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Delich v. Harris (ND IL ED)(J. Schmetterer)

Bankruptcy: In re Caroline Delich,


Adversary: Delich v. Harris Bancorp, 11-00891
Opinion issued Jul. 7, 2011
By Hon. Jack B. Schmetterer

Holding: On March 2, 2011 the Court stripped the lien of Harris Bancorp, holder of the 2nd mortgage against the Debtor/Plaintiff’s residence.

Opinion: According to 11 USC 1322(b)(2) the mortgage lien on the Debtor’s principal residence may not be modified. However, a wholly unsecured lien can be avoided and cancelled altogether through a Chapter 13 plan. See First Bank, Inc. vs. Van Wie, 2003 WL 1563959(S.D. Ind.2003); In Re Mann, 249 B.R. 831, 840 (1st Cir BAP 2000); In Re Pond, 2001 U.S.App.Lexis 11287 (2nd Cir. 2001); In re McDonald, 205 F.2d 606 (3rd Cir 2000); Bartee vs. Tara Colony Homeowners Assoc, 212 F.3d 277 (5th Cir. 2000); In re Lam, 211 B.R. 36 (9th Cir BAP 1357); In Re Tanner, 217 F.3d 1357 (11th Cir). For the principal to be applied, there cannot be any equity securing a 2nd mortgag lien at the time of valuation of the subject property. In other words, a lien must be wholly unsecured to be avoided and cancelled. Since, at the time of filing, the amount due under the Debtor’s first mortgage exceeded the value of the subject real estate, the Harris 2nd mortgage was presumed to be entirely unsecured and could be avoided and cancelled at the conclusion of her plan payments pursuant to 11 U.S.C. 506.

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