Debtor’s can now strip second mortgages in Chapter 7 bankruptcy

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The long standing rule in bankruptcy court that lien striping cannot take place in Chapter 7 bankruptcy has been turned on its ear. In Re: McNeal, Case: 11-11352, Lorraine McNeal v. GMAC Mtg. held that, at least in the 11th Circuit, even though a Debtor still cannot cramdown the value of an investment property as clearly noted in Dewsnup, a Debtor can strip a junior lien from a primary residence. The Court reasoned that because the United States Supreme Court in Dewsnup disallowed only a "strip down" of a partially secured mortgage lien and did not address a "strip off" of a wholly unsecured lien, it is not "clearly on point" and as such, the issue was not intended to be addressed by that Court.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Goldstein, Phillips Law Offices, LLC | Attorney Advertising

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