Lien Stripping in Consumer Bankruptcy: Bringing or Defending Actions to Avoid Junior Mortgages

Applying Divergent Case Law in Chs. 7, 13 and "20" Filings: What Works and What Doesn't

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Tuesday, October 8, 2013

Recorded event now available

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Course Materials

This CLE course will provide bankruptcy counsel with a review of how junior mortgage liens can be stripped in Chapters 7, 13 and so-called Chapter 20 consumer bankruptcies, discuss defenses available to the lender to preserve the lien, and outline various litigation approaches for both sides.

Description

With many home mortgages still underwater, debtors in consumer bankruptcy are aggressively seeking to shed second or third mortgages via lien stripping which has become one of the more contentious issues facing consumer bankruptcy practitioners and lenders.

In Chapter 13 bankruptcies, a junior mortgage no longer secured by the property’s equity may be stripped. The junior mortgage becomes part of the debtor’s unsecured debt and may be paid off through the Chapter 13 plan. At the end of the plan period, the remaining unsecured debt is discharged.

Several cases challenging the 11th Circuit’s controversial 2012 McNeal ruling allowing lien stripping in Chapter 7 cases are pending. While courts are split on whether a debtor may strip liens in a hybrid Chapter 20 proceeding, the 4th Circuit recently answered that question in the affirmative in the case In re Davis.

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Outline

  1. Debtor’s ability to strip junior mortgage liens
    1. Chapter 13 requirements
    2. Adversary proceedings
    3. Chapter 7 bankruptcy options
    4. Developments in Chapter 20 proceedings
  2. Mortgage lender defenses
    1. Litigation tactics

Benefits

The panel will review these and other key questions:

  • What circumstances permit the debtor to strip a junior lien in a Chapter 13 bankruptcy?
  • What options are available to debtors in a Chapter 7 bankruptcy?
  • What are the lender’s most viable defenses?
  • When may an adversary proceeding be necessary to strip a junior lien?
  • What is the status of lien stripping in Chapter 20 proceedings?

Following the speaker presentations, you'll have an opportunity to get answers to your specific questions during the interactive Q&A.

Faculty

Cope, Monette
Monette W. Cope
Junior Partner
Weltman Weinberg & Reis Co.

Ms. Cope practices in the firm’s Bankruptcy, Consumer Bankruptcy and Commercial Bankruptcy Groups. She is also...  |  Read More

Dr. Richard S. Gendler
Dr. Richard S. Gendler
Principal
Law Offices of Richard S. Gendler

He primarily handles consumer bankruptcy filed under Chapters 7, 11 and 13 of the Bankruptcy Code.  In 1998, he...  |  Read More

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