United States Bankruptcy Court Central District of California
San Fernando Valley
Tuesday, March 27, 2012 Hearing Room 302
9:00 am
1:11-15373 David Darzian Chapter 13
Second Amended Motion to avoid junior lien on Principal Residence ***
Docket #: 27
On October 2, 2009, David Darzian (“Debtor”) filed a voluntary chapter 7 petition. Debtor received a discharge in that case on February 10, 2010. Subsequently on May 1, 2011, Debtor filed a voluntary chapter 13 petition. This in turn resulted in what is colloquially known as a chapter 20 case. Now, Debtor has filed a Motion to Avoid (“Motion to Avoid”) the junior lien on his principal residence held by J.P. Morgan Chase Bank, N.A. (“JP Morgan”). An opposition has not been filed. At the January 24, 2012 continued hearing, Debtor was instructed to file additional briefing by February 22, 2012 addressing this Court’s previous ruling in In re Winitzky, 2009 Bankr. Lexis 2430 (Bankr. C.D. Cal. 2009). There, this Court held that chapter 20 debtors are not entitled to avoid junior liens because of their inability to obtain a discharge. Debtor was asked to address why this Court should permit this chapter 20 debtor to avoid the junior lien of JP Morgan. The Court noted that subsequent to its ruling in In re Winitzky, several cases have come down and conflicting rulings have been reached. On February 22, 2012, Debtor filed his Brief. Based on an analysis of subsequent cases, the Court will re-consider its position with respect to avoiding junior liens in chapter 20 cases.
Based on an analysis of further discussions of this subject, the court is inclined to agree that the controlling event, then, is not discharge but rather completion of plan payments. Discharge in chapter 13 and an individual chapter 11 is only granted once the plan payments have been completed. It is also dispositive that a discharge does not, in and of itself, strip a lien; instead, discharge simply operates as a statutory injunction against the “commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor.” In re Oksosisi, 451 B.R. 90, (Bankr. D. Ne 2011), In re Frazier, 448 B.R. 803, 809, and 11 U.S.C. § 524(a)(2). Other courts, as discussed below, identify the completion of plan payments as the controlling event governing permanence of lien avoidance and modification of rights.
Read more…
