Second mortgages in bankruptcy
Bank of America v. Caulkett
In brief
The Court ruled that Chapter 7 debtors cannot erase a second mortgage under these conditions and overturned the Eleventh Circuit's ruling.
- Where it stands
- Decided
Decided 9-0 · June 1, 2015 · Opinion by Justice Thomas
- What it’s about
- David Caulkett sought to erase Bank of America’s second mortgage because his home was worth less than the first mortgage debt.
- Who it affects
- The decision bars Chapter 7 debtors from wiping out a second mortgage in these circumstances when the lender's claim is secured by a lien and allowed under §502.
Summary: written with AI from the case record.
What it's about
The Court ruled §506(d) does not permit that if the bank’s claim is backed by a mortgage and recognized under §502; it overturned the Eleventh Circuit and sent the case back (remanded).
The case asked how Section 506(d) applies to a second mortgage in Chapter 7 bankruptcy.
Question presented
Does Section 506(d) of the Bankruptcy Code allow a debtor filing for bankruptcy to void a second mortgage when the debt owed on the first one exceeds the value of the collateral property?
What the Court decided
Holding
A debtor in a Chapter 7 bankruptcy proceeding may not void a junior mortgage lien under §506(d) when the debt owed on a senior mortgage lien exceeds the current value of the collateral if the creditor’s claim is both secured by a lien and allowed under §502 of the Bankruptcy Code. 911, reversed and remanded.
- Result
- Reversed
The vote
What's next
The case goes back to the Eleventh Circuit, which will continue it under the Supreme Court's ruling.
Documents
Opinions
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AI analysis generated: Impact Analysis
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Opinion added: Caulkett
Sources
Primary materials plus reporting. Best-effort analysis: this explainer relies on a mix of primary materials and trusted secondary sources. Official filings and opinions remain authoritative.