29 Feb Another Southwest Florida Bankruptcy Judge OKs Chapter 20 Lien Strip
The most recent court opinion, In re Scantling, written by Bankruptcy Judge Michael G. Williamson, agrees that a debtor can file a Chapter 20 and strip his or her second mortgage (or whatever is left of it) despite not being eligible for a discharge.
A Chapter 20 Bankruptcy is a slang term used in the bankruptcy world. When debtor files a Chapter 7 and receives a discharge of all dischargeable debts, then follows the Chapter 7 with a Chapter 13 bankruptcy.
The most pressing question in the bankruptcy world is whether a debtor can strip a second mortgage in its entirety by using the Chapter 20 process.
Within the Middle District of Florida Bankruptcy Courts, we have division on this issue. Judge Arthur B. Briskman in Orlando does not believe the bankruptcy code allows a debtor to strip his second mortgage using the Chapter 20 bankruptcy process. Judge Catherine Peek McEwen took a different approach in two cases stating that a debtor can use a Chapter 20 to strip their second mortgages.
In the Southern District of Florida, two recent bankruptcy opinions have also come to the opposite conclusion, In Re Gerardin, 447 B.R. 342, 349 (Bankr. S.D. Fla. 2011) and In Re: Quiros-Amy, 456 B.R. 140, 146-147 (Bankr. S.D. Fla. 2011).
In writing his decision, Judge Williamson took a historical approach to this question, starting with all we have from The Supreme Court. He looked at Johnson v. Home State Bank, Dewsnup v. Timm and Nobelman v. American Savings Bank.
After discussing the meaning of those cases and the decision from the 11th Circuit in In Re Tanner, Judge Wiliamson looked at the language of the bankruptcy code.
I am not going to go into detail on John Williamson’s analysis of the cases and the law on the issue. Judge Williamson’s opinion is a must read for anyone practicing consumer law.
Interestingly, we don’t have an opinion within the Middle District of Florida, Fort Myers Division. But, we do have Judge Schermer who authored the opinion In Re Fisette. So I am thinking that we should be pretty well set down here in Southwest Florida until this matter gets up to the 11th Circuit and then the Supreme Court
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