Caulkett v. Bank of America, N.A.
It has long been settled that a Debtor in a Chapter 13 case can avoid a junior mortgage/lien under 11 U.S.C. Section 506(d) (The Bankruptcy Code) if the amount owed on the first mortgage is more than the value of the home. However, the same cannot be said for Chapter 7 cases. A number of courts throughout the country have allowed Debtors to avoid junior liens in Chapter 7 if they comply with Section 506(d).
Cannot avoid second mortgages in Chapter 7 bankruptcy cases
This is the major issue in the Caulkett case. The United States Supreme Court held that the Debtor cannot avoid the junior lien even if the amount owed on the first mortgage is more than the value of the home.