- Court: U.S. Supreme Court Certiorari Granted
- Area(s) of Law: Bankruptcy Law
- Date Filed: November 17, 2014
- Case #: 13-1421
- Judge(s)/Court Below: 566 Fed.Appx. 879 (11th Cir. 2014)
- Full Text Opinion
The Court consolidated this case with Court’s case #14-163 Bank of America, N.A v. Toledo-Cardona, Edelmiro (556 Fed.Appx. 911 (11th Cir. 2014)). Both cases involve similar facts.
Respondents, both unsecured junior lienholder appealing from per curiam decisions from the 11th Circuit Court of Appeals affirming bankruptcy court orders voiding Respondents’ second priority liens on mortgages involving chapter 7 debtors. The bankruptcy courts, citing McNeal v. GMAC., LLC (In re McNeal), 735 F.3d 1263 (11th Cir. 2012) and Folendore v. United States Small Bus. Admn., 862 F.2d 1537 (11th Cir. 1989), held that an unsecured lien is voidable under 11 U.S.C. 506(d).
The Court granted certiorari to resolve a circuit split on the issued. The Court held in Dewsnup v. Timm, 502 U.S. 410 (1992) that 11 U.S.C. § 506(d) does not allow a debtor to “strip down” the value of a mortgage lien to the current value. The certified question to be answered by the Court is: Under the Bankruptcy Code, 11 U.S.C § 506(d), can a Chapter 7 debtor “strip off” in the entirety, a junior mortgage’s lien if the outstanding debt that is owed to a senior lienholder is more than the current value of the collateral?