Saturday, May 10, 2014

More Chapter 7 lien stripping in Georgia

The Eleventh Circuit Court of Appeals this past week affirmed the lien strip which was allowed in the Malone case (case no. 12-61289 in the Bankruptcy Court for the Northern District of Georgia). This appeal was styled Wilmington Trust, Nat'l Assoc. v. Malone. It relies on the earlier McNeal opinion which is now published at 735 F.3d 1263.

This is a big deal because lien stripping in Chapter 7 is now more firmly established in Alabama, Florida, and Georgia. This procedure allows the lien of a second mortgage to be completely removed from a property when the value of the property is less than the debt owed on the first mortgage. Until recently, it was only available in Chapter 13 cases. It was rarely allowed anywhere in the country in Chapter 7 cases until recently, even though there were strong theoretical arguments that they should be allowed in Chapter 7.

Read more about lien stripping here: "Can I Get Rid of Second Mortgages and Liens in Chapter 7 Bankruptcy?" (Nolo.com.) (Keep in mind that the McNeal decision is now published.)