1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2003 FED App. 0343P (6th Cir.)

File Name: 03a0343p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

In re: TERRY R. TALBERT and

LAHNA L. TALBERT,

Debtors.

______________________

TERRY R. TALBERT and

LAHNA L. TALBERT,

Plaintiffs-Appellants,

v.

CITY MORTGAGE SERVICES,

Defendant-Appellee.

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No. 02-1845

Appeal from the United States District Court

for the Western District of Michigan at Grand Rapids.

No. 01-00795—Richard A. Enslen, District Judge.

Submitted: September 19, 2003

Decided and Filed: September 24, 2003 

Before: SILER, BATCHELDER, and COOK, Circuit

Judges.

2 In re Talbert, et al. No. 02-1845

_________________

COUNSEL

ON BRIEF: Marshall A. Yee, KEMPF & YEE, Lansing,

Michigan, for Appellants.

_________________

OPINION

_________________

SILER, Circuit Judge. This bankruptcy appeal presents

purely a legal question that has split the bankruptcy and

federal district courts, namely, whether a debtor who has filed

for Chapter 7 bankruptcy may avoid a valueless lien under

§ 506(d) of the Bankruptcy Code, 11 U.S.C. § 506(d).

Because the Supreme Court’s reasoning in Dewsnup v. Timm,

502 U.S. 410 (1992), applies with equal force and logic to the

issue at hand, we hold that a Chapter 7 debtor may not use

§ 506 to “strip off” an allowed junior lien where the senior

lien exceeds the fair market value of the real property in

question. Accordingly, we AFFIRM the judgment of the

district court.

I.

Debtors Terry and Lahna Talbert (the “Talberts”) filed an

adversary proceeding against Defendant City Mortgage

Services (“City Mortgage”) to avoid City Mortgage’s lien on

their residence pursuant to 11 U.S.C. § 506(d). Although

properly served with process, City Mortgage failed to file an

answer or other responsive filing in the bankruptcy court, a

strategy to which City Mortgage adhered before the district

court, and continues to employ before this court. At the

hearing for default judgment, the bankruptcy court raised sua
No. 02-1845 In re Talbert, et al. 3

1

The term “strip off” is used when a junior mortgage is totally

unsecured, whereas the term “strip down” is used when a mortgage is

partially unsecured and partially secured. See In re Fitzmaurice, 248 B.R.

356, 357 n.2 (Bankr. W.D. Mo. 2000) (citation omitted).

sponte the issue of whether, as a legal matter, § 506(d)

permits the “strip off” of an allowed unsecured lien.1

For purposes of its analysis, the court accepted as true that

at the time of the Talberts’ bankruptcy filing, they owned a

residence located in Lansing, Michigan, which had a fair

market value of $88,000. The court also accepted that the

residence was encumbered by a first mortgage in the amount

of $90,633, and that City Mortgage held a junior mortgage in

the amount of approximately $33,110. It was thus undisputed

that City Mortgage held a “valueless” lien since the Talberts’

property had a market value that was $2,633 less than the

amount of the lien securing the first mortgage. The

bankruptcy court concluded that § 506(d) does not permit the

“strip off” of a valueless junior lien from real estate. See

Talbert v. City Mortgage Servs. (In re Talbert), 268 B.R. 811,

814 (Bankr. W.D. Mich. 2001). In reaching this conclusion,

the court focused in large part on the claims allowance

process, an analytical approach not followed by the district

court, which affirmed the bankruptcy court based on the

Supreme Court’s statutory interpretation of § 506 as

pronounced in the watershed case of Dewsnup v. Timm.

We have jurisdiction under 28 U.S.C. § 158(d). Of course,

the order by the bankruptcy court, affirmed by the district

court, that a junior valueless lien is not voidable by a debtor

under 11 U.S.C. § 506(d) is a conclusion of law, which we

review de novo. Wesbanco Bank Barnesville v. Rafoth (In re

Baker & Getty Fin. Servs. Inc.), 106 F.3d 1255, 1259 (6th Cir.

