Lower Courts Begin To Accept McNeal. Bankruptcy Courts Set To Strip Liens.

For multiple reasons it seems that judges are increasingly, but resentfully, allowing wholly unsecured liens to be stripped by debtors in Chapter 7 bankruptcy cases. Remember, up until now, debtors were only allowed to strip these wholly unsecured liens in a Chapter 13 bankruptcy.  “Stand[ing] still for a while” might prove increasingly expensive to creditors in these cases. For that reason their counsel should keep close watch on the rulings associated with McNeal. As we know more, we will keep you updated. In the meantime, if you have just been discharged in a Chapter 7 or if you are thinking about filing bankruptcy and want to know more information, please contact our office to discuss this in more detail. 

The In re Williams court case in Georgia resulted in a statement that the court would “follow McNeal, even though the Court is persuaded McNeal was wrongly decided.” Judge Jennemann of the Florida Middle Court heard the In re Bustamante case. In her opinion, she endorsed the evasion of a wholly unsecured junior lien - “provided [that] the Eleventh Circuit or the Supreme Court has not, at the time of discharge, vacated the opinion or otherwise overruled or limited the holding of McNeal.”

Her ruling in Bustamante is exhibitive of the hesitation by bankruptcy courts’ to strip wholly unsecured junior liens in accordance with the McNeal motions. Due to the criticism of the McNeal ruling, along with the pending appeal in the Eleventh Circuit, her opinion is justifiable.

In the appellate courts there is another problem that is thwarting hopes to “vacate, overrule, or limit” the McNeal ruling. GMAC, an appeal in the case from the Eleventh Circuit, began to file for bankruptcy soon after the courts handed down their McNeal decision. In response, the Eleventh Circuit ordered that “[McNeal] must stand still for a while.” This was in February and, due to the automatic stay that GMAC’s proceedings initiated, the court can not proceed until the New York bankruptcy court lifts the stay. The pending motions have since stood still in the Eleventh Circuit.

For multiple reasons it seems that judges are increasingly, but resentfully, allowing wholly unsecured liens to be stripped by debtors in Chapter 7 bankruptcy cases. “Stand[ing] still for a while” might prove increasingly expensive to creditors in these cases. For that reason their counsel should keep close watch on the rulings associated with McNeal. As we know more, we will keep you updated.

Please don’t hesitate to contact RKE Law Group with any questions or concerns you have regarding Chapter 7 bankruptcy cases. Our years of expertise with bankruptcy cases and working for you as our client will ensure the best possible outcome for your case. Call our office for a free consultation to discuss your case. There is no obligation to hire and the case advice is completely free. Experience the difference of a law firm that looks at you as a person, not just another client no matter how in depth your case may be. 

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