FLORIDA REAL ESTATE ATTORNEYS
UNDERWATER HOMEOWNES CAN NO LONGER STRIP
A SECOND MORTGAGE IN A BANKRUPTCY
In an important Supreme Court decision last week, Justice Clarence Thomas and his Supreme Court colleagues ruled that underwater homeowners wishing to strip their second mortgages in a Chapter 7 bankruptcy would no longer be permitted to.
BACKGROUND
Under the bankrtuptcy code, the claims of secured creditors (mortgage lenders) are typically divided into two categories: SECURED claims that run up to the value of the property and UNSECURED which make up the rest
For example:
Property Value:. $400,000
Ist Mortgage $350,000
2nd Mortgage $100,000
The 1st Mortgage is secured through the full value of $350,000
The 2nd Mortgage is secured through the first $50,000.00 but the remaining $50,000 is unsecured, since the value of the collateral would already be superceded.
Before this Supreme Court ruling, the 2nd mortgage unsecured balance of $50,000.00 could be stripped or forgiven. However, now both Chapter 7 and Chapter 13 filers can not strip these liens.
The crux of the most recent decision is the Court’s 1992 ruling in Dewsnup v. Timm. In that case, the debtors wanted to reduce the lien on a second mortgage to the value of the land. The Court stated in its ruling that “it was no convinced that Congress intended to depart from pre-code rule that liens pass through bankruptcy unaffected.” So, instead of following typical treatment, it ruled under the old 1898 Bankruptcy code.
In Monday’s decision under Caulkett v. Bank of America, the Court declined to go back to the 1978 revised bankruptcy code and instead, the Supreme Court disagreed holding the Dewsnup applied across the board.
WHAT DOES THIS MEAN FOR HOMEOWNERS
Homeowners may continue to have a not so easy route out of the mortgage crisis. However, many second lien holders are willing to write-off large portions of the debt, almost always the entire UNSECURED portion by reaching a negotiation with the borrowers.
At the Law Offices of Jacqueline A. Salcines, P.A. we are experienced attorneys and accountants, holding dual degrees to successfully negotiate your second liens and settle them for often pennies on the dollar.
Allow us to put our knowledge and experience to work for you.
If you are buying or selling real estate, call us today to see how we can help you.
Main office 305 | 669 | 5280. Or email the attorney directly: J.Salcines@Salcineslaw.com
TRUST | COMMITMENT | RESULTS
Jacqueline A. Salcines
JACQUELINE A. SALCINES, ESQ.
706 S. DIXIE HIGHWAY
SECOND FLOOR
CORAL GABLES, FL 33146
TEL. 305 669 5280
EMAIL: J.SALCINES@SALCINESLAW.