1997).

4 In re Talbert, et al. No. 02-1845

II.

A. City Mortgage’s Failure to File an Appellate Brief

First, we must determine what consequences, if any, City

Mortgage faces for not filing a brief in this appeal. Although

not a situation we confront often, on a previous occasion, we

have addressed the effects of this unhelpful and highly risky

form of appellate advocacy:

An initial question presented . . . is the effect of appellee

Allgeier’s failure to file a brief on appeal. While Allgeier

did not file a brief, his counsel was present at oral

argument and offered to answer any questions the panel

might have. Neither the Federal Rules of Appellate

Procedure nor our local rules suggest that an appellee’s

failure to file a brief should be penalized by a decision in

favor of the appellant. Instead, Fed. R. App. P. 31(c)

provides in such a case that “the appellee will not be

heard at oral argument except by permission of the

court.” See, e.g., H.C. by Hewett v. Jarrard, 786 F.2d

1080, 1083 n. 1 (11th Cir.1986). Our court rules do not

address this issue. . . . While Rule 31(c) also authorizes

us to dismiss the appeal where the appellant fails to file

a brief to support his burden of persuasion, see id., we

believe that an appellee's failure to file a brief should

normally carry with it only the oral argument sanction

called for by the Rule. However, we do not address the

power of the court to impose additional sanctions should

it specifically order the filing of a brief and the appellee

without adequate reason fails to comply. 

Allgeier v. United States, 909 F.2d 869, 871 n.3 (6th Cir.

1990) (emphasis in original). In this appeal, City Mortgage

has not flouted the authority of this court. Accordingly,

pursuant to Allgeier, and, like the proceedings below, a

decision in favor of the Talberts, or, in the alternative, the

imposition of some other sanction against City Mortgage, is

not compelled.
No. 02-1845 In re Talbert, et al. 5

B. “Strip Off” in Chapter 7

The question of whether a Chapter 7 debtor may use 11

U.S.C. § 506(d) to “strip off” a valueless junior lien from real

property has divided the bankruptcy and federal district

courts. Compare Webster v. Key Bank (In re Webster), 287

B.R. 703 (Bankr. N.D. Ohio 2002); Bessette v. Bank One,

Mich. (In re Bessette), 269 B.R. 644 (Bankr. E.D. Mich.

2001); In re Davenport, 266 B.R. 787 (Bankr. W.D. Ky.

2001); In re Fitzmaurice, 248 B.R. 356 (Bankr. W.D. Mo.

2000); Cunningham v. Homecomings Fin. Network (In re

Cunningham), 246 B.R. 241 (Bankr. D. Md. 2000), aff’d sub

nom. Ryan v. Homecomings Fin. Network, 253 F.3d 778 (4th

Cir. 2001); Cater v. American Gen. Fin. (In re Cater), 240

B.R. 420 (M.D. Ala. 1999); In re Virello, 236 B.R. 199

(Bankr. D.S.C. 1999); Swiatek v. Pagliaro (In re Swiatek),

231 B.R. 26 (Bankr. D. Del. 1999); Laskin v. First Nat’l Bank

of Keystone (In re Laskin), 222 B.R. 872 (B.A.P. 9th Cir.

1998) (all finding that a debtor who has filed Chapter 7

bankruptcy may not “strip off” an allowed valueless junior

lien pursuant to 11 U.S.C. § 506(d)), with Farha v. First Am.

Title Ins. (In re Farha), 246 B.R. 547 (Bankr. E.D. Mich.

2000); Warthen v. Smith (In re Smith), 247 B.R. 191 (W.D.

