By Michael Fuller, The Underdog Lawyer ®

Last October, an Oregon bankruptcy court became the first in the country to require a senior lien holder to accept title to a home surrendered in chapter 13.

The case, In re Watt, gave hope to families across the country that remained obligated to pay HOA dues, even after moving out of their underwater homes.

See related post: Judge Orders Mortgage Company to Accept Title to Surrendered Home

Last week, Oregon’s chief district court judge reversed the Watt opinion in favor of the lien holder, Bank of New York Mellon.

The bank had appealed the bankruptcy judge’s decision, arguing that the court erred in confirming the Watt family’s chapter 13 plan.

The district court judge agreed, reasoning that the bankruptcy court, “read language into the Bankruptcy Code that does not exist, as well as frustrated the purpose of the statute, which is to provide protection to creditors holding allowed secured claims.”

“With all due respect to the district court opinion, we think the judge got it wrong,” says bankruptcy lawyer Michael D. O’Brien, who represents the Watt family.

The Watt family is considering options to appeal.

About the author: Michael Fuller is a partner at OlsenDaines, P.C. in Portland, Oregon and an adjunct consumer law professor at Lewis & Clark Law School.