USA Foreclosure Wiki

Chapter 13 Cure and Lien Stripping

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Chapter 13 Cure and Lien Stripping

Federal-authority page. Legal information, not legal advice. Last verified: 2026-06-02.

Overview

Chapter 13 of the Bankruptcy Code gives an individual debtor with regular income a mechanism to keep real property that is in or near foreclosure by reorganizing the debt over a three-to-five-year plan rather than liquidating. Three statutory levers do most of the work on real-estate debt, and all three operate federally — they preempt or suspend the state tax-foreclosure and mortgage-foreclosure process to the extent the two conflict (U.S. Const. art. VI; the bankruptcy-automatic-stay of 11 U.S.C. § 362 freezes the state sale on filing):

  1. Cure and maintain (§ 1322(b)(5)). A debtor in default on a long-term secured debt (typically a home mortgage, but also a tax-lien certificate or installment redemption obligation whose last payment falls due after the plan ends) may cure the arrearage over the life of the plan while maintaining the ongoing contract payments, undoing an acceleration that state law would otherwise make final.
  2. Cure timing relative to a foreclosure sale (§ 1322(c)(1)). The federal right to cure a default on the principal residence survives “until such residence is sold at a foreclosure sale” — fixing, as a matter of federal law, the outer deadline by reference to the state sale.
  3. Valuation and lien stripping (§ 506(a)/(d) read with § 1322(b)(2)). A claim is secured only “to the extent of the value” of the collateral; a junior lien that is wholly unsupported by any equity (the senior debt exhausts the property’s value) is not a “secured claim” and, in most circuits, can be stripped off in Chapter 13 notwithstanding the anti-modification rule that otherwise shields home-mortgage liens.

The interaction with state foreclosure law is the entire point. State law decides when title passes, what counts as a completed sale, and what redemption or reinstatement rights exist (see right-of-redemption); the Bankruptcy Code decides whether and how the debtor can override an acceleration, reach back a defaulted loan, and void an underwater junior lien. The two systems meet at § 1322(c)(1)‘s phrase “sold at a foreclosure sale … conducted in accordance with applicable nonbankruptcy law.”

This page concerns the debtor-mortgagor / former-owner side of the ledger. Its mirror image — the tax-sale purchaser whose acquisition is unwound or delayed by a debtor’s bankruptcy filing — is treated at bankruptcy-automatic-stay and on each jurisdiction page’s lien-survival module.

Statutory / regulatory framework

All quotations below are from the official U.S. Code text retrieved 2026-06-02.

§ 1322(b) — anti-modification and cure

The chapeau and the operative clauses:

“Subject to subsections (a) and (c) of this section, the plan may— … (2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims …”

(11 U.S.C. § 1322(b)(2). Source: https://www.law.cornell.edu/uscode/text/11/1322 , retrieved 2026-06-02.)

The parenthetical is the anti-modification rule: a plan may rewrite the terms of most secured claims (interest rate, amortization, principal), but it may not modify a claim secured only by the debtor’s principal residence. This is the protection a home mortgagee invokes to defeat a “cramdown.”

Cure is authorized by two clauses:

“(3) provide for the curing or waiving of any default;”

“(5) notwithstanding paragraph (2) of this subsection, provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due …”

(11 U.S.C. § 1322(b)(3), (b)(5). Source: https://www.law.cornell.edu/uscode/text/11/1322 , retrieved 2026-06-02.)

Section 1322(b)(5) is the cure-and-maintain provision. By its own terms it operates “notwithstanding paragraph (2)” — so even the protected home mortgage may have its default cured (arrears paid over the plan) and its ongoing payments maintained, even though the underlying claim may not otherwise be modified. Curing reinstates the loan as though the acceleration had not occurred.

§ 1322(c) — timing relative to the foreclosure sale; short-term home loans

“Notwithstanding subsection (b)(2) and applicable nonbankruptcy law—

(1) a default with respect to, or that gave rise to, a lien on the debtor’s principal residence may be cured under paragraph (3) or (5) of subsection (b) until such residence is sold at a foreclosure sale that is conducted in accordance with applicable nonbankruptcy law; and

(2) in a case in which the last payment on the original payment schedule for a claim secured only by a security interest in real property that is the debtor’s principal residence is due before the date on which the final payment under the plan is due, the plan may provide for the payment of the claim as modified pursuant to section 1325(a)(5) of this title.”

(11 U.S.C. § 1322(c)(1)–(2). Source: https://www.law.cornell.edu/uscode/text/11/1322 , retrieved 2026-06-02.)

