In re: Carolyn L. Davis

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: August 3, 2012
• Docket: CC-11-1692-MkDKi
• Status: Unpublished

Opinion

FILED AUG 03 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-11-1692-MkDKi ) 6 CAROLYN L. DAVIS, ) Bk. No. ND 11-10994-RR ) 7 Debtor. ) ______________________________) 8 ) CAROLYN L. DAVIS, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) BANK OF AMERICA, N.A.; ONEWEST) 12 BANK; ELIZABETH F. ROJAS, ) Chapter 12 Trustee, ) 13 ) Appellees. ) 14 ______________________________) 15 Argued and Submitted on July 19, 2012 at Pasadena, California 16 Filed – August 3, 2012 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Robin L. Riblet, Bankruptcy Judge, Presiding 20 Appearances: Jerry Namba of the Law Office of Jerry Namba 21 argued on behalf of Appellant Carolyn L. Davis; Ellen Cha of Pite Duncan, LLP argued on behalf of 22 Appellee Bank of America, N.A.; Mark D. Estle of the Estle Law Firm argued on behalf of Appellee 23 OneWest Bank. 24 Before: MARKELL, DUNN and KIRSCHER, Bankruptcy Judges. 25 26 * 27 This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 28 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1. 1 INTRODUCTION 2 Debtor Carolyn Davis (“Davis”) appeals from the bankruptcy 3 court’s order determining that she was ineligible to be a debtor 4 in a chapter 121 bankruptcy case and dismissing her case. We 5 AFFIRM. 6 FACTS 7 The controlling facts are undisputed. This is Davis’s 8 second bankruptcy case. In July 2010, she filed a no-asset 9 chapter 7 bankruptcy case,2 and she was granted a discharge in 10 November 2010. Davis commenced her current bankruptcy case by 11 filing a chapter 12 bankruptcy petition in March 2011. Elizabeth 12 Rojas (“Trustee”) was appointed to serve as chapter 12 trustee. 13 In her schedules accompanying her chapter 12 petition, Davis 14 listed over $4.1 million in secured debt.3 According to her 15 schedules, Davis owned three parcels of real property of 16 significant value:4 (1) a ranch located in Paso Robles, 17 California (“Ranch”), (2) a residence located in Cayucos, 18 California (“Residence”) and (3) a triplex located in Paso 19 1 Unless specified otherwise, all chapter and section 20 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 21 all “Rule” references are to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. 22 2 United States Bankruptcy Court for the Central District of 23 California, chapter 7 case no. ND 10-13744-RR. 24 3 Davis listed no unsecured debt in her schedules because she had obtained her chapter 7 discharge only a few months earlier. 25 4 26 There was a fourth parcel of real property that Davis listed, located in Atascadero, California. Davis represented 27 that the Atascadero parcel was essentially worthless. In any event, the Atascadero parcel is not relevant to our analysis, 28 inasmuch as it was not encumbered by any liens.

2 1 Robles, California (“Triplex”). According to Davis, at the time 2 of her chapter 12 filing, the Ranch was worth $614,000 and was 3 encumbered by a first trust deed in the amount of $2,663,190 and 4 an equity line of credit in the amount of $254,911. Meanwhile, 5 Davis valued the Residence at $670,000, and stated that it was 6 encumbered by a first trust deed in the amount of $784,793 and 7 an equity line of credit of $90,086. As for the Triplex, Davis 8 valued it at $350,000 and listed a first trust deed encumbering 9 it in the amount of $369,630. In addition to these secured 10 debts, Davis listed property tax liens in the aggregate amount of 11 roughly $9,500. 12 On its face, the total amount of debt Davis scheduled – 13 $4,172,116 – exceeds the aggregate debt limit for chapter 12 14 cases set forth in § 101(18). That section provides in relevant 15 part that the term “family farmer” means an “individual . . . 16 whose aggregate debts do not exceed $3,792,650 . . . .”5 In 17 turn, only “family farmers” and “family fisherman” (as those 18 terms are defined in § 101(18) and 101(19A)) are eligible to be 19 debtors under chapter 12. See § 109(f). 20 In June 2011, Davis filed her chapter 12 plan, in which she 21 proposed to pay the allowed amount of her secured debt over a 22 period of 30 years. Each creditor holding an allowed secured 23 claim would be paid interest only for the first three years at a 24 rate of 3.35%, with both interest and principal payments 25 thereafter, amortized over the next 27 years. All undersecured 26 5 27 This debt limit is periodically adjusted pursuant to § 104. It was last adjusted, from $3,544,525 to $3,792,650, effective 28 April 1, 2010.

