Very rarely do I get to hear much about bankruptcy court rulings on the news. However, today was the exception to the rule. As you may have heard, the Supreme Court released their decision this morning in Bank of America, N.A. v. Caulkett.
The Supreme Court ruled that Chapter 7 debtors are not able to strip (or remove) underwater second mortgages. Stripping a second is fairly common in a Chapter 13 case, but there were judges in Florida (and I believe one judge in NY) who had previously ruled that Chapter 7 debtors could do this.
Bank of America was not thrilled that debtors were getting out of these underwater second mortgages, so it was appealed eventually all the way up to the Supreme Court.
Enough legal talk – so what does this mean for my clients in California? Well, it unfortunately means that debtors will still continue to have to go the Chapter 13 route to strip underwater mortgages. However, California was not one of the states allowing Chapter 7 lien strips, so it does not really change the current strategies I present to my clients.
This is just a basic overview and is not legal advice specific to your situation. If you are considering bankruptcy or are feeling overwhelmed by debt, you should speak with an attorney in your area for legal advice. If you live in California and would like to speak with me regarding your situation, please email me at [email protected] or call 925-586-6738.