter 13 plan on the unsecured portion of the amount owing to it. . . . Indeed the 1994 amendment of § 348(f)(1)(B) can be read as an explicit recognition by Congress that, at least in a consumer case, even partial payment of the secured portion of an undersecured claim operates as an immediate partial satisfaction of the secured portion of the claim.” Court rejects the bank’s § 349 argument as “myopic.” “To graft into § 1325 the idea that § 349 might allow a holder of a secured claim to keep both a stream of payments received prior to dismissal of a case and the full economic value of collateral that a chapter 13 debtor seeks to ‘redeem’ through his or her plan would be an inappropriate statutory expansion.”); In re Mandrayar, 174 B.R. 289, 292–93 (Bankr. S.D. Cal. Nov. 22, 1994) (Adler) (Plan can provide for release of car lender’s lien upon payment of secured portion of undersecured claim. “Congress has specifically sanctioned the use of deferred payments to satisfy liens in Chapter 13. . . . [I]t is highly doubtful that the debtors in this case will convert their case once Chrysler’s secured claim is paid. . . . In this case, the debtors seek to utilize the cram down provisions of section 1325(a) to avoid Chrysler’s lien. . . . [S]ection 1322(b), . . . coupled with section 1325(a)(5)(B), seem clearly to condone the debtors’ lien avoidance provision. The legislative history of section 1325 further supports this view. . . . [T]his Court finds no conflict between lien avoidance under section 1325(a) and lien reinstatement under section 349(b), since section 349(b) is explicitly not applicable to liens avoided under 1325(a). In fact, section 349(b) is only applicable to liens avoided under 506(d).”). See also § 120.1  11 U.S.C. § 1327: Overview§ 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors§ 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate and § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

