EDWIN MICHAEL BURKHART; TERESA STEIN BURKHART, f/k/a Teresa S. Barham, Debtors - Appellants,
NANCY SPENCER GRIGSBY, Trustee - Appellee, and COMMUNITY BANK OF TRI-COUNTY, Defendant.
Argued: October 24, 2017
from the United States District Court for the District of
Maryland, at Greenbelt. Peter J. Messitte, Senior District
Douglas Burns, BURNS LAW FIRM, LLC, Greenbelt, Maryland, for
Rebecca Anne Herr, OFFICE OF CHAPTER 13 TRUSTEE, Annapolis,
Maryland, for Appellee.
Park McLean, OFFICE OF CHAPTER 13 TRUSTEE, Bowie, Maryland,
KING and DIAZ, Circuit Judges, and SHEDD, Senior Circuit
case, we consider whether a bankruptcy court may strip off
valueless liens on a Chapter 13 debtor's principal
residence when no proof of claims have been filed. The
trustee opposed the debtors' request to strip the liens,
arguing that 11 U.S.C. § 506(d)expressly prohibits lien
avoidance where no proof of claims have been filed. The
bankruptcy court agreed and refused to strip the liens. The
district court affirmed, holding that even if § 506(d)
did not bar the debtors' effort to strip the liens, the
text of § 506(a) still requires a proof of claim to be
filed before a lien can be stripped.
disagree and reverse. There is no question that the liens at
issue are entirely without value making the creditor the
holder of an unsecured claim under § 1322(b).
Accordingly, the liens may be stripped regardless of whether
a proof of claim has been filed.
turning to the merits, we discuss the relevant provisions of
the bankruptcy Code and the factual and procedural history of
Bankruptcy Code contains two chapters aimed at individual
debtors. Under Chapter 7, a debtor's estate is liquidated
to pay creditors, after which he can obtain a discharge,
eliminating personal liability for nonexempt debts.
§§ 726-727. Chapter 7 thus "allows a debtor to
make a clean break from his financial past, but at a steep
price: prompt liquidation of the debtor's assets."
Harris v. Viegelahn, 135 S.Ct. 1829, 1835 (2015). By
contrast, Chapter 13 operates as a "reorganization,
" allowing a debtor to keep certain assets by promising
to repay creditors from future income streams over a three to
five year period. See id.; §§ 1306(b),
1322, 1327(b). However, only those debtors with a regular
income sufficiently stable to enable payments under a plan
may seek relief under Chapter 13. §§ 101(30),
their differences, both chapters are governed by the same
subchapter on creditors and claims, found at §§
501-511. See § 103(a). Among other things, this
subchapter details the formal process for filing a proof of
claim and claim allowance.See §§ 501-503. It
also provides the mechanism for determining a claim's
secured status and instructs courts to ...