Opinion
Case No. 20-31102
09-29-2020
In re: JONATHAN HENRY MARSHALL CYNTHIA ANN MARSHALL, Debtors
Chapter 13
Order Denying Trustee's Objection to Allowance of Claim (Doc. 15), Without Prejudice
On June 24, 2020, prior to the confirmation of the proposed plan in this case, the Chapter 13 Trustee filed an Objection to Allowance of Claim (doc. 15) (the "Objection") asserting that the creditor's lien was not timely perfected and is therefore a preference that fails to meet the affirmative defense requirements of 11 U.S.C. § 547(c)(3)(B). The Objection seeks to reclassify Ally Bank's Claim 8-1 as unsecured. An adversary proceeding has not been filed. See Fed. R. Bankr. P. 3007(b). The creditor did not respond to the Objection.
Absent an agreed order, a proceeding to avoid a preference requires an adversary proceeding. Grella v. Salem Five Cent Sav. Bank, 42 F.3d 26, 33 (1st Cir. 1994); Colvin v. Amegy Mortg. Co., 507 B.R. 169, 188 (W.D. Tex. 2014). "[A] proceeding to determine the validity, priority, or extent of a lien or other interest in property" requires the filing of an adversary proceeding. Federal Rule of Bankruptcy Procedure 7001(2). Moreover, while the Debtors' Confirmed Plan (docs. 7 and 16) treats the claim as a secured "910 Claim," which is subject to a determination of the claim amount through the claim objection process, nothing in the Plan, which was confirmed on July 28, 2020, provides for avoidance of the lien. See 11 U.S.C. §§ 1327(a), and the "hanging paragraph" of 1325(a).
The avoidance of liens under 11 U.S.C. § 506 and Lane v. Western Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir. 2002) are frequently pursued by motion because the central issue in those proceedings is the value of the underlying real estate, which may be pursued as a contested matter or in the Chapter 13 plan. Fed. R. Bankr. P. 3012(b). Government unit claims may not be valued in the plan but still may be pursued as a contested matter, with certain timing restrictions. This practice existed in the Dayton location even prior to the 2017 amendments to Rule 3012. See Bennett v. Springleaf Fin. Servs. (In re Bennett), 466 B.R. 422, 437 (Bankr. S.D. Ohio 2012) (allowing valuation by a plan provision); In re Hill, 304 B.R. 800, 804-05 (Bankr. S.D. Ohio 2003) (similar). In addition, liens can be avoided under 11 U.S.C. § 522(f) by motion because Federal Rule of Bankruptcy Procedure 4003(d) provides that the avoidance of liens impairing exemptions shall be pursued by motion. All other lien avoidances require the filing of an adversary proceeding pursuant to Federal Rule of Bankruptcy Procedure 7001(2).
This court has repeatedly opined that "debtors and creditors cannot modify plan treatment in a confirmed Chapter 13 plan unless the plan failed to comport with constitutional due process." Young v. Chase Home Finance, LLC (In re Young), 523 B.R. 114, 118 (Bankr. S.D. Ohio 2015); Bennett, 466 B.R. at 427. See also Ford Motor Credit Co. v. Bankr. Estate of Parmenter (In re Parmenter), 527 F.3d 606, 608 (6th Cir. 2008) (providing the bases for modification of a plan under 11 U.S.C. § 1329); Ruskin v. DaimlerChrysler Servs. N. Am. (In re Adkins), 425 F.3d 296, 302 (6th Cir. 2005) (providing for payment of a secured claim on a vehicle subsequent to a sale when the confirmed plan treated such claim as secured). This principle is also applicable to the Chapter 13 Trustee. See Storey v. Pees (In re Storey), 392 B.R. 266, 272 (B.A.P. 6th Cir. 2008); Pees v. CitiMortg., Inc. (In re Crum), 479 B.R. 734, 741 (Bankr. S.D. Ohio 2012).
For the foregoing reasons, the Objection to Allowance of Claim (doc. 15) is denied, without prejudice.
IT IS SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/ _________
Guy R. Humphrey
United States Bankruptcy Judge
Dated: September 29, 2020
Copies to: Default List Ally Bank, PO Box 130424, Roseville, MN 55113-0004