Stripping of Liens in Bankruptcy - Revision history

Alanfields at 21:04, 21 March 2019

2019-03-21T21:04:56Z

Joetschida: /* Stripping Liens In Bankruptcy - Background & Analysis */

2016-05-15T18:11:16Z

‎Stripping Liens In Bankruptcy - Background & Analysis

Joetschida: /* Stripping Liens In Bankruptcy - Background */

2016-05-15T18:10:50Z

‎Stripping Liens In Bankruptcy - Background

Joetschida: /* WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision */

2016-05-15T18:06:54Z

‎WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision

Joetschida: /* Chapter 13 Bankruptcies */

2016-05-15T18:05:37Z

‎Chapter 13 Bankruptcies

Joetschida: /* States in the 3d, 5th, and 11th Federal Circuits */

2016-05-15T18:03:38Z

‎States in the 3d, 5th, and 11th Federal Circuits

Joetschida at 18:03, 15 May 2016

2016-05-15T18:03:07Z

Joetschida: /* Chapter 11 Bankruptcies: */

2016-05-15T18:02:00Z

‎Chapter 11 Bankruptcies:

Joetschida: /* WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision. */

2016-05-15T18:01:31Z

‎WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision.

Joetschida: /* WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Case, Is As Follows: */

2016-05-15T18:01:01Z

‎WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Case, Is As Follows:

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 When a person files bankruptcy, the bankruptcy does not automatically remove mortgages, judgments, and other liens from the debtor’s property.  All that the bankruptcy does is discharge the debt so that the debtor is no longer personally liable for the debt.  Mortgages, judgments, and other liens - for which the debt was discharged, remain liens on the property.  However, one way to remove a junior mortgage from property in a bankruptcy is with an order stripping the junior mortgage from the property.  This type of bankruptcy order is commonly referred to as an order stripping liens or a stripping lien order.  The factual basis for stripping a junior mortgage from property is that the amount owed on the first mortgage exceeds the value of the property so that the junior mortgage is totally unsecured.
-There has been a legal debate for many years as to whether stripping liens is authorized in Chapter 7 bankruptcies.  The U.S. Supreme Court settled that debate on June 1, 2015 when it decided the Bank of America v. Caulkett case at 135 S.Ct. 1995 (SC 2015).  In Caulkett, the U.S. Supreme Court  held that a debtor in a Chapter 7 bankruptcy may not void or strip-off a junior mortgage under §506(d) of the bankruptcy code when the debt owed on the senior mortgage exceeds the value of the property.  Due to the Bank of America v. Caulkett decision, WFG will not rely on orders stripping liens in current Chapter 7 bankruptcies to insure over junior mortgages.  However, WFG will consider relying on an order stripping a junior mortgage in an old Chapter 7 bankruptcy if the Chapter 7 bankruptcy was closed one year prior to the date of the Bank of America v. Caulkett decision.  Agents must obtain prior written approval from WFG’s Underwriting Department to insure over a junior mortgage stripped in an old Chapter 7 bankruptcy.
+There has been a legal debate for many years as to whether stripping liens is authorized in Chapter 7 bankruptcies.  The U.S. Supreme Court settled that debate on June 1, 2015 when it decided the [https://casetext.com/case/bank-of-am-na-v-david-b-caulkettbank-of-am-na ''Bank of America v. Caulkett''] case at 135 S.Ct. 1995 (SC 2015).  In Caulkett, the U.S. Supreme Court  held that a debtor in a Chapter 7 bankruptcy may not void or strip-off a junior mortgage under §506(d) of the bankruptcy code when the debt owed on the senior mortgage exceeds the value of the property.  Due to the Bank of America v. Caulkett decision, WFG will not rely on orders stripping liens in current Chapter 7 bankruptcies to insure over junior mortgages.  However, WFG will consider relying on an order stripping a junior mortgage in an old Chapter 7 bankruptcy if the Chapter 7 bankruptcy was closed one year prior to the date of the Bank of America v. Caulkett decision.  Agents must obtain prior written approval from WFG’s Underwriting Department to insure over a junior mortgage stripped in an old Chapter 7 bankruptcy.
 The Bank of America v. Caulkett case did not affect the authority to strip junior mortgages in Chapter 13 bankruptcies in states located in the 3d, 5th, and 11th Federal Circuits.  The reason for the different treatment of orders stripping liens in Chapter 7 bankruptcies and Chapter 13 bankruptcies is due to a bankruptcy code provision that authorizes a debtor in a reorganization bankruptcy such as Chapter 13 to modify the rights of a holder of a junior mortgage when there is no equity in the property to secure that junior mortgage.  It is that provision of the bankruptcy code that authorizes a Chapter 13 debtor to modify a junior mortgage to strip it from the property when the value of the property is insufficient to secure the entire amount of the junior mortgage.  Chapter 7 bankruptcies are not reorganization bankruptcies like Chapter 13s so the bankruptcy code provision that authorizes a Chapter 13 debtor to modify a junior mortgage is not available in Chapter 7 bankruptcies.  While WFG will not rely on orders stripping liens in current Chapter 7 bankruptcies, we will continue to rely on orders stripping liens in Chapter 13 bankruptcies to insure over stripped junior mortgages  in states located in the 3d, 5th, and 11th Federal Circuits.

