Bank With U.C.C. Security Interest In Deposit Account v. Garnishment Creditor: Who Has Priority?

In a commercial loan transaction, a bank is able to (and often does) obtain a perfected Uniform Commercial Code security interest in a deposit account maintained by its borrower at the bank. A bank that has obtained such an interest may not think to worry about what would happen if it receives a garnishment summons from another creditor of that borrower. In a recent case, however, a federal court ruled that a Garnishment Creditor trumped the bank’s security interest in its borrower’s deposit account because the bank failed to declare the borrower’s loan in default and take affirmative steps to enforce its security interest before it received the garnishment summons.

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U.S. Supreme Court Weighs in on Mortgage "Strip-Offs"

Yesterday the United States Supreme Court ruled that a Chapter 7 debtor may not avoid - aka "strip off" - a second mortgage even though the amount owed on the first mortgage exceeds the value of the home that secures the loans. This ruling is consistent with the law applied in bankruptcy courts in Virginia for many years. The decision originated from two bankruptcy cases in Florida in which Chapter 7 debtors were allowed to strip off their second mortgages.

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Bankruptcy Developments: (1) Supreme Court Gets Active in Bankruptcy Law, and (2) Chapter 11 Reform is Under Way

While overall bankruptcy filings continue a decline that started in 2010, the U.S. Supreme Court is unusually active in bankruptcy issues this term, having accepted six cases with bankruptcy issues. In this article, we discuss one of the issues the Supreme Court is considering: whether a debtor can strip a lien off of real estate in a Chapter 7 case.

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