# FIL ED
OCT 29 2019 SUSAN M . SPRAUL, CLERK U. S. BKCY

. APP. PANEL O F T HE NI NT H CI RCUI T 

### ORD ERED PU BLISHED

U NIT E D ST A T E S BA NK RU PT CYA PPE L L A T E PA N E L

OF T HE NINT H CIRCU IT In re: J E F F R E Y M A R K F R E E M A N ,

Deb to r. J E F F R E Y M A R K F R E E M A N ,

A p pellant,

v. N A T IO N S T A R M O R T G A G E LLC,

A p pellee. BA P N o . C C -18-1261-TaFS Bk. N o . 2:11-b k-34162-N B

O P IN IO N

A rgued and Sub m itted o n Septemb er 26, 2019

at Pasadena, C alifo rnia Filed – O c tob er 29, 2019 O rdered Pub lished – N o vemb er 5, 2019 A ppeal fro m the U nited States Bankruptcy C o urt fo r the C entral Distric t o f C alifo rnia Ho no rab le N eil W . Baso n, Bankruptcy Judge, PresidingA ppearanc es: Mark T. Y o ung o f Do naho e & Y o ung LLP argued fo r appellant; Valerie Schratz o f Hall Griffin LLP argued fo r appellee.
Befo r e: T A Y L O R, F A R IS , and S P R A K E R, Bankruptcy Judges. T A Y L O R, Bankruptcy Judge: INT ROD U CT I ON Jeffrey Freem an (“Deb to r”) and a secured c redito r agreed in o p en c o u rt upo n a chapter 13 1 plan that b ifurc ated the secured c redito r’s c laim into secured and unsecured po rtio ns and pro vided fo r full paym ent o f the
secured po rtio n o f the c laim (with interest) during the plan term
. Deb to r m ade all o f the paym ents under his plan, inc luding full paym ent o f the
secured po rtio n o f the c laim, and rec eived his discharge. N evertheless, the
secured c redito r’s suc c esso r-in-interest c o m m enc ed po st-discharge pro c eedings to fo rec lo s e its lien. Deb to r filed a m o t io n to ho ld the suc c esso r lienho lder in c o ntem pt o f the discharge o rder. Sub sequently, the suc c esso r lienho lder rec o nveyed its trust deed, im plic itly ac kno wledging that its secured c laimhad b een paid in full under the c hapter 13 plan; b ut it stro ngly o ppo sed the c o ntem pt

1 Unless speci fi ed other wi se, all chapterand secti on r efer ences ar e to the Bankr uptcy Code, 11 U.S
. C. §§ 101–1532. 2m o tio n. The b ankruptc y c o urt c o nc luded that b ec ause the plan and the

discharge o rder did no t expressly, and in its view suffic iently, avo id the trust deed, the initiatio n o f fo rec lo s ure pro c eedings and related ac tivity was no t c o ntem p tuo us. W e disagree with the b ankruptc y c o urt in o ne respec t. The undisputed evidenc e in the rec o rd estab lishes that the secured c laimwas paid in full under Deb to r’s plan. And under c o ntro lling law, paym ent in full o f the sec ured c laimvo ided any lien. So , a discharge vio latio n o c curred. A nd we c anno t affirm the b ankruptc y c o urt’s c o nc lusio n that the
suc c esso r lienho lder, N atio nstar Mo rtgage LLC, did no t willfully vio late the discharge injunc tio n due to an intervening c hange in the law. Sinc e its dec isio n, the Suprem e C o urt rejec ted the then-b inding N inth C ircuit prec edent fo llo wed b y the b a nkruptc y c o urt. The b ankruptc y c o u rt m ust apply the new test to the fac ts b efo re it. A c c o rdingly, we R EVER SE in part and VA C A TE and R EMA N D fo r further determ inatio ns c o nsistent with this dec isio n and under the standard no w required b y the Suprem e C o urt. FA CT S D ebtor’s initial c hapter 13 proc e eding s . Deb to r filed a chapter 13 petitio n and scheduled an interest in rental pro perty (the “Pro perty”) valued at $215,000. The Property sec ured a senio r ob ligatio n held b y BA C
3Ho m e Lo ans Servic ing, LP (“BA C ”) and ano ther lo an. Deb to rscheduled

