Saturday, November 29, 2014

Death Knell For Bankruptcy Strip-Offs Of Completely Underwater 2nd Mortgages?

Professor Bob Lawless writes on Credit Slips:

Probably No Strip-Offs After Supremes Rule
  • The headline for this post will be mysterious and perhaps slightly salacious in a general newsfeed, but bankruptcy experts will know it means the time is nigh in the 11th Circuit for lien strip-offs. The Supreme Court agreed to hear Bank of America v. Caulkett and Bank of America v. Toledo-Cardona, where the 11th Circuit allowed lien strip-offs of wholly underwater junior mortgages in a chapter 7. The Supreme Court case of Dewsnup v. Timm would seem to hold otherwise, but the 11th Circuit ruled Dewsnup applied only to partially underwater mortgages. Hence, the 11th Circuit believe it was bound by its own pre-Dewsnup precedent allowing strip-offs for wholly underwater junior mortgages.

    I like the 11th Circuit rule as a matter of policy, but I have to believe that as a matter of precedent, the Supreme Court is almost certain to reverse.

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