3 1 portions of these encumberances were to be paid nothing.6 2 Shortly thereafter, Davis amended her plan to provide for 3 interest only payments for seven years, with the full amount of 4 each allowed secured claim due immediately thereafter. Davis’s 5 amended plan also increased the interest rate to be paid on the 6 claims secured by the Ranch and the Residence to 5.25% and the 7 claim secured by the Triplex to 4.75%. 8 The Trustee and some of Davis’s secured creditors filed 9 objections to Davis’s chapter 12 plan. Bank of America, one of 10 the objecting secured creditors,7 argued among other things that 11 Davis was ineligible to be a debtor under chapter 12 because the 12 aggregate amount of her debt exceeded the debt limit set forth in 13 § 101(18).8 14 In response to Bank of America’s ineligibility argument, 15 Davis asserted that the undersecured portion of each secured 16 creditor’s claim should not be counted in determining her 17 eligibility for chapter 12 because her personal liability had 18 6 19 In conjunction with her plan, Davis commenced an adversary proceeding (1) seeking to strip down each undersecured lien to 20 the value of the collateral securing it, (2) seeking to strip off each wholly unsecured lien and (3) seeking to determine the 21 allowed amount of each secured claim as equal to the value of the 22 collateral securing it. 7 23 Bank of America, National Association as successor by merger to LaSalle Bank NA as trustee for WaMu Mortgage 24 Pass-Through Certificate Series 2006-AR13 Trust (“Bank of America”) claims to hold all right, title and interest to the 25 loans secured by the first trust deed on the Ranch and the first 26 trust deed on the Residence. 8 27 The Trustee also questioned Davis’s eligibility, but the Trustee did not elaborate on this point beyond raising the 28 concern in her objection.

4 1 been discharged in her prior chapter 7 case. Based on this 2 argument, Davis calculated the aggregate amount of her debt for 3 eligibility purposes as $1,835,000 – equal to the value of the 4 collateral securing all of the secured creditors’ claims. 5 Ultimately, the bankruptcy court agreed that Davis was 6 ineligible to be a chapter 12 debtor. It relied upon Quintana v. 7 IRS (In re Quintana) (“Quintana I”), 107 B.R. 234, 239 (9th Cir. 8 BAP 1989), aff'd (“Quintana II”), 915 F.2d 513 (9th Cir. 1990), 9 which held that the undersecured portion of an essentially 10 nonrecourse secured debt should be counted for purposes of 11 determining chapter 12 eligibility. 12 On November 23, 2011, the bankruptcy court entered its order 13 dismissing the chapter 12 bankruptcy case, stating that the 14 $4.1 million in debt listed in Davis’s schedules exceeded the 15 debt limit set forth in § 101(18) and hence Davis was ineligible 16 under § 109(f) to file a chapter 12 case. Davis timely filed her 17 notice of appeal on December 7, 2011. 18 JURISDICTION 19 The bankruptcy court had jurisdiction under 28 U.S.C. 20 § 157(b)(2)(A) and (L), and we have jurisdiction under 28 U.S.C. 21 § 158. 22 DISCUSSION 23 The sole issue presented in this appeal is whether, in light 24 of Davis’s prior chapter 7 discharge, chapter 12 eligibility as 25 set forth in § 101(18) counts only the portion of her secured 26 debt up to the value of the collateral. This question of the 27 scope of obligations included within debt limits for eligibility 28 purposes is a question of statutory interpretation subject to de

