§ 138.4 — Nonrecourse Claims and Claims Discharged in Prior Bankruptcy Case

Revised: June 10, 2004

[1]

Prior to 1991 there was disagreement in the reported cases whether a Chapter 13 debtor could provide for payment of a lienholder when the underlying debt was discharged in a prior bankruptcy case.1 The U.S. Supreme Court concluded in Johnson v. Home State Bank2 that a lien that survived discharge in a Chapter 7 case was a claim in a subsequent Chapter 13 case. The so-called “Chapter 20” phenomenon3 thus received a substantial boost from the Supreme Court. It is now well established that a Chapter 13 plan can provide for the lien remaining after discharge of personal liability in a Chapter 7 case and effectively force the lienholder to accept a money satisfaction through the plan.4

[2]

Developments in Chapter 13 practice after Johnson put an interesting twist on the treatment of nonrecourse liens. It is now the law of several circuits that a Chapter 13 plan can strip off a wholly unsecured lien even with respect to a home mortgage that is protected from modification by § 1322(b)(2).5 What happens to the lienholder’s claim when a nonrecourse lien that survived discharge in a Chapter 7 case is stripped off in a subsequent Chapter 13 case? The debtor’s personal liability to the mortgage holder was discharged in the prior Chapter 7 case. The claim that survived discharge is the lien. Once the lien is stripped off the property, does an allowable unsecured claim remain? Two California bankruptcy courts have reported decisions holding that the stripped-off lien becomes an allowed unsecured claim for the full amount of the underlying debt.6

[3]

The lien that survives discharge in a prior Chapter 7 case is a nonrecourse lien. 11 U.S.C. § 502(b)(1) disallows any claim that is “unenforceable against the debtor and property of the debtor, under any agreement or applicable law.”7 In other contexts, the courts of appeals have recognized that a nonrecourse lender, once it has realized upon its collateral, does not have an allowable unsecured claim against a debtor in bankruptcy; some of these same courts have acknowledged that there is no reason to distinguish between debts without recourse by reason of an agreement and debts without recourse by reason of a Chapter 7 discharge.8 The nonrecourse debt that remains after discharge of a partially secured claim in a Chapter 7 case is unenforceable as a personal obligation of the debtor and is not counted toward the unsecured debt limitation for eligibility in a subsequent Chapter 13 case.9 These cases support the conclusion that once the lien of a wholly unsecured creditor is stripped off in a Chapter 13 case, the underlying debt is not an allowable unsecured claim if the debtor’s personal liability was discharged in a prior Chapter 7 case.

[4]

Similar issues arise when the debtor acquires property—for example, by gift or inheritance—that is subject to a lien that is not the personal obligation of the debtor. The lien is a claim in the Chapter 13 case and can be managed through the plan.10 There is some disagreement about the defaults that can be cured when the debtor is not personally liable.11 It has been held that a taxing authority’s right to foreclose upon a debtor’s real property for nonpayment of taxes is a nonrecourse claim that can be provided for through the Chapter 13 plan.12 Citing Johnson, one bankruptcy court held that a Chapter 13 debtor’s marital interest in real property owned by the debtor’s almost ex-spouse was a sufficient property interest to create a claim that could be managed through the plan.13

[5]

The amount of the claim may be difficult to calculate when the debtor is not personally liable but the debtor’s property is subject to a lien. For example, in Stendardo v. Federal National Mortgage Ass’n (In re Stendardo),14 after discharge in a Chapter 7 case, the mortgage holder with a foreclosure judgment paid taxes and insurance with respect to the debtor’s real property. The debtor then filed a Chapter 13 case and proposed to cure default and maintain payments consistent with § 1322(b)(5).15 The mortgage holder argued it was entitled to add to its claim the amounts it paid for taxes and insurance. The U.S. Court of Appeals for the Third Circuit disagreed. Applying Pennsylvania law, it held that no provision of the (discharged) contract or of state law entitled the judgment lienholder to recover taxes or insurance premiums after a foreclosure.16 In a simpler case involving a car lien that survived discharge in a prior Chapter 7 case, one bankruptcy court held that the surviving nonrecourse lien was a claim “allowable only to the extent of the value of the collateral” in the subsequent Chapter 13 case.17

