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Melih Oztalay

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United States Supreme Court Hands Defeat to Struggling Homeowners Who File for Bankruptcy

Underwater homeowners who file for Chapter 7 bankruptcy protection are still liable for secondary loans tied to their properties, the Supreme Court said on Monday.

In a unanimous decision, the Court in Bank of America, N.A. v. Caulkett said that underwater borrowers, i.e., those who owe more on a mortgage than the home is worth — cannot void or “strip off” a completely unsecured junior lien when they file for Chapter 7 bankruptcy protection. A junior lien, such as a home-equity loan, is taken after a first mortgage, and uses the home as collateral for repayment of the loan.

In Caulkett, two borrowers each had two mortgages on their homes, with Bank of America holding the junior liens. Both borrowers owed more on their first mortgages than their homes were worth and filed for Chapter 7 bankruptcy protection. The borrowers wanted to “strip off” the junior mortgages to eliminate those debts completely

The Supreme Court, citing a decision from a 1991 case, Dewsnup v. Timm, that involved a partially secured claim, held that the lenders still have a secured claim, “regardless of whether the value of that property would be sufficient to cover the claim.

The Caulkett decision is a clear victory for mortgage lenders and clarifies the path to recoveries for second lien holders. On the other hand, this decision will undoubtedly make the bankruptcy process more difficult for borrowers seeking bankruptcy protection.



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I have over 20 years of experience in developing successful, efficient and strategic web marketing and advertising solutions for businesses. Working through an entrepreneurial framework, I have focused on business development, sales, execution, and management. Combining solid knowledge of marketing and advertising with information technology, I have been successful in being able to apply digital technologies to the needs of businesses. As an early adopter of new ideas and technology, my clients are able to benefit from imaginative and effective programs that keep them ahead of their competition.

The Company

Smartfinds is a digital marketing agency working with national and global corporate clients including domestic and off-shore franchise operations with their online marketing efforts. We offer a number of core competencies including web marketing research, analysis, strategies, and tactics; website development and SEO; organic search engine marketing with content marketing and social media marketing; Google AdWords advertising including pay-per-click; Google Analytics and Google Webmaster Tools interpretation; Local Store Marketing including customer ratings and reviews management; and more.

Our entrepreneurial business approach employs open-mind creativity and early-adopter assertiveness along with in-depth planning for business growth. Our goal is to be a strategic partner with our clients focused on increasing traffic to the website, business growth, generate leads, increase sales and revenues.