the BA C ob ligatio n at $308,267.06 and prom ptly ob t a ined an o r der
avo iding the junio r trust deed. Deb to r’s initial chapter 13 plan treated BA C as a fully secu red
c redito r. But after BA C filed a secured pro o f o f c laimand do c um ented additio nal arrearages and an inc reased deb t, he filed am ended plans. In his final plan, he pro p o s ed to pay the secured po rtio n o f BA C ’s c laimin full during the c o urse o f the c ase; thus, the plan treated the secured c laimas equal to the value o f the Pro perty and treated the rem ainder o f BA C ’s c laimas an unsecured c laim
. BA C objec t ed to c o nfirm atio n. It did no t direc tly o ppo se Deb to r’s valuatio n o f the Pro perty and the c o rrespo nding reduc tio n in the sec ured po rtio n o f the c laim, b ut it stro ngly o ppo sed the plan’s use o f a 0.24% interest rate and argued that the appro priate rate was no less than 6.76% . In respo nse, Deb to rargued that an appraisal c o nduc ted b y BA C estab lished that the value o f the Pro perty was less than $215,000. T he c onfirm ation hearing res ults in a c ons ens ual plan. A t the final
c o nfirm atio n hearing, and after m o nths o f fits and starts, the b ankruptc y c o u rt was ready todism iss the c ase. And BA C was unhappy that Deb to r was arguing fo r a reduc tio n in the value o f the sec ured po rtio n o f its c laim b elo w$215,000, particu larly as he did sob ased o n an appraisal pro vided as
a c o urtesy and thro ugh what it desc rib ed as “a m o tio n [o ]n im pro per
4pro c edure[.]” Hr’g Tr. (June 14, 2012) 11:3–14. But the b ankruptc y c o urt

allo w ed the m atter to trail to allo w fo r nego tiatio n. When the b ankruptc y c o u rt c alled the m atter again, Deb to r’s c o unsel represented: “[BA C ’s c o u nsel] and I have m et and c o nferred and I b elieve we are in agreem ent to a c o nsensual plan which pro vides a value o f the [Pro perty] at $190,000, and interest rate paym ent o f 6.75 perc ent . . . .” Id. at 15:21–25. BA C ’s c o unsel stated his agreem ent: “[Deb to r’s c o unsel] and I are in agreem ent fo r tho se exac t term s, as c o nfirm ed to day.” Id. at 16:5–6. 2 The b ankruptc y c o urt trailed the m atter yet again, this tim e to allo w the parties and the chapter 13 trustee todeterm ine the prec ise numb ers to inc lude in the plan. When the hearing resum ed, the chapter 13 trustee’s atto rney stated: “[BA C ’s c o unsel] and deb to r ’s c o unsel have agreed to value the [Pro perty], fo rpurpo ses o f the c ram do wn, in the sec ured c laim
am o u nt o f $169,340, 3 which will b e paid interest at the rate o f 6.75 perc ent

2 BAC, thus, wai v ed i ts ar gument that v aluati on at $190,000 r equi red a moti on and hear ing.

3 The di ffer ence between $169,340 and $190,000 appar ently was necessary to take into account pr econfi r mati on payments. Whi le Nati onstar ar gues that ther e i s no ev i dence in the r ecor d to suppor t thi s conclusi on, we di sagr ee. The r ecor d suppor ts that Debtor had made payments to BAC befor e confi rmati on. Thus, in or der to take i nto account the negoti ated v alue of the Pr oper ty as of the peti ti on date ($190,000), the for war d looki ng natur e of the plan that pr ov i ded for payment i n full of thi s clai m ov er the next 48 months, and the fact that some clai m r educing payments pr edated the confi r mati on hear in g, a number less than the agr eed v alue was r equi r ed for the plan to av oi d payment of mor e than $190,000. The r ecor d does not i nclude the data needed to (continued...) 5fo r the rem aining 48 m o nths o f the plan.” Id. at 21:15–19. BA C ’s c o unsel

