Category Archives: Chapter 13

Does Lien Stripping Remain in Chapter 13?

Caulkett Does Not Affect Lien-Stripping in Chapter 13 Posted by NCBRC – June 22, 2015 The recent Supreme Court decision in Bank of America v. Caulkett, ___ U.S. ___, 2015 WL 2464049 (June 1, 2015), does not apply to lien stripping in chapter 13. Turman v. Pinnacle Bank, No. 14-80062, Adv. Proc. 14-8035 (Bankr. D. Neb. June 12, 2015). Alton and Leslie Turman’s residence was subject to two liens, the second of which was wholly unsecured. Relying on Minnesota Housing Fin. Agency v. Schmidt (In re Schmidt), 765 F.3d 877 (8th Cir. 2014), and noting that seven other circuits have found that wholly unsecured liens may be stripped off in chapter 13, the court granted the debtors’ motion for summary judgment to avoid Pinnacle Bank’s lien. The court briefly reiterated the well-established interpretation of Nobelman v. American Sav. Bank, 508 U.S. 324 (1993), that a lien that is wholly unsecured…
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Supreme Court Ends Chapter 7 Lien Strips

The United States Supreme Court ended lien strips in chapter 7 bankruptcy cases. In its June 1, 2015 decision, Bank of America v Caulkett, the Supreme Court reversed the decision of the 11th Circuit Court of Appeals which had permitted lien strips in chapter 7 cases. Florida bankruptcy attorneys had been able to strip second mortgages as a result of the McNeal decision.  See my prior posts on this issue.  While courts throughout the country did not permit eliminating completely underwater second mortgages (and association fees), Florida and Georgia attorneys had a short window of opportunity to eliminate junior liens in bankruptcy.  We are now back to the prior practice which typically involved filing a chapter 13 to eliminate junior mortgage liens.  

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Early Chapter 13 Plan Payoff Allowed

A recent  decision  also found that a chapter 13 debtor in a 5-year payment plan could payoff the balance of the plan early to end the bankruptcy and obtain the discharge. Miami bankruptcy Judge Mark in In re Nelson Gonzalez,  Case No. 11-16677 (November 17, 2014)(DE 155). The rule as interpreted for a Florida Chapter 13 is that an over-median income debtor must file a chapter 13 plan with a term of 5 years. (under median can be a three year period ). This is based on a technical interpretation of the statute as to “an applicable committment period”.   The 11th Circuit has previously ruled that the 5 year plan is necessary for confirmation for an over median income debtor.  However, what if after confirmation the debtor wants to modify a chapter 13 plan to pay if off early?  Judge permitted the modified plan for an early payoff and…
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