As of February 18, 2015, the debtors have filed their brief in the consolidated Supreme Court cases of Bank of Amer. v. Toledo-Cardona, No. 14-163 and Bank of Amer. v. Caulkett, No. 13-1421 (filed Feb. 17, 2014), addressing the issue of whether a wholly unsecured lien can be stripped off in chapter 7.
In McNeal v. GMAC Mortg., 735 F.3d 1263 (11th Cir. 2012)cert. pet. den. (S.Ct. May 20, 2014), the Appellate Court upheld the stripping of wholly unsecured liens. The McNeal Court’s holding was in contract to that in Dewsnup v. Timm, 502 U.S. 410 (1992), which held that a partially secured lien could not be stripped-down in chapter 7.
In Toledo-Cardona and Caulkett, the debtors argue that McNeal was correctly decided. Dewsnup was explicitly limited to its facts and the Supreme Court’s instruction inNobelman v. Am. Sav. Bank, 508 U.S. 324 (1993), to begin analysis with lien valuation under section 506(a) supports the Eleventh Circuit’s position that valueless liens may be stripped off under section 506(d).
This case is very important and has broad reaching affect on many Chapter 7 debtors who have one or more undersecured mortgages.