Bank of America, N.A. v. Caulkett

575 U.S. 790, 135 S. Ct. 1995, 192 L. Ed. 2d 52 (2015)

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Bank of America, N.A. v. Caulkett

United States Supreme Court
575 U.S. 790, 135 S. Ct. 1995, 192 L. Ed. 2d 52 (2015)

Facts

David Caulkett and Edelmiro Toledo-Cardona (debtors) filed separate Chapter 7 bankruptcy petitions. Bank of America, N.A. (Bank of America) (creditor) held junior mortgage liens on Caulkett’s and Toledo-Cardona’s respective homes. Other banks held senior mortgage liens on the homes. The amount owed on the senior mortgage liens exceeded the homes’ market value, which meant that the junior mortgage liens were wholly underwater. In other words, Bank of America would receive nothing if the homes were sold, because the sale proceeds would be needed to satisfy the senior mortgage liens. Both Caulkett and Toledo-Cardona tried to “strip off” (i.e., void) Bank of America’s junior mortgage liens under 11 U.S.C. § 506(d), which provides that a lien is void to the extent that the lien secures a claim against the debtor that is “not an allowed secured claim.” The bankruptcy courts in both cases granted the request, and the district court and Eleventh Circuit affirmed. The United States Supreme Court granted certiorari and consolidated the cases.

Rule of Law

Issue

Holding and Reasoning (Thomas, J.)

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