34  See In re Day, 292 B.R. 133, 136–37 (Bankr. N.D. Tex. Apr. 16, 2003) (Jones) (Denies confirmation of plan that releases undersecured car lien at payment of allowed secured claim. “The court is convinced that a provision requiring a lien release prior to plan completion and discharge is inconsistent with the Code, admitting, however, that the precise basis for this conclusion is uncertain. . . . [In re Thompson, 224 B.R. 360 (Bankr. N.D. Tex. Aug. 27, 1998) (Abramson),] and [In re Gray, 285 B.R. 379 (Bankr. N.D. Tex. Nov. 14, 2002) (Lynn),] agree that section 506(d) is not the operative provision of the Code that allows lien stripping in Chapter 13. . . . Presumably they rely on section 349(b)(3), which . . . provides for revesting of rights. However, section 349(b)(3) provides for the revesting of rights concerning ‘property of the estate.’ . . . Neither Gray nor Thompson addressed whether the property at issue was exempt property. The car in this case . . . is exempt property. . . . The Fifth Circuit has held that exempt property is not property of the estate. . . . Under section 522(c), exempt property is not generally liable for prepetition debts of the debtor, except debts secured by a lien against the exempt property. . . . If section 349 is applicable, it directs that the debtor and his creditors are to be put back to their prepetition status. . . . [T]he court can fathom no remedy that insures that the dictates of section 349(b) are met. . . . [I]f the property at issue is exempt property and section 349 is inapplicable, section 522(c) provides that such property remains liable for ‘debts’ secured by an unavoided lien against the exempt property. . . . In Chapter 13, the ‘debt’ is not discharged until plan completion. . . . Both section 349(b) and section 522(c) imply that the stripping of the lien must await plan completion.”); In re Booth, 289 B.R. 665, 668–70 (Bankr. N.D. Ill. Mar. 7, 2003) (Wedoff) (Notwithstanding confirmed plan that provided, “upon completion of payment of the secured portion of any claim the property securing said claim shall vest in the debtor free and clear of any lien, claim or interest of a secured creditor,” at dismissal, § 349(b)(3) revives car lender’s lien in the full amount of its debt. Debtor paid allowed secured portion of car lender’s claim in full before dismissal. “The plan in Clarence Booth’s Chapter 13 case was unambiguous . . . upon payment in full of any secured claim, the lien supporting the claim was to be deemed satisfied; the collateral was to ‘vest in the debtor free and clear’ of the lien . . . . [T]he question here is simply whether the lien-satisfaction provisions of Booth’s Chapter 13 plan are undone . . . . They are. Section 349(b)(3) of the Code provides that in the absence of a contrary court order, the dismissal of a bankruptcy case ‘revests the property of the estate in the entity in which such property was vested immediately before the commencement of the [bankruptcy] case.’ . . . [I]n Booth’s case, the order of confirmation . . . clearly [stated] that ‘[a]ll property of the estate . . . shall remain property of the estate following confirmation.’ . . . [R]evesting the property of the estate . . . as required by § 349(b)(3) revived the lien (a property interest) that had been satisfied by payments under Booth’s plan. That lien, at the commencement of the case, was in the full amount owed by Booth to Wells Fargo’s predecessor, not limited to the value of the automobile. The satisfaction of the lien was possible only through the operation of the plan during the bankruptcy case; hence, the revesting of the property interest to its pre-bankruptcy state requires the revival of the lien. . . . [I]f a Chapter 13 debtor is allowed to make time payments of only the secured portion of a bifurcated claim, receive a release of the lien, and then dismiss the case without making any payment on the unsecured portion of the claim, the debtor will have obtained the economic equivalent of an installment redemption. It is not unreasonable that § 349(b)(3) should prevent that result.”); In re Smith, 287 B.R. 882, 885 (Bankr. W.D. Tex. Dec. 20, 2002) (King, Clark) (Confirmation conditioned on removal of plan provisions that would release liens after payment of the allowed secured claim. “If a Chapter 13 debtor obtains a clear certificate of title upon satisfaction of only the allowed secured claim of a creditor, the debtor has received benefits to which it is not entitled in the event that the case is later converted or dismissed.”); In re Moore, 275 B.R. 390, 393 (Bankr. D. Colo. Mar. 28, 2002) Brooks) (Denies confirmation of plan that would release car lien when secured portion of undersecured claim was paid in full. “[S]ection 1307(b) gives the Debtors an absolute right to dismiss . . . . After such dismissal, 11 U.S.C. § 349(b) reinstates ‘any lien avoided under section 506(d) of this title.’ If a provision such as that proposed by the Debtors here is allowed, however, and the Debtors dismiss their case after FMCC’s lien has been released and the title returned to Debtors, section 349(b) will effectively be rendered moot. Reinstatement of FMCC’s lien will not be possible, as such lien will not have been ‘avoided under section 506(d)’. . . . There is, therefore, no practicable and certain way to return to the pre-filing status quo as contemplated by section 349. Accordingly, this Court finds that, in order to obtain the benefit of the modification of a secured creditor’s rights and release of a lien without full payment of the debt, the Debtors must complete all of the payments under their Chapter 13 plan and be granted a discharge.”); In re Archie, 240 B.R. 425, 426–27 (Bankr. S.D. Ala. June 2, 1999) (Mahoney) (After conversion from Chapter 13 to Chapter 7, debtors are not entitled to car title notwithstanding payment in full with interest of the car lender’s allowed secured claim during the Chapter 13 case, but debtors can redeem the car for zero dollars in the Chapter 7 case. “Payment of the entire amount of Apex’s secured claim during debtors’ chapter 13 plan does not by itself require Apex to release its lien. . . . [T]he secured claimant cannot be required to release its