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By: Marshall G. Reissman, Attorney at the Reissman Law Group, P.A.
The 11th Circuit Court of Appeals recently held that debtors in Chapter 7 bankruptcy have the ability to strip off their second mortgage on their homestead property if the first mortgage is greater than the value of the home. The ability to wipe out a second mortgage in bankruptcy was previously only available to debtors in Chapter 13 bankruptcy.
Prior to this decision, many practitioners, myself included, would have counseled individuals who wanted to remain in their home, but wanted to strip off a second mortgage to file Chapter 13 bankruptcy. A United States Supreme Court decision in Dewsnup v. Timm, held that a Chapter 7 debtor could not “cram down” a partially secured debt. Cramming down a debt deals with valuing secured property to its actual value as opposed to what is owed on the collateral. This is another big reason folks file Chapter 13 bankruptcy. Many courts interpreted this decision into Chapter 7 debtors not being able to strip off wholly unsecured junior lien.
The 11th Circuit applied its “prior panel precedent rule,” which states that a later court may depart from an earlier court’s decision ONLY if an intervening Supreme Court decision is “clearly on point.” Because the decision in Dewsnup only dealt with cramming down partially secured liens and not stripping off wholly unsecured junior liens, then the 11th Circuit holding in Folendore v. United States Small Bus. Admin remains controlling precedent in the 11th Circuit.
Basically, if a junior lien is allowed under the Bankruptcy Code and is also totally unsecured under the Code, it is also voidable in Chapter 7 bankruptcy under the Code. Please call us today to see if you qualify for relief under Chapter 7 bankruptcy and if you can strip off a second mortgage.
McNeal v. GMAC Mortgage, LLC (In re McNeal) (11th Cir. 2012)
Dewsnup v. Timm, 502 U.S. 410 (1992).
Folendore v. United States Small Bus. Admin., 862 F.2d 1537 (11th Cir. 1989).
11 U.S.C. Sec. 502
11 U.S.C. Sec. 506(a)
11 U.S.C. Sec. 506(d)
The post Can I Strip off a Second Mortgage in Chapter 7? Now you Can! appeared first on St. Petersburg Law Blog.

Many people filing for bankruptcy choose to hire an attorney to file their petition.  Bankruptcy law is very complex and changes from time to time making it somewhat difficult to navigate for a pro se debtor.  It is important to remember, that even though you have an attorney you are still personally responsible for the completeness and accuracy of your petition. 
Your attorney will ask you to provide a number of documents including, but not always limited to, pay stubs, tax returns, and lists of assets and debts. When you are providing information about your debts it is imperative that you provide a complete and accurate list.  It is also imperative that addresses of creditors are correct.  Your attorney cannot obtain all of this information for you because your attorney doesn't know what your debts are.  We can run a credit report for you, but you still need to review that information for accuracy and missing information. 
You will also have to provide information regarding your assets.  Your attorney will then review this information and prepare your bankruptcy petition.  Your attorney can only properly advise you about your case when all of the information is accurate and complete.  Any missing information hinders your attorney's ability to advise you and it may adversely affect your case. 
After your petition is prepared, your attorney will have you come in to review and sign the petition.  This time should be used very wisely.  It is imperative that the debtor thoroughly review the petition for any inaccuracy or missing information.  This is the last opportunity to add creditors prior to filing.  If you realize after filing that you missed a creditor there will be fees to add the creditor(s) to your bankruptcy. Undisclosed assets can cause very serious problems as the trustee may consider the failure to disclose an asset fraud. 
When you sign your petition you are signing it under penalty of perjury.  You alone, and not your attorney, is responsible for the contents of the petition.  This is also a great time to ask any questions you may have.  This is the time to make sure you understand what has been listed.  You can also ask your attorney about the process and any other questions you may have. We cannot answer an unasked question.
If you have questions, or would like to schedule a free consultation, please contact a St. Louis Bankruptcy Attorney today!

