Written by attorney Gary H. Baker

Lien Stripping Second Mortgage in Chapter 7- Florida

Big News! The Eleventh Circuit Court of Appeals has just released an opinion ruling that debtors in a Chapter 7 bankruptcy can "strip off" the lien of a second mortgage if the fair market value of the underlying property is less than the outstanding amount of the first mortgage. For homeowners residing in the Eleventh Circuit (including Florida and Georgia) this is very significant. Prior to this decision, the Bankuptcy Courts in the Circuit had primarily ruled that the a Chapter 7 debtor could not strip off a second mortgage, and to do so required a Chapter 13 filing. The Court entered its opinion on May 11, 2012 In the case of McNeal v. GMAC Mortgage, LLC, 11th Circuit, case No. 11-11352. A copy of the opinion can be found on my home page at The net result is that debtors in Chapter 7 cases can be discharged of all the debt and strip off the lien of the second mortgage to the extent that it is wholly unsecured, in other words that the fair market value of the property is less than the amount owing on the first mortgage. With the large number of totally underwater second mortgages, this should provide significant relief to homeowners in Florida.

Additional resources provided by the author

A copy of the opinion in McNeal v. GMAC Mortgage, LLC 11th Circuit, case No. 11-11352, can be found on the home page at

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