Frances Scarborough

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
IN RE: : CIVIL ACTION
: (Bankruptcy No. 01-35194)
FRANCES SCARBOROUGH :
: NO. 08-cv~04873-JF
MEMORANDUM AND ORDER
Fullam, Sr. J. January 22, 2009
The lengthy history of this bankruptcy proceeding is,
at least in part, attributable to the fact that (1) until
recently, the bankrupt has been proceeding pro se; and (2) the
creditor immediately involved in this litigation, Chase Home
Finance, LLC (holder of a mortgage on the bankrupt's residence),
is represented by different counsel in state-court foreclosure
proceedings than in the present case.
Frances Scarborough filed a Chapter 13 petition on
October 31, 2001. In subsequent attempts to propose a feasible
plan, an important issue was whether or not the $90,000 claim
asserted by Chase Home Finance, LLC could be bifurcated into a
secured claim of $13,000, and an unsecured claim for the balance.
It was and is Ms. Scarborough's contention that the mortgage is
only actually secured to the extent of $13,000.
At an earlier stage of the proceeding, a bankruptcy
judge in this District determined that the claim of Chase Home
Finance, LLC could not be so-bifurcated, in view of the anti-
modification protection afforded the creditor by 11 U.S.C.
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§ 1322 (b) (2). The District Court (James McGirr Kelly, J.) upheld
the Bankruptcy Court order, but the Third Circuit Court of
Appeals reversed, in a decision rendered August 28, 2006. In re
Scarborough, 461 F.3d 406 (3d Cir. 2006). The debtor attempted
to propose a feasible plan without bifurcating the mortgagee's
claim, but the Bankruptcy Court found that her alternative plan
could not be confirmed and, on July 21, 2005, dismissed the
bankruptcy proceeding.
Thereafter, while the appeal from the bifurcation issue
remained pending, Chase Home Finance, LLC proceeded to foreclose
the mortgage. It was, and continues to be, Chase's position
that, since no automatic stay was in effect after the bankruptcy
proceeding was dismissed, its foreclosure action was entirely
proper.
After the Court of Appeals rendered its decision, the
bankruptcy case was reopened. The debtor sought to have the
foreclosure judgment vacated, but was unsuccessful in the state
court. The property was sold at sheriff's sale. The successful
bidder was Chase, which now owns the property. No further action
has been taken to evict the debtor.
In the course of these proceedings, the debtor filed an
adversary proceeding seeking to prevent the foreclosure from
continuing, on the theory that the reopening of the bankruptcy
case rendered previous actions in the state courts null and void,
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because it violated the automatic bankruptcy stay. The
bankruptcy judge rejected that argument and dismissed the
adversary proceeding.
Now before this Court are appeals by the bankrupt from
the dismissal of the adversary proceeding, and from the ultimate
dismissal of the bankruptcy itself.
My conclusions may be summarized as follows: (1) on the
present state of the record, there is a valid pending Chapter 13
proceeding, and the automatic bankruptcy stay is in effect; (2)
the debtor is entitled to a hearing to determine how much of
Chase's claims should be regarded as secured, and how much should
be treated as unsecured; (3) it is unnecessary to reach a firm
conclusion as to whether reinstatement of the bankruptcy
proceeding rendered void any actions taken by the creditor to
enforce its claim; the bankruptcy stay is now in effect, and
precludes any further action to enforce the creditor's claim,
unless approved in this proceeding.
The case will therefore be remanded to the Bankruptcy
Court for the purpose of (1) holding a hearing to establish the
secured amount of Chase's claim; (2) enabling the debtor to
propose a feasible plan, if possible; and (3) establishing a
reasonable time-frame for the further conduct and ultimate
resolution of this bankruptcy proceeding.
An Order follows.
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
IN RE:
FRANCES SCARBOROUGH
CIVIL ACTION
(Bankruptcy No. 01-35194)
NO. 08-CV-04873-JF
ORDER
AND NOW, this 22nd day of January 2009, IT IS ORDERED:
That this case is REMANDED to the Bankruptcy Court for
further proceedings in conformity with the views expressed in the
accompanying Memorandum.
BY THE COURT:
/s/ John P. Fullam
John P. Fullam, Sr. J,
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