Supreme court agrees to hear two cases involving mortgage liens

[JURIST]

The US Supreme Court [official website] on Monday granted certiorari [order list, PDF] in two bankruptcy cases on appeal from the US Court of Appeals for the Eleventh Circuit [official website], consolidating them for one hour of oral argument. The two cases, Bank of America, NA v. Caulkett and Bank of America, NA v. Toledo-Cardona [SCOTUSBlog backgrounders], both involve mortgage liens and Section 506(d) of the Bankruptcy Code [text], and both seek the court's answer to the same question: "Whether a chapter 7 debtor may 'strip off'—that is, void—a valid junior lien on the debtor's house when the debt owed to a senior lienholder exceeds the house's current value." The cases present a circuit split between the Eleventh Circuit's decision, which has held that a debtor may strip off such a junior lien, and decisions from the Fourth, Sixth and Seventh Circuits.

The Supreme Court ruled in several bankruptcy cases last term. In June the court ruled [JURIST report] unanimously in Clark v. Rameker [SCOTUSblog backgrounder] that funds held in inherited individual retirement accounts (IRAs) are not "retirement funds" for bankruptcy purposes. In the same week the court held [JURIST report] that when a bankruptcy court lacks jurisdiction to enter a final judgment, the bankruptcy court can still issue proposed findings of fact and conclusions of law to be reviewed de novo by the district court. In March the court ruled [JURIST report] that a bankruptcy court improperly exceeded its authority by ordering legally exempt funds to be used to pay attorney's costs.