stated that he had no objec tio ns. T he c onfirm ation order and payoff orders . A n attachm ent page to the c o nfirm atio n o rder stated that the parties stipulated and agreed to
c ertain pro visio ns and that the b ankruptc y c o urt c o nfirm ed the plan with tho se pro visio ns. One pro visio n read spec ific a lly as to the BA C c laim : Fo r purpo se o f plan c o nfirm atio n, the value o f the [Pro perty] is determ ined to b e $194,000. The am o unt o f the sec ured c laim which shall b e paid, in full, during the life o f the c hapter 13 plan is $169,340, with interest at the rate o f 6.75% fo r the rem aining 48 m o nths o f the C hapter 13 Plan. A fter c o nfirm atio n, BA C transferred its c laimto N atio nstar Mo rtgage LLC(“N atio nstar”). O ver a year later, Deb to r filed m o tio ns requesting appro val o f a refinanc e o f the Pro perty and m o dific atio n o f the plan to allo w early paym ent in full o f o nly the sec ured c laim . N atio nstar objec ted; it argued that Deb to r failed to pro vide evidenc e that the chapter 13 plan m o dified its lien, and princ ipally it argued that its c laimc o u ld no t b e finally m o dified b efo r e the plan was fully perfo rm ed and discharge was appro priate. The b ankruptc y c o urt sub sequently denied Deb to r ’s m o tio ns witho ut prejudic e. Deb to r then filed a new m o tio n to m o dify the plan to allo w himto

3 (...continued) confi r m the fi gur es in the Plan, but BAC, Debtor, and the chapter 13 tr ustee’s counsel agr eed to them. 6pay the entire plan o ff early. This tim e, N atio nstar did no t o ppo se, and the

b ankruptc y c o urt eventually granted the m o tio n b y an o rder stating: Deb to r m ay sho rten his plan fro m60 m o nths to a final lum p sumpaym ent whic h pays o ff his entire plan, nam ely . . . [t]he rem aining b alanc e o wed o n the senio r secured c laimo f [N atio nstar] in the to tal am o unt o f princ ipal and ac c rued interest thro ugh May 30, 2014 o f $121,632.21 . . . [and] O ne Perc ent (1% ) to allo wed . . . . general unsecured c laim s in the am o unt o f $153.33 . . . . It alsopro vided: “U po n paym ent o f such C laim s, [] N atio nstar’s secured
c laimwill b e deem ed satisfied in ac c o rdanc e with the m o dified plan . . . .” The b ankruptc y c o urt sub sequently entered an am ended o rder. It
no ted that the rem aining b alanc e o f the N a tio nstar c laim was $123,649.62. A nd it repeated: “U po n paym ent o f such C laim s, [] N atio nstar’s secured
c laimwill b e deem ed satisfied in ac c o rdanc e with the m o dified plan . . . .” W e refer to these o rders, c o llec tively, as the “Payo ff O r ders.” Deb to r thereafter m ade the required paym ent, and the b ankruptc y c o u rt entered a discharge o rder. Pos t-dis c harg e ev ents . N ine m o nths later, Deb to r reo pened the b ankruptc y c ase to address alleged discharge vio latio ns; he asserted that N atio nstar sent hima statem ent c laim ing signific a nt arrearages and o ther
am o u nts due and also filed a no t ic e o f default to c o m m enc e fo rec lo sure. In a sub s equent status repo rt, Deb to r advised that, after reo pening, N atio nstar agreed that fo rec lo s ure was no t appro p riate and that Deb to r antic ipated
7rec o nveyanc e o f N atio nstar’s trust deed.

But the rec o nveyanc e was no t rec eived, so several m o nths later Deb to r filed his m o tio n fo r an o rder to sho w c ause why N atio nstar sho uld
no t b e sanc tio ned fo rvio lating the discharge injunc tio n. He alleged that N atio nstar’s secu r ed c laim was paid in full thro ugh his chapter 13 plan. He argued that N atio nstar: rec eived no tic e o f the discharge; knew the discharge injunc tio n applied; and then vio lated the discharge injunc tio n thro ugh its c o llec tio n ac tivity and b y failing to respo nd to his requests fo r c essatio n o f fo rec lo s u re ac tivity and im m ediate rec o nveyanc e o f its trust deed. He so ught punitive and em o tio nal distress dam ages. Deb to r later filed a dec laratio n in suppo rt o f the c o ntem pt m o tio n. That sam e day, N atio nstar rec o nveyed its deed o f trust. N atio nstar respo nded to the c o ntem pt m o tio n. It did no t c o ntest Deb to r’s assertion that its c laimwas extinguished b y paym ent in full under the plan. Instead, it argued that it did no t kno wingly vio late the discharge injunc tio n and that it b o th resc inded its no tic e o f default and rec o nveyed its deed o f trust pro m ptly o nc e it learned that the discharge injunc t io n was applic ab le. A fter num ero us hearings, a failed m ediatio n attem pt, and additio nal filings b y Deb to r, the b ankruptc y c o urt to o k the m atter under sub m issio n. T he bankruptcy c ourt’s dec is ion. The b ankruptc y c o urt entered a
m em o randumdec isio n denying the m o tio n. In the dec isio n, it c o nc luded
8that Deb to r failed to m eet his b urden to sho w, b y c lear and c o nvinc ing

