Florida Chapter 7 Lien Strip Alive and Well (For now)

I attended the November 8 Bankruptcy View from the Bench Seminar.  All of the bankruptcy judges from the Southern District of Florida attended as well as a few other judges from elsewhere in Florida.  They provided their annual update and comments on important court cases during the past year.

One of the issues discussed was the pending litigation in the GMAC v McNeal case on the stripping off of a wholly unsecured second mortgage in Chapter 7.   Bottom line, the current status of McNeal  provides binding authority for Florida bankruptcies that would permit the elimination of entirely unsecured second mortgages in Chapter 7, but this binding authority might not last long.  Now may be the only time to strip off second mortgages in chapter 7.  If you want to get confused, keep reading the next paragraph.

The 11th Circuit Court of Appeals decision was previously unpublished, non-binding,  but became published so is now binding, but might be subject to a rehearing which would make it non-binding pending resolution of the rehearing, which also might be heard in an en banc hearing with all of the judges of the 11th Circuit Court of Appeal.   GMAC is in bankruptcy, by the way.  The court’s reasoning seems contrary to the reasoning on a similar but different issue already decided by the US Supreme Court, so many expect that McNeal will not continue as good authority)

So for a Fort Lauderdale bankruptcy or Miami bankruptcy, now may be the time to file that chapter 7 lien strip.  The chapter 13 lien strip will remain without a problem.

Stay tuned.  Also, my next blog posts will cover other new lien strip issues.


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