[6]

The failure to properly consummate a reaffirmation agreement in a prior Chapter 7 case has received some attention. It has been held that a creditor whose reaffirmation agreement was unenforceable for failure to comply with the admonition requirements of § 524(c) and (d) has no claim in a subsequent Chapter 13 case because the debtor’s personal liability was discharged in the Chapter 7 case.18 On unusual facts, one court found that a Chapter 13 debtor was judicially estopped to deny personal liability for a residential mortgage that was discharged in a prior Chapter 7 case but with respect to which the debtor made provision through the Chapter 13 plan to avoid foreclosure.19

[7]

Conversion to Chapter 13 after discharge in a Chapter 7 case generates related issues and problems. Discussed in more detail elsewhere,20 there is some disagreement whether discharged debts are claims against the Chapter 13 estate after conversion.21

[8]

The management of nonrecourse liens and liens that survived discharge in a prior bankruptcy case should be distinguished from the absence of personal liability when there is no property of the estate or property of the debtor subject to a lien. Without a lien or personal liability, there is no debt at all and thus nothing to be paid through the Chapter 13 plan. For example, in In re Scott,22 the debtor proposed to repay a $37,200 “debt” arising from the debtor’s withdrawal of funds from an ERISA-qualified pension plan. The court analyzed the terms of the pension plan and found that the debtor’s withdrawals reduced the balance in the plan, but the debtor was not contractually obligated to repay the amounts withdrawn. The pension plan had no setoff or other right that might give rise to a secured claim under § 506(a). The court held that the “debt” to the pension plan was less than just nonrecourse, it was nonexistent.23


 