evidenc e, that N atio nstar knew that the discharge injunc tio n applied to its ac ts and, nevertheless, pro c eeded in willful vio latio n o f the discharge injunc tio n. In reaching this dec isio n, the b ankruptc y c o urt dec ided two things: first, the plan and Payo ff O rders did no t alter the lien; sec o nd, N atio nstar wo uld no t have expec ted the plan to do so . In reaching this dec isio n, the b a nkruptc y c o urt did no t discu ss the o r al agreem ents at the
c o nfirm atio n hearing; and, prio r to this dec isio n, N a tio nstar did no t dispute that the plan paid its secured c laimin full and had already
rec o nveyed its trust deed, soDeb to r had no reaso n to pro vide a transc ript o r o ther evidenc e o f the agreem ents m ade o n the rec o r d. There is no indic atio n that this spec ificissue was the sub jec t o f dispute when the b ankruptc y c o urt to o k the m atter under sub m issio n. The b ankruptc y c o urt entered a separate o rder. Deb to rtim ely appealed. JU RISD ICT ION The b ankruptc y c o urt had jurisdic tio n under 28 U .S.C . §§ 1334, 157(b )(2). W e have jurisdic tio n under 28 U
. S.C
. § 158. ISSU E Did the b ankruptc y c o urt ab use its disc r etio n when it denied Deb to r’s m o tio n fo r sanc tio ns?

9ST A ND A RD OF RE V I E W

W e review fo r an ab u s e o f disc retio n the b ankruptc y c o u rt’s dec isio n o n a m o tio n fo rc o ntem pt. Knupfer v. Lindbla de (In re Dy er) , 322 F.3d 1178, 1191 (9th C ir. 2003). Ab ankruptc y c o urt ab u ses its disc retio n if it applies the wro ng legal standard, m isapplies the c o r rec t legal standard, o r m akes fac tual findings that are illo gic al, im plausib le, o r witho ut suppo rt in inferenc es that m ay b e drawn fro m the fac ts in the rec o rd. S ee Tra fficS cho o l.co m, Inc. v. Edriver Inc. , 653 F.3d 820, 832 (9th Cir. 2011) (c iting United S ta tes v. Hinkso n , 585 F.3d 1247, 1262 (9th Cir. 2009) (en b anc )). D ISCU SSION The o nly issue b efo re the b ankruptc y c o urt when it to o k the m atter under sub m issio n was whether N atio nstar was sub jec t to c ivil c o ntem pt sanc tio ns b a sed o n ac tio n and inac tio n b efo re its rec o nveyanc e o f its trust deed. “Under traditio nal princ iples o f equity prac t ic e, c o urts have lo ng im po sed c ivil c o ntem pt sanc tio ns to ‘c o erc e the defendant into c o m plianc e’ with an injunc t io n o r‘c o m pensate the c o m plainant fo r lo sses’ stemm ing fro mthe defendant’s no nc o m plianc e with an injunc tio n.” T agga rt v. Lo renz en , 139 S. C t . 1795, 1801 (2019); cf. In re D ua l -D eck V i deo Ca ssette R eco rder Antitrust Litig. , 10 F.3d 693, 695 (9th Cir. 1993) (“C ivil c o ntem pt in this c o ntext c o nsists o f a party’s diso b edienc e to a spec ificand definite
c o u rt o rder b y failure to take all reaso nab le steps within the party’s po wer to c o m ply.”). Bankruptcy c o urts m ay ho ld parties in c o ntem pt, inc luding
10fo r vio lating the discharge injunc tio n. Tagga r t, 139 S. C t. at 1801.