lien until the debtor has completed its chapter 13 plan. . . . To hold otherwise would deprive creditors of the one protection they have in an uncompleted chapter 13 case, i.e., their lien . . . . The efforts made during their chapter 13 case are not a nullity . . . . A creditor cannot pretend that payments on its secured claim were not made if a chapter 13 case is dismissed for nonpayment or converted to a chapter 7 case.” The 1994 amendments to § 348(f) “clarify the Code,”—debtor can redeem car for zero dollars because allowed secured claim was paid in full during the Chapter 13 case.); In re McPherson, 230 B.R. 99, 99–101 (Bankr. E.D. Ky. Feb. 22, 1999) (Howard) (Chapter 13 debtor is entitled to return of car title upon completion of payments under the plan even if no discharge has been entered. Plan provided “‘the holder of any allowed secured claim provided for by the plan shall retain a lien securing such claim until the amount for which the claim is allowed as secured is paid in full.’ . . . [T]he full amount of the secured claim had been paid . . . . [D]ebtors had completed all payments to the Trustee . . . . The Trustee’s position that lien extinguishment did occur when the secured portion of the debt was paid . . . does have some support in case law. . . . This Court believes, however, that in order to protect the creditor from premature lien termination, and insure that the debtor is not held hostage beyond the time he/she has performed according to the confirmed plan, that the better approach is to require that a lien be released upon successful completion of the Chapter 13 plan, but before a discharge is entered.”); In re Thompson, 224 B.R. 360, 364, 366–67 (Bankr. N.D. Tex. Aug. 27, 1998) (Abramson) (Plan cannot require that liens be extinguished upon payment of the secured portion of undersecured claims. Acknowledging substantial split in case law, quotes extensively from In re Scheierl, 176 B.R. 498 (Bankr. D. Minn. Jan. 6, 1995) (Kishel). “[I]n Chapter 13 a debtor must wait until all plan payments are made to get a discharge . . . . If a debtor’s case is dismissed prior to completion of the plan payments and discharge, § 349(b) unravels the bankruptcy . . . . [I]f secured car creditors are forced to turn over title to the debtor upon payment of the secured portion of their claim, then should the case later be dismissed by the debtor under § 1307(b), or by the court upon motion by a party in interest under § 1307(c), the objective of § 349(b) (to leave the parties in their pre-bankruptcy postures) is thwarted.” Neither § 506(d) nor § 1322(b)(2) changes this outcome. Cites [Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (Jan. 15, 1992),] for proposition “as long as the claim is secured by a lien with recourse to the underlying collateral, and allowed under § 502, lien stripping is not available under § 506(d).”); In re Pruitt, 203 B.R. 134, 137 (Bankr. N.D. Ind. Mar. 22, 1996) (Dees) (Refuses to confirm plan that releases undersecured car lender’s lien upon completion of payments of allowed secured claim. “[P]ermitting an undersecured creditor to retain its lien pending the completion of a debtor’s plan appropriately protects the creditor’s interests in the event of a subsequent dismissal of the debtor’s case. . . . [R]eleasing the lien prior to completion of the plan and discharge would thwart the underlying purpose of § 349(b) which is to restore the parties’ property rights in the event of a dismissal. . . . [I]f Congress had intended for a lien to be released upon payment of the creditor’s allowed secured claim, it would have drafted § 1325(a)(5)(B)(i) to require that a plan provide ‘that the holder of such retain the lien securing such claim until the creditor receives full payment of the allowed secured claim.’ Congress did not do so. . . . In the event the debtor needs to sell the vehicle and obtain other transportation prior to the conclusion of her plan, she may apply to the court for appropriate relief.”); In re Scheierl, 176 B.R. 498 (Bankr. D. Minn. Jan. 6, 1995) (Kishel) (Although Chapter 13 debtor can lien strip and cram down an automobile-secured creditor by reducing the amount of the debt to the value of the car and re-amortizing that reduced amount, In re Lee, 162 B.R. 217 (D. Minn. Dec. 21, 1993) (MacLaughlin), inappropriately releases the car lender’s lien upon payment of the secured portion of its claim. A Chapter 13 debtor is not entitled to release of liens until the debtor completes payments to all creditors and is entitled to a discharge. Plan provision that liens would be released upon payment of the allowed secured claim cannot be confirmed.). See also In re Gamble, No. 06-36485, 2007 WL 895809 (Bankr. S.D. Tex. Mar. 22, 2007) (unpublished) (Isgur) (Provision of confirmed plan that released lien of an undersecured creditor upon payment of allowed secured portion of debt did not preclude allowable secured claim in subsequent Chapter 13 case when first case was dismissed after payment of secured portion of debt; § 349(b) reinstated lien rights of partially secured creditor, and balance of debt became secured claim in subsequent case.); In re Parker, 285 B.R. 394, 395–98 (Bankr. E.D. Tenn. Oct. 17, 2002) (Stinnett) (Court refuses provision that would release liens upon payment of allowed secured claim, because it is premature to decide the early release question at confirmation. “[T]he early release requirement asks the court to rule on an issue that is not ripe for decision. . . . [T]he relevant facts have not occurred. . . . Confirming a plan with an early release amounts to an order by the court to every secured creditor whose claim is provided for under § 1325(a)(5)(B) to release its lien once its allowed secured claim has been paid. This order will give the debtor a great advantage in obtaining an early release and will put secured creditors at a great disadvantage. The court should not enter such an order as part of confirmation because the court cannot possibly have before it all the facts that should be relevant to early release. When the debtor finishes paying an allowed secured claim is the earliest point at which the facts may allow a fair decision on early release.”).

