Lien Stripping in Chapter 20 Bankruptcy: A Permissible Relief to Debtors
Johns, Jessica L.
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Abstract
Chapter 20 bankruptcy cases arise when a debtor files for chapter 13 after completing a chapter 7 case. Lien stripping is a benefit available to certain debtors in bankruptcy and it removes an unsecured lien from property. The removal of the part of a lien that is partially unsecured is called a 'strip down,' whereas the removal of a completely unsecured lien is called a 'strip off.' The Supreme Court has held that a 'strip down' in both a chapter 7 and a chapter 13 are impermissible modifications of a secured claim. Recently, the Supreme Court held in Bank of America, N.A. v. Caulkett that a strip off in chapter 7 is also impermissible.
This Comment argues that despite the recent Caulkett decision, lien stripping in chapter 20 remains permissible. Additionally, there is a body of case law indicating that circuit courts are permitting.