Two distinct rules:

  • § 1322(c)(1) sets the federal cure deadline for the residence at the moment it is “sold at a foreclosure sale” under state law. Congress added this in 1994 to settle a conflict over when the cure window closes; what state event constitutes the “sale” is itself litigated (see Connors below).
  • § 1322(c)(2) is a narrow exception to the anti-modification rule: where the home loan’s final scheduled payment comes due before the plan’s final payment (i.e., a short-term or balloon loan, or a fully matured loan), the plan may pay the claim “as modified” under the cramdown standard of § 1325(a)(5).

§ 506(a)/(d) — valuation and lien voidance

“An allowed claim of a creditor secured by a lien on property in which the estate has an interest … is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property … and is an unsecured claim to the extent that the value of such creditor’s interest … is less than the amount of such allowed claim.”

(11 U.S.C. § 506(a)(1). Source: https://www.law.cornell.edu/uscode/text/11/506 , retrieved 2026-06-02.)

“To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless— (1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.”

(11 U.S.C. § 506(d). Source: https://www.law.cornell.edu/uscode/text/11/506 , retrieved 2026-06-02.)

Section 506(a) bifurcates a claim into a secured part (up to collateral value) and an unsecured part (the rest). When the senior debt exceeds the property’s value, a junior lien secures nothing — it is wholly unsecured. The mechanism for actually voiding that junior lien in Chapter 13 is § 1322(b)(2) (modifying the rights of a holder of a secured claim), available because — per the case law below — a wholly unsecured lender is not “a holder of a … claim secured only by … the debtor’s principal residence” within the anti-modification protection.

How it interacts with tax sales and foreclosure

The operational sequence the wiki’s audiences encounter:

  1. Filing imposes the automatic stay. A Chapter 13 petition triggers the § 362 stay, which halts a pending tax or mortgage foreclosure — including a scheduled sale — and is the precondition for everything below. See bankruptcy-automatic-stay for scope, exceptions, in-rem relief, and the purchaser’s exposure when a debtor files on the eve of sale.

  2. Cure-and-maintain reinstates an accelerated loan. Outside bankruptcy, a missed mortgage payment and acceleration can make the entire balance due, and state law may bar reinstatement after a point. Section 1322(b)(5) lets the debtor pay the arrearage over the plan while resuming regular payments, effectively de-accelerating the loan. The same structure applies to a defaulted tax-installment / redemption obligation whose final payment falls due after the plan ends — a Chapter 13 plan can spread a tax delinquency or the cost of redeeming a treasurer-sale certificate over the plan period, subject to the priority and interest rules of §§ 511 and 1322(b).

  3. § 1322(c)(1) marks the point of no return for the residence. Once the home is “sold at a foreclosure sale … conducted in accordance with applicable nonbankruptcy law,” the federal cure right is gone. Because what counts as the “sale” is defined by reference to state law, the deadline is earlier in gavel-fall states and later in states where the sale is not complete until confirmation or deed delivery — this is the single most state-dependent feature on the page (see State interaction notes).

  4. Stripping a wholly unsecured junior lien. A debtor with a first mortgage exceeding the home’s value can move to value the collateral under § 506(a); if the second (or third) lienholder is left with $0 of security, most circuits permit a Chapter 13 plan to strip off that lien, treating the entire junior balance as unsecured and voiding the lien on completion of the plan. This is distinct from “strip-down” of a partially secured lien, which is not available against a home mortgage (Nobelman) and not available at all in Chapter 7 (Dewsnup, Caulkett).

▸ For Investors / Operators. A Chapter 13 filing by the former owner is the most common way a tax-sale or junior-mortgage acquisition gets unwound or stalled. Diligence points: (a) confirm under the target state’s law whether the foreclosure sale was “completed” for § 1322(c)(1) purposes — in confirmation/deed-delivery states a debtor can file after your winning bid and still cure, clouding your title; (b) a junior lien bought at a discount is the classic strip-off target — if the senior debt exhausts value, a Chapter 13 plan can void your lien entirely (§ 506(a)/(d) + § 1322(b)(2)), so price that risk; (c) a defaulted redemption/installment obligation can be stretched over a 5-year plan under § 1322(b)(5), delaying your payoff.

▸ For Former Owners. If your home or property is in foreclosure, a Chapter 13 plan can stop a scheduled sale (the automatic stay) and let you cure the past-due amount over up to five years while keeping current — reinstating a loan your lender had accelerated (§ 1322(b)(5)). The cure right on your residence generally lasts until the foreclosure sale actually occurs (§ 1322(c)(1)), and in some states until the sale is confirmed or the deed is delivered. If a second mortgage is completely underwater because the first mortgage already exceeds your home’s value, a Chapter 13 plan may be able to strip it off entirely. Any surplus from a completed sale is a separate right — see surplus-funds and .

