Converting a ch7 discharge to ch 13 to strip off 2nd mortgage?

[BKMarty]

Hi everyone I have retained an attorney to file my BK and I will be filling for chapter 7. I have too many mortgages to file for chapter 13. I want to stay in my primary residence which I owe 650K on the 1st and 290K on the 2nd unfortunately my house is now only worth $750K I live in Florida. My attorney is telling me that I can convert the 7 to a 13 after filing or discharge so I can strip off most of the 2nd mortgage. Can you convert the 7 to a 13? and how does the stripping of the second work? My attorney was not to sure and was going to check with another attorney that specializes in chapter 13. Would greatly appreciate some info. Thanks.

[justbroke]

Wow, a Chapter 20.

You're in Florida, so Lien Stripping is an accepted practice here in the Sunshine State (and the 11th Circuit Court of Appeals!). It's pretty easy, and I have a sample motion to strip in my blog!

In any event, the key is your conversion from Chapter 7 to Chapter 13, or actually going through Discharge on a Chapter 7 and then filing a Chapter 13. The only thing about a Chapter 13, is that you won't get any discharge -- but your lawyer knows that.

Okay, so let's talk about your mortgages. You say that the home is worth $750K. You say that you have a first mortgage of $650K and a second mortgage of $290K. You also say that this is your primary residence (homestead).

Sorry, but you will not be able to strip down or cramdown the second. The second mortgage must be wholly unsecured in order to strip it off. Since the value of the property far exceeds the first mortgage, the second mortgage is partially secured. Hence the infamous 11 USC 1322(b)(2) comes into play.

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(b) Subject to subsections (a) and (c) of this section, the plan may--
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(2) modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims;