Objection to Claim Cannot be used to Seek Judicial Determination of the Validity or Extent of a Lien; Adversary Proceeding is Required

Objection to Claim Cannot be used to Seek Judicial Determination of the Validity or Extent of a Lien; Adversary Proceeding is Required

On December 30, 2015, Debtor filed a voluntary petition for relief under chapter 7 of title 11 of the United States Code (the “Bankruptcy Code”). A Chapter 7 trustee was appointed (the “Trustee”).

On January 13, 2016, Debtor filed bankruptcy schedules, including Schedule A/B, claiming, inter alia, a fee simple ownership interest in various parcels of real property including the East Fulton Property, the Lawrence Street Property, and the William Street Property (the “Properties”).

Debtor filed adversary proceedings related to each of these (and other) Properties, each seeking, inter alia, a declaratory judgment that certain parties were not the holders of the notes and mortgages encumbering each of the Properties (the “Adversaries”).

On May 2, 2016, the Court entered an Order discharging Debtor (the “Discharge Order”).

On October 27, 2016, the Trustee filed a status report and stated, among other things, that he did not intend to administer any interest of this bankruptcy estate in the William Street Property nor the Lawrence Street Property, but that he intended to administer the estate’s interest in the East Fulton Property.

On October 28, 2016, the Trustee filed a Notice of Discovery of Assets and indicated a deadline of January 26, 2017 for proofs of claim to be filed (the “Discovery of Assets”).

On May 10, 2017, Debtor filed the Lawrence Street Claim Objection, in which he asserts, among other things, that the IndyMac lien encumbering the Lawrence Street Property should be disallowed and void pursuant to 11 U.S.C. § 506(d)(2) and § 502 because a proof of claim asserting the lien was not timely filed after the Trustee’s Discovery of Assets.

On June 2, 2017, Deutsche filed an opposition to the Lawrence Street Claim Objection (the “Deutsche Opposition”). Deutsche asserts that, as a secured creditor, it was not required to file a claim in Debtor’s case to preserve its lien against the Lawrence Street Property, the Lawrence Street Claim Objection is procedurally improper as it was not brought as an adversary proceeding pursuant to Bankruptcy Rule 7001, and it is duplicative of the Lawrence Street Adversary, from which this Court has already abstained.

On June 20, 2017, Debtor filed an affirmation in further support of the Lawrence Street Claim Objection, asserting that due to Deutsche’s failure to timely file a proof of claim its lien is extinguished as to the Lawrence Street Property.

On September 18, 2017, Deutsche filed a sur-reply in support of the Deutsche Opposition.

On June 28, 2017, Debtor filed the William Street Claim Objection, in which he asserts, among other things, that the U.S. Bank lien encumbering the William Street Property should be disallowed and void pursuant to 11 U.S.C. § 506(d)(2) and § 502 because a proof claim was not timely filed by U.S. Bank after the Trustee’s Discovery of Assets.

On July 10, 2017, U.S. Bank filed an opposition to the William Street Claim Objection (the “William Street Opposition”).  U.S. Bank asserts that Debtor has failed to claim an interest in the William Street Property in his amended schedules at docket item 87 and therefore lacks standing to challenge U.S. Bank’s lien, U.S. Bank was not required to file a claim in Debtor’s case to preserve its lien against the William Street Property, the William Street Claim Objection is identical to the Lawrence Street Claim Objection, and the William Street Claim Objection is duplicative of the William Street Adversary, from which this Court has already abstained.

On July 20, 2017, Debtor filed an affidavit in further support of the William Street Claim Objection (the “William Street Support”).

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