Observing an “emerging consensus in this Circuit” that lien stripping can be accomplished through Chapter 13 Plan Completion, the court in Litton Loan Servicing, et al v. Robert Blendheim, et. al, In re Blendheim, Nos. 13-35354, 13-35412, U.S. Court of Appeals For the Ninth Circuit, 2015. You can watch oral arguments here. So, what do you get when you already have a Chapter 7 Bankruptcy Discharge and subsequently file a Chapter 13 Bankruptcy Case to avoid a mortgage lien? You get a Chapter 20 case that, upon completion you don’t get a discharge, but rather, a permanent mortgage lien strip! Strip away those unwanted mortgage liens; now available in Chapter 20!
For those new to the bankruptcy community, you will not find the term, “Chapter 20” in the Bankruptcy Code, but rather, it is only spoken of in the hallways of our courtrooms and near law firm water coolers. It’s called a “chapter 20” bankruptcy case if, a consumer files a Chapter 7 bankruptcy case, followed by a Chapter 13 case. See, 13 plus 7 equals 20; simple. Consumer attorneys now have another powerful tool to assist their clients in opening the door to freedom from debt.
I think the entire decision is worth a read to all our practitioners. You can read the entire decision here. As a consumer advocate, it’s a great day to help clients get that fresh start they deserve. Now, avoiding liens can be accomplished by discharging all debts under Chapter 7, then file a chapter 13 case to strip those unwanted liens. Complete the plan and the lien is void!