Va. 2000), aff’d, 1 Fed. Appx. 178 (4th Cir. 2001)

(unpublished decision), overruled by Ryan, 253 F.3d at 782;

Zempel v. Household Fin. Corp. (In re Zempel), 244 B.R. 625

(Bankr. W.D. Ky. 1999); Yi v. Citibank (Md.), N.A. (In re Yi),

219 B.R. 394 (E.D. Va. 1998), overruled by Ryan, 253 F.3d

at 782; Howard v. National Westminister Bank, U.S.A. (In re

Howard), 184 B.R. 644 (Bankr. E.D.N.Y. 1995) (all finding

that notwithstanding the Supreme Court’s decision in

Dewsnup, a Chapter 7 debtor may “strip off” an allowed

secured claim if there is no value in the collateral to cover any

part of the subject lien). The Fourth Circuit is the only

federal appellate court to discuss this debate, and it has sided

with those courts that hold that § 506 does not permit the

“stripping off” of liens in Chapter 7 proceedings. See Ryan,

253 F.3d at 783 (“[W]e hold that an allowed unsecured

consensual lien may not be stripped off in a Chapter 7

6 In re Talbert, et al. No. 02-1845

2

Section 506(a) provides in relevant part: 

An allowed claim of a creditor secured by a lien on property in

which the estate has an interest . . . is a secured claim to the

extent of the value of such creditor’s interest in the estate’s

interest in such property . . . and is an unsecured claim to the

extent that the value of such creditor’s interest . . . is less than the

amount of such allowed claim. 

11 U.S.C. § 506(a). 

3

Section 506(d) provides in pertinent part that “to the extent that a

lien secures a claim against the debtor that is not an allowed secured

claim, such lien is void.” 11 U.S.C. § 506(d).

4

In the Talberts own words, “[p]ursuant to the definition of a secured

claim under 11 U.S.C. § 506(a), a creditor only has a secured claim to the

extent of the value of such creditor’s interest in the estate’s interest in

such property.” They continue, “[i]n the case at bar, because of

Appellee’s default, it is undisputed that the amount of the first mortgage

exceeds the value of Appellant’s residence. It therefore cannot be

gainsaid that the Appellee does not have a secured claim.”

proceeding pursuant to the provisions of 11 U.S.C. §§ 506(a)

and (d).”). We agree with the Fourth Circuit.

As did the debtors in Ryan, the Talberts argue that the

secured status of a claim is determined by the securityreducing provision of § 506(a),2

 and that pursuant to this

provision, their junior lien is completely unsecured, and, thus,

according to § 506(d),3 may be “stripped off.”4 See Ryan,

253 F.3d at 781. A similar argument was rejected by the

Supreme Court in the analogous context of a debtor’s attempt

to “strip down” an under-collateralized creditor’s lien in a

Chapter 7 case. In Dewsnup, the debtors owned farmland

encumbered by deed of trust securing a debt of $120,000.

The farmland was valued at approximately $39,000. This

arrangement left an unsecured deficiency of approximately

$81,000, which the debtors sought to avoid pursuant to

§ 506(d). The lower courts would not grant this relief, and

the Supreme Court affirmed.
No. 02-1845 In re Talbert, et al. 7

5

A claim or interest is deemed “allowed” if proof thereof is timely

filed pursuant to Code § 501, and (1) no objection is made by a party in

interest, or (2) the bankruptcy court, after notice and a hearing, determines

the validity of the claim, thereby overruling the objection of a party in

interest. 11 U.S.C. § 502.

In its analysis, the Court laid out in detail the different

readings that could be given to the thorny statutory

interpretation question presented bythe perceived interplay of

§§ 506(a) and 506(d). See Dewsnup, 502 U.S. at 414-16.

One interpretation, which was urged by the debtors, was that

“§§ 506(a) and 506(d) are complementary and to be read

together.” Id. at 414. According to this argument,

“[b]ecause, under § 506(a), a claim is secured only to the

extent of the judicially determined value of the real property

on which the lien is fixed, a debtor can void a lien on the

property pursuant to § 506(d) to the extent the claim is no

longer secured and thus is not ‘an allowed secured claim.’”