 

35  See In re Jordan, No. 05-18287, 2008 WL 1743855, at *3 (Bankr. D. Kan. Apr. 11, 2008) (unpublished) (Nugent) (In pre-BAPCPA case, debtors are bound by confirmed plan that released vehicle lien at plan completion; “creditor cannot be forced to release its security interest before debtors complete their plan payments.”).

 

36  See §§ 59.1 [ Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise ] § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, 103.2 [ Direct Payment of Secured Claims by Debtor ] § 74.8  Direct Payment of Secured Claims by Debtor before BAPCPA, 147.1 [ Direct Payment of Mortgage or Payment by Trustee ] § 85.6  Direct Payment of Mortgage or Payment by Trustee and 454.2 [ Direct Payment of Secured Debt after BAPCPA ] § 74.9  Direct Payment of Secured Debt after BAPCPA. See, e.g., In re Westenberg, 365 B.R. 895 (Bankr. E.D. Wis. Mar. 30, 2007) (McGarity) (When plan provided for payment of secured claims beyond term of plan, creditors’ liens would survive discharge and creditors would continue to receive payments beyond discharge.); In re Linkous, 339 B.R. 375 (Bankr. W.D. Va. Mar. 24, 2006) (Krumm) (When plan provided for direct payments by debtor to creditor of $453.60 per month without specifying how many months, plan provided that creditor would retain its lien until its allowed secured claim was paid in full and creditor filed claim for $20,302.78 to which no objection was filed, creditor and debtor were bound—debtor to pay $453.60 until allowed claim was paid in full; creditor to retain its lien until allowed claim was paid in full.).

 

37  175 B.R. 698 (Bankr. N.D. Ill. Dec. 19, 1994) (Barliant), aff’d, 183 B.R. 509 (N.D. Ill. June 30, 1995) (Alesia).

 

38  175 B.R. at 700–01.

 

39  11 U.S.C. § 1325(a)(5)(B)(i)(II), discussed in § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

40  11 U.S.C. § 349(b).

 

41  285 B.R. 703 (Bankr. D. Ariz. Nov. 14, 2002) (Haines).

 

42  285 B.R. at 705–12.

 

43  See §§ 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate and 231.1 [ 11 U.S.C. § 1327(c): Free and Clear Effect on Liens ] § 120.4  11 U.S.C. § 1327(c): Free and Clear Effect on Liens.

 

44  See discussion of property of the estate beginning at § 46.1  What Is Property of the Chapter 13 Estate?

 

45  See § 230.1 [ 11 U.S.C. § 1327(b): Vesting Effect on Property of Estate ] § 120.3  11 U.S.C. § 1327(b): Vesting Effect on Property of Estate. See also § 207.1 [ Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) ] § 113.11  Retention of Property of the Estate: Overcoming 11 U.S.C. § 1327(b) for plan provisions that overcome vesting of property in the debtor at confirmation.