1  See Home State Bank of Lewis v. Johnson (In re Johnson), 904 F.2d 563 (10th Cir. 1990) (Mortgage on farmland discharged in a prior Chapter 7 case is not a claim against the debtor, the mortgage holder is not a creditor and the debtor cannot treat the lien that survived discharge in a subsequent Chapter 13 case. Panel rejects Downey Sav. & Loan Ass’n v. Metz (In re Metz), 820 F.2d 1495 (9th Cir. 1987), and does not acknowledge Jim Walter Homes, Inc. v. Saylors (In re Saylors), 869 F.2d 1434 (11th Cir. 1989). The court reasons that the legislative history to § 102(2) discussing nonrecourse loan agreements was intended to cover only consensual nonrecourse loans and not the nonrecourse lien that remains after discharge of in personam liability in a Chapter 7 case.), rev’d, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991); Jim Walter Homes, Inc. v. Saylors (In re Saylors), 869 F.2d 1434 (11th Cir. 1989); Downey Sav. & Loan Ass’n v. Metz (In re Metz), 820 F.2d 1495 (9th Cir. 1987) (Chapter 13 plan can cure the arrearages and reinstate a mortgage claim even though the underlying obligation was discharged in the debtor’s prior Chapter 7 case. Good faith is the only limit on this practice. “Claim” includes a creditor’s encumbrance against property of the estate although there is no in personam liability of the debtor. Restructuring of nonrecourse debt in a Chapter 13 case is possible subject to good-faith requirement of § 1325(a)(3).); Grundy Nat’l Bank v. Johnson, 106 B.R. 95 (W.D. Va. 1989) (Chapter 13 debtor can use §§ 1322(b)(2) and 1322(b)(5) to manage a secured claim when the debtor’s personal liability was discharged in a prior Chapter 7 or in a prior Chapter 13 case.); In re Farrington, 129 B.R. 271 (Bankr. M.D. Fla. 1991) (Case was decided before Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991). Mortgage lien that survived discharge in prior Chapter 7 case is not a claim in a Chapter 13 case filed after discharge but before closing of Chapter 7 case.); In re Neal, 126 B.R. 730 (Bankr. E.D. Ky. 1990) (withdrawn at request of court) (Case was decided before Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991). A mortgage lien that survived discharge in a prior Chapter 7 case may constitute a claim against the debtor based on the nonrecourse mortgage remaining. However, that claim is not allowable for purposes of distribution in a Chapter 13 case. “In order to be allowable for purposes of distribution from the estate, other than from property on which the creditor holds a lien, the claim must be enforceable against the debtor and property of the debtor under applicable law . . . 11 U.S.C. § 502(b)(1). The requirements for allowability are in the conjunctive and not the disjunctive. These claims may be enforceable against property of the debtors under applicable non-bankruptcy law, but they are not enforceable against the debtors individually under non-bankruptcy law. . . . There is no applicable law that authorizes allowance of [nonrecourse] claims in . . . a Chapter 13 case.”); In re McGrue, 108 B.R. 592 (Bankr. N.D. Ohio 1989) (Debtor is permitted to complete installment payments on car loan notwithstanding discharge of personal liability in prior Chapter 7 case.); Society Nat’l Bank v. Barrett (In re Barrett), 105 B.R. 385 (Bankr. N.D. Ohio 1989) (Under Ohio law, where the debtor’s personal liability has been discharged in a Chapter 7 case, a mortgagee nonetheless has a right to payment and a claim that can be managed in a subsequent Chapter 13 case under § 1322(b)(5).); In re Randall, 101 B.R. 708 (Bankr. E.D. Okla. 1989) (Creditor does have a claim that can be treated in Chapter 13 plan notwithstanding discharge of debtor’s personal liability in a prior Chapter 7 case. However, debtor cannot cure the default and reinstate the obligation because it has merged into a prepetition judgment of foreclosure and the debtor’s only option is to remit the full amount of that judgment to the creditor.); In re Rorie, 98 B.R. 215 (Bankr. E.D. Pa. 1989) (Mortgage holder has a secured claim notwithstanding that underlying property was transferred to the debtor subject to the mortgage on the eve of the Chapter 13 filing and the debtor is not personally liable to the mortgage holder.); In re Ligon, 97 B.R. 398 (Bankr. N.D. Ill. 1989) (If the Seventh Circuit were called on to decide whether a Chapter 13 debtor can cure the default and reinstate a home mortgage that was discharged in a prior Chapter 7 case, it would most likely follow Downey Sav. & Loan Ass’n v. Metz (In re Metz), 820 F.2d 1495 (9th Cir. 1987), and evaluate the debtor’s proposal in light of the good-faith standards in Ravenot v. Rimgale (In re Rimgale), 669 F.2d 426, 432 (7th Cir. 1982).); In re Hagberg, 92 B.R. 809, 814–15 (Bankr. W.D. Wis. 1988) (Downey Sav. & Loan Ass’n v. Metz (In re Metz), 820 F.2d 1495 (9th Cir. 1987) “has much to recommend it. . . . [B]y focusing the inquiry on the debtor’s good faith in proposing the plan, the problem of unfairness to the mortgagee can be addressed. The proposed cure of the discharged, unreaffirmed debt would be one consideration in making the good faith determination.”); In re Klapp, 80 B.R. 540 (Bankr. W.D. Okla. 1987) (In re Lewis, 63 B.R. 90 (Bankr. E.D. Pa. 1986), and In re Lagasse, 66 B.R. 41 (Bankr. D. Conn. 1986), are minority but better view. Mortgage securing debt previously discharged in a Chapter 7 case is a nonrecourse obligation that may be scheduled and treated in a Chapter 13 plan.); In re Lagasse, 66 B.R. 41 (Bankr. D. Conn. 1986) (Chapter 13 debtors may cure the default and reinstate home mortgage notwithstanding that the debtors’ personal liability was discharged in a prior Chapter 7 case. Chapter 7 discharge converted mortgage into a nonrecourse obligation, but even a nonrecourse obligation may be a claim, and nothing in § 1322(b)(5) forbids the debtor to cure the default and reinstate a nonrecourse obligation.); In re Lewis, 63 B.R. 90 (Bankr. E.D. Pa. 1986) (“Claim” includes a mortgage lien on property of the estate notwithstanding discharge of debtor’s personal liability in a prior Chapter 7 case. Debtor can pay secured claim in full through the plan, and the automatic stay precludes foreclosure of the lien during pendency of the case.); In re Reyes, 59 B.R. 301 (Bankr. S.D. Cal. 1986) (Debtor cannot use Chapter 13 plan to compel reaffirmation of a debt that was discharged in Chapter 7 case. Debtor’s personal obligation was discharged, and only creditor’s lien remains.); In re McKinstry, 56 B.R. 191 (Bankr. D. Vt. 1986); In re Brown, 52 B.R. 6 (Bankr. S.D. Ohio 1985); Manufacturer’s Hanover Mortgage Corp. v. Fryer, 47 B.R. 180 (Bankr. S.D. Ohio 1985) (After discharge in a Chapter 7 case, although creditor’s lien may survive, there is no surviving “claim”; thus, reinstatement of the obligation is not possible in a subsequent Chapter 13 case.).