Leading cases

All four Supreme Court / circuit decisions below were retrieved and confirmed as controlling or good law as of 2026-06-02.

  • Nobelman v. American Savings Bank, 508 U.S. 324 (1993). A unanimous Supreme Court held that § 1322(b)(2) bars a Chapter 13 debtor from using § 506(a) to bifurcate and “strip down” an undersecured home mortgage to the property’s value. Because the home partially secured the lender’s claim, the lender was a “holder of … a claim secured only by” the residence and was protected from modification; the debtor could not reduce the secured portion to fair market value. The opinion is the anchor for the rule that anti-modification turns on whether the lien has any value supporting it. (Source: https://www.law.cornell.edu/supremecourt/text/508/324 , retrieved 2026-06-02.) Good law; repeatedly applied (e.g., Caulkett).

  • Tanner v. FirstPlus Financial, Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000). The Eleventh Circuit held that Nobelman protects only a lien with at least some collateral value, so a wholly unsecured junior mortgage on the principal residence can be stripped off in Chapter 13. The court read §§ 506(a) and 1322(b)(2) together: “the only reading of both sections … that renders neither a nullity is one that first requires bankruptcy courts to determine the value of the homestead lender’s secured claim under section 506(a)”; “[a]ny claim that is wholly unsecured … would not be protected from modification under section 1322(b)(2).” This is the majority position, shared by the 3d (McDonald), 5th (Bartee), 6th (Lane), and 9th (Zimmer) Circuits. (Source: https://law.resource.org/pub/us/case/reporter/F3/217/217.F3d.1357.99-11895.html , retrieved 2026-06-02.) Good law in the Eleventh Circuit.

  • Dewsnup v. Timm, 502 U.S. 410 (1992). The Supreme Court held that a Chapter 7 debtor cannot “strip down” a partially secured lien to the collateral’s value under § 506(d): ”§ 506(d) does not allow petitioner to ‘strip down’ respondents’ lien, because respondents’ claim is secured by a lien and has been fully allowed pursuant to § 502.” The Court read “allowed secured claim” in § 506(d) as any claim that is allowed and backed by a lien, not the bifurcated § 506(a) sense. (Source: https://www.law.cornell.edu/supremecourt/text/502/410 , retrieved 2026-06-02.) Good law; reaffirmed and extended by Caulkett.

  • Bank of America, N.A. v. Caulkett, 575 U.S. 790 (2015). The Supreme Court extended Dewsnup to wholly underwater junior liens in Chapter 7: a debtor may not void even a completely unsecured junior mortgage under § 506(d), because the claim is “secured by a lien” and “allowed” under § 502. The Court declined to draw a line at one dollar of senior over-encumbrance. Caulkett confirms the chapter divide: strip-off of wholly unsecured junior liens is a Chapter 13 remedy (via § 1322(b)(2)), not a Chapter 7 one. (Source: https://www.law.cornell.edu/supremecourt/text/13-1421 , retrieved 2026-06-02.) Good law.

  • In re Connors, 497 F.3d 314 (3d Cir. 2007) — direct opinion text not retrieved (needs_verification). Secondary descriptions (UC Davis Bus. L.J.; Lexology) state that the Third Circuit held § 1322(c)(1) cuts off the debtor’s federal cure right at the foreclosure sale itself — “the fall of the gavel” — and not later at deed delivery, resolving a long-standing New Jersey split. Cited here to illustrate the § 1322(c)(1) “what counts as the sale” question; the holding and quotation should be confirmed against the official reporter before relied upon. (Secondary source: https://blj.ucdavis.edu/archives/7/2/interpretation-bankruptcy-code-ss-1322c1 , retrieved 2026-06-02.)

State interaction notes

The federal layer is uniform on its face but varies in effect because §§ 1322(b)(5), 1322(c)(1), and 506(a) all incorporate state-law inputs.

  • What “sold at a foreclosure sale” means (§ 1322(c)(1)) is state-specific. In gavel-fall jurisdictions the cure window closes when the auctioneer’s hammer drops and equitable title vests in the high bidder; in confirmation or deed-delivery jurisdictions the sale is not “completed” until a court confirms it or the deed is delivered/recorded, extending the debtor’s cure window past the auction. States with a judicial-confirmation step (e.g., illinois) or a statutory post-sale redemption period therefore give debtors a materially later federal deadline than pure gavel-fall states. Map this against each jurisdiction page’s Sale Procedure and Redemption modules.

