Supreme Court decides second mortgages are worth more than the paper they're written on

John Lande Iowa bankruptcy law Iowa Real Estate & Land Use Iowa Banking Law Dickinson Law Des Moines Iowa

Posted on 06/16/2015 at 09:31 AM by John Lande

This blog previously covered a pair of cases pending before the United States Supreme Court that presented the following question: Can a debtor who files for Chapter 7 bankruptcy strip off a second mortgage if the outstanding debt owed on the first mortgage exceeds the value of the collateral?

On June 1, 2015, the United States Supreme Court answered the question no. The Supreme Court's decision ensures that junior liens will survive Chapter 7 bankruptcies even when the collateral is worth less than the amount of the first lien. The Supreme Court relied on its prior decision in Dewsnup v. Timm, where the Court held that a Chapter 7 debtor cannot strip down the value of a lien to equal the value of the collateral. The same is now true for junior lien holders when the value of the collateral is less than the amount of the first lien. Of course, the Supreme Court's ruling does nothing to change the practical realities for junior lien holders where the collateral is worth less than the value of the first lien. Nevertheless, the Supreme Court's decision ensures that if a debtor files for Chapter 7 bankruptcy the junior lien will survive the bankruptcy.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.

- John Lande

 

Questions, Contact us today.

 


The material, whether written or oral (including videos) that is posted on the various blogs of Dickinson Law is not intended, nor should it be construed or relied upon, as legal advice. The opinions expressed in the various blog posting are those of the individual author, they may not reflect the opinions of the firm.  Your use of the Dickinson Law blog postings does NOT create an attorney-client relationship between you and Dickinson, Mackaman, Tyler & Hagen, P.C. or any of its attorneys.  If specific legal information is needed, please retain and consult with an attorney of your own selection.

Comments
There are no comments yet.
Add Comment

* Indicates a required field