 

2  501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991).

 

3  See also § 8.3  Prior Bankruptcy Discharge, § 23.1  Eligibility of a Serial Filer: “Chapter 20” and Beyond, § 23.2  Eligibility of Repeat Filers after BAPCPA, § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts and § 104.2  Frequency of Filing Bankruptcy—Chapter 20 and Beyond.

 

4  See, e.g., In re Craig, 222 B.R. 266, 269, 270 (Bankr. E.D. Va. 1998) (In Chapter 20 situation, car lender has a claim in the subsequent Chapter 13 case that is limited to the replacement value of the car. Citing Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), “[e]ven after the debtor’s personal obligations have been extinguished, the mortgage holder still retains a ‘right to payment’ in the form of its right to the proceeds from the sale of the debtor’s property.” Citing In re Cushman, 217 B.R. 470 (Bankr. E.D. Va. 1998), “it was held that upon an analysis of section 506, ‘a claim enforceable only against property of the bankruptcy estate and not against the debtor personally is allowable only to the extent of the value of the collateral.’ . . . We adopt this reasoning and hold that the amount of the claim is limited to the replacement cost of the collateral or, as in the case at bar, to the amount stipulated to by the parties.”); In re Thorsted, 157 B.R. 5 (Bankr. E.D. Va. 1993) (Under the Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), definition of claim, a residential mortgage holder has a claim that can be included in the debtor’s Chapter 13 plan where the debtor’s personal liability was discharged in a prior Chapter 7 case and the creditor gave notice of default and accelerated the entire indebtedness under the note.). See also Heritage Fed. Credit Union v. Cox (In re Cox), 162 B.R. 191, 198 (Bankr. C.D. Ill. 1993) (Debtors can deal with a mortgage on real property through their Chapter 13 plan where the property originally belonged to the debtors but was conveyed to their daughter prepetition, daughter borrowed money secured by the real property, but the proceeds were actually paid to the debtors. The debtors continued to live in the property, paid the taxes and insurance and made some payments on the secured loan to their daughter. The daughter discharged her personal liability on the loan in a separate Chapter 7 case. The court found that the “true nature” of the transaction was that the residence belonged to the debtors and that the creditor had a “claim” against the debtors because it had a mortgage against “their property, their residence.” The creditor’s only remedy of foreclosure “develops into a right of payment because if the DEBTORS do not pay they will lose their residence through the foreclosure.”).

