The Coopers had a home equity line of credit with First Bank. They refinanced their home with AHMS, which directed First Bank to close the line of credit, but the closing attorney failed to do so. The Coopers subsequently drew the available funds from the line of credit and filed Chapter 13 bankruptcy, with First Bank owed approximately $90,000 and AHMS owed approximately $160,000 .
Extended litigation ensured between AHMS and First Bank, with a settlement ultimately providing that the lien of First Bank (at that point assigned to title insurance) would be subordinated to the AHMS lien.
The Coopers then sought to strip-off the lien of First Bank pursuant to 11 U.S.C.… Read More
As an initial matter, the 4th Circuit affirmed, in a published opinion, that pursuant to 11 U.S.C. §§ 506(a) and 1322(b)(2), a junior lien against real estate that serves as the debtor’s principal residence can be stripped-off if there is no equity above the senior lien(s).
The Court of Appeals next proceeded to the question of whether a Debtor, who had recently obtained and Chapter 7 discharge and was thus ineligible for a Chapter 13 discharge, could similarly strip-off a junior lien. The Chapter 13 Trustee argued that lien-stripping was contingent on receipt of a dsicahrge, as 11 U.S.C. § 132(a)(5)(B)(i)(I) provides that a lien is retained until either the underlying debt is paid or a discharge is granted.… Read More