5 1 novo review. Quintana I, 107 B.R. at 236 (addressing chapter 12 2 eligibility); see also Ho v. Dowell (In re Ho), 274 B.R. 867, 870 3 (9th Cir. BAP 2002) (addressing chapter 13 eligibility). 4 There is a split of authority regarding whether the 5 “aggregate debts” referred to in § 101(18) includes the 6 discharged unsecured deficiency claims of secured creditors. If 7 it does, Davis is ineligible; if it does not, she is. Two 8 reported cases – one of which was reversed – have answered this 9 question in the affirmative. In re Scotto-DiClemente, 463 B.R. 10 308, 311-14 (Bankr. D.N.J. 2012); In re Cavaliere, 194 B.R. 7, 13 11 (Bankr. D. Conn. 1996), rev’d, Cavaliere v. Sapir, 208 B.R. 784, 12 785-86 (D. Conn. 1997). And three reported cases have answered 13 this question in the negative. In re Osborne, 323 B.R. 489, 493 14 (Bankr. D. Or. 2005); Cavaliere v. Sapir, 208 B.R. at 785-86; In 15 re Winder, 171 B.R. 728, 731 n.5 (Bankr. D. Conn. 1994) (in 16 dicta).9 17 But before we address any of these decisions, we first must 18 look at Quintana I and Quintana II. As prior precedent of this 19 Panel and the Ninth Circuit, they control the outcome of this 20 appeal unless they are inapposite. In these cases, prior to the 21 debtors’ chapter 12 bankruptcy filing, the debtors were in 22 default on secured debt in the original principal amount of 23 $1 million. The secured creditor, Connecticut General Life 24 Insurance Company (“CGLIC”), obtained prepetition a state court 25 judgment on the debt in the amount of $1,527,861.89, plus a 26 27 9 The above-cited cases arise under both chapter 12 and 28 chapter 13.

6 1 decree entitling it to conduct a foreclosure sale of the real 2 property collateral. But before CGLIC could conduct the 3 foreclosure sale, the Quintanas filed their chapter 12 petition. 4 In addition to the judgment in favor of CGLIC, the Quintanas 5 listed debts in their bankruptcy schedules in the approximate 6 amount of $60,000. 7 Asserting a claim in the amount of $1,527,861.89, CGLIC 8 filed a motion to dismiss the bankruptcy case because the 9 aggregate amount of the Quintanas’ debt exceeded the debt 10 limitation for chapter 12 eligibility.10 11 The Quintanas disputed that the entire $1,527,861.89 should 12 be counted for eligibility purposes. They pointed out that, in 13 the process of obtaining its state court judgment, CGLIC had 14 agreed to waive “any right to seek a deficiency judgment . . . 15 if, after any foreclosure sale of the mortgaged property, the 16 debt was not fully satisfied.” Id. at 515. They further 17 asserted that, because this waiver had effectively transformed 18 their debt into a nonrecourse obligation, the amount of the debt 19 for eligibility purposes should be limited to the value of the 20 collateral. 21 In Quintana I, we rejected the Quintanas’ argument. We held 22 that, for eligibility purposes, CGLIC’s deficiency waiver did not 23 limit the amount of the debt to the value of the collateral. We 24 reasoned that, unless and until the collateral was sold, the full 25 10 26 At the time of the Quintanas’ bankruptcy filing, the debt limitation was set forth in § 101(17)(A), and was set at $1.5 27 million. Since that time, § 101(17) has been re-designated as § 101(18), and the amount of the debt limitation has been 28 adjusted upward from time to time, pursuant to § 104.

7 1 $1,527,861.89 was still a “claim” or “right to payment” held by 2 CGLIC, and hence still a “debt” of the Quintanas, as those terms 3 are defined in the Bankruptcy Code. Quintana I, 107 B.R. at 237- 4 39. We explained that the statutory definitions of “claim” and 5 “debt” were coextensive and quite broad. As set forth in 6 § 101(5), a “claim” includes any “right to payment” and any 7 “right to an equitable remedy for breach of performance if such 8 breach gives rise to a right to payment.” And under § 101(12), 9 the term “debt” means “liability on a claim.” 10 We further reasoned that § 102(2) directly resolved the 11 issue because, for Bankruptcy Code purposes, § 102(2) specified 12 that a “claim against the debtor” means and includes a “claim 13 against property of the debtor.” Id. at 238.11 We summed up our 14 reasoning in Quintana I as follows: 15 The obligation at issue in this appeal was personally created by the Quintanas. Even though Connecticut 16 General has waived its right to pursue the remedy of a deficiency judgment, under section 102(2) the claim 17 against the property is a claim against the debtors. Because the term claim is coextensive with the term 18 debt, this obligation is a debt of the debtors which is defined by the amount of the claim against the 19 property. Connecticut General's claim against the property is approximately $1.528 million because it has 20 21 11 We further pointed out that the accompanying legislative history confirmed our interpretation of § 102(2): 22 23 This paragraph [Section 102(2)] is intended to cover nonrecourse loan agreements where the creditor's only 24 rights are against property of the debtor, and not against the debtor personally. Thus, such an agreement 25 would give rise to a claim that would be treated as a 26 claim against the debtor personally, for the purposes of the Bankruptcy Code. 27 Id. (quoting H.R.Rep. No. 95–595 at 315; S.Rep. No. 95–989 at 28, 28 U.S. Code Cong. & Admin. News 1978, pp. 5814, 6272).

