HON. JOHN C. NINFO, II, CHIEF U.S.BANKRUPTCY JUDGE.
BACKGROUND
On June 23, 2000, Brian J. Goff and Lisa J. Goff (the "Debtors") filed a petition initiating a Chapter 7 case. On the Schedules and Statements required to be filed by Section 521 and Rule 1007, the Debtors indicated that: (1) they were the fee owners of a single family residence at 2495 Andrews Road, Canandaigua, New York ("Andrews Road"); (2) Andrews Road had a current market value of $64,000.00; (3) Fleet Mortgage Group, Inc. ("Fleet") held a first mortgage on Andrews Road with a current balance of $64,786.30 (the "Fleet Mortgage"); (4) The Money Store held a second mortgage on Andrews Road with a current balance of $16,534.31 (the "Money Store Mortgage"); and (5) they had unsecured indebtedness in excess of $119,000.00, approximately $65,000.00 of which was a student loan.
On August 2, 2000, the Debtors filed a motion (the "Strip Off Motion") to have the Court declare the Money Store Mortgage unsecured. The Motion asserted that: (1) the Debtors had valued Andrews Road at $64,000.00, in accordance with a May 5, 2000 appraisal prepared by David G. Krause, a New York State licensed real estate broker; (2) on the date of the filing of their bankruptcy petition, the outstanding principal balance due on the Fleet Mortgage was $64,786.30; (3) the amount due on the Fleet Mortgage exceeded the appraised fair market value of Andrews Road, so that the claim of The Money Store for the amount due on the Money Store Mortgage was an unsecured claim, in accordance with Section 506(a); and (4) since the claim of The Money Store was wholly unsecured, the Court should declare the lien of the Money Store Mortgage to be void, in accordance with Section 506(d). The Strip Off Motion further alleged that: (1) the Money Store Mortgage was not a purchase money mortgage, but was a consolidation loan used by the Debtors to pay off consumer debt; (2) the Federal Courts were divided as to whether such a wholly unsecured junior mortgage was entitled to the protection of the antimodification provisions of Section 1322(b)(2) in a Chapter 13 case; (3) in Chapter 7 cases, the Federal Courts were also divided as to whether a debtor could strip off a wholly unsecured junior mortgage lien by resorting to a Section 506 analysis; and (4) the Court should follow the reasoning and decisions of those courts which have permitted a Chapter 7 debtor to strip off a wholly unsecured junior mortgage lien, such as that of the Court in Farha Khala v. First American Title Insurance, 246 B.R. 547 (Bankr.E.D.Mich. 2000).
Although The Money Store failed to interpose a response to the Strip Off Motion, the Court always reserves the right to deny a motion, even if there has been a default, should it find that the relief requested is unavailable or inappropriate.
Section 50 6(a) provides that:
(a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to set off under section 553 of this title, is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property, or to the extent of the amount subject to set off, as the case may be, and is an unsecured claim to the extent that the value of such creditor's interest or the amount so subject to set off is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor's interest.
11 U.S.C. § 506(a)(2000).
Section 50 6(d) provides that:
(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void unless —
(1) such claim was disallowed only under Section 502(b)(5) or 502(e) of this title; or
(2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under Section 501 of this title.
11 U.S.C. § 506(d)(2000).
DISCUSSION
After reviewing the Strip Off Motionand the Decisions on each side of the debate, I am persuaded by those courts that have prohibited a Chapter 7 debtor from stripping off a wholly unsecured junior mortgage lien. In his decision in In re Fitzmaurice, 248 B.R. 356 (Bankr. W.D. Mo. 2000)("Fitzmaurice"), Chief Judge Frank W. Koger set forth an extensive analysis of the issue and a comprehensive review of the reasoning set forth by a number of other courts, which, as he did, prohibited such a strip off. I concur in the analysis set forth in Fitzmaurice and many of the findings set forth in the cases cited and summarized therein, including that: (1) to allow the strip off of such a junior mortgage lien by the use of Section 506 is inappropriate in view of the Decision of the United States Supreme Court in Dewsnup v. Timm, 502 U.S. 410 (1992); (2) a Chapter 7 debtor has no standing under Section 506(d) to strip off a wholly unsecured junior mortgage lien; (3) in the absence of a claims allowance process, there is no basis to avoid a lien under Section 506(d);(4)Section 506 was intended to facilitate the valuation and disposition of property in a reorganization proceeding, not to confer an additional avoiding power on a Chapter 7 debtor; and (5) to allow such a strip off would be an exercise of judicial legislation.
The attorney for the Debtors made an excellent presentation of the various arguments for permitting a strip off.
I find that a Chapter 7 debtor cannot strip off a wholly unsecured junior mortgage lien through the use of Section 506.
CONCLUSION
The Strip Off Motion is in all respects denied.
IT IS SO ORDERED.
HON. JOHN C. NINFO, II, CHIEF U.S. BANKRUPTCY JUDGE. October 4, 2000.