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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