Removing Second Mortgage In Chapter 7

I want to quote from Atty Robin Miller:

In a surprising decision by a court of appeals not noted for its sympathy for debtors’ positions, the Eleventh Circuit Court of Appeals, relying on circuit precedent, has held in a unanimous panel decision that a Chapter 7 debtor may strip off a lien that is wholly unsecured by value in the collateral. Twenty-three years earlier, the Court of Appeals had reached this conclusion in Matter of Folendore, 862 F.2d 1537 (11th Cir. 1989), and the present court reasoned that the decision in Folendore survived the Supreme Court’s subsequent decision in Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), which held that a Chapter 7 debtor may not cram down an undersecured claim to the value of the collateral. Here, the Court of Appeals reasoned, the creditor’s junior mortgage lien was both allowed under Code § 502 and wholly unsecured under § 506(a), and the lien was therefore voidable under the plain language of § 506(d).

This was incorrect, the Court of Appeals explained, because a later panel of the Court of Appeals (and, by extension, lower courts within the circuit) may depart from an earlier panel’s decision only when the intervening Supreme Court decision is “clearly on point.”

That the reasoning of an intervening Supreme Court decision is at odds with that of a prior decision by the Court of Appeals is no basis to depart from the court’s prior decision: “Obedience to a Supreme Court decision is one thing, extrapolating from its implications a holding on an issue that was not before that Court in order to upend settled circuit law is another thing.”

The impact of this decision outside the circuit will be undercut by two factors: the court’s decision not to designate the opinion for publication, and the court’s reliance on pre-Dewsnup authority without reconsidering the validity of that earlier authority.

Still, this decision may make Judge Dorothy Eisenberg of the Bankruptcy Court for the Eastern District of New York–the only judge in the country currently permitting Chapter 7 lien strips, at least in published opinions–feel not quite so lonely on this issue.

The next step in this case is to see if the creditor, GMAC Mortgage, files a motion for rehearing en banc.”

This case is significant because I have been trying to bring what is called a ‘506 Motion in Chapter 7 in order to remove second mortgages’ from the land records.