 

46  11 U.S.C. § 1322(b)(9) permits a Chapter 13 plan to “provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity.”

 

47  See discussion of 11 U.S.C. § 522(f) beginning at § 49.1  Available in Chapter 13 Cases.

 

48  See § 50.1 [ Available in Chapter 13 Cases ] § 49.1  Available in Chapter 13 Cases.

 

49  See § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

50  See discussion beginning at § 120.1  11 U.S.C. § 1327: Overview. See, e.g., In re Harvey, 213 F.3d 318, 319, 323 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (Without reaching the question whether lien stripping prior to the completion of payments is permitted over a creditor’s objection, rejects car lender’s objection to modification of a confirmed plan that contained a lien-stripping provision based on the creditor’s failure to object to identical provision in the original confirmed plan. Long form of plan contained provision “[u]pon payment of the allowed secured claim as indicated, any lien held by GMAC on said vehicle shall be void and title to said vehicle shall be released to the debtor.” Short form of plan did not contain this provision. GMAC did not object to confirmation. Sixteen months later the debtor moved to modify the plan in other respects. GMAC objected to the lien-stripping provision. “[W]e hold that if GMAC had any doubts as to what plan was being confirmed in the 1996 proceedings, it should have alerted the bankruptcy court to the ambiguity at that time, not 16 months later. We add that our resolution of this appeal on waiver grounds makes it unnecessary for us to express an opinion on whether GMAC could have been forced to accept lien stripping in a Chapter 13 proceeding over its objection; we leave that complex subject for another day.”).

 

51  See, e.g., In re Rheaume, 296 B.R. 313 (Bankr. D. Vt. Aug. 5, 2003) (Brown) (Plan can release undersecured lien upon payment of the allowed secured portion of the debt so long as there is clear and conspicuous notice of the lien-releasing language.).

 

52  See § 229.1 [ 11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors ] § 120.2  11 U.S.C. § 1327(a): Binding Effect on Creditors and Debtors. In re Harvey, 213 F.3d 318 (7th Cir. May 2, 2000) (Kanne, Rovner, Wood) (Car lender’s failure to object to plan that required release of lien upon payment of the allowed secured claim precludes objection to modified plan that contains the same lien stripping provision.).

 

53  See § 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases.

 

54  See, e.g., In re Penrod, 50 F.3d 459, 463 (7th Cir. Mar. 22, 1995) (Posner, Rovner, Moran) (In a Chapter 11 case, discussing the similar language in §§ 1141(c) and 1327(c), “unless the plan of reorganization, or the order confirming the plan, says that a lien is preserved, it is extinguished by the confirmation.”); Brooks v. GMAC (In re Brooks), 340 B.R. 648, 652 & 653 (Bankr. D. Me. Apr. 10, 2006) (Haines) (Acknowledging split of authority on when a stripped-down lien on vehicle must be released but declining to “enter the briar patch this day,” confirmed plan was “insufficiently clear and conspicuous to have put GMAC on notice that it would be required to release its lien before its contract claim was paid in full.” GMAC’s refusal to release its lien is lawful since “[a] lien release requirement . . . , if it could be valid at all, must be express, not left to implication.”).

 

55  See § 132.7  Secured Claim Holders, § 135.5  Failure to File Proof of Claim§ 135.6  Untimely Filed Claims in Cases Filed before October 22, 1994: The Hausladen Phenomenon and § 135.7  Untimely Filed Claims in Cases Filed after October 22, 1994.

 

56  See 11 U.S.C. § 1322(b)(2), discussed in § 118.1 [ Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman ] § 79.1  Most Home Mortgages Cannot Be Modified: § 1322(b)(2) and Nobelman.

 

57  See discussion beginning at § 75.1  In General: Modification Without § 506.

 

58  See § 104.1 [ The Power to Modify ] § 74.11  The Power to Modify.

 

59  See §§ 447.1 [ Lien Retention, Including in No-Discharge Cases ] § 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases and 543.1 [ New Limitations on Successive Discharges ] § 156.2  Limitations on Successive Discharges.