Sunday, March 22, 2015

Bankruptcy - US Supreme Court looks at a major change in Chapter 7 bankruptcies.

UPDATE: The argument took place today, March 24, 2015. Commentary indicate the court did not really seem to lean one way or the other: "Argument analysis: Navigating between Scylla and Charybdis on underwater mortgages" -

The court's decision will be released sometime this summer.


The U.S. Supreme Court will hear oral arguments on March 24, 2015, in two cases to determine whether a chapter 7 debtor may strip off a second (or any junior) mortgage that is not secured by the home’s actual market value.

Image courtesy of renjith krishnan at

In Bank of America, N.A. v. Toledo-Cardona, No. 14-163, the market value of the chapter 7 debtor’s home was $77,689.00.  The first mortgage owed to Quicken Loans had a balance of $135,703.00, and the second mortgage owed to Countrywide Bank had a balance of $32,000.00.

In Bank of America, N.A. v. Caulkett, 13-1421, the market value of the chapter 7 debtor’s home was $98,000.00, the Countrywide Financial first mortgage balance was $183,264.00, and the Countrywide Financial second mortgage balance was $47,855.00.

The lower court allowed the second liens to be discharged (stripped) as unsecured debt. If the court upholds these decisions by Eleventh Circuit U.S. Court of Appeals, it will be a major change for many Chapter 7 debtors. This could give more homeowners access to relief under Chapter 7 or finally close the door on this option in Chapter 7. Of course this should not impact a debtor's ability to strip liens in Chapter 13. It will be interesting to see the results in the next couple months.

If you want assistance, legal representation, or just want to know more about Mark Medvesky or Medvesky Law Office, LLC, check out our website at
#bankruptcy #Chapter_7 #Chapter_13 #Montgomery_County #law_firm #Bucks_County #Pennsylvania

NOTE: I found this info in a blog and a deeper explanation can be found here

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