Burr Alert: DRAWING A BRIGHT LINE IN THE FOG: Eleventh Circuit Precedent for Challenging McNeal

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As most mortgage lenders know by now, on May 11, 2012, the Eleventh Circuit issued an unpublished decision in McNeal v. GMAC Mortgage, LLC (In re McNeal), 477 Fed. App'x 562, holding that a chapter 7 debtor can "strip off" (extinguish) a lien that is no longer secured by the current value of the collateral pursuant to 11 U.S.C. § 506(d). This ruling may cause surprise, if not confusion, for most mortgage lenders, considering that since the inception of bankruptcy law in America over one hundred years ago, liens have generally survived a bankruptcy liquidation case untouched.[1] Notwithstanding the perplexities of McNeal, there is still hope for a reversal. This article will explore some of the inequities that result from a bankruptcy court's application of McNeal in the context of valuing property in bankruptcy, and point to the Eleventh Circuit's own precedent as grounds for challenging the decision in McNeal.

 

To read the announcement, click here by Jonathan Sykes.

 

 

 

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