Id. Although not without merit, see id. at 420-36 (Scalia, J.,

dissenting) (filing a sharp dissent criticizing the majority for

brushing aside the plain language of § 506 and employing an

unorthodox method of statutory interpretation), this argument

was rejected in favor of an analysis advanced by the creditors,

and joined by the United States asamicus curiae, namely, that

the words “‘allowed secured claim’ in § 506(d) need not be

read as an indivisible term of art defined by reference to

§ 506(a), which by its terms is not a definitional provision.”

Id. at 415.

Under this construction, “allowed secured claim” “should

be read term-by-term to refer to any claim that is, first,

allowed,5 and, second, secured.” Id. (footnote added). The

Court continued, “[b]ecause there is no question that the

claim at issue here has been ‘allowed’ pursuant to § 502 of

the Code and is secured by a lien with recourse to the

underlying collateral, it does not come within the scope of

§ 506(d), which voids only liens corresponding to claims that

have not been allowed and secured.” Id. (emphasis in

8 In re Talbert, et al. No. 02-1845

original). This reading, the Court explained, “gives the

provision the simple and sensible function of voiding a lien

whenever a claim secured by the lien itself has not been

allowed.” Id. at 415-16. Thus, although limited to the facts

of the case, the Court’s holding was quite clear: “[w]e hold

that § 506(d) does not allow petitioner to ‘strip down’

respondent’s lien, because respondents’ claim is secured by

a lien and has been fully allowed pursuant to § 502.” Id. at

417.

Three considerations constituted the analytical

underpinnings of the Court’s holding, namely, that: (1) any

increase in the value of the property from the date of the

judicially determined valuation to the time of the foreclosure

sale should accrue to the creditor; (2) the mortgagor and

mortgagee bargained that a consensual lien would remain

with the property until foreclosure; and (3) liens on real

property survive bankruptcy unaffected. Id. at 417-18. In the

Court’s own words

The practical effect of petitioner’s argument is to freeze

the creditor’s secured interest at the judiciallydetermined

valuation. By this approach, the creditor would lose the

benefit of any increase in the value of the property by the

time of the foreclosure sale. The increase would accrue

to the benefit of the debtor, a result some of the parties

describe as a “windfall.”

We think . . . that the creditor’s lien stays with the real

property until the foreclosure. That is what was

bargained for by the mortgagor and the mortgagee. The

voidness language sensibly applies only to the security

aspect of the lien and then only to the real deficiency in

the security. Any increase over the judicially determined

valuation during bankruptcy rightly accrues to the benefit

of the creditor, not to the benefit of the debtor and not to

the benefit of other unsecured creditors whose claims

have been allowed and who had nothing to do with the

mortgagor-mortgagee bargain. . . .
No. 02-1845 In re Talbert, et al. 9

This result appears to have been clearly established

before the passage of the 1978 Act. Under the

Bankruptcy Act of 1898, a lien on real property passed

through bankruptcy unaffected. This Court recently

acknowledged that this was so. See Farrey v.

Sanderfoot, 500 U.S. 291, 297, 111 S.Ct. 1825, 1829,

114 L.Ed.2d 337 (1991) (“Ordinarily, liens and other

secured interests survive bankruptcy”); Johnson v. Home

State Bank, 501 U.S. 78, 84, 111 S.Ct. 2150, 2154, 115

L.Ed.2d 66 (1991) (“Rather, a bankruptcy discharge

extinguishes only one mode of enforcing a claim--

namely, an action against the debtor in personam--while

leaving intact another--namely, an action against the

debtor in rem”). . . .

Congress must have enacted the Code with a full

understanding of this practice. See H.R.Rep. No.

95-595, p. 357 (1977), U.S.Code Cong. & Admin. News

1978, pp. 5787, 6313 (“Subsection (d) permits liens to

pass through the bankruptcy case unaffected”).

When Congress amends the bankruptcy laws, it does not

write “on a clean slate.” See Emil v. Hanley, 318 U.S.

