Johnson v. Home State Bank


THE ISSUE:


After  a Chapter 7 discharge, is there anything left of a mortgage to reorganize in Chapter 13?


That’s the question that the U.S. Supreme Court resolved in Johnson v. Home State Bank, the next on our summer reading list for new bankruptcy lawyers.  Believe it or not, it was 12 years after adoption of the 1978 Code before we got an answer as to what a “claim” was.jUST CLICK THE BASIC VERSION BELOW SO YOU CAN HAVE AN UNDERSTANDING OF THE ISSUE. Basically, after a Chapter 7 Distchare, there is NO MORTGAGE subject to mortgage interest, but ony a general claim under section 101 of the bankrutpcy code.


The Johnson Family Farm - Save after A Chapter 7 Discharge



Johnson mortgaged the farm, fell behind, and filed Chapter 7.  After his discharge, which eliminated his personal liability on the promissory notes, he filed Chapter 13 just ahead of the foreclosure sale.  The district court and the circuit court both ERRONEOUSLY held that the bankruptcy court erred in confirming the plan, finding that the Code did not allow a Chapter 13 plan to modify a claim where the debtor had no personal liability.


Click Here for the Basic Version


(READ THIS FIRST, THEN COME BACK TO THIS PAGE AND READ TEH SUPREME COURT DECISION BELOW)


or


READ THE SUPREME COURT DECISION




CLICK HERE FOR THE ACTUAL SUPREME COURT DECISION