 

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

 

6  In re Gounder, 266 B.R. 879 (Bankr. E.D. Cal. 2001) (Reaching the same result as In re Akram, 259 B.R. 371 (Bankr. C.D. Cal. 2001), but for different reasons, wholly unsecured mortgage lien that survived discharge in prior Chapter 7 case can be stripped off in subsequent Chapter 13 case under Lam v. Investors Thrift (In re Lam), 211 B.R. 36 (B.A.P. 9th Cir. 1997), appeal dismissed, 192 F.3d 1309 (9th Cir. 1999), but becomes an allowed unsecured claim for the full amount of the debt.); In re Akram, 259 B.R. 371 (Bankr. C.D. Cal. 2001) (Wholly unsecured mortgage lien that survived discharge in a Chapter 7 case can be stripped off in a subsequent Chapter 13 case under Lam v. Investors Thrift (In re Lam), 211 B.R. 36 (B.A.P. 9th Cir. 1997), appeal dismissed, 192 F.3d 1309 (9th Cir. 1999), subject to limitation from In re Gold Coast Asset Acquisition, L.P. v. 1441 Veteran Street Co. (In re 1441 Veteran Street Co.), 144 F.3d 1288 (9th Cir. 1998), that res judicata would not apply unless debtor completed payments under a confirmed plan; after Lam-stripping, the wholly unsecured mortgage lien becomes an allowable unsecured claim for the full amount of the note.). See also § 146.1 [ Debts Discharged in Prior Bankruptcy and Nonrecourse Debts ] § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts.

 

7  11 U.S.C. § 502(b)(1).

 

8  See, e.g., In re PCH Assocs., 949 F.2d 585 (2d Cir. 1991).

 

9  See In re Cavaliere, 208 B.R. 784, 786–87 (D. Conn. 1997).

 

10  See § 146.1 [ Debts Discharged in Prior Bankruptcy and Nonrecourse Debts ] § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts. See, e.g., In re Curinton, 300 B.R. 78, 84–85 (Bankr. M.D. Fla. 2003) (Citing Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), debtor can manage a mortgage through a Chapter 13 plan notwithstanding lack of privity of contract. Debtor acquired real property from a dissolved corporation. Debtor was not personally liable on the corporation’s mortgage. “The Supreme Court in Johnson has told us that a debtor can include a claim in a Chapter 13 plan, even when the debtor is not personally liable for the underlying debt. . . . [T]he debtor admittedly lacks personal liability . . . . However, the debtor has been the title holder of the home . . . . The debtor has made payments on the mortgage . . . . Pursuant to Johnson, the debtor can include the subject property in the debtor’s Chapter 13 plan because Western United has a claim against the debtor’s property.”); In re Lumpkin, 144 B.R. 240, 241 (Bankr. D. Conn. 1992) (Mortgage on real property that was quitclaimed to the debtor by the debtor’s mother is a claim notwithstanding that the debtor has no personal liability to the mortgage company. Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991) stands for the proposition “even if a debtor has no personal liability on a mortgage loan, the in rem ‘claim’ of a mortgagee is a ‘claim’ subject to inclusion in a Chapter 13 plan.”); In re Wells, 125 B.R. 297 (Bankr. D. Colo. 1991) (Property inherited by debtor subject to a mortgage is a claim under § 102(2) notwithstanding the absence of personal liability.).

 

11  See discussion of “due on sale” clauses in §§ 132.1 [ Nonmonetary Defaults ] § 82.3  Nonmonetary Defaults and 146.1 [ Debts Discharged in Prior Bankruptcy and Nonrecourse Debts ] § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts. See, e.g., In re Garcia, 276 B.R. 627 (Bankr. D. Ariz. 2002) (There is a debtor-creditor relationship between mortgage holder and Chapter 13 debtor who purchased property subject to deed of trust without assuming personal liability; debtor can cure violation of due-on-sale clause through the Chapter 13 plan.); In re Threats, 159 B.R. 241 (Bankr. N.D. Ill. 1993) (Chapter 13 debtors cannot use § 1322(b)(3) or (b)(5) to cure defaults with respect to a mortgage that the debtors are not personally liable upon and that contains a due-on-sale clause that was triggered prepetition.).

