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August 2015 Archives

Supreme Court Prohibits "Stripping" Junior Liens in Chapter 7 Bankruptcy

A recent US Supreme Court decision will strengthen the position of condominiums and homeowners associations when their delinquent owners file Chapter 7 bankruptcy. Whereas, in a Chapter 13 bankruptcy, where the subject property has no equity (i.e. is "underwater"), the debtor may seek to "strip" the association's lien by filing a motion to that effect in the bankruptcy court (this varies by jurisdiction and by judge), it was not entirely clear whether the same action could be taken to strip a lien in a Chapter 7 bankruptcy.

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