T he relev ant leg al s tandard has c hang ed: the Suprem e Court’s Taggart dec is ion. When the b ankruptc y c o u rt issued its dec isio n and o rder, it c ited and relied o n the N inth C irc u it’s then-b inding dec isio n, Lo renz en v. Tagga rt (In re Ta

gga rt) , 888 F.3d 438 (9th C ir. 2018). But thereafter, the Suprem e C o urt c o nc luded that the N inth C irc uit applied the wro ng legal standard and thus vac ated and rem anded. Tagga rt, 139 S. C t. at 1804. In its Tagga rt dec isio n, the N inth C ircuit held that if a c redito r had a “go o d faith b elief” that the discharge injunc t io n did no t apply, then a
c o ntem pt finding wo uld b e inappro priate. 888 F.3d at 444–45. This was true, the N inth C irc uit held, even “if the c redito r’s b elief is unreaso nab le.” Id. at 444. A pplying the law to the fac ts o f the c ase b efo r e it, the N inth C irc uit ruled: “A ltho ugh the C redito rs . . . were ultim a tely inc o rrec t , their go o d faith b elief, even if unreaso nab le, insulated themfro ma finding o f
c o ntem pt.” Id. So, the N inth C irc uit’s Tagga rtstandard was fo rgiving to c redito rs: it allo w ed a c redito r to pro c eed with o therwise objec tively unreaso nab le ac ts so lo ng as it held a sub

j ec tive go o d faith b elief that it was in the right. Tagga rt, 139 S. C t. at 1803 (“[The N inth C ircuit’s standard] m a y to o o ften lead c redito rs who stand o n shaky legal gro und to c o llec t discharged deb ts . . . .”). Finding such a c redito r in c o ntem pt, then, required investigating and litigating “diffic ult-to -pro ve states o f m ind.” Id . A nd what the
11b ankruptc y c o urt fo und here, in effec t, was that the plan, related o rders,

and the lac k o f the c o nventio nal lien reduc tio n m o tio n c reated such
c o nfusio n and unc ertainty that N atio nstar had an adequate defense under the N inth C irc uit T

agga rt standard. The Suprem e C o urt, ho wever, changed the m etric s o f dec isio n after the b ankruptc y c o urt ruled. It determ ined that a b ankruptc y c o urt m ay “im po se c ivil c o ntem pt sanc tio ns when there is no objec tively reaso nab le b asis fo r c o nc luding that the c redito r’s c o nduc t m ight b e lawful under the discharge o rder.” Id. at 1801. This standard is “generally” an o bj ec tive o ne. Id. at 1802. The Suprem e C o urt rejec ted the N inth C ircuit’s “go o d faith b elief” standard: “W e have explained b efo r e that a party’s sub jec tive b elief that she was c o m p lying with an o rder o rdinarily will no t insulate her fro m c ivil c o ntem pt if that b elief was obj ec tively unreaso nab le.” Id . That said, subjec tive intent is no talways irrelevant: “Ou r c ases suggest, fo r exam ple, that c ivil c o ntem pt sanc tio ns m ay b e warranted when a party ac ts in b ad faith.” Id. O n the o ther hand, a party’s go o d faith, even if it do es no t prevent a finding o f c ivil c o ntem p t, m ight help determ ine the appro priate sanc tio n. Id. Given the c hange in c o ntro lling law, we m ust vac ate the dec isio n and
rem and fo r a dec isio n under the standard no w required b y the Suprem e C o urt. T he bankruptcy c ourt erred to the extent it c onc luded that the plan
12and bankruptcy proc eeding s did not affec t Nations tar’s lien. The

b ankruptc y c o urt alsodeterm ined that perfo rm anc e under the plan did no t require rec o nveyanc e o f the N atio nstar lien; we reverse o n this po int. W e agree that the plan did no t expressly so state. But the legal effec t o f the paym ent in full o f the BA C secured c laimas estab lished b y the plan had this effec t. In chapter 13 pro c eedings, no n-residential real pro p erty sec ured
c laim s are sub

jec t to nego tiated o r c o m pelled m o d ific atio n, and paym ent in full o f such a m o dified sec u red c laimelim inates the lien. Deb to r’s plan, agreed to b y N a tio nstar’s predec esso r-in-interest, b ifurc ated its c laimand paid the secured po rtio n in full. The C o d e generic a lly desc rib es a discharge as b arring effo rts to c o llec t deb ts perso na llyfro mthe deb to r. S ee11 U .S.C . § 524(a)(2). But a
c redito r’s right to fo r ec lo se o r o therwise realize o n its c o llateral, which is an in rem ac tio n against spec ificpro p erty, will o ften pass thro ugh the b ankruptc y. Jo hnso n v. H o m e S ta te Ba nk