 

12  See In re Lago, 301 B.R. 365 (Bankr. S.D. Fla. 2003) (Tax certificate holders are creditors with secured claims based on lien rights of tax collector notwithstanding that debtor is not personally liable to the certificate holders; plan payments should be made directly to certificate holders as the real parties in interest.); In re O’Neal, 142 B.R. 411 (Bankr. D. Or. 1992) (Citing Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), although debtor has no personal liability to state taxing authority, state’s right to foreclose upon the debtor’s real property is a right to payment sufficient to constitute a claim that can be dealt with in a Chapter 13 plan.). Accord In re Ivory, 146 B.R. 27 (Bankr. D. Or. 1992).

 

13  In re Rosa, 261 B.R. 136, 139 (Bankr. D.N.J. 2001) (On mortgage holder’s motion for relief from the stay, debtor’s marital interest in real property is a right to joint possession under New Jersey law sufficient to generate a claim for Chapter 13 purposes under Johnson v. Home State Bank, 501 U.S. 78, 111 S. Ct. 2150, 115 L. Ed. 2d 66 (1991), notwithstanding that almost ex-spouse owns property. “[T]he right to joint possession under [New Jersey law] is a form of property interest in the marital residence. . . . [T]he Supreme Court held in Johnson that if a claim is enforceable against property of the debtor, that claim can be modified under a chapter 13 plan even if the debtor is not personally liable to the lienholder. The court holds that the marital residence is ‘property of the debtor’ who holds a right to joint possession of that property.”).

 

14  991 F.2d 1089 (3d Cir. 1993).

 

15  See § 129.1 [ Overview: General Rules for Saving Debtor’s Home ] § 81.1  Overview: General Rules for Saving Debtor’s Home.

 

16  991 F.2d at 1101.

 

17  In re Craig, 222 B.R. 266, 270 (Bankr. E.D. Va. 1998).

 

18  In re Petry, 76 B.R. 651 (Bankr. C.D. Ill. 1987); In re Jackson, 49 B.R. 298 (Bankr. D. Kan. 1985).

 

19  In re Hutchins, 162 B.R. 1014, 1019–21 (Bankr. N.D. Ill. 1994) (Debtor is judicially estopped from asserting that personal liability to second mortgage holder was discharged in a prior Chapter 7 case. South Central had a junior lien on the debtor’s residence. In a Chapter 7 case in 1987, the debtor failed to list South Central. The debtor received a discharge in 1988. In 1990, the debtor filed a Chapter 13 case and scheduled South Central as an unsecured claim holder. The Chapter 13 plan was confirmed without objection. Unsecured claim holders, including South Central, were to be paid 100%. South Central did not file a proof of claim, but the debtor filed an unsecured claim for $4,282 on behalf of South Central pursuant to § 501(c). More than two years after confirmation, the debtor defaulted in payments to the first mortgage holder, the first mortgage holder foreclosed, the debtor moved out of the house and the court entered an order abandoning the residence. The debtor then filed several motions to amend the Chapter 13 plan to stop payments to the first and second mortgage holders, effective as of the date of abandonment and to recover plan payments made to the mortgage holders after the property was abandoned. The debtor argued for the first time that the debtor had no personal liability to the second mortgage holder because of the discharge in the prior Chapter 7 case, and thus the second mortgage holder had no claim in the Chapter 13 case and should not have received any payments. “[A]n unusual circumstance bars Debtor from claiming that her personal debt on the second mortgage was discharged. . . . [T]he omission to schedule . . . affected South Central adversely. . . . It deprived South Central of the knowledge that Debtor could claim that the debt had become non-recourse because the personal debt had been discharged. Then, by filing an unsecured claim herein for South Central in a plan providing 100% payment to unsecured creditors, Debtor put South Central in a position where it appears protected by a Plan and a claim on its behalf, whereas, unbeknownst to it, Debtor could claim it held only a lien, not a personal claim. In these circumstances, . . . Debtor is judicially estopped from denying the personal claim of South Central to which HUD has succeeded. . . . [T]he confirmed Chapter 13 plan had the practical, if not legal, effect of reaffirming her South Central debt. . . . [S]he sought the benefits of reaffirmation without going through the reaffirmation procedures so as to be bound to the debt if the benefit proved inadequate. . . . It would be inequitable to allow Hutchins to reap the benefits of her convoluted tactics, to wit, the continued enjoyment of her home for over two extra years, without requiring her also to bear the burdens of the claim she filed for South Central. She is estopped now from taking back commitments made here in order to obtain benefits partially obtained thereby. She is therefore estopped from claiming that the South Central debt was discharged in her Chapter 7 proceeding.”).

