Caulkett Does Not Affect Lien-Stripping in Chapter 13

The recent Supreme Court decision in Bank of America v. Caulkett, ___ U.S. ___, 2015 WL 2464049 (June 1, 2015), does not apply to lien stripping in chapter 13. Turman v. Pinnacle Bank, No. 14-80062, Adv. Proc. 14-8035 (Bankr. D. Neb. June 12, 2015). Alton and Leslie Turman’s residence was subject to two liens, the second of which was wholly unsecured. Relying on Minnesota Housing Fin. Agency v. Schmidt (In re Schmidt), 765 F.3d 877 (8th Cir. 2014), and noting that seven other circuits have found that wholly unsecured liens may be stripped off in chapter 13, the court granted the debtors’ motion for summary judgment to avoid Pinnacle Bank’s lien. The court briefly reiterated the well-established interpretation of Nobelman v. American Sav. Bank, 508 U.S. 324 (1993), that a lien that is wholly unsecured under section 506(a) is not a “secured claim” subject to the anti-modification provision of section 1322(b)(2) and may, therefore, be stripped off.

Allaying fears that Caulkett negatively impacted chapter 13 practice, the court stated definitively, “This case is unaffected by the recent United States Supreme Court decision of Bank of America, N.A. v. Caulkett, ___ U.S. ___, 2015 WL 2464049 (June 1, 2015) (holding that Chapter 7 debtors may not strip off wholly unsecured liens), because Caulkett applies only to Chapter 7 cases. Id. at *5” The court also cited Green Tree Servicing, LLC v. Wilson (In re Wilson), Case No. 14–CV–9543 (CS), 2015 WL 3561476 at *6 n.10 (S.D.N.Y. June 5, 2015). In that case the New York district court, likewise noted that “The recent Supreme Court decision on lien stripping, Bank of America, N.A. v. Caulkett, has no effect on the Bankruptcy Court’s order granting the [lien-stripping] motion because Caulkett only applies in the Chapter 7 context.”

Turman Bankr. Neb. opinion

Green Tree SD NY opinion