On March 24, 2015, the U.S. Supreme Court heard oral argument in two cases that should resolve a persistent split between the U.S. Court of Appeals for the Eleventh Circuit and several other circuits pertaining to a Chapter 7 debtor’s ability to “strip off” underwater junior mortgages1 during a bankruptcy proceeding.
In Bank of America v. Caulkett (No. 13-1421) and Bank of America v. Toledo-Cardona (No. 14-163),2 the court has been asked to consider whether a decades-old holding that partially unsecured junior mortgages may not be “stripped down” in a Chapter 7 bankruptcy should be extended to cases where a junior mortgage is wholly, rather than only partially, underwater.