 

20  See § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts, § 148.2  Absolute Right of Debtor?, § 148.3  Effects of Conversion from Chapter 7 to Chapter 13 and § 148.4  Conversion to Chapter 13 after BAPCPA.

 

21  See, e.g., In re Marcakis, 254 B.R. 77, 82–83 (Bankr. E.D.N.Y. 2000) (“To permit a discharged debtor to convert his Chapter 7 case to a Chapter 13 case is ludicrous as Debtor no longer has any meaningful debts to repay pursuant to a Chapter 13 plan. His discharged creditors no longer have any right to either receive payment or object to confirmation of any plan proposed by the debtor. . . . [O]nce the Chapter 7 discharge has been granted, the Debtor’s personal liability is extinguished thus rendering the conversion meaningless, except as to those creditors holding non-dischargeable claims.”); In re Mosby, 244 B.R. 79, 87 (Bankr. E.D. Va. 2000) (Debtor can convert from Chapter 7 to Chapter 13 after discharge, but the debts discharged in the Chapter 7 case remain claims against the Chapter 13 estate. “[T]he argument that once a discharge has been issued there are no debts for a plan to pay cannot be supported by a close reading of the Bankruptcy Code. The effect of a discharge is to prohibit collection of the discharged debt ‘as a personal liability of the debtor.’ § 524(a) . . . . It does not, however, affect the liability of any other person or entity for the debt. § 524(e) . . . . In particular, nothing in the Code suggests that a discharge eliminates the creditor’s claim against the bankruptcy estate. . . . The bankruptcy estate comes into existence upon ‘the commencement of [the] case.’ § 541(a) . . . . Claims against the estate, if objected to, are determined ‘as of the date of the filing of the [bankruptcy] petition.’ § 502(b) . . . . The conversion of a case does not change the date of the commencement of the case or the date of the filing of the petition. § 348(a) . . . . Thus, creditors with valid claims against the bankruptcy estate on the date the bankruptcy petition is filed do not lose them simply because the debtor is granted a discharge or the case is converted to another chapter.”).

 

22  142 B.R. 126 (Bankr. E.D. Va. 1992).

 

23  There are contrary cases. See § 85.5  Debts Discharged in Prior Bankruptcy and Nonrecourse Debts,  § 91.2  Projected (Disposable) Income and § 91.3  Reasonably Necessary for Maintenance or Support. See also Geiger v. Pennsylvania (In re Geiger), 143 B.R. 30, 33 (E.D. Pa. 1992) ($25 driver’s license restoration fee required by Pennsylvania law does not constitute a claim because the debtor has no enforceable obligation to tender payment to have her driver’s license restored, nor does the state of Pennsylvania have any right to payment, because the debtor is not required to seek restoration of her driver’s license. “A discharge of existing debts . . . does not exonerate debtors from future payments for goods, services or privileges which they are under no enforceable or legal obligation to purchase or obtain.”).