, 501 U .S. 78, 83 (1991). The deb to r’s perso nal liab ility o n the c laimis discharged, b ut the underlying o b ligatio n rem ains secured b y the pro perty. Id . at 85. Sosecured c redito rs m ay o ften fo rec lo se o n liens po st-discharge. In so m e c irc um stanc es, ho wever, the b ankruptc y pro c eedings m ay alter the underlying c laim
. Here, Deb to r rec eived a chapter 13 discharge under § 1328(a), which pro vides that, ab sent c ertain exc eptio ns, as so o n as prac tic ab le after a
chapter 13 deb to r finishes m aking plan paym ents, the b ankruptc y c o urt
13“shall grant the deb to r a discharge o f all deb ts pro vided fo r b y the plan o r

disallo wed under sec tio n 502 o f this title . . . .” 11 U
. S.C . § 1328(a). The
sc o pe o f the discharge, then, depends o n the plan. Aplan is, at heart, a c o ntrac t b etween a deb to r and her c redito rs, and it “m ust b e interpreted ac c o rding to the rules go verning the interpretatio n o f c o ntrac ts.” M iller v. U nited S ta tes , 363 F.3d 999, 1004 (9th Cir. 2004). Whether a c o ntrac t is am b iguo us is a question o f law. Id. at 1003–04. So, the relevant questio ns are: did the plan pro vide fo r BA C ’s c laim and ho w was it treated? The transc ript o f the final c o nfirm atio n hearing
m akes c lear that BA C nego tiated c o nsensual plan term s with Deb to r. The
c o nfirm atio n o rder also evidenc es that the parties stipulated tothe plan’s term s. And the Payo ff O r ders state that the secured c laimwo uld b e satisfied b y paym ent under the plan. The rec o rd, thus, pro vides undisputed evidenc e that the plan pro vided fo rpaym ent in full o f the
secured po rtio n o f the BA C c laim . Deb t o r then perfo rm ed o n that plan, as later m o dified, and ob tained a chapter 13 discharge o f the sec ured c laim
. Paym ent in full o f a secured c laimhas im po rt under the c o ntro lling C alifo rnia law. In C alifo rnia, a lien do es no t exist independently o f the underlying deb t; satisfac t io n o f the underlying deb t satisfies the lien. All. Mo rtg. Co . v. R o thwell, 10 C a l. 4th 1226, 1235 (1995); C al. C iv. C o de § 2909. Put sim ply, as a m atter o f C alifo rnia law, o nc e an ob ligatio n no lo nger exists to b e secured b y the lien, the lien is vo id. S ee, e.g. , Ma rtin v.
14C itiF ina ncia l S ervs. (In re Ma r tin) , 491 B.R . 122, 127 (Bankr. E.D. C al. 2013).

Bankruptcy law also suppo rts this c o nc lusio n. Sec tio n 506(d) pro vides, sub

jec t to two exc eptio ns no t applic ab le here: “To the extent that a lien secures a c laimagainst the deb to r that is no t an allo wed secured
c laim, such lien is vo id . . . .” 11 U .S.C . § 506(d). Put differently, § 506(d)
vo ids liens when a c redito r ’s c laimis no t allo wed in the b ankruptc y. H S BC Ba nk U S A, N .A. v. Blendheim(In re Blendheim ) , 803 F.3d 477, 489 (9th Cir. 2015). Here, BA C filed a secured c laim, and the stipulated plan
c o nfirm atio n o rder pro vided that the am o unt o f the sec u red c laimwas $169,340. That sec

ured c laimwas paid. Tothe extent there was any o ther deb t o wing BA C, it was no t an allo wed secured c laimand any lien allegedly sec uring it was vo id. The c o rrec tness o f the c o nc lusio n that paym ent in full under the plan elim inated the N atio nstar secured c laim and required rec o nveyanc e is undersc o red b y the fac t that N atio nstar never argued to the c o ntrary and
vo luntarily rec o nveyed the trust deed o nc e Deb t o r filed its dec laratio n in suppo rt o f its discharge vio latio n m o tio n. A gain, the rec o rd evidenc es no dispute o n this po int b efo re the b ankruptc y c o urt to o k the m atter under sub m issio n. W e pause to discuss the b ankruptc y c o urt’s c o nc lusio n o n that po int. The b ankruptc y c o urt tho ught that the lien survived fo r several reaso ns. That is wro ng as a m atter o f law, and, therefo re, we c anno t agree with
15tho se c o nc lusio ns.

