Opinion analysis: Bad news for “underwater” homeowners

A little over two months ago, the Justices heard oral argument in Bank of America v. Caulkett.  The issue is whether in a bankruptcy liquidation (a so-called Chapter 7), the debtor can void a second mortgage when the property (typically, the home) is worth less than the first mortgage.  By the end of the arguments, the Justices appeared to have two choices, both of which they regarded as fairly unpalatable.  On the one hand, as the bank urged, they could rely on a 1992 decision (Dewsnup v. Timm) that seems to go a long way towards dictating a ruling in the bank’s favor that the second mortgage stays, even if many of them don’t believe that the old decision is very persuasive. On the other hand, they could instead rule in favor of the homeowners that the

Original SCOTUS article

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