Sonja Ritter v. Lois Brady, Chapter 7 Trustee

Under Chapter 7 of the Bankruptcy Code, a debtor’s assets are liquidated. Creditors then submit claims for payment, with priority going to secured claims—that is, claims backed by a lien on property. Under Section 506(a) of the Code, a claim is “a secured claim to the extent of the value of [the] creditor’s interest” in the property underlying the lien. 11 U.S.C. § 506(a). The remaining value of the lien is treated as unsecured. Id. And Section 506(d) voids any part of a lien that “is not an allowed secured claim.” Id. § 506(d). Yet Dewsnup v. Timm, 502 U.S. 410 (1992), held that Section 506(d) does not void the portion of the lien that the Court acknowledged is made unsecured by Section 506(a). Instead, Dewsnup concluded that for purposes of Section 506(d) only, a claim with a lien is fully secured, regardless of the value of the underlying property. Because Dewsnup gave different meanings to the same terms in the same section of the same statute, it “has been the target of criticism” “[f]rom its inception.” Bank of Am., N.A. v. Caulkett, 135 S. Ct. 1995, 2000 & n.† (2015). The question presented is whether Dewsnup v. Timm, 502 U.S. 410 (1992), should be overruled.