515, 521, 63 S.Ct. 687, 690-691, 87 L.Ed. 954

(1943). . . . [T]o attribute to Congress the intention to

grant a debtor the broad new remedy against allowed

claims to the extent that they become “unsecured” for

purposes of § 506(a) without the new remedy’s being

mentioned somewhere in the Code itself or in the annals

of Congress is not plausible, in our view, and is contrary

to basic bankruptcy principles.

Id. at 417-20. 

The Supreme Court’s reasoning for not permitting “strip

downs” in the Chapter 7 context applies with equal validity to

a debtor’s attempt to effectuate a Chapter 7 “strip off.” See

Ryan, 253 F.3d at 782 (“[W]e discern no principled

distinction to be made between the case sub judice and that

10 In re Talbert, et al. No. 02-1845

decided in Dewsnup. The Court’s reasoning in Dewsnup is

equally relevant and convincing in a case like ours where a

debtor attempts to strip off, rather than . . . strip down, an

approved but unsecured lien.”); In re Webster, 287 B.R. at

708 (“Contrary to the Yi court’s reasoning, . . . [the ‘stripdown’ versus ‘strip-off’ distinction] is a distinction without a

difference according to the majority of courts post-Dewsnup.

The analysis does not change depending on the available

equity in the collateral to which the lien attaches.”); In re

Davenport, 266 B.R. at 790 (“We agree with the Fourth

Circuit that Dewsnup’s reasoning is equally applicable in a

case where a debtor attempts to strip off a wholly unsecured

consensual mortgage.”); In re Cater, 240 B.R. at 423

(“Although the lien at issue in Dewsnup was secured by at

least some equity in the debtor’s property, that factual

distinction is not relevant. What is relevant is the Supreme

Court’s construction of § 506(d).”); In re Virello, 236 B.R. at

205 (“This Court . . . is of the opinion that for Dewsnup to

have meaning, it must be applied to instances of ‘strip off’ of

liens as much as it does to the ‘strip down’ of liens, the

difference being primarily one of degree.”); In re Swiatek,

231 B.R. at 29-30 (“Although in Dewsnup the claim was

undersecured, not totally unsecured, we think the same result

obtains under the Dewsnup rationale when the claim is

completely unsecured in a chapter 7 and no objection to the

claim has been filed and sustained.”). In fact, one court has

gone so far as to describe this conclusion as “flawless.” In re

Davenport, 266 B.R. at 790.

As in the case of a “strip down,” to permit a “strip off”

would mark a departure from the pre-Code rule that real

property liens emerge from bankruptcy unaffected. Also, as

in the case of a “strip down,” a “strip off” would rob the

mortgagee of the bargain it struck with the mortgagor, i.e.,

that the consensual lien would remain with the property until

foreclosure. In fact, in Dewsnup, the Court was persuaded by

the creditors’ argument that “‘the fresh start’ policy cannot

justify an impairment of respondents’ property rights, for the

fresh start does not extend to an in rem claim against property
No. 02-1845 In re Talbert, et al. 11

but is limited to a discharge of personal liability.” 502 U.S.

at 416. Finally, as was true in the context of “strip downs,”

Chapter 7 “strip offs” also carry the risk of a “windfall” to

the debtors should the value of the encumbered property

increase by the time of the foreclosure sale. As one court

observed, “[w]ho knows what the real estate market will be

tomorrow? By the time of sale in the future, a piece of real

estate may have increased in value to cover a secondmortgage lien not covered by the property’s value today.” In

re Cater, 240 B.R. at 424; see also Ryan, 253 F.3d at 783

(“[W]e are acutely aware that in the volatile, modern real

estate market, substantial price variations occur with weekly

or monthly regularities.”).