← Older revision		Revision as of 18:11, 15 May 2016
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−	== ~~Stripping Liens In Bankruptcy -~~ Background & Analysis==	+	==Background & Analysis==
	When a person files bankruptcy, the bankruptcy does not automatically remove mortgages, judgments, and other liens from the debtor’s property. All that the bankruptcy does is discharge the debt so that the debtor is no longer personally liable for the debt. Mortgages, judgments, and other liens - for which the debt was discharged, remain liens on the property. However, one way to remove a junior mortgage from property in a bankruptcy is with an order stripping the junior mortgage from the property. This type of bankruptcy order is commonly referred to as an order stripping liens or a stripping lien order. The factual basis for stripping a junior mortgage from property is that the amount owed on the first mortgage exceeds the value of the property so that the junior mortgage is totally unsecured.		When a person files bankruptcy, the bankruptcy does not automatically remove mortgages, judgments, and other liens from the debtor’s property. All that the bankruptcy does is discharge the debt so that the debtor is no longer personally liable for the debt. Mortgages, judgments, and other liens - for which the debt was discharged, remain liens on the property. However, one way to remove a junior mortgage from property in a bankruptcy is with an order stripping the junior mortgage from the property. This type of bankruptcy order is commonly referred to as an order stripping liens or a stripping lien order. The factual basis for stripping a junior mortgage from property is that the amount owed on the first mortgage exceeds the value of the property so that the junior mortgage is totally unsecured.

← Older revision		Revision as of 18:10, 15 May 2016
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−	== Stripping Liens In Bankruptcy - Background==	+	== Stripping Liens In Bankruptcy - Background & Analysis==
	When a person files bankruptcy, the bankruptcy does not automatically remove mortgages, judgments, and other liens from the debtor’s property. All that the bankruptcy does is discharge the debt so that the debtor is no longer personally liable for the debt. Mortgages, judgments, and other liens - for which the debt was discharged, remain liens on the property. However, one way to remove a junior mortgage from property in a bankruptcy is with an order stripping the junior mortgage from the property. This type of bankruptcy order is commonly referred to as an order stripping liens or a stripping lien order. The factual basis for stripping a junior mortgage from property is that the amount owed on the first mortgage exceeds the value of the property so that the junior mortgage is totally unsecured.		When a person files bankruptcy, the bankruptcy does not automatically remove mortgages, judgments, and other liens from the debtor’s property. All that the bankruptcy does is discharge the debt so that the debtor is no longer personally liable for the debt. Mortgages, judgments, and other liens - for which the debt was discharged, remain liens on the property. However, one way to remove a junior mortgage from property in a bankruptcy is with an order stripping the junior mortgage from the property. This type of bankruptcy order is commonly referred to as an order stripping liens or a stripping lien order. The factual basis for stripping a junior mortgage from property is that the amount owed on the first mortgage exceeds the value of the property so that the junior mortgage is totally unsecured.

