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In re Harlan Eugene Reed and Lola Frances Reed

Bankr. No.: 
10-30068
Chapter: 
13
Date of Decision: 
March 16, 2011
Issue: 
Whether 11 U.S.C. § 1322(b)(2) prohibits a debtor from avoiding – or "stripping off" – a wholly unsecured creditor's mortgage lien against the debtor's homestead?
Ruling: 
No. While some lower courts have extended the holding in Nobelman v. American Savings Bank, 508 U.S. 324 (1993), in which the Supreme Court held § 1322(b)(2) prohibits a debtor from avoiding – or "stripping down" – an undersecured creditor's mortgage lien against the debtor's homestead, the Court declined to do so. The Court instead agreed with and adopted the reasoning of the appellate courts in eight different circuits (1st, 2nd, 3rd, 5th, 6th, 9th, 10th, and 11th) that have addressed the issue, each of which held § 1322(b)(2) does not prohibit a debtor from stripping off a wholly unsecured creditor's mortgage lien against the debtor's homestead.
Full Bankruptcy Court Decision: