An underwater mortgage is a loan for the purchase of a home with a higher balance than the fair-market value of the home. The Court will decide whether a Chapter 7 debtor may void a second mortgage when a home’s current value has dropped below the amount owed on the first mortgage.
One of the parties to the case, Bank of America, argued that the avoiding process is conflicting among the circuit courts that have considered the issue. For the past four decades, only a few circuits have heard an argument on the question presented.
The Supreme Court will most likely hear arguments in the Spring. This case should resolve the conflicting opinions. For more information, contact bankruptcy counsel.
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