James H. Monroe, P.A.
Call Us For A Free consultation 407-872-7447
No One Should Face Crushing Debt Alone
Practice Areas

Supreme Court decision affects Florida mortgage rights

A recent Supreme Court decision stemming from two Florida cases will affect the rights of those homeowners with a second mortgage who declare bankruptcy. The case, considered a victory for the banks, deals a tough blow to homeowners with a second mortgage. The Court ruled that even if a debtor owes more on his or her home than the home is worth, the bankruptcy filing will not void the second mortgage.

In the two cases that led to the Court's decision, homeowners who faced overwhelming debt and were underwater on their primary mortgages wanted to "strip off" their second mortgages. In lower court rulings, the homeowners who had filed Chapter 7 bankruptcy were allowed to eliminate the second loans, which the homeowners said were essentially worthless. The lender appealed the lower court rulings based on the argument that the lender could be repaid, if the value of the property increases.

Second mortgages differ from first mortgages in this situation, as in a first mortgage the lender may anticipate that if a property is sold, the lender will recover financially since the house is collateral for the loan. Often, in bankruptcy proceedings, unsecured debts, such as personal loans or credit card debt, may be canceled. The dispute in this case was whether second mortgages qualified as unsecured debt that could be canceled, and the Court determined that they did not.

It is important to remember that despite this case, bankruptcy can provide a great deal of relief for someone struggling with debt. Furthermore, a homeowner may still be permitted to strip off a second mortgage through a Chapter 13 bankruptcy filing. An experienced bankruptcy attorney can help explore a person's options with him or her and discuss how this recent decision may affect an individual's particular financial situation.

Source: The New York Times, "Justices Curb Bankruptcy Filers' Ability to Have Second Mortgages Canceled," Michael Corkery, June 1, 2015

No Comments

Leave a comment
Comment Information