Bank of America v. Caulkett, 135 S.Ct. 1995 (2015).
Opinion issued: Jun. 1, 2015. Supreme Court Document Link.
Written by: Nicole Holland, Organizational Development Chair
Both debtors had houses with value less than the amount owed on the senior mortgage liens, making the junior mortgage liens wholly underwater. The debtors filed for Chapter 7 Bankruptcy and petitioned the court to strip off the junior mortgage liens. While both sides agreed that the Bank’s claim on the debtors’ houses were allowed, the debtors argued that the Bank’s claims were not secured under 11 U.S.C. § 506(d).
The Court found the claims were secured and could not be voided under § 506(d). The decision came down to the definition of secured claim. Section 506(a)(1) states a creditor’s claim cannot be secured if the value of the claim is less than the amount of the claim. The Court agreed that under normal statutory construction rules identical words within separate parts of the same act should have similar meaning. However, the Court applied its previous meaning of the phrase from Dewsnup, where it held a creditor’s claim is secured when it is “supported by a security interest in property, regardless of whether the value of that property would be sufficient to cover the claim.” Consequently, the junior mortgage liens on the properties could not be voided. The Court reasoned that real estate values fluctuate greatly, and the status of a secured lien should not be contingent on the current market. Under this ruling, § 506(d)'s function is reduced to “voiding a lien whenever a claim secured by the lien itself has not been allowed.”
When the Supreme Court went back to its decision in Dewsnup, it was not to clarify a previously identified ambiguity in the Bankruptcy Code. Instead, the Court reaffirmed its decision and rejected “normal rule[s] of statutory construction.” Even while standing by its decision in Dewsnup, the Court admitted to its numerous weaknesses. The Caulkett Court emphasized that the debtors did not ask that Dewsnup be overturned three times. Although the Court’s ultimate decision does not favor bankruptcy debtors, perhaps the door is not entirely closed for future litigants to, once again, challenge the Dewsnup decision.
 Bank of Am., N.A. v. Caulkett, 135 S. Ct. 1995, 1997 (2015).
 Id. In Dewsnup, the Court refers to the debtor’s argument as a strip down because the lien was only partially underwater. Because the junior mortgage was wholly underwater in Caulkett, the Court refers to the debtor’s request as a strip off. Caulkett, 135 S. Ct. at 1997; see Dewsnup v. Timm, 502 U.S. 410, 411-12 (1992). (meaning “the Bank would receive nothing if the properties were sold today”).
 See 11 U.S.C. § 502(a)–(b) (2014); Caulkett, 135 S. Ct. at 1997.
 Id. at 1999.
 Id. at 1998–99.
 11 U.S.C. § 506(a)(1) (“An allowed claim of a creditor secured by a lien on property . . . is a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim.”).
 Caulkett, 135 S. Ct. at 1999.
 Id. In Dewsnup, the Court ruled that a bankruptcy debtor may not strip down a creditor’s claim on the debtor’s real property when the claim is secured by a lien and allowed under 11 U.S.C. § 502.
 Id. at 2001.
 Id. at 2001.
 Id. at 135 S. Ct. at 1999.
 Id. at 1999.
 Id. at 1995. The Court also refers to the “hedging language” of the Dewsnup decision. Id. at2000, 2001. (“Even if Dewsnup were deemed not to reflect the correct meaning of § 506(d), the debtors' solution would not either.”) (emphasis added).
 Id. at 1995, 1999, 2001.