Chapter 7 Debtor Cannot Strip Underwater Second Homestead Mortgage
On June 1, 2015, the United States Supreme Court delivered its decision in Bank of America, N.A. vs. Caulkett . The decision was unanimous. The Court held that a chapter 7 debtor cannot utilize Section 506(d) of the U.S. Bankruptcy Code to avoid (“strip”) a second mortgage from his homestead even when the value of the homestead is less than the balance of the first mortgage, i.e., when the second mortgage is, in the vernacular, “entirely underwater”. The Court stated that Section 1322(b)(2) of the Bankruptcy Code might allow a different result in a chapter 13 case.