April 23, 2009
Cramming Down a Wholly Unsecured Lien in Chapter 7?
Question: You cannot strip away a wholly unsecured lien in chapter 7 - right?
Answer from Dan Press:
That was conventional wisdom before 1998, when I won Yi v. Citibank, 219 BR 394 (ED Va. 1998) (wholly unsecured lien strippable in a 7). It then became a hot issue until 2001, when after saying in a 2001 unpublished case that wholly unsecured liens were strippable in a 7, in Warren v. Smith 1 Fed Apx. 178 (4th Cir. 2001), the 4th Cir decided later that same year, in Ryan v. Homecomings, 253 F.3d 778 (4th Cir 2001), that they were not. The 6th Cir. has agreed with Ryan, in Talbert v. City Mortgage, 344 F.3d 355 (6th Cir. 2003). As such, this issue is foreclosed only in the 4th and 6th Circuits. No other circuit has ruled on the issue. The 9th Cir. BAP has said no. In re Laskin, 222 B.R. 872 (9th Cir. BAP 1998).
Since Talbert in 2003, probably because of the economy, there were few if any appellate decisions on lien stripping at all, until recently, and it appears that no one has picked up the ball in other circuits. It appears that Howard v. Nat. West, 184 BR 644 (Bk. EDNY 1995) (lien strip-offs OK in C7) has not been overruled or rejected in that court, for example. The Third Circuit seems to have expressly left the issue open in McDonald v. Master Fin., 205 F.3d 605 (3rd Cir. 2000). So it seems to me that this ought to be considered still a live issue everywhere but the 4th and 6th circuits.
Chung & Press, P.C.
6718 Whittier Ave. #200
McLean, VA 22101
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