United States Court of Appeals For the Seventh Circuit
Bankruptcy — secured claims
Liens pass through bankruptcy unaffected, and the term “allowed secured claim” in § 506(d) means a claim that is, first, allowed under § 502 and, second, secured by a lien enforceable under state law, without regard to whether that claim would have been deemed secured or unsecured under § 506(a).
Section 103(a) of the Code states that: ‘Except as provided in section 1161 of this title, chapters 1, 3, and 5 of this title apply in a case under chapter 7, 11, 12, or 13 of this title . . . .’ 11 U.S.C. § 103. The exception in § 1161 is inapplicable here, as it merely provides that certain sections of the Code do not apply ‘in a case concerning a railroad.’ Accordingly, § 506(d), which is part of Chapter 5, applies equally to cases under Chapter 7 and Chapter 13. In fact, Ryan does not contest that under § 103(a), § 506(d) applies to both Chapter 13 and Chapter 7 petitions, and he does not seek to carve out an exception to that rule for § 506(d). Instead, his argument is that the language in § 506(d) should be interpreted differently in Chapter 13 than in Chapter 7 cases because to hold otherwise would be contrary to the purposes of those statutory vehicles. This argument is not based on any language in § 506(d) that would signal differential treatment. In fact, the language of § 506(d) is straightforward, and does not indicate any intent for the terms to have meanings that differ based upon the circumstances. To the contrary, § 103(a) provides clear evidence that § 506(d) was to apply equally to Chapters 7 and 13.”
On Appeal from the United States Bankruptcy Court for the Northern District of Illinois, Goldgar, Bankr. J., Rovner, J.