Interesting...

[Freddy03]

I received a letter from my attorney the other day stating I could possibly strip my 2nd mortgage if I reopened my CH 7 case. I'm not going to bother with this because I'm not planning on keeping my house.

Has anyone ever heard of this? I wish I brought the letter with me b/c I can't remember all the details about it.

[HHM]

There have been some recent case rulings (although sporadic) that allow a chapter 7 lien strip. Still very much a long shot and not the majority position nationwide.

The most recent case, I believe, came out of the 11th circuit (Florida, Georgia, Alabama).

There is also a rogue opinion out of the E.D. of New York, but no one follows it there (unfortunately).

[Freddy03]

There have been some recent case rulings (although sporadic) that allow a chapter 7 lien strip. Still very much a long shot and not the majority position nationwide.

The most recent case, I believe, came out of the 11th circuit (Florida, Georgia, Alabama).

There is also a rogue opinion out of the E.D. of New York, but no one follows it there (unfortunately).

Yes it did state this in the letter.

[justbroke]

The case is In Re McNeal, Case No. 11-11352 (11th Cir., May 11, 2012). I was thinking of re-opening my Chapter 7 for this specific reason. This case came out of the 11th circuit on May 11th 2012. I haven't studied the case but plan to do so.

The case ruling is here.

http://www.ca11.uscourts.gov/unpub/ops/201111352.pdf

What's interesting is that the McNeal case is now in limbo because GMAC Mortgage has filed Chapter 11 and invoked the Stay by sumitting a "suggestion of bankruptcy" (Notice of Bankruptcy) in the McNeal's bankruptcy case!

[tobee43]

i have also read about this case. very interesting about chapter 7 lien strips. the only problem i see, freddy, is what would be the out of pocket costs to someone. of course in many cases, provided this new case/aw will stand up on it's own, it will be well worth it to re-open one's case. however, when one doesn't plan on keeping the house i can see how it may not be worth the trouble.

jb, YES!! that is so interesting pertaining to your comment about GMAC!!!

[Freddy03]

i have also read about this case. very interesting about chapter 7 lien strips. the only problem i see, freddy, is what would be the out of pocket costs to someone. of course in many cases, provided this new case/aw will stand up on it's own, it will be well worth it to re-open one's case. however, when one doesn't plan on keeping the house i can see how it may not be worth the trouble.

jb, YES!! that is so interesting pertaining to your comment about GMAC!!!

My attorney gave me a breakdown. It would cost about $3K total to strip $12K second mortgage. This included all his fees to open the case and about $2k homestead exemptions (something about being over the FL allowance) paid back to the trustee. I could pay it over 10 months if I wanted to try and strip it.

[last2cents]

Does anyone know the 9th district's (I think that's where I am - Arizona) position on this?

[HHM]

Does anyone know the 9th district's (I think that's where I am - Arizona) position on this?

Pretty much EVERYWHERE else is against it, sorry.

[justbroke]

The only reason why the 11th Circuit (Florida, Alabama, and Georgia) is for lien stripping in Chapter 7s, is due to a ruling back in the 1980s on the applicability of 11 USC 506 (regarding a "secured claim"). The 11th Circuit confirmed that the old case was STILL the law in the 11th Circuit since the so-called "landmark" Dewsnup case (U.S. Supreme Court) did not address "wholly" unsecured loans.

The 11tch Circuit basically said that the you don't get to take a U.S. Supreme court ruling (Dewsnup) and extrapolate from that case that a "wholly" unsecured loan is somehow now allowed. Dewsnup was a Supreme court case a bout "partially" secured loans! The 11th was smart, if you ask me, that just because SCOTUS says something similar, it does not upset the Appellate divisions prior ruling if it's not on point.

If another circuit finds similarly to the 11th, it could get interesting and end up back in the Supreme court.

As for Florida, there are judges in Florida that are NOT GOING to allow this ruling or at least make it difficult. However, I looked at the Middle District after I had read that the Middle District of Florida appears to have prepared for this. They now allow negative noticing lien stripping in Chapter 7s! I'm unsure about the other Districts, but I think it was the Southern District of Florida that had mixed feelings about it. No news on the Northern District.

Very interesting. I'm going to see how many cases are re-opened!

[despritfreya]

Does anyone know the 9th district's (I think that's where I am - Arizona) position on this?

No authority in the 9th Cir to lien strip in a 7 and, specifically, none of the AZ judges will entertain the lien strip in the context of a 7. However Judge Baum, about 2 years ago, did allowed it based upon the creditor's failure to answer the complaint in 2 cases I am aware of. But recently he has "seen the err of his ways" and refused to enter default judgments.

As to the McNeal decision, since it is unpublished it is not binding on any lower court. It can be cited but its only value is that of persuasion.

Des.

[justbroke]

... it is unpublished it is not binding on any lower court. It can be cited but its only value is that of persuasion.

Yep, and is the reason the South Florida BK Judges say they won't entertain it, but the Middle District has already updated their negative noticing! Should be fun in the Middle District of Florida! At least they'll make a bunch of money with th $260 re-open fees and the attorney fees.

[TBA]

Hate to necromance a thread... but...

Anyone have an updates on this? I actually just heard about this today and about fell over. I am what i would consider almost a perfect candidate. We have an SBA lien as second on our primary which we DID NOT reaffirm due to the SBA lien in second (its for $1.58mil!!!!). We have been debating about what to do with the house bc we are not underwater, but our family is starting to outgrow it. We were going to use the SOL for SBA to strip it originally, but my investigations today have me curious.

[IBroke]

Well, we visited an attorney last week and my mother is going to file CH7 in January mainly due to this new stripping-opportunity. The attorney we're going to hire charges a $250 fee for the motion to strip the second. Well worth it, considering the second is more than $150K. Of course, I also asked the attorney how "waterproof" this option currently is at court and he made it clear to us that as of today, there is no doubt that this can be done in the Middle District of Florida. I also asked what's going to happen to a discharged and stripped second in case this this ruling will be overturned one day. He said "Nothing. Once it's discharged, it's discharged."

The total fee we have to pay for my mother's filing is $2,150. That includes the $300 filing-fee, the motion to strip the second ($250) and a total of 5(!!) motions to avoid judgment liens. I think that is reasonable.

We have to pay that in 5 installments before we can file by the end of January. My only concern is that something legally changes 'til then but the attorney told us that as far as he knows, the ruling of May 11th hasn't even been objected yet - so it could take a while before something changes. However, he indicated that what is possible in regards to the second might not be possible any more in a year or so.

[jacenty]

Spoke with 3 attnys and only one wants to touch it( second mortg. strip- southern FL) for $ 750, on top of 2K for Bk filing. My latest research: Gmac was appealing it, never knew Gmac filed notice for BK. That makes it more interesting. You can always settle with second mortgage lien holder for pennies on the dollar. Just got my first offer from debt collector for 25c on the dollar. I will be sure to follow this thread for further news.

[justbroke]

You can settle, but completely discharging the debt is much better and cheaper!