  • Statutory redemption interacts but is not the same right. A state right-of-redemption (paying off to recover title after sale) is a state remedy that may persist after § 1322(c)(1)‘s federal cure right has lapsed; a debtor who has missed the federal cure deadline may still have a state redemption window the plan can fund. Confirm on the jurisdiction page whether redemption is pre-sale, post-sale, or both.

  • Tax-lien / tax-deed states. Where the delinquency is a treasurer-sale tax obligation rather than a mortgage, the cure-and-maintain and § 511 interest rules apply to the taxing authority’s claim; the strip-off analysis is generally irrelevant (a tax lien is typically senior, not the junior lien being stripped). Stripping targets are almost always consensual junior mortgages, not government tax liens.

  • Surplus is downstream and separate. None of these provisions create or defeat a surplus right. If the property is sold (federal cure unavailable or unused), any excess proceeds above the debt are governed by state surplus law and tyler-v-hennepin-county, 598 U.S. 631 (2023) — see surplus-funds. Federal tax-lien interests in a redemption or sale follow federal-tax-lien-redemption.

bankruptcy-automatic-stay, surplus-funds, right-of-redemption, federal-tax-lien-redemption, tyler-v-hennepin-county, treasurer-sale, sheriff-sale, illinois

Sources

  • {statute, https://www.law.cornell.edu/uscode/text/11/1322, retrieved 2026-06-02} — 11 U.S.C. § 1322: chapeau of (b); (b)(2) anti-modification; (b)(3) cure/waive; (b)(5) cure-and-maintain “notwithstanding paragraph (2)”; (c) chapeau “Notwithstanding subsection (b)(2) and applicable nonbankruptcy law”; (c)(1) cure “until such residence is sold at a foreclosure sale”; (c)(2) short-term-loan modification under § 1325(a)(5). Verbatim text quoted.
  • {statute, https://www.law.cornell.edu/uscode/text/11/506, retrieved 2026-06-02} — 11 U.S.C. § 506(a)(1) bifurcation “to the extent of the value”; § 506(d) lien void “to the extent … not an allowed secured claim.” Verbatim text quoted.
  • {case, https://www.law.cornell.edu/supremecourt/text/508/324, retrieved 2026-06-02} — Nobelman v. American Savings Bank, 508 U.S. 324 (1993): § 1322(b)(2) bars strip-down of an undersecured home mortgage; anti-modification applies where lien is at least partially secured.
  • {case, https://law.resource.org/pub/us/case/reporter/F3/217/217.F3d.1357.99-11895.html, retrieved 2026-06-02} — Tanner v. FirstPlus Financial (In re Tanner), 217 F.3d 1357 (11th Cir. 2000): wholly unsecured junior home lien strippable; “[a]ny claim that is wholly unsecured … would not be protected from modification under section 1322(b)(2)”; collects 3d/5th/6th/9th Cir. majority.
  • {case, https://www.law.cornell.edu/supremecourt/text/502/410, retrieved 2026-06-02} — Dewsnup v. Timm, 502 U.S. 410 (1992): Chapter 7 debtor cannot strip down a partially secured lien under § 506(d).
  • {case, https://www.law.cornell.edu/supremecourt/text/13-1421, retrieved 2026-06-02} — Bank of America, N.A. v. Caulkett, 575 U.S. 790 (2015): Chapter 7 debtor cannot void a wholly underwater junior lien under § 506(d); extends Dewsnup; confirms strip-off is a Chapter 13 remedy.
  • {secondary, https://blj.ucdavis.edu/archives/7/2/interpretation-bankruptcy-code-ss-1322c1, retrieved 2026-06-02} — UC Davis Bus. L.J. analysis of the § 1322(c)(1) “gavel-fall vs. deed-delivery” split, describing In re Connors, 497 F.3d 314 (3d Cir. 2007) (gavel-fall). Connors official opinion text NOT directly retrieved — holding/quotation flagged needs_verification.
  • {internal, concepts/surplus-funds.md; cases/tyler-v-hennepin-county.md; edge-cases/bankruptcy-automatic-stay.md; edge-cases/federal-tax-lien-redemption.md; concepts/right-of-redemption.md, read 2026-06-02} — cross-linked wiki pages confirmed to exist.

Disclaimer. This page is legal information, not legal advice. It is a general summary of federal bankruptcy provisions that interact heavily with state law and that may be incomplete or out of date; the Bankruptcy Code and its case-law gloss change, and circuit law differs. Nothing here creates an attorney-client relationship. Verify every provision and holding against the current primary source and consult a licensed bankruptcy attorney before acting.

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