In a 9-0 decision on Monday, the United States Supreme Court (SCOTUS) ruled that underwater homeowners, or homeowners who owe more on their mortgage than their house is worth, cannot get rid of their second mortgage by filing for bankruptcy. All nine justices agreed that filing for Chapter 7 bankruptcy protection does not allow for canceling a second mortgage.
The original case involved two Florida homeowners who argued that a second mortgage is paid after the first and is essentially worthless after filing bankruptcy. However, SCOTUS sided with lenders who fought to keep the second mortgage liens, such as home-equity loans, citing the constant shift in the property market in their decision. The justices agreed that when the value of real estate changes, the second mortgage could be paid off in full.
For more information, visit http://www.wsj.com/articles/supreme-court-underwater-homeowners-cant-void-second-mortgages-in-bankruptcy-1433173699.