The issue on appeal is whether the bankruptcy court may confirm the debtor’s plan which provides for the avoidance of two junior liens on the Debtor’s principal residence. In particular, the Bankruptcy Appellate Panel (the “BAP”) considered whether: (1) Bankruptcy Code Section 1322(b)(2) prevents a debtor from modifying the rights of junior lienholders of liens on his principal residence if the value of the residence is less than the amount owed to the senior lienholder; and (2) if not, whether such modification is contingent upon the debtor’s receipt of a Chapter 13 discharge.
The BAP held that a strip off of a wholly unsecured lien on a debtor’s principal residence is effective upon completion of his obligations under his plan and is not contingent on his receipt of a Chapter 13 discharge
The BAP remanded to the bankruptcy court requiring that the debtor must amend his plan to provide for proper treatment of the junior lienholders’ claims as unsecured nonpriority claims, and the district court should consider whether the debtor’s plan complies with these additional requirements for confirmation.