On May 11, 2012, the Court of Appeals for the Eleventh Circuit stunned the bankruptcy community by holding that wholly unsecured liens could be “stripped off” in a chapter 7 bankruptcy. See Lorraine McNeal v. GMAC Mortgage. Before McNeal, an unsecured lien could only be “stripped off” in a chapter 11 bankruptcy or a chapter 13 bankruptcy, which are referred to as reorganization plans. The new ruling allows homeowners to get rid of junior liens in a quick chapter 7 bankruptcy rather than having to enter into a reorganized payment plan under a chapter 11 bankruptcy or a chapter 13 bankruptcy.
Many consumers have been able to benefit from the McNeal decision. The Orlando bankruptcy attorneys at Cleaveland & Cleaveland, P.L. have seen many old chapter 7 bankruptcy cases reopened to avoid second priority mortgages so that the homeowners could work out a mortgage modification with the first priority mortgage holder. In other cases, homeowners have been able to save their house by wiping out second and third priority mortgages through a chapter 7 bankruptcy when they could only afford to pay their first priority mortgage.
McNeal can also give homeowners a more efficient way of dealing with homeowners’ association disputes. Homeowners’ associations in central Florida commonly file a lien to secure their fees. There are many horror stories where a homeowners’ association attempts to foreclose on a home for a few hundred dollars in assessments and thousands of dollars in attorneys’ fees. McNeal has been an instrumental decision in these types of situations, because homeowners now have the option to file a chapter 7 bankruptcy, “strip off” the association’s lien and discharge the debt if the association lien is unsecured bringing them current on their assessments and saving their home. Contacting an experienced bankruptcy attorney in Orlando may prove beneficial if you are currently behind on your homeowners’ association dues.
The Orlando bankruptcy lawyers at Cleaveland & Cleaveland, P.L. recommend that anyone seeking guidance in regards to the lien strip process within a bankruptcy, visit www.cc-lawoffice.com, or call (407) 893-5200 for a FREE CONSULTATION.