United States District Court, D. Connecticut
appeal from United States Bankruptcy Court, District of
Connecticut at New Haven
MEMORANDUM AND ORDER
R. UNDERHILL, United States District Judge.
question in this bankruptcy appeal is whether a debtor in a
Chapter 13 case who is ineligible for discharge as a result
of receiving a Chapter 7 discharge within the prior four
years is for that reason per se barred from
obtaining confirmation of a plan that contemplates voiding
(or “stripping off” or
“lien-stripping”) a wholly unsecured, junior
mortgage lien. That question can also be framed as whether it
is correct to follow a 2011 opinion of U.S. Bankruptcy Judge
Albert S. Dabrowski-In re Sadowski, 473 B.R. 12
(Bankr. D. Conn. 2011)-which concluded that a per se
bar does exist, or a 2013 opinion of Chief U.S. District
Judge Janet C. Hall-In re Rogers, 489 B.R. 327 (D.
Conn. 2013)-which expressed her view that Sadowski
was wrongly decided (albeit in dicta, because she affirmed on
bankruptcy judges in this district have followed
Sadowski, and apparently none has yet been reversed,
despite Chief Judge Hall's discussion in Rogers.
The position Chief Judge Hall expressed in Rogers,
however, has become the majority rule elsewhere, and has been
adopted by three Circuits. For the reasons that follow, I
follow Chief Judge Hall and the decisions of those Circuits
and accordingly REVERSE the decision of the Bankruptcy Court
and REMAND to that Court for further proceedings consistent
with this ruling.
Standard of Review
district courts have jurisdiction to hear appeals from
“final judgments, orders and decrees” of the
bankruptcy court as well as from some interlocutory orders.
28 U.S.C. § 158(a). The Supreme Court recently decided
that orders that deny confirmation of a plan are not final
for purposes of appeal. Bullard v. Blue Hills Bank,
135 S.Ct. 1686 (2015). However, the Court noted its
“expectation that lower courts will certify and accept
interlocutory appeals from plan denials in appropriate
cases.” Id. at 1696.
standard generally applied by district courts deciding
whether to grant leave to appeal interlocutory orders of the
bankruptcy court is the same as that set forth in 28 U.S.C.
§ 1292(b). See Weiner's Inc. v. T.G. & Y.
Stores Co., 191 B.R. 30, 31 (S.D.N.Y. 1996); In re
Orlan, 138 B.R. 374, 377 (E.D.N.Y. 1992). The district
court should grant leave to appeal from an interlocutory
order where the decision of the bankruptcy court involves:
(1) a controlling question of law (2) as to which there is a
substantial ground for difference of opinion, (3) where
immediate appeal may materially advance the termination of
the litigation. See 28 U.S.C. § 1292(b). I
granted leave to appeal in this case (doc. # 7).
reviewing bankruptcy appeals, the district court must review
conclusions of law de novo and apply the
“clearly erroneous” standard to the bankruptcy
court's findings of fact. In re Ionosphere Clubs,
Inc., 922 F.2d 984, 988 (2d Cir. 1990). The issue on
this appeal is a pure question of law and therefore subject
to de novo review.
and Robert Curwen received a discharge in a Chapter 7
liquidation case in May 2014, and in August 2014 they filed
this Chapter 13 reorganization case. They filed a motion
under sections 506(a) and (d) of the Bankruptcy Code to
obtain a valuation of their home in Bridgeport, Connecticut,
and an order entered finding that the value of the property
is $120, 000, that the debt owed to the first mortgage on the
home is $179, 858, and that the second mortgage therefore
attaches to no value in the collateral and is totally
Curwens filed a Chapter 13 plan of reorganization that would
eliminate the junior mortgage holder's lien on the
property under 11 U.S.C. § 1322(b)(2). The Trustee
objected, arguing that the plan is unconfirmable as a matter
of law because the Curwens are ineligible for discharge and
the plan does not otherwise provide for payment under
nonbankruptcy law as is required by 11 U.S.C. §
1325(a)(5)(B)(i)(I). Following Sadowski, Bankruptcy
Judge Alan H.W. Shiff sustained the objection. The Curwens
sought leave to file an interlocutory appeal, and I permitted
them to do so.
parties dispute section 1325(a)(5)'s effect on the
bankruptcy court's ability to confirm a Chapter 13 plan
that contemplates “lien-stripping” under section
1322(b)(2). The crux of the dispute is whether the phrase
“allowed secured claim, ” as set forth in section
1325(a)(5), should be defined using 11 U.S.C. §
506(a)'s definition of the phrase, or whether it should
be defined as it was in Dewsnup v. Timm, 502 U.S.
410 (1992). To evaluate the dispute, I must first consider
the distinctions between Chapter 7 liquidation and Chapter 13
Chapter 7, Chapter 13, and