McNeal Update

My last post discussed the McNeal case which could lead to a huge change in practice in the 11th Circuit including Florida. On June 1, the creditor in McNeal filed a Petition for Rehearing En Banc. This means that the creditor is requesting that the entire 11th Circuit Court review the decision. Note that the decision was narrowly based on the fact that the 11th Circuit had previously ruled on this issue and that this panel of the court would not change its position unless the Supreme Court expressly rules on the issue of a lien strip in chapter 7.

The Middle District of Florida has already agreed to hear motions to eliminate second mortgages in chapter 7 upon “negative notice”, meaning the secured creditor must affirmatively object to the motion or the motion will be granted without the need for a hearing. We are waiting to see how the South Florida bankruptcy judges will handle this issue.


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