It is true that the Court’s opinion has not escaped scholarly

criticism, see Cunningham, 246 B.R. at 246 (compiling law

review articles that have criticized the Dewsnup decision),

and that some courts have been unwilling to extend Dewsnup

to its logical conclusion, see, e.g., In re Yi, 219 B.R. at 397;

In re Howard, 184 B.R. at 646. However, notwithstanding

the dissatisfaction of some, we are not at liberty to ignore the

Supreme Court’s reasoning, which Congress has made no

apparent attempt to modify or correct through legislative

action. See Virello, 236 B.R. at 204-05 (The “Supreme Court

has interpreted the statute . . . and Congress has made no

apparent attempt to correct that interpretation or clarify the

statute. Under the doctrine of stare decisis, this Court is

constrained to follow . . . Dewsnup. [To do otherwise] . . .

would effectively render the Supreme Court’s reasoning in

Dewsnup meaningless.”).

In the instant case, the Talberts do not challenge that City

Mortgage’s claim is allowed pursuant to § 502. Also,

regardless of the fact that the current value of the real

property is insufficient to recover City Mortgage’s junior lien,

the claim is nonetheless “secured in the ordinary sense, that

is, . . . [it] is backed up by a security interest in property,

whether or not the value of the property suffices to cover the

claim.” Cater, 240 B.R. at 422. As Dewsnup teaches, that is

12 In re Talbert, et al. No. 02-1845

6

The bankruptcy court reached this same conclusion, although by

different reasoning. According to the bankruptcy court, 11 U.S.C. § 506

is meaningless in Chapter 7 proceedings unless the debtor is redeeming

property and needs § 506(d) to avoid any residual lien the creditor might

claim in the property once the allowed secured claim has been paid.

Because the Talberts were not redeeming the property, the court reasoned

that they could not use § 506(d) to “strip off” City Mortgage’s lien on the

property. The bankruptcy court noted that § 506(d) is needed in

reorganization proceedings to classify secured claims as allowed or

disallowed in order to determine who gets paid. According to the court,

however, there is no need for such a determination in a Chapter 7

proceeding because the trustee’s job does not include making distributions

to holders of secured claims; a trustee’s job in a Chapter 7 proceeding is

to distribute property of the estate, defined as the legal or equitable

interests of the debtor in the property. 11 U.S.C. § 541. From this

all that is required; the Talberts may not utilize § 506(a) and

(d) to “strip off” City Mortgage’s lien. See Dewsnup, 502

U.S. at 415 (“Because there is no question that the claim at

issue here has been ‘allowed’ pursuant to § 502 of the Code

and is secured by a lien with recourse to the underlying

collateral, it does not come within the scope of § 506(d),

which voids only liens corresponding to claims that have not

been allowed and secured.”) (emphasis removed); see also

Cater, 240 B.R. at 423 (“[B]ecause [the creditor’s] claim is

allowed under § 502 and is secured by a valid lien, the same

result obtains. The fact that the value of the property is

insufficient to cover the debt does not warrant a different

result.”).

“Section 506 was intended to facilitate valuation and

disposition of property in the reorganization chapters of the

Code, not to confer an additional avoiding power on a

Chapter 7 debtor.” Ryan 253 F.3d at 783 (quoting Laskin,

222 B.R. at 876). When a debtor proceeds under Chapter 7,

creditors are “entitled to their lien position until foreclosure

or other permissible final disposition is had.” Id. Thus, we

conclude that a Chapter 7 debtor may not use 11 U.S.C. § 506

to “strip off” an allowed junior lien where the senior lien

exceeds the fair market value of the real property.6
No. 02-1845 In re Talbert, et al. 13

definition, the bankruptcy court found that secured claims do not qualify

as property of the estate, thus avoiding the need to classify the claims as

allowed or disallowed.

After reviewing this question of law de novo, we agree with the

district court that the more prudent analytical approach to resolving the

“strip-off” question presented in this matter is to affirm on the basis of the

statutory interpretation analysis contained in Dewsnup–and on that basis

only. We thus express no opinion on the bankruptcy court’s analysis.

AFFIRMED.