In Rem Claim that Survived Chapter 7 Discharge Must be Paid as Allowed Unsecured Claim in Subsequent Chapter 13 Case

In Rem Claim that Survived Chapter 7 Discharge Must be Paid as Allowed Unsecured Claim in Subsequent Chapter 13 Case

“Chapter 20”  Debtors had filed Chapter 7 in 2014 and then  filed this Chapter 13 petition 13 months later. In their Chapter 7 case, they discharged their personal liability on two junior mortgages on their homestead. The junior mortgagee filed claims in their subsequent  Chapter 13 case. The Debtors objected to these claims asking the Court to disallow them–secured or unsecured.

The issue  is whether the in rem claim that survives a chapter 7 discharge must be paid as an allowed unsecured claim in a subsequent chapter 13 when the claim does not constitute a secured claim due to insufficient equity in the collateral.

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