## Facts

- Sieglinde M. Zimmer filed a Chapter 13 bankruptcy case and owned a primary residence encumbered by a first deed of trust securing about $123,000 and a junior deed of trust held by PSB Lending Corporation with a balance of $37,411.19.
- Zimmer valued the residence at $110,000, leaving no equity after the senior lien.
- Zimmer filed an adversary proceeding seeking to avoid (“strip off”) PSB’s junior lien on the ground that, under 11 U.S.C. § 506(a), PSB’s claim was wholly unsecured.

## Issues

1. Whether a junior lien on a debtor’s principal residence that is wholly unsecured under 11 U.S.C. § 506(a) is protected from modification by 11 U.S.C. § 1322(b)(2).
2. Whether a Chapter 13 debtor may strip off and avoid such a wholly unsecured junior lien through the plan process.

## Decision

- The Ninth Circuit reversed the district court’s judgment affirming dismissal of Zimmer’s adversary proceeding.
- The court held that a wholly unsecured junior lienholder is not entitled to § 1322(b)(2)’s anti-modification protection.
- The case was remanded for further proceedings consistent with permitting lien stripping of the wholly unsecured junior lien.

## Legal Principles

- Under 11 U.S.C. § 506(a), a creditor has a “secured claim” only to the extent of the collateral’s value; any remaining portion is an unsecured claim.
- The anti-modification clause in 11 U.S.C. § 1322(b)(2) protects only “holders of secured claims” secured solely by the debtor’s principal residence; it does not apply when § 506(a) values the creditor’s claim as entirely unsecured.
- The treatment of undersecured home mortgage claims (partly secured, partly unsecured) differs from wholly unsecured junior liens; § 1322(b)(2) may protect the former but not the latter.
- A wholly unsecured junior lien on a principal residence may be stripped off in Chapter 13 because the creditor is not the holder of a secured claim for § 1322(b)(2) purposes.

## Conclusion

The Ninth Circuit held that a Chapter 13 debtor may strip off a junior lien on a principal residence when senior liens exhaust the property’s value, because the junior creditor holds no secured claim under § 506(a) and therefore receives no anti-modification protection under § 1322(b)(2).


In re Zimmer, 313 F.3d 1220 (9th Cir. 2002)