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July 27, 2010
A (Brief) history of New York exemptions, Part I
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Bankruptcy exemption expansion passes New York legislature, awaits Governor's signature
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Bankruptcy Exemption may expand in NY - an historical perspective
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Retroactive application of Increased homestead exemption; Part II: Calloway and Nguyen
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Bad Faith Chapter 13 plan: case filed 10 days after property transferred: Johnson
Second Mortgage on Long Island voided as unsecured
Posted by: Peter Scribner
December 09, 2009
Topic: Notes on Bankruptcy Cases outside WDNY
In re Lavelle; Eastern District of New York Bk #09-72389-478 (Judge Eisenberg 11/19/09). Debtors on Long Island NY got the second mortgage on their house voided by a bankruptcy court as unsecured. The house was valued at $400,000 and the balance on the Bank of America first mortgage was $411,193. Bank of America also held a second mortgage in the amount of $10,127.99. This mortgage was in default, and the bank, by their attorney, Steven Baum, moved to lift the automatic stay of bankruptcy to allow a foreclosure to proceed. Mr. Baum operates a well-known foreclosure law office based in Buffalo. The debtors opposed the lift stay motion on the grounds, among others, that there was no equity in the house securing the second mortgage and so it should be declared void.
The bankruptcy judge bought the argument, despite the fact that 1) it was brought on as a defense to a motion, not as an adversary proceeding; 2) the automatic stay had actually been lifted prior to the motion by operation of law and 3) this was a Chapter 7 case, not a chapter 13 case. Interestingly the decision was entered November 19, 2009 (a slightly modified version, correcting typos, entered Nov. 25), but the bank did not appeal the order and the bankruptcy case was clsoed December 8.
I would not expect the bankruptcy judges in the Western District of New York to follow the decision. If the Eastern District continues this line, I would imagine the issue will eventually be appealed.
For more analysis:American Bankruptcy Institute analysis