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 The Bank of America v. Caulkett case did not affect the authority to strip junior mortgages in Chapter 13 bankruptcies in states located in the 3d, 5th, and 11th Federal Circuits.  The reason for the different treatment of orders stripping liens in Chapter 7 bankruptcies and Chapter 13 bankruptcies is due to a bankruptcy code provision that authorizes a debtor in a reorganization bankruptcy such as Chapter 13 to modify the rights of a holder of a junior mortgage when there is no equity in the property to secure that junior mortgage.  It is that provision of the bankruptcy code that authorizes a Chapter 13 debtor to modify a junior mortgage to strip it from the property when the value of the property is insufficient to secure the entire amount of the junior mortgage.  Chapter 7 bankruptcies are not reorganization bankruptcies like Chapter 13s so the bankruptcy code provision that authorizes a Chapter 13 debtor to modify a junior mortgage is not available in Chapter 7 bankruptcies.  While WFG will not rely on orders stripping liens in current Chapter 7 bankruptcies, we will continue to rely on orders stripping liens in Chapter 13 bankruptcies to insure over stripped junior mortgages  in states located in the 3d, 5th, and 11th Federal Circuits.
-===WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision===
+===WFG’s Underwriting Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision===
 ====Chapter 7 Bankruptcies====

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 ====Chapter 13 Bankruptcies====
-*For property located in states in the 3d, 5th, and 11th Federal Circuits, the requirements to insure over a stripped junior mortgage stripped are, as follows:
+*For property located in states in the 3d, 5th, and 11th Federal Circuits, the requirements to insure over a stripped junior mortgage are, as follows:
 **1. Record a certified copy of the Motion To Strip the Junior Mortgage.  Agent must confirm that the mailing matrix in the bankruptcy case shows that a copy of the Motion was mailed to the lender - whose mortgage was stripped, the bankruptcy Trustee, and to all creditors.
 **2.   Record a certified copy of the Notice of Hearing on the Motion To Strip the Junior Mortgage.  Agent must confirm that the mailing matrix in the bankruptcy case shows that a copy of the Notice of Hearing on the Motion To Strip the Junior Mortgage was mailed to the lender - whose mortgage was stripped, the bankruptcy Trustee, and to all creditors.

@@ Line 31: / Line 31: @@
 *3d Federal Circuit: Delaware, New Jersey, Pennsylvania.
 *5th Federal Circuit: Louisiana, Mississippi, Texas.
-*11th Circuit:  Alabama, Florida, Georgia.
+*11th Federal Circuit:  Alabama, Florida, Georgia.
 ====Preliminary Notes for Underwriting ====

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 ===WFG’s Position On Stripping Liens In Bankruptcy After The Bank Of America v. Caulkett Decision===
-====Chapter 7 Bankruptcies:====
+====Chapter 7 Bankruptcies====
 *WFG will not rely on orders stripping liens in current Chapter 7 bankruptcies to insure over junior mortgages.
 *WFG will consider relying on an order stripping a junior mortgage in an old Chapter 7 bankruptcy if the Chapter 7 bankruptcy was closed one year prior to the                     date of the Bank of America v. Caulkett decision i.e. June 1, 2014 or before.
 *Prior written approval from WFG’s Underwriting Department is required to insure over a junior mortgage stripped in an old Chapter 7 bankruptcy.
-====Chapter 13 Bankruptcies:====
+====Chapter 13 Bankruptcies====
 *For property located in states in the 3d, 5th, and 11th Federal Circuits, the requirements to insure over a stripped junior mortgage stripped are, as follows:
 **1. Record a certified copy of the Motion To Strip the Junior Mortgage.  Agent must confirm that the mailing matrix in the bankruptcy case shows that a copy of the Motion was mailed to the lender - whose mortgage was stripped, the bankruptcy Trustee, and to all creditors.
@@ Line 28: / Line 28: @@
 *WFG will continue to rely on appropriately entered orders authorizing sale of property "free and clear" of liens under Bankruptcy Code §363(f).
-====States in the 3d, 5th, and 11th Federal Circuits:====
+====States in the 3d, 5th, and 11th Federal Circuits====
 *3d Federal Circuit: Delaware, New Jersey, Pennsylvania.
 *5th Federal Circuit: Louisiana, Mississippi, Texas.
 *11th Circuit:  Alabama, Florida, Georgia.
-====Preliminary Notes for Underwriting: ====
+====Preliminary Notes for Underwriting ====
 (Not based on full research)

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 **6.  Agent must obtain prior approval from WFG’s Underwriting Department to insure over a junior mortgage stripped in a Chapter 13 bankruptcy.
-====Chapter 11 Bankruptcies:====
+====Chapter 11 Bankruptcies====
 *WFG will rely on a bankruptcy court order “stripping down” or “stripping off” a lien appropriately entered in a Chapter 11 bankruptcy.
 ====Orders To Sell Free & Clear====