In re Travers

(Bankr. E.D. Ky. Nov. 18, 2015)

The bankruptcy court rejects the creditor’s argument that its wholly underwater lien on the Chapter 13 debtors’ residence cannot be avoided based on § 1322(b)(2). The creditor argued that the Supreme Court’s recent decision in Bank of America, N.A. v. Caulkett mandates that result, despite the fact that prior Sixth Circuit precedent makes clear that a Chapter 13 debtor may strip off such a lien. The court holds that Caulkett does not apply and it is required to comply with the prior Sixth Circuit precedent because it has not been overruled. Opinion below.

2015-11-16 – in re travers

Author: Matt Lindblom

Bank of America, N.A. v. Caulkett

(U.S. Sup. Ct. June 1, 2015)

The Supreme Court holds that a Chapter 7 debtor may not void a junior mortgage lien when the senior lien exceeds the value of the collateral. The Court recognizes that 11 U.S.C. § 506(a)(1) provides that an allowed claim is only a secured claim to the extent of the value of such creditor’s interest in the collateral. Section 506(d) provides that to the extent a lien secures a claim that is not an allowed secured claim, it is void. The Court suggests that the Code could be interpreted such that § 506(d) would allow the voiding of the junior mortgage lien, if not for the Court’s prior decision in Dewsnup v. Timm, 502 U.S. 410 (1992). There, the Court held that for purposes of § 506(d) a claim is a secured claim regardless of whether the collateral value is less than the lien amount. Thus, Dewsnup controls here and the debtors are not permitted to void the junior mortgages. Opinion below.

2015-06-01 – bank of america v caulkett

Author: Matt Lindblom

In re Cain

(Sixth Circuit B.A.P July 14, 2014)

The Sixth Circuit B.A.P reverses the bankruptcy court’s denial of the debtor’s unopposed motion to strip off a wholly unsecured mortgage lien on the debtor’s residence. The debtor filed this Chapter 13 within four years of receiving a Chapter 7 discharge, and was thus not eligible for a discharge in the Chapter 13. The Sixth Circuit, considering this issue for the first time, follows other circuits in holding that the discharge ineligibility is not a bar to the right to strip off the lien. Opinion below.

2014-07-14 – in re cain