Avoiding Defective Mortgages In Chapter 13- The How And Why - Or How to Use your Strong Arm to Strip off a Defective Mortgage without Losing your Shirt

Avoiding Defective Mortgages In Chapter 13- The How And Why – Or How to Use your Strong Arm to Strip off a Defective Mortgage without Losing your Shirt – Part I of II

By Jan M. Sensenich, Chapter 13 Trustee for the District of Vermont

A. INTRODUCTION – How §544 works and how it can work in Chapter 13 cases

The classic use of § 544 of the Bankruptcy Code (also known as the “Strong Arm Clause”) is for a Chapter 7 trustee to avoid a defective lien on a debor’s asset in order to benefit the Chapter 7 estate and its unsecured creditors. This would typically involve the Chapter 7 trustee selling the asset subject to the defective lien to enhance payments to unsecured creditors. While that . . .

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