Chapter 7 Second Mortgage Stripping Is Alive and Well

Bankruptcy people have been getting nervous about debtors stripping second mortgages from their homestead properties in Chapter 7 bankruptcy.

The Eleventh circuit appeals court earlier this year said that Chapter 7 debtors could strip away second mortgages from their homes where the fair market value of the house was less than the amount due under the first mortgage. The mortgage strip had previously been available only in more complicated and expensive Chapter 13 bankruptcies. However, the appeals court indicated it would rehear the issue this month in front of the entire panel of court judges. Some motions to strip second mortgages had been put on hold or continued by the bankruptcy court pending the court’s reevaluation on the rehearing.

This week one of our Orlando bankruptcy judges stated that the eleventh circuit court decided not to rehear the mortgage strip case this month, and that it would not consider the matter again, if ever, for several months. Therefore, the court indicated that it would continue to process motions to strip unsecured mortgages in Chapter 7 bankruptcy cases, and that where the facts warranted would issue final orders stripping second mortgages until otherwise directed by the appellate court.

Chapter 7 mortgage strips are in full swing.

The post Chapter 7 Second Mortgage Stripping Is Alive and Well appeared first on Orlando Bankruptcy Law Blog.