Home / Uncategorized / Can a Mortgage Lien Be Stripped in a Chapter 7?

Can a Mortgage Lien Be Stripped in a Chapter 7?

As reported by Robin Miller of CBAR:

A dream is over, as today in Bank of America, N. A. v. Caulkett, Case No. 13-1421 (June 1, 2015) the Supreme Court disallowed the stripping of wholly-unsecured liens in Chapter 7 cases. The court reasoned that, while a “straightforward reading” of Code § 506(a) and § 506(d) favored the debtor’s position,Dewsnup v. Timm, 502 U. S. 410 (1992) foreclosed it, as none of the reasons offered by the debtor for distinguishing between the partially-underwater mortgages at issue in Dewsnup and the wholly-underwater mortgages involved in the present case was “compelling.” The definition of the term “secured claim” in § 506(d) that Dewsnup settled on—that a claim is “secured” if it is “secured by a lien” and “has been fully allowed pursuant to §502”—does not depend on whether a lien is partially or wholly underwater. The debtor did not ask the Court to overrule Dewsnup, and the Court declined to adopt the artificial distinction the debtor proposed instead.