Memorandum of Decision Re: Chapter 13

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re GRACE M. BOLEN,                                                                                           No. 92-10032              Debtor. ___________________________/ GRACE M. BOLEN,              Plaintiff,      v.                                                                                                                          A.P. No. 96-1033 BANK OF AMERICA,              Defendant. ______________________________/
Memorandum of Decision
     The facts in this adversary proceeding are simple and undisputed. At issue is whether the mortgage lien of Bank of America on the debtor's residence survived her Chapter 13 discharge.      At the time of the Chapter 13 filing, the debtor owed the Bank a relatively small amount secured by a deed of trust to her home. Her plan clearly provided that "the claim will be paid in full through the plan" (emphasis in the original) and, in another portion of the plan, "Default on Residence is to be cured through the plan, and the balance to be paid in full." The plan was confirmed.      The Bank's actions are stated in its pending motion for summary judgment:            Plaintiff's Chapter 13 plan was unusual in that            it provided for payment within the plan of Movant's            entire mortgage debt, as opposed to just the usual            pre-petition arrearages. Movant, however, had filed            its standard secured claim in the amount of prepetition            arrearages only. Upon learning of the unusual plan            terms, it elected not to contest the plan, choosing to            rely upon its lien rights instead. (emphasis added)      The issue before the court is whether the Bank's lien has survived the discharge issued to the debtor upon completion of her plan.      Section 1327(c) of the Bankruptcy Code could hardly be clearer: confirmation of a plan vests all property in the debtor free and clear of any claim or interest of any creditor provided for by the plan. A Chapter 13 plan "provides for" a claim when it acknowledges the claim and makes explicit provision for it. Cen-Pen Corp. v. Hanson, 58 F.3d 89, 94 (4th Cir.1995). The Bank's entire secured claim was provided for by the plan, and the Bank knew it.      The Bank correctly notes that section 506(d)(2) provides a safe harbor for secured creditors who do not file a proof of claim. That section provides that a lien that secures a claim which is not an allowed secured claim is void unless the claim is not allowed only due to the failure to file a proof of claim. The mortgage lien of a creditor which does not file a proof of claim survives a Chapter 13 discharge, notwithstanding section 1327(c). Cen-Pen Corp. v. Hanson, supra. However, the facts show that the Bank is not entitled to the protection of section 506(d)(2) because it filed a proof of claim.      The Bank has cited no case where a creditor who filed a secured claim has been allowed to enforce its lien after completion of a plan providing for payment of the secured claim, nor is the court aware of any such case. In re Bisch, 159 B.R. 546 (9th Cir.BAP 1993), is easily distinguished; in that case, the federal tax lien at issue was not provided for in the debtor's plan.      According to the Bank, a creditor whose secured claim is fully provided for in a plan is at liberty to file a claim for only a portion of the debt and then enforce its lien for the balance after the bankruptcy is over. There is no basis in the law for such a position. Section 506(d)(2) only protects such creditors who file no claim at all.      Judgment against the Bank is mandated by both section 1327(c) and section 506(d). The former voids liens provided for by the plan, as the Bank's clearly was. The latter voids liens not evidenced by allowed claims, unless lack of an allowed claim is due only to failure to file a claim. In this case, the Bank did file a proof of claim.      The court would have more sympathy for the Bank's position if it had misunderstood the nature of the debtor's plan and thought that only arrearages were to be paid through the plan. However, the Bank openly admits that it understood the plan but felt entitled to disregard it. The law does not permit such a cavalier attitude toward the Chapter 13 process.      The Bank argues that its lien survives as to the interest of the debtor's husband. Since she argues that she is an elderly widow, the court assumes that this issue is moot. In any event, the issue is not before the court since the husband is not a party to this suit.      For the foregoing reasons, the Bank's motion for summary judgment will be denied and judgment shall be entered in favor of the debtor, who shall recover attorneys' fees and costs. Counsel for the debtor shall submit a form of order so providing and a form of judgment.
Dated: September 6, 1997                                                                                   _______________________                                                                                                                            Alan Jaroslovsky                                                                                                                            U..S. Bankruptcy