8 1 the right to payment of that amount from the property or from the proceeds of the sale of the property. 2 Although, as a practical matter, Connecticut General will only be able to collect the value of the property, 3 it has the right to payment of the entire obligation if under some circumstance, the property is sold for more 4 than its present value. Therefore, although the collectability may be limited to the value, the right 5 to payment is not so limited and consequently neither is the claim, nor the debt. Accordingly, 6 notwithstanding the non-recourse nature of the obligation, the entire debt is to be considered in 7 computing aggregate debts. 8 Id. (footnote omitted). 9 The Ninth Circuit affirmed Quintana I in Quintana II. 10 Quintana II, 915 F.2d at 518. Whereas we focused on the relevant 11 Bankruptcy Code provisions, the Ninth Circuit focused on the key 12 provisions under Idaho law establishing that, unless and until 13 the collateral actually was sold, CGLIC continued to hold a claim 14 for $1,527,861.89, and hence the Quintanas continued to owe a 15 debt in that amount at the time of their bankruptcy filing.12 16 Notwithstanding the difference in emphasis, the reasoning of 17 both Quintana I and Quintana II is essentially the same. 18 Quintana II necessarily decided that CGLIC’s continuing right to 19 recover the full amount owed against the collateral or the 20 proceeds of the collateral meant that, for purposes of chapter 12 21 eligibility, the Quintanas continued to be indebted to CGLIC for 22 12 23 Davis has not argued that there was any basis under state law for counting only the secured debt up to the value of the 24 collateral. Instead, Davis entirely has relied on its claim regarding the effect of the prior chapter 7 discharge. To the 25 extent Davis could have made any argument under state law, she 26 has waived it by not raising it either in the bankruptcy court or on appeal. See Golden v. Chicago Title Ins. Co. (In re Choo), 27 273 B.R. 608, 613 (9th Cir. BAP 2002); Branam v. Crowder (In re Branam), 226 B.R. 45, 55 (9th Cir. BAP 1998), aff'd, 205 F.3d 28 1350 (9th Cir. 1999).

9 1 the full amount owed. See Quintana II, 915 F.2d at 516-17. 2 Both Quintana I and Quintana II dovetail with the Supreme 3 Court’s subsequent decision in Johnson v. Home State Bank, 4 501 U.S. 78, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991). Johnson held 5 that mortgage obligations may be restructured in a chapter 13 6 case even when the debtor previously has obtained a chapter 7 7 discharge extinguishing his or her personal liability for that 8 debt. Id. at 80, 111 S.Ct. at 2152. Johnson reasoned that, even 9 though the debtor no longer was personally liable for such 10 mortgage obligations, the mortgagor’s surviving rights against 11 the collateral fell within the Bankruptcy Code’s broad 12 definitions of “debt” and “claim” and hence could be restructured 13 in a chapter 13 case. Id. at 80-85, 111 S.Ct. at 2152-55. 14 Johnson emphasized that the prior chapter 7 discharge did 15 not wholly terminate the creditor’s claim but rather merely 16 extinguished “one mode of enforcing [the] claim – namely, an 17 action against the debtor in personam - while leaving intact 18 another – namely, an action against the debtor in rem.” Id. at 19 84, 111 S.Ct. at 2154. 20 Johnson further emphasized that Congress intended to include 21 obligations enforceable only against the debtor’s property within 22 the Bankruptcy Code’s definition of claim (and hence within the 23 coextensive definition of debt.) Id. at 85-87, 111 S.Ct. at 24 2154-55. In discerning the congressional intent, Johnson in 25 relevant part pointed to the text of and legislative history 26 accompanying § 102(2) – the very same text and legislative 27 history that we relied upon in Quintana I. 28 Particularly instructive for our purposes, Johnson opined

