Can I Strip Off A Second Mortgage In A Minnesota Chapter 13 Bankruptcy?

The answer to this depends upon several factors including how the 8th Circuit Court of Appeals rules on a pending appeal in the case of In Re Fissette, 11-6012 (B.A.P., 8th Circuit, August 29, 2011). Currently a majority of decisions have found that a debtor should be allowed to strip off a wholly unsecured 2nd, 3rd, 4th, or 5th (junior liens) mortgages in a chapter 13 bankruptcy. This has significant ramifications for the debtor, it may make it feasible for him or her to stay in their home, if they are able to remove those mortgages. In most cases this allows the 2nd mortgage payment to be included as part of the chapter 13 plan to be distributed equally to all of a debtors unsecured creditors. At the end of the plan the debtor will no longer have the 2nd mortgage on the property, since it was discharged as part of the bankruptcy.
As of the writing of this biog. the 8th Circuit Court of Appeals has not decided this issue for Minnesota, if they allow debtors to strip off the 2nd mortgages it will be a huge victory for people looking to keep their homes and in a chapter 13 bankruptcy. I can tell that from first hand experience that allowing debtors to strip off junior liens would allow many of my clients to stay in their homes, instead of facing foreclosure. I am hopeful that the 8th Circuit will allow debtors the option to save their homes by stripping off junior lien holders in a bankruptcy. The bankruptcy courts in Minnesota have determined on a number of occasions that a debtor may not strip off junior liens. This could all change with the 8th Circuits ruling. We will just have to wait for the decision regarding this issue of junior lien holders and chapter 13 bankruptcy.