First, the b ankruptc y c o urt did no t take into ac c o unt that the secured
c redito r expressly c o nsented to c o nfirm a t io n o f the plan and the treatm ent o f its c laim, did no t o ppo se the deb to r ’s m o tio n to pay o ff the lien, and eventually rec o nveyed the deed o f trust. The deb to r’s failure topro vide the b ankruptc y c o urt with the transc ript o f the c o nfirm a t io n hearing pro b ab ly
c o ntrib uted to this. But even witho ut the transc ript, the c redito r’s c o nsistent b ehavio ro nly m akes sense as the c r edito r’s ackno wledgm ent that its secured c laimhad b een fully satisfied and its lien rights extinguished. Sec o nd, the b a nkruptc y c o urt m isinterpreted a termo f the standard fo rmplan that pro vides (with the b ankruptc y c o urt’s em phasis) that pro perty that revests in the deb to r at the end o f the plan term will b e “subjec t to all liens and encumb ranc es in existenc e when the c a se was filed,
exc ept tho se liens avo ided b y c o urt o rder o r extinguished b y o peratio n o f law.” The b ankruptc y c o urt tho ught that the underlined language requires a separate lien avo idanc e o rder. But the b ankruptc y c o urt did no t em phasize the last phrase: “o r extinguished b y o peratio n o f law.” A s we have po inted o ut, full paym ent o f an allo w ed secured c laimvo ids (i.e., extinguishes) the lien sec u r ing that c laim b y o p eratio n o f state law and the Bankruptcy C o de. The plan thus do es no t suppo rt the b ankruptc y c o urt’s c o nc lusio n.
16Third, the b a nkruptc y c o urt stated that lo c al prac tic e requires a two
step pro c ess fo r lien avo idanc e. But the c redito r never c o m p lained (in respo nse to the Deb to r’s c o ntem pt m o tio n) that its pro c edural rights were ab ridged. Further, the b ankruptc y c o urt ac kno wledged that the lo c al fo rm s it c ited are m a ndato r y o nly when a deb to r seeks to avo id a who lly
unsecured junio rlien o n the deb to r’s residenc e. 4 In this c ase, the deb to r so ught to m o dify a senio r lien o n no nresidential pro perty o n term s that the lienho lder expressly ac c epted. The b ankruptc y c o urt did no texplain why a deb to r s ho uld have to file a separate m o tio n to avo id a lien where the
c redito r had expressly agreed to the allo wed am o unt o f its secured c laim, the deb to r paid that c laimin full, and state law and the Bankruptcy C o de extinguish liens that do no t secure allo w ed secu red c laim s. 5 Fo urth, the b ankruptc y c o urt em phasized that the plan c o nfirm atio n o rder pro vides fo r allo wanc e and paym ent o f the sec ured c laim“[f]o r purpo se o f plan c o nfirm atio n.” The b ankruptc y c o urt interpreted this prefato ry c lause to require a separate lien avo idanc e m o tio n and o rder. The language o f the c o nfirm atio n o rder is inartful, b ut there is a m o re natural

4 Indeed, the ci ted for m i s now opti onal. See Centr al Di str i ct Local For m F 4003- 2.4.JR.LIEN.ORDER.

5 Local bankr uptcy r u les cannot enlar ge, abr i dge, or modi f y substanti v e r i ghts; they must be consi stent wi th the Code and feder al r ules; and they must be appli ed in a mannerconsi stent wi th the feder al r ules. Anwar v. Johnson , 720 F.3d 1183, 1189 (9th Ci r . 2013). 17reading: the plan was c o nfirm ed o n the b asis that the secured c redito r’s

c laimwas allo wed in an agreed am o unt and wo uld b e paid in full. The “fo r purpo ses o f” phrase c anno t reaso nab ly b e interpreted to im po se a pro c edural requirem ent that wo uld serve no useful purpo se in the c o ntext o f a c o nsensual plan like th is o ne. CONCL U SION Based o n the fo rego ing, we R EVER SE in part and VA C A TE and R EMA N D fo r further determ inatio ns c o nsistent with this dec isio n.

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