10 1 that the mortgagor rights surviving after the debtor’s receipt of 2 his chapter 7 discharge were the functional equivalent of a 3 nonrecourse loan for purposes of applying § 102(2): 4 . . . we must infer that Congress fully expected that an obligation enforceable only against a debtor's 5 property would be a “claim” under § 101(5) of the Code. 6 The legislative history surrounding § 102(2) directly corroborates this inference. The Committee 7 Reports accompanying § 102(2) explain that this rule of construction contemplates, inter alia, “nonrecourse 8 loan agreements where the creditor's only rights are against property of the debtor, and not against the 9 debtor personally.” Insofar as the mortgage interest that passes through a Chapter 7 liquidation is 10 enforceable only against the debtor's property, this interest has the same properties as a nonrecourse loan. 11 It is true, as the Court of Appeals noted, that the debtor and creditor in such a case did not conceive of 12 their credit agreement as a nonrecourse loan when they entered it. However, insofar as Congress did not 13 expressly limit § 102(2) to nonrecourse loans but rather chose general language broad enough to encompass 14 such obligations, we understand Congress' intent to be that § 102(2) extend to all interests having the 15 relevant attributes of nonrecourse obligations regardless of how these interests come into existence. 16 17 Id. at 86-87, 111 S.Ct. at 2155 (emphasis added and citations 18 omitted). 19 In sum, while Quintana I, Quintana II and Johnson emphasize 20 different points, each holds that obligations enforceable against 21 the debtor’s property but for which the debtor has no personal 22 liability are nonetheless “claims” and “debts” within the meaning 23 of the Bankruptcy Code. These decisions control the outcome of 24 this appeal. Their reasoning simply cannot be reconciled with 25 Davis’s contention that the undersecured portion of the amount 26 owed to her secured creditors does not count as a debt for 27 eligibility purposes. As we explained in Quintana I, the full 28 amount owed continues to be a claim against the collateral, and

11 1 hence a “debt” under the Bankruptcy Code, unless and until the 2 collateral is sold. Furthermore, as stated in Johnson, a prior 3 chapter 7 discharge only extinguishes one “mode of enforcing” the 4 claim but does not extinguish the claim itself (or any portion 5 thereof).13 6 We acknowledge the three reported decisions holding that, 7 after a chapter 7 discharge, only the amount of debt owed up to 8 value of the collateral is counted as debt for eligibility 9 purposes. In re Osborne, 323 B.R. 489, Cavaliere v. Sapir, 10 208 B.R. 784, and In re Winder, 171 B.R. 728. But we don’t find 11 any of these three decisions persuasive. None of them 12 effectively distinguished Quintana I, Quintana II or Johnson. 13 Indeed, Cavaliere and Winder – as Connecticut cases out of the 14 Second Circuit – don’t even mention the Ninth Circuit precedent 15 of Quintana I or Quintana II. 16 As for Osborne, its reasoning and efforts to distinguish 17 both Quintana cases do not bear close analysis. In Osborne, 18 after receiving a chapter 7 discharge, the Osbornes filed a 19 chapter 12 petition. Id. at 490-91. The secured creditor, Farm 20 21 13 The discharge also did not extinguish the secured creditors’ rights to assert the discharged debt as a setoff 22 against any prepetition claim that Davis ultimately might have 23 attempted to assert against the secured creditors. See Davidovich v. Welton (In re Welton), 901 F.2d 1533, 1538-39 (10th 24 Cir. 1990); Camelback Hosp., Inc. v. Buckenmaier (In re Buckenmaier), 127 B.R. 233, 236-37 (9th Cir. BAP 1991); see also 25 Carolco Television Inc. v. Nat’l Broad. Co. (In re De Laurentiis 26 Entm’t Group Inc.), 963 F.2d 1269, 1276-77 (9th Cir. 1992) (chapter 11 discharge did not prohibit creditor from asserting 27 setoff in defense to claims asserted by reorganized debtor). In that sense as well, the secured creditors’ deficiency claims 28 would have survived Davis’s chapter 7 discharge.

12 1 Credit, moved to dismiss the chapter 12 case on eligibility 2 grounds. According to Farm Credit, it was owed over $1.4 3 million, and that amount when combined with other debts the 4 Osbornes owed exceeded the $1.5 million family farmer eligibility 5 limit set forth in § 101(18) at the time. Id. at 492. But 6 Osborne held that, in light of the effectively nonrecourse nature 7 of the debt owed to Farm Credit as a result of the prior 8 chapter 7 discharge, the amount of debt to be counted for 9 eligibility purposes should be limited to the value of Farm 10 Credit’s collateral – $480,500. Id. at 492-93. 11 In reaching this holding, Osborne imported into its 12 eligibility analysis both § 506(a)(1)14 and § 502(b)(1).15 13 Osborne pointed out that, under § 506(a), Farm Credit’s secured 14 claim in the chapter 12 case would be limited to the value of the 15 14 16 Section 506(a)(1) provides in relevant part: 17 An allowed claim of a creditor secured by a lien on property in which the estate has an interest . . . is a 18 secured claim to the extent of the value of such 19 creditor's interest in the estate's interest in such property, . . . and is an unsecured claim to the extent 20 that the value of such creditor's interest . . . is less than the amount of such allowed claim. 21 15 Section 502(b)(1) provides in relevant part that, if an 22 objection to claim is filed: 23 the court, after notice and a hearing, shall determine 24 the amount of such claim . . . , and shall allow such claim in such amount, except to the extent that – 25 26 (1) such claim is unenforceable against the debtor and property of the debtor, under any 27 agreement or applicable law for a reason other than because such claim is contingent 28 or unmatured; . . . .

13 1 collateral. As for any unsecured claim Farm Credit otherwise 2 would have been entitled to under § 506(a)(1) for the remaining, 3 undersecured balance it was owed, Osborne reasoned that, pursuant 4 to § 502(b)(1), the unsecured claim was subject to disallowance 5 because it was unenforceable as a result of the Osbornes’ prior 6 chapter 7 discharge. Id. at 493. Thus, according to Osborne, 7 the fact that Farm Credit’s unsecured claim was unenforceable and 8 subject to disallowance (as a result of the prior chapter 7 9 discharge) meant that it had no claim at all for eligibility 10 purposes. 11 Osborne further opined that Quintana II was distinguishable. 12 According to Osborne, Quintana II’s holding hinged on the fact 13 that the collateral had not yet been sold, so the full amount of 14 the debt still was collectible against the collateral (unless and 15 until the sale of the collateral actually occurred), whereas the 16 Osbornes’ prior chapter 7 discharge already had rendered 17 uncollectible the undersecured portion of the debt owed to Farm 18 Credit. Id. 19 But Osborne’s reasoning and its grounds for distinguishing 20 Quintana II cannot be reconciled with Johnson, which stated that 21 nonrecourse secured debt and undersecured debt subject to a 22 chapter 7 discharge are functional equivalents under the 23 Bankruptcy Code for purposes of the meaning of the terms “claim” 24 and “debt.” See Johnson, 501 U.S. at 86-87, 111 S.Ct. at 2155. 25 Osborne also cannot be reconciled with Johnson’s statement that 26 the prior chapter 7 discharge only extinguished one mode of 27 collecting the claim and not the claim itself. Id. at 84, 111 28 S.Ct. at 2154.

14 1 In any event, Osborne simply fails to offer any legitimate 2 justification for using § 506(a) and § 502(b)(1) to diminish the 3 amount of the Osbornes’ debt for eligibility purposes.16 Osborne 4 claims that Scovis v. Henrichsen (In re Scovis), 249 F.3d 975 5 (9th Cir. 2001) supports its usage of § 506(a) and § 502(b)(1), 6 but Osborne’s reliance on Scovis is misplaced. Scovis held 7 that the entire amount of debt owed to a wholly-undersecured 8 secured creditor should be counted as unsecured for purposes of 9 determining chapter 13 eligibility. Id. at 983-84.17 In so 10 holding, Scovis relied upon the “readily ascertainable” effect 11 § 506(a) and § 522(f) would have on the secured creditor’s claim 12 in the chapter 13 bankruptcy case. Id. In short, Scovis stands 13 for the relatively unremarkable proposition that, when 14 determining a debtor’s chapter 13 eligibility, the undersecured 15 portion of a secured creditor’s claim should be counted as 16 unsecured debt. 17 Importantly, Scovis did not hold that undersecured 18 nonrecourse claims should not be counted at all for eligibility 19 purposes. Extending Scovis in this manner would bring it into 20 21 16 Cavaliere similarly relies on § 506(a) and § 502(b)(1) to 22 reach the same result as Osborne. Accordingly, we reject Cavaliere as well. As for Winder’s dictum, it is unclear how 23 Winder reached its conclusion. Ironically, Winder cites to Johnson, but Winder does not explain how Johnson supports 24 Winder’s dictum. As we have explained above, Johnson supports the opposite conclusion. 25 17 26 Section 109(e), which governs eligibility for chapter 13, sets separate limits for secured debt and unsecured debt. In 27 contrast, § 109(f), which governs eligibility for chapter 12, refers to the definition of “family farmer” in § 101(18) for its 28 aggregate debt limits.

15 1 conflict with Quintana I, Quintana II and Johnson. Thus, we 2 decline to so extend Scovis. 3 Most importantly, there is a fundamental flaw in Osborne’s 4 reasoning: it conflates bifurcation of claims into secured and 5 unsecured portions (as addressed in § 506(a)), and the 6 allowability of claims after objection (as addressed in 7 § 502(b)(1)) with whether there is any claim in the first 8 instance to be counted for eligibility purposes. Congress 9 clearly knew how to limit the type and nature of claims counted 10 for eligibility purposes. See § 109(e) (specifying that only 11 noncontingent and liquidated claims should be counted for 12 eligibility purposes). But Congress chose to narrow neither the 13 term “claim” nor the term “debt” in the manner Osborne suggests 14 they should be narrowed – to only cover allowed or allowable 15 claims. Put another way, the statutes Osborne invokes concern 16 the bifurcation and allowance of claims – issues which generally 17 are beyond the scope of the inquiry into the existence of claims 18 for eligibility purposes.18 19 18 20 We also note that giving the chapter 7 discharge the effect Osborne urges would be the functional equivalent of 21 enabling chapter 7 debtors to strip the liens of partially and wholly undersecured creditors. But the Supreme Court has held 22 that, notwithstanding § 506(d), chapter 7 debtors are not 23 permitted under the Bankruptcy Code to engage in lien stripping. See Dewsnup v. Timm, 502 U.S. 410, 417, 112 S.Ct. 773, 116 24 L.Ed.2d 903 (1992) (holding that chapter 7 debtor is not permitted to “strip down” an undersecured lien); see also Laskin 25 v. First Nat'l Bank of Keystone (In re Laskin), 222 B.R. 872, 876 26 (9th Cir. BAP 1998) (extending Dewsnup to hold that chapter 7 debtor not permitted to “strip off” wholly unsecured lien). 27 Indeed, if Davis’s chapter 7 discharge effectively had stripped down the secured creditors’ liens to the value of their 28 (continued...)

16 1 We will not substitute Osborne’s judgment of how eligibility 2 should work in place of Congress’s apparent intent. When 3 Congress’s intent is clear based on the plain and unambiguous 4 language of the statute, our task of construing the statute is at 5 an end, so long as the statutory scheme appears coherent and 6 consistent. United States v. Ron Pair Enters., Inc., 489 U.S. 7 235, 240–41, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). Here, there 8 is no ambiguity or incoherence in the broad definition of 9 “claims” and “debts” used in the Bankruptcy Code. Nor did 10 Osborne (or Davis) identify any inconsistency in the statutory 11 scheme. 12 Consequently, we will assume that Congress has said what it 13 meant and meant what it has said. See Conn. Nat'l Bank v. 14 Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 15 (1992). If Congress believes that the scope of debts counted for 16 eligibility purposes should be narrower, it will need to amend 17 the statute. See Lamie v. U.S. Trustee, 540 U.S. 526, 542, 124 18 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). 19 CONCLUSION 20 For all of the reasons set forth above, we AFFIRM the 21 bankruptcy court’s order dismissing Davis’s chapter 12 case. 22 23 24 25 26 18 27 (...continued) collateral, it would have been unnecessary for her to file, as 28 she did, a lien-stripping complaint in her chapter 12 case.