There is one call every bankruptcy lawyer dreads getting from a client after their case has been closed.  The call  regarding a missing creditor - a creditor not listed on their bankruptcy schedules and now the creditor is making demands for payment or a lawsuit has been filed against the client by this creditor.  It's a common mistake and one that unfortunately happens all too frequently.  The Bankruptcy Courts are divided on whether or not a no-asset chapter 7 case can be reopened to add a new creditor.  In the Western District of Texas where I practice, the current state of the law is you cannot discharge the claim of the creditor.  If there was a distribution made to the creditors by the Chapter 7 Trustee then the law is uniform that the debtor is flat out of luck.
By the time potential clients contact a Bankruptcy Lawyer they are under a great deal of stress.  Often they've stopped answering all creditor calls and trash all their mail. Obtaining a Credit Report helps a great deal, especially if it's one of the specialized reports designed for the purpose of preparing bankruptcy documents.  A Credit Report is not a cure all.  Not every creditor reports to one or more of the Credit Bureaus.  A Credit Report lists: mortgage lender, car purchases and most but not all credit cards.  Certain creditors are automatically listed on bankruptcy schedules such as the Internal Revenue Service (IRS).  The foregoing types of creditors are listed because of requirements established by the local rules of a Bankruptcy Court.
There are many types of creditors and other potential claimants that do not show up on Credit Reports: small retailers; medical bills; ambulance bills; utilities; payday loans; pawned items; loans guaranteed for a family member or friend; money borrowed from a family member or friend; rent from an apartment complex or to the homeowner of  the house you rented are examples of creditors not listed on a Credit Report.  There are potential claimants such as those arising from of an accident which is not covered by insurance, a dispute with a neighbor over a variety of issues,  unpaid tuition, are types of claims not listed in a Credit Report.  If a client fails to disclose a creditor to their lawyer, this debt would not be listed in their bankruptcy.  Another example of a missed creditor:  I didn't think I owed the claimant anything and in fact, I think the claimant owes me. 
On the business side of bankruptcy, there are potential claims by customers for warranty issues, business creditors the client guaranteed for their corporation or limited liability company.  It's important to include every possible liability to your bankruptcy schedules.
The prime rule in real estate is location, location and location and in the same vein the prime rule in bankruptcy is notice, notice and notice (review, review and review).    When filling out the bankruptcy questionnaire take time to reflect and think about every potential person or business who might claim you owe them money.  There are two important things a client should do: first, not to rely on a Credit Report exclusively; second, take your time to reflect on who might be out there with a claim or potential claim.  Remember, whether you really owe the claimant something is not the issue.  The issue is giving notice to the claimant so that any potential claim is disposed in your bankruptcy.  Even if you don't owe the claimant anything, you still may be faced with having to defend a lawsuit, which is expensive. This type of lawsuit can be avoided by simply providing a name, address, and some basic information.

Myths and Truths About Chapter 7 Bankruptcy, Part III
Myth:  If a debtor wishes to retain personal property or real property, the property can be excluded from the bankruptcy and does not need to be listed in the petition.
Truth:  All property, real and personal, a debtor owns at the time of the bankruptcy must be listed in the bankruptcy schedules, even if the debtor intends to retain the property and maintain the payments.  Many debtors believe that if they are current on their payments and are going to continue paying for the real or personal property, such as a vehicle or home, they can leave the debt off the bankruptcy petition entirely.  This is not true.  The trustee and bankruptcy court want to know the assets debtors have at the time of filing.  They want to know what property the debtors have, the value of the property, and the amount still owed on the property.  The lien holder for the property must be listed with their address so they get notice of the bankruptcy.  If the debtor wishes to retain the property and maintain the payments, the debtor will indicate that in the petition so the creditor knows they intend to retain and reaffirm.  It is important for debtors to list all their property, even if they wish to retain it, so the trustee may determine whether there is unexempt equity and proceed accordingly.
Myth:  A debtor is not required to list cash they have on hand.
Truth:  A debtor must list any cash they have on hand at the time of filing the bankruptcy.  Schedule B specifically asks about cash on hand.  If the debtor leaves that question blank, they are stating to the trustee that they do not have cash on hand.  The debtor has an obligation to list any money they have in their possession, in their house, or anywhere else, such as a safe deposit box at the bank.  This rule also applies to un-cashed checks the debtor possesses.  Many debtors may believe it is acceptable to take money out of the bank or cash a check and keep it in cash so the trustee does not know about it and potentially require the debtor to turn that money over to pay some of their unsecured creditors.  This is false.  Any property a debtor has must be listed, including cash.  If not reported, the debtor can be investigated.  It is essential for a debtor to list all property and value that property honestly and fairly. 
If you have any questions, please contact a St. Louis or St. Charles bankruptcy attorney.