9th Circuit Upholds Statute Of Limitations Defense To 2nd Mortgage After Bankruptcy

On September 8, 2020, the firm of Seattle Consumer Justice P.S. scored a major victory for homeowners when the 9th Circuit Court of Appeals affirmed the US District Court in holding that the statute of limitations on a deed of trust (commonly referred to as a mortgage in Washington State) begins to run when a debtor receives a discharge in bankruptcy. the court explained:

Here, Debtor received a chapter 7 discharge in 2012 and thereafter neither reaffirmed nor made any further payment on the note. Despite this, Appellants took no action to collect payment, did not seek to accelerate the debt, and did not initiate foreclosure proceedings. In these circumstances, the statute of limitations for Appellants to foreclose on the deed of trust ran from the last installment due before Debtor's discharge and expired before Debtor [brought the current action].

In re Hernandez, No. 19-35719, 2020 WL 5362095, at *1 (9th Cir. Sept. 8, 2020)

This important decision means that for many people who received a bankruptcy discharge 6 years ago or more, there is a clear path to removing an unpaid mortgage from the title of their property. In most cases, this will be a 2nd position mortgage or home equity line of credit, but it is also possible with a first position mortgage. Our attorneys are always happy to discuss your case with you to determine if relief is possible for you and your home.